exam #3
The amount of goods to be purchased from suppliers during the period is shown on the ______ budget.
merchandise purchases
The first step in the process of preparing the master budget is the ___________budget or forecast. (Enter only one word per blank.)
sales
The first step in the process of preparing the master budget is the___________ budget or forecast. (Enter only one word per blank.)
sales
The production budget is based upon the________ budget. (Enter only one word per blank.)
sales
The production budget is based upon the____________ budget.
sales
Specific actions or mechanisms managers use to achieve objectives are called ___________ . (Enter only one word per blank.)
tactics
When an organization uses a top-down approach to budgeting, ______.
the budget is imposed on lower levels of the organization top management sets the budget
Budgetary slack occurs when a manager submits a budget that is ______.
too easy to attain
Each component of a(n) _________ budget is based on or provides input for another component. (Enter only one word per blank.)
master
Comparing the relevant costs and benefits of alternative decision choices is called___________analysis. (Enter only one word per blank.)
incremental
All costs of production other than direct materials and direct labor are shown on the ______ budget.
manufacturing overhead
The amount of goods for resale to be purchased from suppliers during the period is shown on the___________ ____________ budget. (Enter only one word per blank.)
merchandise purchases
To calculate the direct labor requirement for each quarter, ______.
multiply the number of direct labor hours required per unit times the number of units to be produced
The direct materials purchases, direct labor, and manufacturing overhead budgets are all based on the__________ budget. (Enter only one word per blank.)
production
Edison Corporation's variable manufacturing overhead rate is $5.00 per direct labor hour. Budgeted direct labor cost is $20 per hour. Total budgeted fixed overhead is $25,000 per month. Total budgeted direct labor hours for the month of July are 20,000. Total budgeted manufacturing overhead for July is ______.
Variable overhead (20,000 × $5.00) $100,000 + fixed overhead $25,000 = $125,000.
The operating budgets feed directly into the __________ __________ , which then feeds directly into the budgeted balance sheet. (Enter only one word per blank.)
cash budget
Collections on credit sales made to customers in prior period(s) plus collections on sales made in the current budget period equal ______.
cash receipts
The three sections of the cash budget are__________ ,____________ , and financing. (Enter only one word per blank.)
collections disbursements
When performing a keep-or-drop decision analysis, ___________fixed costs should be excluded from the analysis. (Enter only one word per blank.)
common or irrelevant
Budgets ______.
communicate management's plan throughout the organization
Managers must prioritize how products are produced when faced with a(n)__________ resource. (Enter only one word per blank.)
constrained or limited
Another budget period is automatically added to the budget as one period passes when using a(n)__________ or rolling budget. (Enter only one word per blank.)
continuous or perpetual
When planning a trip and making a decision to drive or take the train, the cost of boarding your dog while you are away is a(n) ______ cost.
irrelevant Reason: Boarding the dog is a relevant cost of deciding whether or not to take the trip, but irrelevant to the mode of travel.
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
Deciding to carry out an activity internally or buy externally from a supplier is called a ______ decision.
make-or-buy
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. (Enter only one word per blank.)
production
When making a decision to drive or take the train on a trip, the cost of the train ticket is a(n) ______ cost.
relevant
Managers prepare a selling and administrative budget based on the ___________ budget.
sales
Budgeted expenses for costs related to selling the product and managing the business are shown on the ______ budget.
selling and administrative
The budget that shows the budgeted expenses for areas other than manufacturing is the ____________ and ____________ expense budget.
selling, sales, or marketing administrative or admin
Select all that apply Irrelevant costs include ______. Multiple select question. -all fixed costs -sunk costs -future costs that do not differ between alternatives -future costs that differ between alternatives
sunk costs future costs that do not differ between alternatives
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
The process that limits overall output is called a(n)__________ . (Enter only one word per blank.)
bottleneck or constraint
Company objectives are translated into financial terms in a(n) . (Enter only one word per blank).
budget
When a manager creates a budget that understates expected revenues or overstates expected expenses,________ _______ occurs. (Enter only one word per blank.)
budgetary or budget slack
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 ______.
budgeted sales price per unit
The number of customers who can be seated in an auditorium is a measure of the facility's ______.
capacity
A future-oriented version of the statement of cash flows is the ___________ ___________ . (Enter only one word per blank.)
cash budget
The ______ budget is prepared first when creating the master budget.
sales
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.
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 ______.
$6.50 + $15.00 ($30 × 1/2) + $2.75 + $7.00 ($63,000/9,000) = $31.25 × 7,000 units = $218,750. Sales commission is not part of cost of goods sold.
JPL bases budgeted variable manufacturing overhead on 30% of direct labor costs. If direct labor cost is budgeted at $104,500 and fixed overhead is budgeted to be $40,000, total budgeted manufacturing overhead is $___________.
$71,350:($104,500 x .3) + $40,000
Financial budgets ______.
- include the capital expenditures budget - include the cash budget - impact the budgeted balance sheet
When preparing a direct materials purchases budget, which of the following is needed to calculate raw materials to be purchased?
-Raw materials per unit -Beginning inventory of raw materials
The manufacturing overhead budget includes ______.
-depreciation on product equipment -indirect manufacturing costs
A continuous or rolling budget ______.
-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
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.
10,000 + 5,000 - 2,000 = 13,000
Which of the following CANNOT be added together when computing the yearly totals for a production budget prepared by quarter?
Finished goods inventory
JPL bases budgeted variable manufacturing overhead on 30% of direct labor costs. If direct labor cost is budgeted at $104,500 and fixed overhead is budgeted to be $40,000, total budgeted manufacturing overhead is $_________.
71,350 or 71350
Product ABC has a contribution margin per unit of $10.00. Each unit of ABC requires 5 minutes of machine time. Product XYZ has a contribution margin per unit of $15.00 and each unit requires 10 minutes of machine time. If the company's constraint is machine hours, to maximize profit, they should first fill the demand for product ______.
ABC Reason: The company should fill the demand for the product with the highest CM per unit of the constrained resource. ABC's is $2 per minute of machine time (CM of $10 ÷ 5 minutes) while XYZ's is only $1.50 per minute of machine time (CM of $15 ÷ 10 minutes).
Which of the following budgets shows the company's planned profit?
Budgeted income statement
What number does the raw materials budget take directly from the production budget?
Budgeted production
Assume a company is preparing an annual production budget by quarter. Which of the columns can be added together when computing the yearly total column?
Budgeted production in units Budgeted unit sales
Which of the following provides critical information managers need to manage daily operations?
Cash budget
Which of the following budgets are needed to calculate unit product costs?
Direct labor budget Manufacturing overhead budget Direct materials budget
True or false: The sales budget is based on the production budget.
False
True or false: The same budget that is used for planning should always be used for performance evaluation.
False
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.
February purchases ($130,000 × 75%) $97,500 + January purchases ($100,000 × 25%) $25,000 = $122,500.
When is it profitable to continue processing a product instead of selling it as is?
It is profitable when the incremental revenue exceeds the incremental manufacturing cost.
Which of the following is NOT information that helps to determine the sales forecast? Research on industry trends Planned marketing activities Actual sales from prior periods Long-term research and development plans
Long-term research and development plans
Which of the following is NOT a way to determine the sales forecast? -Planned production activities for the upcoming period. -Input from top management about market share goals. -Input from research and development about new products. -Research on overall industry trends.
Planned production activities for the upcoming period.
Which of the following is NOT a way to determine the sales forecast? Multiple choice question. Research on overall industry trends. Input from research and development about new products. Planned production activities for the upcoming period. Input from top management about market share goals.
Planned production activities for the upcoming period.
Which of the following budgets is NOT used to calculate the budgeted manufacturing cost per unit?
Selling and administrative
Which of the following is needed to prepare a sales budget?
The budgeted number of units to be sold
The calculation of unit product cost requires information from the ______ budget.
manufacturing overhead
A comprehensive set of budgets that covers all phases of planned activities for a specific period is called the___________ budget. (Enter only one word per blank.)
master
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.
Units to be produced × time per unit × rate per hour = 11,000 × 1/2 × $15 = $82,500.
Once you have identified a problem, the next step is to determine the possible solutions, which are called ___________ ___________ . (Enter only one word per blank.)
decision alternatives
To calculate materials to be purchased on the direct materials purchases 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. (Enter only one word per blank.)
ending production deduct
Budgeted cost of goods sold is based on ______.
expected sales
True or false: Using a participative approach to budgeting is less likely to motivate employees than using a top-down approach.
false
True or false: When making a decision, only quantitative factors should be considered.
false
The cash budget is one of the primary_________ budgets that is prepared.
financial
A pro forma budgeted balance sheet is developed from the ___________ budgets. (Enter only one word per blank.)
financial or previous
Managers must try to find the "just-right" level of difficulty in setting budgetary goals so they ______.
have motivating effects on employee behavior
Managers may choose to retain an unprofitable product line because it ______.
helps sell other products
Segment margin ______.
includes both variable and direct fixed costs
The budgeted ____________ ___________shows a company's planned profit. (Enter only one word per blank.)
income statement
Jay's Furniture makes several types of furniture, including couches and love seats. Last year the total contribution margin was $900,000 for couches and $350,000 for love seats. Love seats had a segment margin of $50,000 and common fixed costs of $100,000, so the company is considering stopping love seat production. If that happens, sales of couches are expected to increase by 10%, The net impact of stopping production of love seats will (increase/decrease)__________ profits by $_____________.
increase 40,000
Select all that apply Short-term objectives ______. Multiple select question. -need to be achieved in one year or less -are developed after the budget process -are the starting point of strategic planning -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
The budgeted income statement is formed from the combined ______ budgets.
operating
The sales, production, and purchases budgets are all_____________ budgets.
operating
The sales, production, and purchases budgets are all _________budgets.
operating or operational
The sales, production, and purchases budgets are all___________ budgets.
operational or operating
Budgets are used for two distinct purposes: ______ and ______. The first of these purposes relates to developing goals and preparing various budgets, while the second involves comparing actual results to the budget.
planning; controlling
The ______ budget shows the number of units needed to satisfy sales and provide the desired ending inventory.
production
The direct materials budget directly relies on the ______ budget.
production
Under_________-________ budgeting managers must justify their budget each year by starting from scratch.
zero based
The entire budget must be created from scratch every period when using ______ budgeting.
zero-based
Which of the following is NOT included on a budgeted cash payments budget?
Production in units
Costs and benefits that always differ between alternatives are called ______ costs and benefits.
relevant
The ______ budget does not rely on the production budget.
selling and administrative
Goodstone Tire Corporation sells tires for $90 each. Per-unit costs associated with producing and selling the tires are: Direct materials $35; Direct labor $10; Factory overhead $20. The variable portion of the factory overhead is $8 per unit. A foreign company wants to purchase 1,000 tires for $65 each. Assuming that Goodstone has excess capacity, ______.
the incremental profit from the special order will be $12,000 Reason: The revenue per tire is $65 and the cost is $53 (direct materials, direct labor, variable overhead), so each tire will generate $12 in incremental profit or $12,000 total.
Select all that apply It is important to review the results of decisions because ______. Multiple select question. -it is important to make sure that all expected costs occurred -feedback is an important component of managerial accounting -there are likely to be unexpected costs and benefits -corrective action may be needed
there are likely to be unexpected costs and benefits corrective action may be needed
When management sets the budget and imposes it on employees throughout the organization, a________ -_________ approach is being followed. (Enter only one word per blank.)
top- down
