MANAGERIAL: Ch 22

A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed

continuous budget

a master budget would include operating budgets and financial budgets t/f

true

a non manufacturing entity would most likely have a staffing budget t/f

true

X sells 2 products. A's and B's. X sold 14 A's at $10, and 56 B's at $20 last year. the single enterprise sales price is

$18 A's: 14, 20% *$10 = $2 B's: 56, 80% *$20= $16 = $18

When budget goals are set to type, the budget becomes less effective as a tool for planning and controlling expenses t/f

True

the cash budget calculates the timing of cash receipts on account t/f

true

Terra companies budget shows the following credit sales for the current year September: $25,000 October: $36,000 November: $30,000 December: $32,000 Experience has shown that payment for credit sales is received as follows 15% in the month of a sale 60% in the first month after sale 20% in the second month after sale and 5% is uncollectible the amount of cash Tara company will expect to collect in November as a result of current, and past credit sales is

$31,100

Next year's sales forecast shows that 20,000 units of product a and 22,000 units of product B are going to be sold for prices of $10 and $12 per unit respectively the desired in the ending inventory of product a is 20% higher than the beginning inventory of 2000 units the beginning inventory a product be is 25,000 units. The desired ending inventory of product be is 3000 units. Total budget and sales of both products for the year would be

$464,000 = (20,000 x $12) + (22,000x$12)

pro forma means

- results based on financial assumptions or projections - the balance sheet or income statement based on projections - intended outcome if the hypothetical events occur - expected outcome if the plan is performed

pro forma income statement includes

- sales budget - cost of goods sold budget - selling and administrative expenses budget - estimates of other revenue, other expense, and income tax are also integrated into the budgeted income statement

direct labor cost budget steps (2)

1. budgeted direct labor hours required for production= budgeted production volume * direct labor hours expected per unit 2. direct labor cost = direct labor required for production * hourly rate

The financial budgets are prepared before the operating budget t/f

False

budgeted direct material required steps (3)

1. budgeted direct materials required for production = budgeted production volume * direct material quantity expected per unit 2. direct material quantity to be purchased= (materials required for production + desired ending materials inventory) - estimated beginning materials inventory 3. budgeted direct materials = direct material quantity to be purchased * unit price to be purchased

if AR is collected 10% in the month of the sale and 90% the next month. sales are 100 and 2000 cash collected in month 2 is

110 200*10% + 100*90%= 110

budgeted sales in units are 500, beg inv is 50, desired ending inv is 100, how many units will be produced

550 500 -50 =450 + 100

After the sales budget is prepared the capital expenditures budget is normally prepared next t/f

False

Which of the following estimate the number of units be manufactured to meet budgeted sales in desired inventory levels

Production budget

The budgetary unit of an organization that is led by a manager, who has the authority and responsibility for achieving the units. Goals is known as a.

Responsibility center

The first budget customarily, prepared as a part of an entities. Master budget is the. Budget.

Sales

The primary budget in a non-manufacturing business is the

Staffing budget

which of the following stays the same in total as the number of units produced changes - electricity per KWH to operate factory equipment - direct materials cost - wages of assembly worker - Straightline depreciation on factory equipment

Straightline depreciation on factory equipment

Budgeting affects which of the following management process functions Strategic planning and measurement only Measurement and evaluation only Strategic planning and control only Strategic planning measurement evaluation and control

Strategic planning measurement evaluation and control

If division and Coorperate expects to sell 200,000 units in the current year desires ending inventory of 24,000 units and has 22,000 units on hand as of the beginning of the year the budgeted volume of production for the year is 202,000 units t/f

True

The budget of direct materials purchases is based on the sum of one the materials needed for production into the desired, ending materials inventory less three, the estimated beginning materials inventory t/f

True

a flexible budget

adjusts the budget changes in activity level *the government almost always used a static budget

which of the following would be ignored when preparing the cash budget

amortization expense depreciation expense

COGS budget includs

direct materials purchased budget, direct labor cost budget, factory overhead budget

factory overhea cost budget

estimates the cost for each item of factory overhead needed to support budgeted production

total units produced formula

expected units to be sold + desired units in ending inventory ### - estimated units in beginning inventory = ### total units to be produced

budgets are normally only used by operating for profit t/f

false

continuous budgeting means managers estimate sales production other operating data as if operations were just started t/f

false

financial budgets are prepared before the operating budgets t/f

false

financial budgets include the cash budget, capital expenditures, and the budgeted income statement t/f

false *does not include budgeted income statement

which of the following budgets allows for adjustments in activity level

flexible budget

which of the following is an integrated set of operating and financial budgets for a period of time

master budget

the master budget begin with preparing the __________________ _________________ which from the budgeted ____________ _______________________

operating budgets income statement

a report that predicts the companies assets, liabilities, as the end of the budget period is

pro forma balance sheet *pro forma: as if * similar to normal balance sheet, just with estimated amounts

steps of constructing a flexible budget

step 1. identify the relevant activity levels step 2. identify the fixed and variable cost components of the costs being budgeted Step 3. prepare the budget for each activity level by multiplying the variable cost per unit by the activity level and then adding the monthly fixed cost

budgeting affects which of the following managment process functions

strategic planning, measurement, evaluation, and control

budgets affect the following management processes

strategic planning, measurement, evaluation, and control

budgeting is done by almost all entities whether a for profit or not for profit entity t/f

true

budgets set too tight cause demotivation and therefore are less effective for planning and controlling t/f

true

goal conflict can be avoided if budget goals are carefully designed for consistency across the entire organization t. f

true

t/f part of the cash budget is based on information from the capital expenditure udget

true

the cash budget uses the sales budget, the budgets for manufacturing and operating expenses and the cap-ex budget t.f

true

which of the following generally provides the most useful reports for controlling cots - variable - absorption - both are equal - neither

variable *fixed costs generally not in your control so use variable costing to control costs that can VARY, absorption measures fixed and var