Chapter 8

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

sales

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

sales price per unit

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

self imposed

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

self-imposed budgeting

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

selling and administrative

Limitations of self-imposed budgeting include

suboptimal budget recommendations budgetary slack

A company can repay outstanding principal and interest when

the cash excess is greater than the minimum required cash balance

Borrowing money is required whenever

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

A company determines that the number of units sold is the cost driver for its variable selling and administrative expense budget. The product of its variable selling and administrative rate and budgeted unit sales will be

total budgeted variable selling and administrative expenses

Using budgeting assumptions when preparing the master budget,

makes it easier to answer "what-if" question

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

manufacturing overhead

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

may still have cash deficiency issues during the year

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

motivation will suffer

A 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed is called a(n)

perpetual

Budgets are used for two distinct purposes: Blank______ and Blank______

planning and control

The direct labor budget is based directly on the Blank______ budget.

production

In a manufacturing company, the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget are all based on the

production budget

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

False,Monthly cash budgets are common and some companies may need budgets for shorter time periods to capture major cash fluctuations.

The cash budget

is prepared near the end of the master budget process

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.

$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.

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

10,000 + 5,000 - 2,000 = 13,000

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.

11,000 × 1/2 × $15 = $82,500

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 1stBlank 1Blank 1 1st , Correct Unavailable quarter and the ending cash balance for the year is the same as the ending cash for the

1st and 4th

When a manager creates a budget that is too easy to attain, Blank______ occur

Budgetary slack

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

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

Cash

Which of the following is not found in the financing section of the cash budget?

Cash deficiencies

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

Cash disbursements

Which of the following explains why operating budgets generally span a period of one year?

Companies choose a span of one year to correspond to their fiscal years.

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

Control

Which of the following is deducted from the total selling and administrative expense budget to determine the cash disbursements for selling and administrative expense budget?

Depreciation expense

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

Which of the following is not a benefit of self-imposed budgets?

Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations

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

Master

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

Merchandise purchase

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

Participative

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

Produce

A merchandising company prepares a merchandise purchasing budget instead of a(n)

Production

In a manufacturing company, the Blank______ 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, 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 budge

Production

The direct materials budget directly relies on the budget.

Production

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

Production Selling & administrative expense

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

Raw materials required per unit Beginning inventory of raw materials

Each unit requires two pounds of material. Given a desired ending inventory of 20% of next month's production needs, the pounds of material to be purchased in April is Blank______.

Reason: April production needs (105,000 x 2) 210,000 + Ending inventory (20% of May production needs: 110,000 x 2 x 20%) 44,000 - Beginning inventory (20% of April) 42,000 = 212,000 pounds.

Each unit requires two pounds of material. Given a desired ending inventory of 20% of next month's production needs, the pounds of material to be purchased in February is Blank______.

Reason: February production needs (70,000 x 2) 140,000 + Ending inventory (20% of March production needs: 85,000 x 2 x 20%) 34,000 - Beginning inventory (20% of February) 28,000 = 146,000 pounds.

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

Sales

he budgeting process begins with the preparation of the _________blank budge

Sales

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

Sales Budget

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

Selling and admin

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

The budgeted number of units to be sold

Which of the following is not one of the reasons that organizations use budgets

The budgeting process enables managers to uncover bottlenecks as they occur.

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

Master budget schedules

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

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

balance sheet

Budgets

communicate management's plan throughout the organization

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

create the budget with a budgeting assumption tab

Budgets

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

In a direct materials budget, the desired ending raw materials inventory for the year is equal to the

desired ending raw materials inventory for the last period

The cost of unsold units is computed on the Blank______ budget

ending finished goods inventory

The purpose of preparing a direct materials budget is to

estimate the quantity of raw materials to be purchased

When profit targets are set by top managers,

goals may be unrealistically high too much slack may be allowed

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