ACCT 610

Operating expense budgets are organized by:

cost behavior patterns

ABC Company has identified the following information related to its cash budget for October: Beginning cash balance = $20,000; Cash receipts from sales = $100,000; Cash payments for purchases = $50,000; Proceeds from borrowings = $25,000; Payments for other manufacturing expenses = $40,000; Payments for operating expenses = $35,000; Dividend payment = $10,000; Ending cash balance = $_____.

10000

A firm's budgeted sales for the month of September is 10,000 units, for the month of October is 12,000 units, and for the month of November is 14,000 units. The budgeted ending inventory must equal 25 percent of the next month's sales. Based on the given information, the production budget for the month of October is _____ units.

12,500

ABC Company's production standards for Product Z indicates that each unit requires 6 hours of direct labor time. Union labor wage rates are currently $24 per hour. ABC's production manager earns a salary of $1,000 per week overseeing all units produced. The standard direct labor cost for Product Z is $_______ per unit.

144

ABC Company's budgeted production is as follows: January = 5,000 units; February = 8,000 units. Each unit produced requires 3 pounds of raw material. January beginning inventory = 3,000 pounds. Budgeted ending inventory must equal 20 percent of next month's production. Raw material purchases budgeted for January would equal _____ pounds.

16,800

Arrange the cash budget elements and mathematical operations in the correct order as used in the preparation of a cash budget.

Beginning cash balance plus Cash Receipts minus Cash Disbursements equals - Ending cash balance

ABC Company pays for raw material purchases as follows: 75 percent in the month of purchase; 25 percent in the subsequent month. Budgeted purchases are as follows: June = $56,000; July = $60,000. Cash disbursement forecast for the purchases budgeted for the month of June will be anticipated as follows: June = $___ . July = $____.

Blank 1: 42,000 or 42000 Blank 2: 14,000 or 14000

ABC Company collects sales as follows: 30 percent in the month of sale, 60 percent in the next month, and 8 percent in the second month after the sale; 2 percent is uncollectable. Budgeted sales are as follows: March = $22,000; April = $19,000; May = $23,000. Budgeted cash collections for March sales will be anticipated as follows: March = $______ . April = $______ . May = $______.

Blank 1: 6,600 Blank 2: 13,200 Blank 3: 1,760

The ________ (sales/production) budget depends on the ________(sales/production) budget, and the raw materials budget depends on the ________ (sales/production) budget.

Blank 1: production Blank 2: sales Blank 3: production

Identify a true statement about a past experience standard.

It is not likely to provide much incentive for improvement.

Identify the true statements about fixed overhead.

Its per unit rate is used only to allocate fixed overhead to individual products for product costing. It is expressed as a total cost per accounting period for planning and control purposes.

Which of the following management needs does a cash budget specifically support?

Know when excess cash is available to invest Prepare a budgeted balance sheet Anticipate need for short-term borrowing

Identify the true statements about budgeting techniques.

Manufacturing firms can develop these techniques to meet the needs of other functional areas, such as the research and development departments. The service sector uses these techniques for nonfinancial measures, such as the utilization of productive capacity.

Identify the items that would be included in a cash budget.

Proceeds form a short-term loan Payment of dividends Sale of common stock Collection of sales

Which of the following lists the budgets of a manufacturing firm in the correct sequence based on the budget dependencies?

Sales budget, production budget, raw materials budget

The cost of goods sold budget summarizes changes in the Finished Goods Inventory account for a manufacturing firm as indicated by the results of which of the following budgets?

The direct labor budget The raw materials purchases budget The manufacturing overhead budget The production budget The sales budget

Identify the budgets that must be complete before the preparation of a budgeted income statement.

The sales budget The operating expense budget The production budget The cost of goods sold budget

Identify the elements used to prepare a production budget.

The sales budget The quantity of beginning inventory The inventory policy The quantity of ending inventory

A standard cost or production standard that is achievable under actual operating conditions is known as an ______ (ideal/attainable/average) standard.

attainable

The development of the operating budget is complete when the budgeted _____________ ____________(balance sheet/income statement) is complete.

balance sheet

Another term used to describe a rolling budget time frame is a __________ budget.

continuous

A fixed cost that can be raised or lowered in the short-run planning of an organization is known as a:

discretionary cost

An organization's master budget is also referred to as its __________ budget.

operating

Organizations require a minimum cash balance in the cash budget in order to:

provide a cushion that can absorb forecast errors

When a budget is prepared for several periods in the future and then revised several times prior to the budget period, it is called a __________ budget.

rolling

The key information necessary for developing an organization's operating budget is found in the:

sales forecast

The key budgeting element on which the entire operating budget is based is the:

sales/revenue forecast

When a budget is prepared only once prior to the budget period, it is called a __________ budget.

single-period

A budgeting process that starts with a clean slate and involves justifying resource requirements based on an analysis and prioritization of organizational objectives is called _____ budgeting.

zero-based

ABC Company currently pays $5 per gallon for raw material X and $3 per pound for raw material Y. Product Z production standard requires 5 gallons of raw material X and 10 pounds of raw material Y. The standard raw material cost for Product Z is $_____ per unit.

55

The operating budget requires the preparation of many detailed budgets and the budgeted financial statements. Identify the sequential order in which the budgeted financial statements must be prepared. Instructions

Budgeted income statement Budgeted cash flow statement Budgeted balance sheet

Identify the expense items that would be included in the operating expense budget.

Delivery expense Sales commissions Depreciation of office equipment Advertising expense

Standard unit costs are comprised of two elements, the cost per unit of input and the quantity of input allowed for each unit. Identify those elements of product cost for which standard costs are developed.

Direct labor Fixed overhead Raw materials Variable overhead

True or false: A cash receipts analysis of customer payment patterns will always reflect the collection of 100 percent of the sales dollars identified in the sales forecast.

False

Identify a true statement about variable overhead.

It is expressed in terms of physical measure, such as machine hour, that reflects the causes of overhead expenditures.

A standard cost or a production standard that assumes maximum operating condition efficiency at all times is known as an ______ (ideal/attainable/average) standard.

ideal

A production standard that assumes maximum operating conditions and 100 percent efficiency at all times is called a(n):

ideal standard

Standard costs are comprised of two elements, the quantity of _______ (input/output) and the cost per unit of ______ (input/output).

input input

A budgeting process that involves the input and negotiation of several layers of management describes the management philosophy of __________ budgeting.

participative

A raw materials purchases budget is completed immediately after preparing the __________ budget.

production

While preparing a budget, there are some estimates that must be made more than a year in advance. This particular aspect is not considered while preparing a _____.

single-period budget

When managers submit budget requests that include allowances for contingencies that are higher than what costs are really expected to be, the intent is to create budget ________ .

slack

The development of the budgeted balance sheet is possible when:

the cash budget is complete

The development of the budgeted income statement is possible when:

the operating expense budget is complete

A cash disbursement forecast is impacted by the sales forecast because _____.

the sales forecast impacts the finished goods budget and the raw materials purchases budget

An authoritarian approach to budgeting is another way to describe the management philosophy of __________ budgeting.

top-down

True or false: In addition to manufacturing companies, budgeting techniques can be very useful to many other types of organizations.

True

ABC Company collects sales as follows: 30 percent in the month of sale, 60 percent in the next month, and 8 percent in the second month after the sale; 2 percent is uncollectable. Budgeted sales are as follows: March = $22,000; April = $19,000; May = $23,000. Budgeted cash collections for May are $ __________

20060

A firm's budgeted production for the month of May is 6,000 units and for the month of June is 10,000 units. Each unit produced requires 5 pounds of raw material. The budgeted ending inventory must equal 30 percent of next month's budgeted production. If the raw materials purchases budgeted for the month of May is 25,000 pounds, the beginning inventory for the month of May is _____ units.

4000

ABC Company pays for raw material purchases as follows: 75 percent in the month of purchase; 25 percent in the subsequent month. Budgeted purchases are as follows: June = $56,000; July = $60,000. Budgeted cash payment to be made in the month of July is $_______

59000

ABC Company requires a minimum cash balance of $15,000 at the end of each month and has identified the following information related to its cash budget for October: Beginning cash balance = $20,000; Cash receipts = $125,000; Cash disbursements = $135,000; Required short-term borrowing = $________. Ending cash balance = $_______.

Blank 1: 5,000 or 5000 Blank 2: 15,000 or 15000

Identify the true statements about the cost of goods sold budget.

For a manufacturing firm, the cost of goods sold budget is dependent on the raw materials budget, the direct labor budget, and the manufacturing overhead budget. For a merchandising firm, the cost of goods sold budget is dependent on the purchases budget.

A standard that is based on historical data and includes all the inefficiencies that have crept into the operation over time is known as:

a past experience standard

The cash budget is especially important to an organization in order to:

anticipate a need to secure a short-term bank loan

In comparison to ideal standards, attainable standards _____.

are more likely to motivate employees

ABC Company's budgeted sales are as follows: July = 3,000 units; August = 2,500 units. June ending inventory = 1,200 units. Budgeted ending inventory must equal 40 percent of next month's budgeted sales. Production budgeted for July would equal ______ units.

2,800

Which of the following are important factors to consider when preparing a sales forecast?

New competitors in the market The state of the economy Seasonal demand variations Market research information

In addition to developing the standard cost for a unit of product, organizations may determine standards for other activities. Identify the appropriate activities that can be expressed as standards.

Quality control measures Machine usage and performance Customer service response times

Identify the key factors that will lead to an accurate cash receipt forecast.

The accuracy of the sales forecast The accuracy of the estimated collection patterns for sales

Identify the keys to estimating an accurate amount of cash to be disbursed from the raw material purchases.

The accuracy of the sales forecast The accuracy of the estimated payment patterns for purchases The accuracy of the production budget

Identify the true statements about standards.

They can be developed and used for qualitative goals in both manufacturing and service organizations. They can be developed and used for planning and control of both product costs and period costs.

True or false: Managers have the decision option to reduce discretionary fixed costs during the annual budget planning process.

True

A standard cost best describes:

a budget for a single unit component of a product or service

Developing a standard cost to be used for planning and control purposes is like developing:

a budget for a single unit of production