Chapter 8 Smart Book

Which of the following is needed to calculate raw materials to be purchased on the direct materials budget? (Select all that apply) A. Raw materials required per unit B. Ending finished goods inventory C. Beginning inventory of raw materials D. Budgeted unit sales

Raw materials required per unit Beginning inventory of raw materials

A detailed plan for the future that is usually expressed in formal quantitative terms is a(n) ________.

budget

Edison Corporation's variable manufacturing overhead rate is $5.00 per direct labor-hour. Total budgeted fixed overhead is $25,000 per month. The $25,000 per month includes $7,000 in depreciation expense. Total budgeted direct labor-hours for the month of July is 20,000. Based on the month of July only, the predetermined overhead rate is $____.

$6.25 $25,000/20,000+$5.00= $6.25

The master budget culminates in a _____ budget, a budgeted income statement and a budgeted balance sheet.

Cash

When profit targets are set up by top managers, _________________ (Select all that apply) A. strategic direction may be insufficient B. employee motivation will increase C. goals may be unrealistically high D. too much slack may be allowed E. Waste may occur

Goals may be unrealistically high Too much slack may be allowed Waste may occur

The purpose of a budget should be to (Select all that apply) A. Isolate areas needing attention B. Establish Goals C. Measure operating results D. Pressure managers to meet targets

Isolate areas needing attention Establish goals Measure operating results

A company with adequate cash balances at the beginning and end of the year , ___________

May still have cash deficiency issues during the year

Borrowing money is required whenever ________

There is a cash deficiency The cash excess is less than the minimum required cash balance.

The receipts section of the cash budget lists ________

all cash inflows, except from financing

In a manufacturing company, the ____________ budget details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories.

direct materials

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted ______ _________

income statement

The amount of goods to be acquired from suppliers during the period is shown on the __________ budget.

merchandise purchases

Because all other parts of the budget depend on it, if the ________ budget is inaccurate, the rest of the budget will be inaccurate

sales

The first step in the budgeting process is preparing the __________ budget.

sales

A merchandise purchasing budgeting is usually accompanied by a(n) _________.

schedule of expected cash disbursements.

A manager cannot complain that the budget was unrealistic and impossible to meet when a(n) __________-_________ budget is in place.

self-imposed

In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the ________ budget.

selling and administrative

The cost of unsold units is computed on the _________ budget.

ending finished goods inventory.

A budget that keeps managers focused at least one year ahead is a continuous or ___________ budget.

perpetual

In a manufacturing company, the ______________ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

Madison Corporation's expected beginning cash balance is $35,000. Cash collections are budgeted at $50,000 and cash disbursements are estimated to be $80,000. The minimum required cash balance is $20,000 and the company can borrow as much as needed in increments of $10,000. Calculate the expected ending cash balance for the month. A. $20,000 B. $5,000 C. $25,000

$25,000 ($35,000+$50,000-$80,000= $5,000.) Since they can borrow in increments of $10,000 they much borrow $20,000 to meet or exceed the minimum cash balance making the ending balance $25,000

Carter Production, Inc.'s required production for the first six month of the year is as follows. Month || Required Production January 50,000 February 70,000 March 85,000 April 105,000 May 110,000 June 120,000 Each unit requires two pounds of material. Given a desired ending inventory of 20% of the next month's production needs, the pounds of material to be purchased in April is: A. 210,000 B. 106,000 C. 212,000 D. 208,000

212,000 April production needs (105,000 x 2) 210,000 + Ending inventory (20% of May production needs: 110,000 x 2 x 20%) 44,000 - Beginning inventory (20% of April) 42,000 = 212,000 pounds

The cash budget includes four major sections: receipts, disbursements, the cash excess or deficiency, and _______

cash

The receipts, disbursements, excess or deficiency, and financing section are all parts of the __________ budget.

cash

The ending finished goods inventory budget computes the _______ units.

cost of unsold

Budgetary slack occurs when a manager submits a budget that is ____________

too easy to attain

Which of the following budgets are needed to calculate unit production costs? (Select all that apply) A. Manufacturing overhead B. Direct Labor C. Selling and administrative D. Cash E. Direct Materials

MOH Direct labor Direct materials

Limitations of self-imposed budgeting include __________. (Select all that apply) A. Suboptimal budget recommendations B. Budgetary slack C. Unrealistic profit targets D. A broad strategic perspective

Suboptimal budget recommendations Budgetary slack

Highly achievable budget targets ________ (Select all that apply) A. May help build manager confidence B. Should not be used when budgets are tied to bonuses C. May increase the likelihood that managers will engage in undesirable behavior D. Are used in most companies E. May generate greater management commitment to the budget.

May help build manager confidence Are used in most companies May generate greater management commitment to the budget

Under the concept of ___________ ____________, managers should only be held accountable for items they can actually control.

responsibility accounting

A detailed schedule showing the expected sales for the budget period is presented on the ________ budget

sales

Budgets __________. (Select all that apply) A. And the budgeting process can uncover bottlenecks before they occur. B. Provide each department with the same amount of money to spend so that all departments are treated fairly. C. Coordinate the activities of the entire organization by integrating the plans of its various parts D. Force managers to think about and plan for the future E. Define goals and objectives that can serve as benchmarks for evaluating subsequent performance.

A. And the budgeting process can uncover bottlenecks before thy occur. C. Coordinate the activities of the entire organization by integrating the plans of its various parts D. Force managers to think about and plan for the future E. Define goals and objectives that can serve as benchmarks for evaluating subsequent performance.

Which of the following is not found in the financing section of the cash budget? A. Repayments B. Borrowings C. Interest D. Cash deficiency

Cash deficiency

Risks of not knowing in advance how much labor time will be needed throughout the budget period includes _________ (Select all tat apply) A. Erratic layoffs B. Labor shortages C. Low employee morale D. Excessive inventory levels

Erratic layoffs Labor shortages Low employee morale

True or False: Control involves developing goals and preparing various budgets to achieve those goals.

FALSE

What is usually the major source of receipts in the receipts section of the cash budget? A. Interest received B. Insurance proceeds C. Gains D. Sales

Sales

Which of the following budgets are directly based on information from the sales budget? (Select all that apply) A. Selling and administrative expense budget B. Direct labor budget C. Production budget D. Direct materials budget

Selling and administrative expense budget Production budget

A 12-month budget that rolls forward one month (or quarter) as the current month (or quarter is completed is called a(n)___________ or perpetual budget.

continuous

Gathering feedback to ensure that the plan is being followed is referred to as _____________

control

In a manufacturing company, the ___________ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

The direct labor budget is based directly on the __________ budget.

production

The number of working hours required to salsify the production budget is shown on the _______ _______ budget.

Direct labor

Payments for direct materials, direct labor, and manufacturing overhead costs are all listed in the ________ section of the cash budget.

disbursements

All costs of production other than direct materials and direct labor are shown on the ____________ _______________ budget.

manufacturing overhead

A number of separate but interdependent budgets formally lay out a company's sales, production, and financial goals are contained in the ________ budget.

master

Developing goals and preparing various budgets to achieve those goals is part of the _______ process.

planning

Which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured? A. Budgeted balance sheet B. Budgeted selling and administrative expenses C. Budgeted income statement D. Manufacturing overhead budget

Budgeted income statement

Working hours required to satisfy the production budget are shown on the ________ budget.

direct labor

A budget that is prepared with the full cooperation of managers at all levels is a self-imposed or __________ budget.

participative

Developing goals for the budget is _______, while ________ involves steps taken to ensure that steps towards meeting the goal are being followed.

planning control

Variable selling and administrative expenses are calculated by multiplying the budgeted units ________ by the variable selling and administrative expense per unit.

sold

In companies that do not use a self-imposed budgeting process, profit targets are generally set by ________

top managers