PART I (32 Points, 2 Points each) Multiple Choice: Indicate the answer that best completes the opening statement. A static budget is appropriate in...

PART I (32 Points, 2 Points each) Multiple Choice: Indicate the answer that best completes the opening statement.1. A static budget is appropriate in evaluating a manager's performance if a. actual activity closely approximates the master budget activity. b. actual activity is less than the master budget activity. c. the company prepares reports on an annual basis. d. the company is a not-for-profit organization 2. A flexible budget a. is prepared when management can't agree on objectives for the company. b. projects budget data for various levels of activity. c. is only useful in controlling fixed costs. d. cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results. 3. Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets? a. Direct materials cost b. Direct labor cost c. Variable manufacturing overhead d. Fixed manufacturing overhead4. The maintenance department of a manufacturing company is a(n) a. segment. b. profit center. c. cost center. d. investment center.5. An unfavorable materials quantity variance would occur if a. more material is purchased than is used. b. actual pounds of material used was less than the standard pounds allowed. c. actual labor hours used was greater than the standard labor hours allowed. d. actual pounds of material used was greater than the standard pounds allowed. 6. A total materials variance is analyzed in terms of a. price and quantity variances. b. buy and sell variances. c. quantity and quality variances. d. tight and loose variances. 7. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,000 pounds of direct materials were purchased for $3,800. The direct materials price variance for last month was a. $3,800 favorable. b. $200 favorable. c. $100 favorable. d. $200 unfavorable. 8. The per-unit standards for direct labor are 2 direct labor hours at $12 per hour. If in producing 600 units, the actual direct labor cost was $12,800 for 1,000 direct labor hours worked, the total direct labor variance is a. $480 unfavorable. b. $1,600 favorable. c. $1,000 unfavorable. d. $1,600 unfavorable. 9. A favorable variance a. is an indication that the company is not operating in an optimal manner. b. implies a positive result if quality control standards are met. c. implies a positive result if standards are flexible. d. means that standards are too loosely specified. 10. The total overhead variance is equal to the a. sum of the total materials variance and the total labor variance. b. difference between the total materials variance and the total labor variance. c. sum of the controllable variance and the volume variance. d. total variance minus the controllable variance and the volume variance. d. of eliminating unprofitable product lines. 12. If a payback period for a project is greater than its expected useful life, the a. project will always be profitable. b. entire initial investment will not be recovered. c. project would only be acceptable if the company's cost of capital was low. d. project's return will always exceed the company's cost of capital. 13. If a company's required rate of return is 10% and, in using the net present value method, a project's net present value is zero, this indicates that the a. project's rate of return exceeds 10%. b. project's rate of return is less than the minimum rate required. c. project earns a rate of return of 10%. d. project earns a rate of return of 0%. 14. Using the net present value method, the present value of cash inflows for Project A is $44,000 and the present value of cash inflows of Project B is $24,000. If Project A and Project B require initial investments of $40,000 and $20,000, respectively, and have the same useful life, the project that should be accepted is a. Project A. b. Project B. c. either; they are both the same. d. not capable of being calculated. 15. A company's cost of capital refers to the a. rate the company must pay to obtain funds from creditors and stockholders. b. total cost of a capital project. c. cost of printing and registering common stock shares. d. rate of return earned on common stock. 16. A thorough evaluation of how well a project's actual performance matches the projections made when the project was proposed is called a a. pre-audit. b. post-audit. c. risk analysis. d. sensitivity analysis. PART II (15 Points) Hall Company uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are:6% 4% 5% 1%Fixed selling expenses consist of Sales Salaries $40,000 and Depreciation on Delivery Equipment $10,000.The actual variable selling expenses incurred in February, by Hall Company are as follows:$13,700 8,000 11,300 1,600The actual fixed selling expenses incurred in February, consist of Sales Salaries $41,000 and Depreciation on Delivery Equipment $10,000.Instructions: Prepare a flexible budget performance report, assuming that February sales were $220,000. Expected and actual sales are the same. PART III (21 points)Graves Company has developed the following standard costs for its product for the current year:GRAVES COMPANY Standard Cost CardProduct A