ACCT-2521: Chapter 7 Smartbook Questions

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

cash budget

What consists of collections on credit sales made to customers in prior periods plus collections on sales made in the current budget period?

cash collections

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

Which of the following types of budgets keep managers focused one year ahead, so they do not become too narrowly focused on short-term results?

continuous & perpetual

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

control

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

ending finished goods inventory budget

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

Non-cash expenses

What is the underlying idea behind responsibility accounting?

Someone must be held responsible for each cost or the cost will grow out of control.

Required borrowings on a cash budget is calculated by:

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

The budget that shows the budgeted expenses for areas other than manufacturing is the ___ and ___ expense budget.

administrative & sales

Highly achievable budget targets:

are used in most companies; may help build manager confidence; & may generate greater management commitment to the budget

Which budget shows all costs of production other than direct materials and direct labor?

manufacturing overhead budget

Which budget consists of a number of separate but interdependent budgets that formally lay out a company's sales, production, and financial goals?

master budget

A budget prepared with the full cooperation of management at all levels is a ___ budget.

participative / self-imposed

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

planning

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

production

In a manufacturing company, the ___ production 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

The direct labor budget is based on the ___ budget.

production

Which budget is prepared directly after the sales budget in a manufacturing company?

production budget

When preparing a direct materials purchase budget, which of the following is needed to calculate the raw materials to be purchased?

raw materials required per unit & beginning inventory of raw materials

The underlying idea behind ___ accounting is that a manager should be held accountable for only those items the manager can actually control.

responsibility

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

sales

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

sales

Which budget is a detailed schedule showing the expected sales for the budget period?

sales budget

Which one of the following budgets should be completed first in a manufacturing company?

sales budget

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

sales price per unit

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

selling and administrative

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

selling and administrative expense budget & production budget

A manager who wants to submit a budget that is easy to attain will try to put budgetary ___ into his or her budget.

slack

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 budget direct labor rate is ___ per hour.

$12 Budgeted production = 15,000 units x 1/2 hour = 7,500 required labor hours $90,000 / 7,500 = $12 per hour

Madison Corporation's expected beginning 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 $35,000 + $50,000 - $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.

Identify some of the characteristics of the master budget schedules

1. Answers several key questions for a company 2. Based on estimates and assumptions

Which of the following are advantages of budgeting?

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

ABC Inc's expected sales for the first six months of the year are as follows: January: 12,000 February: 15,000 March: 16,000 April: 20,000 May: 22,000 June: 25,000 Management believes that an appropriate ending inventory is 25% of next month's sales. Calculate the number of units to be produced in March.

17,000 March sales (16,000) + Ending inventory (.25 x (April sales) 20,000) - Beginning inventory of March sales (.25 x 16,000 = 4,000) = 17,000 units to be produced

Which of the following is an advantage of budgeting?

Budgets communicate management's plan throughout the organization.

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

beginning

A quantitative plan for acquiring and using resources over a specified time period is a(n) ___.

budget

The purpose of a(n) ___ is to assist in establishing goals and measuring operating results.

budget

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

budgetary slack

The direct labor 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 to provide for adequate inventories.

direct materials

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

direct materials budget

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

direct materials budget, direct labor budget, & manufacturing overhead budget

To calculate raw materials to be purchased on the direct materials budget, add the desired ___ inventory of raw materials to the raw materials needed based on the ___ budget and ___ the beginning inventory of raw materials to arrive at raw materials to be purchased.

ending, production, & deduct

The purpose of a budget should be to:

establish goals, motivate people, & coordinate efforts

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

financing

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