Chapter 8 SmartBook - ACCT 2302

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

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 first step in the budgeting process is preparing the ______ budget.

sales

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

top managers

Many of the schedules in a master budget are based on a variety of management estimates and assumptions.

true

The ending finished goods inventory budget computes the cost of ______ units.

unsold

The cash budget ______.

is prepared near the end of the master budget process

If a budget initiated by top management has targets that are set too high, ______.

motivation will suffer

More accurate estimates and higher motivation are generally the result of using a(n) ______ budget.

participative

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

participative or participatory

Developing goals and preparing various budgets to achieve those goals is part of ______,

planning

Budgetary slack occurs when a manager submits a budget that is ______.

too easy to attain

When profit targets are set by top managers, ______.

too much slack may be allowed goals may be unrealistically high

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

During May, Davidson Corporation's expected sales equal 12,000 units and expected production is 15,000 units. If each unit requires 1/2 hour of direct labor and the direct labor rate is $12.00 per hour, the expected total direct labor cost for the month of May is $_____.

90,000

Which of the following is needed to calculate raw materials to be purchased on the direct materials budget?

Beginning inventory of raw materials Raw materials required per unit

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

direct materials

Because it is needed for the schedule of expected cash collections, the annual master budget file includes the _____ _____ from last year.

balance sheet

To prepare a budgeted balance sheet as of December 31, 2021, data is needed from the ______ December 31, 2020.

balance sheet as of

A budgeted balance sheet is developed using data from the ______ of the budget period and data contained in the various schedules.

beginning

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

control

The number of working hours required to satisfy the production budget is shown on the _____ _____ budget.

direct labor

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

direct labor

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

manufacturing overhead

The calculation of unit product cost requires information from the ______ budget

manufacturing overhead

An integrated business plan that formally lays out the company's goals is called the ______ budget.

master

In a manufacturing company, the _____ budget is used to determine the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

production

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

master, static, or planning

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

may still have cash deficiency issues during the year

A detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period is called a(n) _____ _____ budget.

merchandise purchases

The first line of the direct labor budget consists of the budgeted units expected to be ______ during the period.

produced

Borrowing money is required whenever ______.

the cash excess is less than the minimum required cash balance there is a cash deficiency

The annual master budget file includes the ______ from last year because it is needed for the schedule of expected cash collections.

balance sheet

Budgets ______.

communicate management's plan throughout the organization

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

manufacturing overhead

The direct materials budget directly relies on the ______ budget.

production

A manager cannot complain that the budget was unrealistic and impossible to meet when a(n) _____ - _____ budget, or a participative budget, is in place.

self imposed

Budgeted expenses for areas other than manufacturing are shown on the ______ budget.

selling and administrative

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

selling and administrative

A company can repay outstanding principal and interest when ______.

the cash excess is greater than the minimum required cash balance

Which of the following budgets are needed to calculate unit product costs?

Direct materials Direct labor Manufacturing overhead

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. Budgeted cash disbursements for manufacturing overhead for July equals ______.

$118,000

ABC, Inc.'s expected sales for the first six month of the year are as follows. Month Expected Sales January $120,000 February $150,000 March $160,000 April $200,000 May $220,000 June $250,000 Experience has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of March.

$156,000

ABC, Inc.'s expected sales for the first six month of the year are as follows. Month Expected Sales January $120,000 February $150,000 March $160,000 April. $200,000 May $220,000 June $250,000 Experience has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of April.

$184,000

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.

$25,000

Which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?

Budgeted income statement

What is added to the variable selling and administrative expenses to get the total selling and administrative expenses?

Fixed selling and administrative expenses

What is subtracted from total budgeted selling and administrative expenses to determine the cash disbursements for selling and administrative expenses?

Non-cash expenses

In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget?

Production

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget?

Production

What number does the direct materials budget take directly from the production budget?

Required production

What is usually the major source of receipts in the receipts section of the cash budget?

Sales

Which of the following budgets are directly based on information from the sales budget?

Selling & administrative expense Production

Identify the true statements about budgets.

They define goals and objectives that can serve as benchmarks for evaluating subsequent performance. They coordinate the activities of the entire organization by integrating the plans of its various parts. The budgeting process can uncover potential bottlenecks before they occur. They encourage managers to think about and plan for the future.

Master budget schedules ______.

answer several key questions for a company are based on estimates and assumptions

If a cash budget is prepared by quarter, the beginning cash balance for the year is the same as the beginning cash balance for the _____ quarter and the ending cash balance for the year is the same as the ending cash balance for the _____ quarter.

first fourth

Many managers believe that being empowered to create their own self- _____ budgets is the most effective method of budget preparation.

imposed

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

Using budgeting assumptions when preparing the master budget, ______.

makes it easier to answer "what-if" questions

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

sales

Both the production and selling and administrative expense budgets are prepared using information directly from the _____ budget.

sales

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

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

ending finished goods inventory

Control involves developing goals and preparing various budgets to achieve those goals.

false

For most companies a single, annual cash budget is sufficient.

false

The amounts under the Year column in the cash budget always equal the sum of the amounts for the months or quarters of the budget.

false

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

merchandise purchases

Sperling Company's master budget shows expected sales of 10,000 units and expected production of 11,000 units for the month of March. Each unit requires 1/2 hour of direct labor. The direct labor rate is $15.00 per hour. Calculate the expected total direct labor cost for the month of March.

$82,500

When a manager creates a budget that is too easy to attain, ______ occurs.

budgetary slack

When creating an Excel budget and performing what-if analysis, it is generally easiest to ______.

create the budget with a budgeting assumption tab