SB Ch 8 Budgeting
Managers are kept in continuous planning mode, always looking into the future, when a continuous or ______budget approach is used.
rolling
Managers prepare a selling and administrative budget based on the ________ budget.
sales
Managers prepare a selling and administrative budget based on the _________ budget.
sales
The first step in the process of preparing the master budget is the ______ budget or forecast.
sales
Which of the following is NOT included on a budgeted cash payments budget? -Depreciation -Payments for raw materials -Production in units -Cash paid for selling and administrative expenses
Production in units
Company objectives are translated into financial terms in a(n) _____________.
budget
All of the operating budgets are combined to form a budgeted_________ ___________ .
income; statement
Long-term objectives are goals ______.
managers want to achieve in 5 to 10 years
True or false: The sales budget is based on the production budget.
False
Which of the following is needed to prepare a sales budget? -Desired ending inventory of raw materials -Beginning inventory of finished goods -The budgeted number of units to be sold -Desired ending inventory
The budgeted number of units to be sold
Budgeted cost of goods sold is based on ______. -actual sales -expected production -expected sales -actual production
expected sales
Managers must try to find the "just-right" level of difficulty in setting budgetary goals so they ______.
have motivating effects on employee behavior
Each component of a(n) ________ budget is based on or provides input for another component.
master
The amount of goods to be purchased from suppliers during the period is shown on the ______ budget.
merchandise purchases
The pro-forma income statement is based on the combined ______ budgets.
operating
The pro-forma income statement is based on the combined ______ budgets. -master -operating -financial
operating
The production budget is based upon the ________budget.
sales
The production budget is based upon the _____budget.
sales
When creating the master budget, the ______ budget is prepared first -cash -direct materials -production -sales
sales
The budget that shows the budgeted expenses for areas other than manufacturing is the ______________ and ________ expense budget.
selling administrative
Pastoria Enterprises has scheduled raw 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
$122,500
The manufacturing overhead budget includes ______.
-indirect manufacturing costs -depreciation on production equipment
Which of the following statements is true? -Most components of a master budget stand on their own. -The master budget may be prepared in any order. -Understanding the interrelationships of individual budgets is the key to developing a master budget. -The first step in preparing the master budget is a budgeted balance sheet.
Understanding the interrelationships of individual budgets is the key to developing a master budget.
Managers must justify their budget each year by starting from scratch under the _______-_____ budgeting approach.
Zero-Based
Budgets that are most likely to motivate employees _____.
are tight but attainable
A detailed document that identifies resources and expenditures that will be required over a limited time (typically a year) is a(n) ______.
budget
The final step in the master budgeting process is to prepare the ______.
budgeted balance sheet
Total sales on the sales budget equal budgeted unit sales multiplied by ______. -gross margin percentage -budgeted units to be produced -budgeted cost of goods sold -budgeted sales price per unit
budgeted sales price per unit
The operating budgets feed directly into the ______________ ______________ , which then feeds directly into the budgeted balance sheet.
cash budget
Budgets ______.
communicate management's plan throughout the organization
A company's planned profit is shown on the budgeted _____________ _____________ .
income statement
All of the operating budgets are combined to form a budgeted ______________ ____________ .
income statement
All costs of production other than direct materials and direct labor are shown on the _______ _______________budget.
manufacturing or factory overhead
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. selling and administrative cash ending finished goods inventory manufacturing overhead
manufacturing overhead
To calculate the direct labor requirement for each quarter, ______. -add the number of direct labor hours required per unit to the number of units to be produced -add the number of direct labor hours required per unit to the number of units to be sold -multiply the number of direct labor hours required per unit times the number of units to be sold -multiply the number of direct labor hours required per unit times the number of units to be produced
multiply the number of direct labor hours required per unit times the number of units to be produced
The sales, production, and purchases budgets are all ______________ budgets.
operating
The sales, production, and purchases budgets are all __________budgets.
operating or operational
Employees throughout the organization have input into the budget-setting process when _______budgeting is used.
participative, bottom up, or participatory
Setting goals and objectives for the future is done during the ____________ phase.
planning
Setting goals and objectives for the future is done during the _______phase.
planning
What number does the raw materials budget take directly from the production budget? -Ending inventory of finished goods -Beginning raw materials inventory -Budgeted sales -Budgeted production
Budgeted production
What number does the raw materials budget take directly from the production budget? Ending inventory of finished goods Beginning raw materials inventory Budgeted sales Budgeted production
Budgeted production
Select all that apply Which of the following budgets are NOT needed in service firms? -Manufacturing overhead -Production -Selling and administrative -Cash
Manufacturing overhead Production
The cash budget is one of the primary ______ budgets that is prepared. -operating -pro forma -financial
financial
The cash budget is one of the primary ______ budgets that is prepared. -pro forma -financial -operating
financial
Select all that apply The sections of the cash budget are ______. -balances -financing -disbursements -collections
financing disbursements collections
All of these rely on the production budget except for the ______ budget. -direct labor -selling and administrative -manufacturing overhead -direct materials purchases
selling and administrative
Budgeted expenses for costs related to selling the product and managing the business are shown on the ______ budget.
selling and administrative
When a manager creates a budget that understates expected revenues or overstates expected expenses, budgetary __________occurs.
slack
The starting point of the planning process is management's __________plan or vision for the organization.
strategic
Planning starts with managers' ______.
strategic plan
When it comes to preparing budgets, ______. merchandising and service firms prepare identical budgets the budgets prepared for manufacturing and merchandising business are the same the budgets needed depend upon the type of firm
the budgets needed depend upon the type of firm
Budgetary slack occurs when a manager submits a budget that is ______. -vague -the same as last year's budget -too easy to attain -too difficult to attain
too easy to attain
The entire budget must be created from scratch every period when using ______ budgeting. -zero-based -participative -continuous -top-down
zero-based
ABC, Inc.'s expected sales for the first six months 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 budgeted cash receipts for the month of April. $200,000 $184,000 $208,000 $176,000
$184,000
XYZ, Inc.'s expected sales for the first six months of the year are as follows. Month Expected Sales January $100,000 February $120,000 March $140,000 April $180,000 May $200,000 June $220,000 Experience has shown that 20% of sales are for cash. Of the sales on account, 40% are collected in the month of sale and 60% are collected the month after sale. Calculate budgeted cash receipts for the month of May. $228,000 $206,400 $190,400 $212,000
$190,400
S&P's direct material cost is $6.50 per unit. The direct labor rate is $30 per hour and each unit takes 1/2 hour to produce. Variable manufacturing overhead is $2.75 per unit and total budgeted fixed overhead is $63,000. A sales commission of $5.00 is paid on each unit. If S&P expects to produce 9,000 units and sell 7,000 units, the total budgeted cost of goods sold for the year is ______. $232,750 $218,750 $281,250 $253,750
$218,750
S&P's direct material cost is $6.50 per unit. The direct labor rate is $30 per hour and each unit takes 1/2 hour to produce. Variable manufacturing overhead is $2.75 per unit and total budgeted fixed overhead is $63,000. A sales commission of $5.00 is paid on each unit. If S&P expects to produce 9,000 units and sell 7,000 units, the total budgeted cost of goods sold for the year is______. $218,750 $281,250 $232,750 $253,750
$218,750
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 $20,000 $5,000
$25,000
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. . $82,500 $75,000 $165,000 $150,000
$82,500
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. $75,000 $82,500 $165,000 $150,000
$82,500 11,000 × 1/2 × $15 = $82,500
Select all that apply Which of the following budgets are needed to calculate unit product costs? -Manufacturing overhead budget -Selling and administrative budget -Cash budget -Direct materials budget -Direct labor budget
-Direct materials budget -Direct labor budget -Manufacturing overhead budget
Select all that apply Advantages of budgeting include ______. -providing benchmarks for evaluating performance -providing lead time to solve potential problems -promoting cooperation and coordination among different areas within the organization -providing each department with the same amount of money to spend, so all are treated fairly -forcing managers to think about and plan for the future
-forcing managers to think about and plan for the future -providing lead time to solve potential problems -promoting cooperation and coordination among different areas within the organization -providing benchmarks for evaluating performance
Select all that apply Financial budgets ______. -impact the budgeted income statement -include the capital expenditures budget -include the cash budget -impact the budgeted balance sheet
-include the capital expenditures budget -include the cash budget -impact the budgeted balance sheet
Select all that apply A continuous or rolling budget ______. -is also known as a zero-based budget -keeps managers in continuous planning mode -helps avoid games at the end of a budget period -adds one period to the end of the budget as each period comes to a close
-keeps managers in continuous planning mode -helps avoid games at the end of a budget period -adds one period to the end of the budget as each period comes to a close
Select all that apply Short-term objectives ______. -need to be achieved in one year or less -are the starting point of strategic planning -are developed after the budget process -are an important component of long-term objectives
-need to be achieved in one year or less -are an important component of long-term objectives
Select all that apply When an organization uses a top-down approach to budgeting, ______. -the budget is imposed on lower levels of the organization -employees are highly motivated to meet goals -top management sets the budget -budgetary slack is often a problem
-the budget is imposed on lower levels of the organization -top management sets the budget
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 $ ________ per hour.
12
Which of the following budgets shows the company's planned profit?
Budgeted income statement
Budgeting is more important in manufacturing firms than in other types of businesses.
False
True or false: Using a participative approach to budgeting is less likely to motivate employees than using a top-down approach. True False
False
Which of the following statements is true? -The master budget may be prepared in any order. -Understanding the interrelationships of individual budgets is the key to developing a master budget. -The first step in preparing the master budget is a budgeted balance sheet. -Most components of a master budget stand on their own.
Understanding the interrelationships of individual budgets is the key to developing a master budget.
Based on all of the previous budgets, a pro-forma _____________ ________________ is prepared.
balance sheet
To calculate the cash balance before financing on the cash budget, add the ______.
beginning cash balance to the budgeted cash receipts and deduct budgeted cash payments
Managers put plans into action as part of ______.
implementing
The direct materials budget directly relies on the ______ budget.
production
The direct materials budget directly relies on the ______ budget. direct labor merchandise purchases sales production
production
The direct materials purchases, direct labor, and manufacturing overhead budgets are all based on the ________ budget.
production
The number of units needed to satisfy sales and provide the desired ending inventory is shown on the ______ budget. -direct materials -cash -sales -production
production
The number of units that must be made to satisfy sales needs and to provide for the desired ending inventory is shown on the _______ budget.
production