A company is preparing its annual budget and is estimating the number of units of Product W that it will sell in each quarter of year 2. Past experience has shown that the trend for sales of the product is represented by the following relationship:

Calculate the expected unit sales of Product W for each quarter of year 2, after adjusting for seasonal variations using the multiplicative model.

• A. The sales forecast for year 2 Quarter 4 = 38,100 units
• B. The sales forecast for year 2 Quarter 4 = 22,600 units
• C. The sales forecast for year 2 Quarter 4 = 35,100 units
• D. The sales forecast for year 2 Quarter 4 = 25,100 units

A medium-sized manufacturing company, which operates in the electronics industry, has employed a firm of consultants to carry out a review of the company's planning and control systems. The company presently uses a traditional incremental budgeting system and the inventory management system is based on economic order quantities (EOQ) and reorder levels. The company's normal production patterns have changed significantly over the previous few years as a result of increasing demand for customized products. This has resulted in shorter production runs and difficulties with production and resource planning.
The consultants have recommended the implementation of activity based budgeting and a manufacturing resource planning system to improve planning and resource management.
Select ALL the benefits for the company that could occur following the introduction of an activity based budgeting system.

• A. Activity based budgeting allows the identification of value added and non-value added activities and ensures that cuts are made to non-value added activities. ABB is also useful for review of capacity utilization.
• B. Under an activity based budgeting system, resource allocation is linked to the strategic plan is prepared after considering alternative strategies. This approach ensures that new activities that are required to meet the company's strategic objectives are included in the budget.
• C. Under an activity based budgeting system the focus is on existing resources and operations. Adjustments are then made for changes in activity and price which results in past inefficiencies being perpetuated.
  Under a traditional budgeting system, only resources that are needed to perform activities required to meet the budgeted production and sales volumes are included.
• D. The approach under an activity based system is to make arbitrary cuts in order to meet overall financial targets.
• E. Activity based techniques including activity based budgeting focus on the outputs of a process rather than the input to the process. This approach provides a clear framework for understanding the link between costs and the level of activity. It allows the ranking of activities and the determination of how limited resources should be allocated across competing activities.
• F. ABB systems present costs under functional headings i.e. the emphasis is on the nature of the cost. The weakness of this approach is that it gives little indication of the link between the level of activity and the cost incurred.

THS produces two products from different combinations of the same resources. Details of the products are shown below:

Identify, using graphical linear programming, the optimal production plan for products E and R to maximize THS's profit in the month.

• A. The solution (from the graph0 is to produce 475 units of E and 770 units of R.
• B. The solution (from the graph0 is to produce 375 units of E and 750 units of R.
• C. The solution (from the graph0 is to produce 375 units of E and 870 units of R.
• D. The solution (from the graph0 is to produce 495 units of E and 470 units of R.
• E. The solution (from the graph0 is to produce 495 units of E and 670 units of R.
• F. The solution (from the graph0 is to produce 675 units of E and 470 units of R.

A flexible budget is a budget that is:

• A. changed in response to changes in costs
• B. set prior to the control period and not subsequently changed in response to changes in activity period has expired
• C. continuously updated by adding a further accounting period when the earliest accounting period has expired
• D. changed in response to changes in the level of activity

A company produces a product that requires two materials, Material A and Material B. Details of the material quantities and costs for August are given in the table below.

Budgeted and actual output of the product for August was 12,000 units.
The material yield variance for August is:

• A. $1,840 A
• B. $1,590 A
• C. $1,340 F
• D. $1,740 A
• E. $1,340 A