ACCT 3

Cash budget: Cash receipts (itemized)

+ Collections form customers + Sale of investment securities = Total receipts

Cash budget: financing (itemized)

+ Borrowing - Repayments including interest = end cash balance

Cash budget

Beginning cash balance + Cash receipts = Total available cash. - Cash disbursements = Excess from available cash + Or - financing = Ending cash balance

standard compared to budgets

Budgets are total amounts, the whole thing. Whiles standards are unit cost that are predetermined for companies to use as means of measuring performance

statements about budget acceptance in an organization is true?

Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process

Who uses standard cost principals?

Companies may use a standard cost system with either job order or process costing.

Return on investment % =

Controllable margin ÷ Average operating assets

Answer to # 21

D

Budgeted Income statement through Gross profit

Expected sales - Budgeted COGS: + Beginning inventory + Required purchases = Budgeted Cost of goods available for sale - Ending inventory - Total COGS fro sales = Budgeted gross profit

A static budget is most useful for evaluating a manager's performance in controlling variable costs.

False

Once set, normal standards should not be changed during the year.

False

True/False The budget itself and the administration of the budget are entirely accounting responsibilities.

False

Budgeted Income statement

Sales - Cost of goods sold = Gross profit. - Selling and administrative expenses = Income form operations. - Interest expense = Income before taxes. - Income tax expense = Net income

Production Budget

Sales units + desired ending inventory = total needs. - beginning inventory = Required Production

Normal standards

Standards based on an efficient level of performance that are attainable under expected operating conditions.

Ideal standards

Standards based on the optimum level of performance under perfect operating conditions.

Direct materials quantity standard

The quantity of direct materials that should be used per unit of finished goods.

Direct labor price standard

The rate per hour that should be incurred for direct labor.

What is the primary difference between a static budget and a flexible budget?

The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels.

Direct labor quantity standard

The time that should be required to make one unit of product.

What is budgetary control?

The use of budgets in controlling operations

A cost center incurs costs and generates revenues and cost center managers are evaluated on the profitability of their centers.

True

A flexible budget is a series of static budgets at different levels of activities.

True

An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs.

True

If actual costs are less than standard costs, the variance is favorable.

True

Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.

True

The budgeted income statement indicates the expected profitability of operations for the next year.

True

The total overhead variance is the difference between actual overhead costs and overhead costs applied to work done.

True

True/False Financial planning models and statistical and mathematical techniques may be used in forecasting sales.

True

True/False The manufacturing overhead budget shows the expected manufacturing overhead costs.

True

Variance analysis facilitates the principle of "management by exception."

True

If actual Direct material cost > standard cost, what does this mean?

Unfavorable

Direct Labor budget

Units to be produced × direct labor hours per unit = total direct labor hours. × direct labor cost per hour = total cost of direct labor

Direct Material Budget

Units to be produced × direct materials per unit = total pounds needed for production + desired ending inventory = total materials required. - beginning direct materials = direct material purchases. × direct labor hours per unit = total cost of direct material purchases

A standard cost is

a predetermined cost.

Normal standards:

allow for rest periods, machine breakdowns, and setup time

Standards differ from budgets in that:

budgets are a total amount and standards are a unit amount.

Generally accepted accounting principles allow a company to:

report inventory and cost of goods sold at standard cost as long as there are no significant differences between actual and standard cost.

What do you start with when making a master budget?

sales budget

when finding selling expense for a month go to

sales budget for selling and administrative and use EXPECTED UNIT SALES

Budget development for the coming year usually starts

several months before the end of the current year.

A responsibility report should?

show only those costs that a manager can control.

A major element in budgetary control is

the comparison of actual results with planned objectives.

when doing direct labor budget

there are no beginning or ending inventories

Selling and Admin Budge

total variable cost + total fixed cost = total manufacturing overhead

Overhead Budget

total variable cost + total fixed cost = total manufacturing overhead ÷ direct labor hours = manufacturing overhead per direct labor hour

sales budget

units × sales price = total sales

CAUSES OF LABOR VARIANCES

use of an inexperienced worker instead of an experienced one will result in a favorable price variance because of the lower pay rate of the unskilled worker. OR, An unfavorable price variance would result if a skilled worker were substituted for an inexperienced one

What are some operating budgets?

- Direct labor budget - Production budget - Sales budget

Cash budget: Cash disbursements (itemized)

- Direct materials. - Direct labor - Manufacturing overhead - Selling and administrative - Purchases - Income taxes = Total Cash disbursements

causes of Labor quantity variance

- Relates to worker efficiency. - may be poor training, worker fatigue, faulty machinery, or carelessness. - causes are the responsibility of the production department

what are the different standards?

1. Direct labor price standard 2. Direct labor quantity standard 3. Direct materials price standard 4. Direct materials quantity standard 5. Normal standards 6. Ideal standards

compution of total unit cost. what are the 3 cost elements?

1. direct materials. 2. direct labor 3. manufacturing overhead

The advantages of standard costs include all of the following:

1. management by exception may be used. 2. management planning is facilitated. 3. they may simplify the costing of inventories.

What is the proper preparation sequencing of the following budgets? 1. Budgeted Balance Sheet 2. Sales Budget 3. Selling and Administrative Budget 4. Budgeted Income Statement

2, 3, 4, 1

If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on

60,000 units of activity.

Standard cost + price variance + quantity variance =

Budgeted cost.

standard cost accounting system?

It is applicable to job order costing. It is applicable to process costing. It reports only favorable variances.

To find dollar amount of ROI for a year:

Multiply % time average operating asset. (times 100, ex 1.30 for 30%)

Which is the last step in developing the master budget?

Preparing the budgeted balance sheet

What is a standard cost?

The amount management thinks should be incurred to produce a good or service

Direct materials price standard

The cost per unit of direct materials that should be incurred.

The total direct labor hours required in preparing a direct labor budget are calculated using the

production budget.

language in accounts: variables from standards expressed in what?

dollars

Variances from standards are

expressed in total dollars.

If costs are not responsive to changes in activity level, then these costs can be best described as

fixed.

A manufacturing company would include setup and downtime in their direct

labor quantity standard.