Managerial Accounting - Chapter 8: Master Budget

Risks of not knowing in advance how much labor time will be needed throughout the budget period includes ______.

-low employee morale -erratic layoffs -labor shortages

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

1. Selling and administrative expense budget 2. Production budget

Master budget schedules ______.

1. are based on estimates and assumptions. 2. answer several key questions for a company

When profit targets are set by top managers, ______.

1. goals may be unrealistically high 2. too much slack may be allowed

Highly achievable budget targets ______.

1.are used in most companies 2.may generate greater management commitment to the budget 3.may help build manager confidence

Budgets ______.

1.coordinate the activities of the entire organization by integrating the plans of its various parts 2.and the budgeting process can uncover potential bottlenecks before they occur 3.define goals and objectives that can serve as benchmarks for evaluating subsequent performance 4.force managers to think about and plan for the future

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

beginning

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

budget

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

budgetary slack

The final schedule of the master budget is the ______.

budgeted balance sheet

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

cash

On the cash budget, what is subtracted from total cash available to find the cash excess or deficiency?

cash disbursements

Budgets _________.

communicate management's plan throughout the organization

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

control/controlling

The ending finished goods inventory budget computes the ______ units.

cost of unsold

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

create the budget with a budgeting assumption tab

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

direct labor

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

True or false: For most companies a single, annual cash budget is sufficient.

false

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

financing

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

If inventory levels are ______, the result can lead to lost sales or last-minute, high-cost production efforts.

insufficient

The cash budget ______.

is prepared near the end of the master budget process

Using budgeting assumptions when preparing the master budget, ______.

makes it easier to answer "what-if" questions

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

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

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

master

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

may still have cash deficiency issues during the year

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

merchandise purchase

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

merchandise purchases

A perpetual budget keeps managers focused at least one year ahead by adding one ______.

month to the end of the budget as each month comes to a close

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

motivation will suffer

Facing labor shortages or having to hire or lay off workers at awkward times are consequences of ______.

neglecting to budget the amount of labor time that will be needed

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

participative

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

participative

A budget that keeps managers focused at least one year ahead is a continuous or______________budget

perpetual

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

perpetual or roling

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

planning

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

planning

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

produced

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 is prepared right after the sales budget.

production

The budgeted income statement does NOT rely on information from the ______ budget. Multiple choice question. production

production

The direct materials budget directly relies on the ______ budget.

production

in a manufacturing company, the _____ budget is used to determine the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

production

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

roling

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

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

sales

The first step in the budgeting process is the preparation of the________________budget

sales or revenue

To calculate total sales on the sales budget, multiply budgeted sales in units by ______.

sales price per unit

Recognizing individuals at all levels of the organization as team members whose views and judgments are valued by top management is an advantage of ______.

self-imposed budgeting

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

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

sold

A likely consequence of excessive inventory levels is ______.

storage problems

A company can consider making investments or repay outstanding principal and interest when ______.

the cash excess is greater than the minimum required cash balance

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

too easy to attain

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

top managers

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 Reason: Variable overhead (20,000 × $5.00) $100,000 + fixed overhead $25,000 - non-cash (depreciation) expenses $7,000 = $118,000

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.

$82500 Reason: Units to be produced × time per unit × rate per hour = 11,000 × 1/2 × $15 = $82,500

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

Davidson Corporation's master budget shows expected direct labor cost of $90,000 for the month of May. During May, the company's expected sales equal 12,000 units and expected production is 15,000 units. If each unit requires 1/2 hour of direct labor, the budgeted direct labor rate is $

12 or twelve

S&P Enterprises has scheduled direct material purchases of $100,000 in January, $130,000 in February and $150,000 in March. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of February.

122500 Reason: February is the month after January so, the company will be paying for 75% of February purchases + 25% of January purchases.: February purchases ($130,000 x 75%) $97,500 + January purchases ($100,000 x 25%) $25,000 = $122,500.

Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ______ units.

13000

S&P Enterprises has scheduled direct material purchases of $120,000 in April, $140,000 in May and $160,000 in June. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of May.

135000 Reason: May is the month after April so, the company will be paying for 75% of May purchases + 25% of April purchases.: May purchases ($140,000 x 75%) $105,000 + April purchases ($120,000 x 25%) $30,000 = $135,000

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 for the______ budget

1st, 4th

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.

25000 Reason: $35,000 + $50,000 - $80,000 = $5,000. Since they can borrow in increments of $10,000 they must borrow $20,000 to meet or exceed the minimum cash balance making the ending balance $25,000.

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

A detailed plan for the future that is usually expressed in formal quantitative terms is ______.

A budget

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

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

Direct labor Direct materials Manufacturing overhead

True or false: Challenging but highly achievable budgets increase the likelihood that lower-level managers will engage in undesirable behavior to secure their desired compensation.

False

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

False

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

n 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

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

Required production

Which of the following is needed to prepare a sales budget?

The budgeted number of units to be sold

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

True

Required borrowings on a cash budget is calculated by ______.

adding the desired ending cash balance to the amount of the cash deficiency

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

balance sheet

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

balance sheet

To prepare a budgeted balance sheet as of December 31, 2020, data is needed from the ______ December 31, 2019.

balance sheet as of