Question

1) ARO Inc. sold 10,000 units during its second month of operations at an average selling price of $8 per unit. Its Accounts Receivable balance at the start of the second month was $50,000. ARO collects all sales as follows: 60% during the month of the sale and 40% in the month following the sale. What was ARO's Accounts Receivable at the end of its second month of operations?

2) The process of getting people at all levels of the organization involved in the budgeting process is known as:

a. Budgeting.

b. Controlling.

c. Participative budgeting.

d. Master budgeting.

3) XYZ Inc. sells a single product for a budgeted selling price of $30 per unit. Budgeted direct materials costs were $5 per unit, while budgeted direct labour and variable overhead costs were $3 and $2 respectively. Budgeted fixed overhead costs amount $25,000 per month. The company has a practical production capacity of 10,000 units per month. Budgeted Variable selling costs are $2 per unit. Budgeted Fixed selling costs are $2,000 per month. During the company's first month of operations, the company produced 10,000 units and sold 7,500 units at an average selling price of $18 per unit. Fixed and variable costs were as budgeted. The company's sales volume variance was:

Multiple Choice

• $75,000 unfavourable

• $50,000 favourable

• $10,000 unfavourable

• $10,000 favourable

4) The process of attempting to justify budgeted costs as if they were occurring for the first time is known as:

a. Budgeting.

b. Zero-base budgeting.

c. Participative budgeting.

d. Master budgeting.

Answer 1

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ARO	Amount $	Note
Units sold	10,000.00	A
Selling price per unit	8.00	B
Sales Revenue	80,000.00	C=A*B
Accounts Receivable @ 40%	32,000.00	D=C*40%
Answer 2
C. Participative budgeting.
Answer 3	Amount $
Budgeted sales units	10,000.00	E
Less: Actual sales units	7,500.00	F
Volume variance	2,500.00	G=E-F
Budgeted sell price	30.00	H
Sales volume variance	75,000.00	I=G*H
Sales volume variance is $75,000 unfavorable.
Answer 4
Zero-base budgeting.