Chapter 9 accounting Exam Review

Acme Gears produces gear boxes. The company has projected sales of 45,000 gear boxes for the month. Each gear box requires five gears. The company has projected beginning inventory of 22,000 gears and it plans to have 5% less than that in ending inventory. Production of one gear takes 0.5 pounds of raw material. What are the standard pounds of raw material needed for the month to meet production and achieve the desired inventory reduction?

111,950 pounds of raw material

Henning Incorporated has the following values in their budgeted income statement:Sales Revenue: $1,475,000 Cost of Goods Sold: $1,250,800 Selling and Administrative Expenses:$325,000 Interest Expense:$600 If Henning Incorporated's average sales price is $25, what is the budgeted cost of goods sold per unit?

21.20

In early February, Heavenly Swimwear is preparing the budget for swimsuits for the summer season. Budgeted sales are 47,600 suits for May, 58,200 suits for June, and 43,500 suits for July. Each suit requires 1.3 yards of fabric. Heavenly Swimwear requires ending Finished Goods inventory equal to 30% of the following month's budgeted sales. What is Heavenly Swimwear's budgeted production for May?

50,780 units.

The formula for budget production is

Budget Production = Total Budgeted Direct Labor / (Direct Labor hour per unit x Direct Labor rate per hour) $739,200 ÷ (2 x $10) =

Budgeted production can be computed as

Budgeted sales + Budgeted ending inventory - Budgeted beginning inventory.

The formula to arrive at the production budget is

budgeted sales + budgeted ending inventory - budgeted beginning inventory. 47,600 + (58,200 x 30%) - (47,600 x 30%)

production budget is

budgeted sales + budgeted ending inventory - budgeted beginning inventory. ex: 30,000 + (50,000 x 5%) - (30,000 x 5%) = 31,000 units.

A budget that is based on research and analysis will likely result in a budget that

closely represents the company's actual results.

If a company's sales budget is too optimistic, the company may

end up with too much inventory.

Total direct materials per unit is

total material required for production divided by production units.

Production =

Projected Sales + Ending Inventory - Beginning Inventory

Home Health manufactures medical supplies. For the month of April, it projects the following selling and administrative expenses:Sales commissions: 8% of salesShipping expense: $12,800Advertising and marketing costs: $4,200Electric and water utilities: $1,900Equipment depreciation: $18,700Bad debt expense: $3,000Sales for the month of April equal $694,000. What is the total of expenses that will be reported on the budgeted income statement?

Total Expenses is $96,120

Which of the following is most likely to result in a budget that will closely represent the company's actual results?

a budget based on research and analysis

Eliciting information from lower-level operating managers and their subordinates with the help of a bottom-up budgeting process

is a costly but beneficial exercise.

If the sales budget increases by 10%, the production budget

is likely to increase by the same number of units as the sales budget.

Which of the following is a characteristic of long-range planning?

look at economic trends

Cara's Wedding Designs makes and sells bridal dresses, bridesmaid dresses, tuxedos, and suits. The company plans to produce 60 dresses during the next month and will require 390 yards of fabric for production. The total fabric required for the month is 429 yards. What are the direct materials per dress?

6.5 yards

Joan is a manager with Steel Works, Inc. Joan would love to beat the budget this year. She believes that revenues for the coming year will be $200,000 and expenses will be $120,000. To build in budgetary slack, Joan is least likely to budget f

$110,000 of expenses.

Sam Montana manufactures bookcases for colleges and universities to use in dorm rooms. Each bookcase sells for $65. Due to the cyclical nature of the business, the company budgets two months ahead. In early May, it is planning for July, its busiest month. The company plans to sell 114,500 bookcases in July. At the end of June, it expects to have 26,000 assembled bookcases in inventory and it would like to have 3,000 bookcases in inventory at the end of July. What is the company's budgeted sales revenue for July?

$7,442,500

How do the direct materials budget, direct labor budget, and manufacturing overhead budget relate to the budgeted income statement?

They are incorporated into the unit cost that is used to calculate the cost of goods sold of the income statement.

Budgetary slack

provides an allowance or flexibility for managers to reach the budget goals. It is done by understating budgeted revenues or overestimating budgeted expenses. (To build in budgetary slack, Joan would likely budget for expenses over $120,000 or budget for revenues under $200,000.)