Question 1) What best describes the purpose of a budget?  Budgets are “cost reduction” tools (No

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Question 1) What best describes the purpose of a budget? 

• Budgets are “cost reduction” tools (No.  Budgets are “plans of action” tools)
• Budgets are “plans of action” tools (Yes.  Budgets are “plans of action” tools)
• Budgets are “cost control” tools (No.  Budgets are “plans of action” tools)
• Budgets are none of the above (No.  Budgets are “plans of action” tools)

Question 2.   Which of the following are common causes for labor efficiency variances?  Check all that apply:

• Use of lower-skilled or higher-skilled workers. (Yes.  Common causes for labor efficiency variances include use of lower-skilled or higher-skilled workers; effects of the learning curve; lower-quality or higher-quality materials; changes in methods or scheduling; and installation of new equipment.)
• Effects of the learning curve. (Yes.  Common causes for labor efficiency variances include use of lower-skilled or higher-skilled workers; effects of the learning curve; lower-quality or higher-quality materials; changes in methods or scheduling; and installation of new equipment.)
• Sufficient training, correct instructions, or worker satisfaction. (No.  Common causes for labor efficiency variances include use of lower-skilled or higher-skilled workers; effects of the learning curve; lower-quality or higher-quality materials; changes in methods or scheduling; and installation of new equipment.)
• Lower-quality or higher-quality materials. (Yes.  Common causes for labor efficiency variances include use of lower-skilled or higher-skilled workers; effects of the learning curve; lower-quality or higher-quality materials; changes in methods or scheduling; and installation of new equipment.)
• Changes in methods or scheduling. (Yes.  Common causes for labor efficiency variances include use of lower-skilled or higher-skilled workers; effects of the learning curve; lower-quality or higher-quality materials; changes in methods or scheduling; and installation of new equipment.)
• Installation of new equipment. (Yes.  Common causes for labor efficiency variances include use of lower-skilled or higher-skilled workers; effects of the learning curve; lower-quality or higher-quality materials; changes in methods or scheduling; and installation of new equipment.)
• Well maintained equipment or machine malfunction. (No.  Common causes for labor efficiency variances include use of lower-skilled or higher-skilled workers; effects of the learning curve; lower-quality or higher-quality materials; changes in methods or scheduling; and installation of new equipment..)   

Question 3.   What is the advantage of the accounting rate of return method? 

• It is easily applied because it uses readily available financial accounting data. (Yes.  It is easily applied because it uses readily available financial accounting data.)
• It ignores the time value of money (No.  It is easily applied because it uses readily available financial accounting data.)
• It generally assumes smooth cash flows over the project’s life regardless of the actual cash-flow pattern. (No.  It is easily applied because it uses readily available financial accounting data.) 
• It includes depreciation expense and other accounting accruals in the calculation of project income, losing the purity of cash-flow data.(No.  It is easily applied because it uses readily available financial accounting data.)