ACCT CH 21

Jeremy is the CFO of a growing company. When the company was smaller, Jeremy developed the master budget on his own with input from the CEO. Now that the company is larger, he feels that both he and the CEO are too far removed from the day-to-day operations to accurately develop a budget. What would you suggest to help Jeremy develop an effective budget?

The company should develop a budget committee to receive input from department managers for their own portion of the budget.

DIY Furnishings is planning its material purchase budget. During the month, it expects to sell 18,000 units, each of which requires 24 nails. In addition, it projects a beginning inventory of 4,000 units and a closing inventory of 4,500 units. If the standard material cost is $0.02 per nail, how much is the company's purchasing budget for nails for the month?

$8,880 Units to be produced = Sales + Ending inventory - Beginning inventory = 18,000 + 4,500 - 4,000 = 18,500. budgeted nail quantity=18,500 * 24 nails= 444,000 nails total direct material budget for nails= 444,000 * $0.02 = $8,880

In the Progressa Company required production for June is 44,000 units. To make one unit of finished product, three pounds of direct material Z are required. Actual beginning and desired ending inventories of direct material Z are 100,000 and 110,000 pounds, respectively. How many pounds of direct material Z must be purchased?

142,000

The Brenneman Company's direct materials budget shows total cost of direct materials purchases for January $125,000, February $150,000 and March $175,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for March are

165,000

On January 1, Scarlett Company has a beginning cash balance of $21,000. During the year, the company expects cash disbursements of $170,000 and cash receipts of $145,000. If Scarlett requires an ending cash balance of $20,000, the Scarlett Company must borrow:

24,000

Katie's Cleaning Service has cleaning contracts for 15 apartments, 45 family homes, and 25 office buildings. She estimates that an apartment takes 4 hours to clean, a home takes 6 hours to clean, and an office building takes 10 hours to clean. Katie pays her cleaning staff $12.50/hour. If each location is cleaned once per week, how much does Katie need to budget for direct labor each month? Assume there are four weeks per month.

29,000

Dobbins Resources pays sales commissions of $2 per unit and shipping costs of $0.75 per unit. If Dobbins expects to sell 12,000 units in the third quarter, what will their total variable expenses be?

33,000

James Company determines that 13,500 pounds of direct materials are needed for production in July. There are 800 pounds of direct materials on hand at July 1 and the desired ending inventory is 700 pounds. If the cost per pound of direct materials is $3, what is the budgeted total cost of direct materials purchases?

40,200

The Crawford Company has 3,000 units in beginning finished goods. The sales budget shows expected sales to be 12,000 units. If the production budget shows that 14,000 units are required for production, what was the desired ending finished goods?

5,000

The Burlington Company has 12,000 units in beginning finished goods. If sales are expected to be 60,000 units for the year and Burlington desires ending finished goods of 15,000 units, how many units must Burlington produce?

63,000

who has responsibility for coordinating the preparation of the budget

budget committee

Place the following four budgets into their correct sequence of preparation: 1. Production budget 2. Cash budget 3. Budgeted income statement 4. Direct labor budget

1, 4, 3, 2

Toledo Manufacturing has the following variable overhead costs: Indirect materials: $2.18/hour Indirect labor: $3.26/hour Utilities: $0.90/hour Maintenance: $0.33/hour Direct labor hours: 14,500 If Toledo decides that they need to increase their indirect materials to $2.25 per hour, how much will this increase their total variable costs?

1015

City Mission is a not-for-profit organization that provides hot meals, living quarters, and showers for homeless people. Based on their yearly budget, they expect to spend $450,000 on food expenses, $350,000 on housing expenses, $280,000 on staff salaries, $90,000 on utilities, and $118,000 on other expenses. How much will City Mission need to raise in donations?

at least $1,288,000

In comparing the production budget to the actual production costs, the CFO found that production's expenses were 14% higher than expected. Because they were able to compare actual to budgeted financial numbers, the CFO and the production manager worked out a way to reduce production expenses. In this situation, the budget served as a(n)

early warning sign of problems

Sotelo Restaurants produced a one-year budget. At the end of the year, top managers and executives were disappointed to find that they had spent 8% more than they had planned without a compensating increase in sales. The most likely reason for this is that

lower-level managers felt the budget was unfair.

Philip is a manager who oversees raw materials ordering, inventory levels, employee efficiency and productivity, and assembly line maintenance. Which of the following budgets would Philip most likely help develop?

manufacturing overhead budget

Ellen is a manager who helps develop sales promotions, targets customers for upselling, and searches for potential new customers. Which of the following budgets would Ellen most likely help develop?

sales budget

Rose Company is preparing its direct labor budget for May. Projections for the month are that 8,350 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $9, what is the total budgeted direct labor cost for May?

225,450

what represents the flow of budget data under participative budgeting?

Department Manager to Plant Manager to Vice President of Production

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

It is used to review progress rather than as a basis for control.

Sarah is trying to prepare the manufacturing budgets. She believes that the manufacturing overhead budget will be the most complicated, so she decides to tackle it first before the direct materials and direct labor budgets. Do you think this is the best way to prepare the budgets? Why or why not?

No, because the manufacturing overhead budget depends on the direct labor budget, so the direct labor budget needs to be prepared first.

A company that uses the top-down approach rather than a participative process will feel the impact of its budgeting process mostly in which form?

lack of commitment of operating managers to the final budget

In order to assure better management acceptance, the flow of input data for budgeting should begin with the

lower levels of management.