ACC 202 Ch 8- BURGESS HW and Quiz

d) total budgeted variable selling and administrative expenses Explanation: When budgeted variable selling and administrative expenses are driven by the number of units sold, the variable selling and administrative rate per unit sold is multiplied by the budgeted unit sales to arrive at the total budgeted variable selling and administrative expenses. The total budgeted fixed selling and administrative expenses are then added to the total budgeted variable selling and administrative expenses to arrive at the total budgeted selling and administrative expenses. Finally, the total budgeted selling and administrative expense is adjusted by subtracting any noncash selling and administrative expenses to arrive at the budgeted cash disbursements for selling and administrative expenses.

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 ________. a) budgeted sales revenue b) total budgeted cash disbursements for selling and administrative expenses c)total budgeted fixed selling and administrative expenses d) total budgeted variable selling and administrative expenses

a) avoid labor shortages Explanation: Companies prepare direct labor budgets to adjust the labor force according to the production schedule and to avoid the risk of labor shortages or costs of idle capacity.

Companies prepare direct labor budgets to ________. a) avoid labor shortages b) determine the direct labor-hours per unit c) ensure timely supply of raw materials d) reduce inventories

$100,000 Explanation: Ending retained earnings = Beginning retained earnings + Net income - Dividends; Ending retained earnings = $80,000 + $70,000 − $50,000 = $100,000

Film Studio, Inc. has beginning retained earnings of $80,000 and expects to earn net income of $70,000 during the budget period. What would be the budgeted ending balance in retained earnings if the company declares and pays dividends of $50,000?

a) beginning inventory for the first quarter Explanation: The beginning inventory for the first quarter is the beginning inventory for the year.

For a production budget, the ______ is the beginning inventory for the year. a) beginning inventory for the first quarter b) beginning inventory for the last quarter c) ending inventory for the last quarter d)sum of beginning inventories for the four quarters

cost of goods sold Explanation: Sales minus cost of goods sold equals the gross margin.

In a budgeted income statement, _________ is subtracted from sales to arrive at gross margin. cost of goods sold interest expense S&A expense depreciation expense

b) 46,000

Maxine Company plans to sell 48,000 units during the month. If the company has 10,000 units on hand at the start of the month, and plans to have 8,000 units on hand at the end of the month, how many units must be produced during the month? a) 56,000 b) 46,000 c) 48,000 d) 50,000

d) $315,000 Explanation: Total direct labor cost for the fourth quarter = 35,000 units × 0.50 DLHs per unit × $18 = $315,000

Pro Clean Company, a manufacturer of hand sanitizers, intends to produce 40,000 units in the third quarter and 35,000 units in the fourth quarter. Each unit requires 0.50 direct labor-hours (DLHs) and the cost of direct labor per hour is $18. What would be the total direct labor cost for the fourth quarter? a) $355,000 b) $360,000 c) $300,000 d) $315,000

c) 48,000 Explanation: Budgeted net income = Gross margin - Selling and administrative expenses - Interest expense Budgeted net income = $90,000 - $30,000 - $12,000 = $48,000

Smarton Company is in the process of preparing its budgeted income statement. It has determined its estimated gross margin to be $90,000. The company also expects to incur selling and administrative expenses of $30,000 and interest expense of $12,000. What is Smarton's budgeted net income? a) 18,000 b) 30,000 c) 48,000 d) 60,000

d) Sales Explanation: The budgeting process begins with the preparation of the sales budget, which is a detailed schedule showing the expected sales for the budget period.

The budgeting process begins with the preparation of the ______ budget. a) Cash b) DM c) Production d) Sales

a) 32,500 Explanation: Budgeted sales revenue for the fourth quarter = 1,300 units × $25 = $32,500

The following is a schedule of the projected unit sales of Western Company, which manufactures casual wear. Each unit sells for $25. The company began the period with a beginning accounts receivable balance of $10,000. Budgeted Unit Sales 1st= 1,500 2nd= 1,300 3rd=1,400 4th= 1,300 Year= 5,500 % of sales collected in the quarter of the sale = 75% % of sales collected in the quarter after the sale 25% What is the amount of budgeted sales revenue for the 4th quarter? a) 32,500 b) 33,750 c) 35,000 d) 37,500

c) 195,000 Bottles Explanation: Production needs for the first quarter = Budgeted sales of 200,000 bottles + Ending inventory of 15,000 bottles - Beginning inventory of 20,000 bottles = 195,000 bottles

Vineyard Corporation, a manufacturer of fine wines, began the year with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of the current year to be 200,000 bottles, 150,000 bottles, 250,000 bottles, and 400,000 bottles, respectively. The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate. What are the production needs for the first quarter? a) 160,000 Bottles b) 175,000 Bottles c) 195,000 Bottles d) 215,000 Bottles

d) $6 per machine hour Explanation: Predetermined overhead rate = (Variable manufacturing overhead + Fixed manufacturing overhead) ÷ Total machine-hours required Predetermined overhead rate = [($4 × 100,000 machine-hours) + ($50,000 per quarter × 4 quarters)] ÷ 100,000 machine-hours or ($400,000 + $200,000) / 100,000 machine-hours = $6 per machine hour

What is the predetermined overhead rate for the year? a) $2 per machine hour b) $4 per machine hour c) $5 per machine hour d) $6 per machine hour

a) The budgeting process enables managers to uncover bottlenecks as they occur Explanation: Organizations use budgets to uncover potential bottlenecks before (rather than as) they occur.

Which of the following is not one of the reasons that organizations use budgets? a) The budgeting process enables managers to uncover bottlenecks as they occur b) Budgets communicate financial goals throughout the organization. c) Budgets evaluate and reward employees

GO TO HW AND LOOK AT #8

GO TO HW AND LOOK AT #8

$151,500

Fifty percent of the Randall Company's sales are for cash; the rest are on credit. Seventy percent of the credit sales are collected in the month of sale, twenty percent in the month following sale, and five percent in the second month following sale. The remaining credit sales are expected to be uncollectible. The company's sales budget for the year included the following budgeted sales data. Total sales January= $140,000 February= $120,000 March= $160,000 Total cash receipts in March would be budgeted to be: $136,000 $151,500 $167,000 $56,000

$40,000 Explanation: Total current assets = Cash + Accounts receivable + Finished goods inventory + Raw materials inventory Total current assets = $4,000 + $16,000 + $12,000 + $8,000 = $40,000

For the budget period ending December 31 of the current year, Aaron Corporation estimates its ending balances for cash as $4,000, accounts receivable as $16,000, finished goods inventory as $12,000, and raw materials inventory as $8,000. Invoices relating to raw materials in the amount of $14,000 are expected to be unpaid as of December 31. What is the amount of total current assets that will be reported on the budgeted balance sheet? $20,000 $26,000 $32,000 $40,000

b) desired ending raw materials inventory for the last period Explanation: In a direct materials budget, the desired ending raw materials inventory for the year is the same as the desired ending raw materials inventory for the last period.

In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ________. a) beginning balance of accounts payable b) desired ending raw materials inventory for the last period c) total merchandise purchased during the year d) value of raw material used during the year

900,000 units

Jackson Company plans the following beginning and ending inventory levels (in units) for April 1: Raw Material 80,000 Work in process 20,000 Finished goods 160,000 April 30 Raw Material 100,000 WIP 20,000 FG 100,000 Two units of raw material are needed to produce each unit of finished product. If the company plans to sell 960,000 units during April, the number of units it would need to manufacture during April would be: 880,000 units 900,000 units 1,020,000 units 960,000 units

116,000 units

Jordan Company produces and sells basketballs. To guard against out of stock situations, the company requires that 20% of the next month's sales be on hand at the end of each month. Budgeted sales of basketballs over the next three months are: Budgeted Sales in Units: Oct= 80,000 Nov= 120,000 Dec= 100,000 Budgeted production for November would be: 116,000 units 140,000 units 100,000 units 124,000 units

$16,000

Lennon Company has a cash balance of $36,000 on April 1. The company is required to maintain a minimum cash balance of $24,000. During April expected cash receipts are $180,000. Expected cash disbursements during the month total $208,000. During April the company will need to borrow: $12,000 $28,000 $8,000 $16,000

responsibility accounting

Murphy Company uses an accounting system that charges costs to the manager who has been delegated the authority to make decisions concerning the costs. For example, if the sales manager accepts a rush order that will result in higher than normal shipping costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as: absorption accounting contribution accounting operational budgeting responsibility accounting

$400,000 Explanation: Variable manufacturing overhead for the year = Variable manufacturing overhead rate per machine-hour × Total machine-hours required for the year Variable manufacturing overhead for the year = $4 × 100,000 machine-hours = $400,000

Precision Company estimates its machine-hour requirements for the four quarters to be 35,000 hours, 20,000 hours, 15,000 hours, and 30,000 hours respectively. The variable manufacturing overhead rate is $4 per machine-hour. The fixed manufacturing overhead is $50,000 per quarter, which includes $20,000 of depreciation expense. What is the budgeted variable manufacturing overhead for the year? $200,000 $260,000 $280,000 $400,000

$25,000 Explanation: Excess (deficiency) of cash available over disbursements = Beginning cash balance + Cash receipts − Cash disbursements Excess (deficiency) of cash available over disbursements = $5,000 + $80,000 − $70,000 = $15,000 Amount to be borrowed = Minimum cash balance − Excess (deficiency) of cash available over disbursements Amount to be borrowed = $40,000 − $15,000 = $25,000

Striker Company estimates its expected cash receipts for the period to be $80,000 and its expected cash disbursements to be $70,000. The beginning cash balance for the period was $5,000. The management wants to maintain a minimum cash balance of $40,000. How much cash will the company need to borrow? $15,000 $25,000 $30,000 $40,000

248,000 lbs

The Austin Company has budgeted production for next year as follows: First: 40,000 Second: 48,000 Third: 64,000 Fourth: 56,000 Five pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 5,000 lbs. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Budgeted purchases of raw materials in the second quarter would be: 248,000 lbs 49,600 lbs 320,000 lbs 132,000 lbs

$200,000

The Beta Company makes and sells a single product. Budgeted sales for April are $1,200,000. Gross margin is budgeted at 30% of sales. If the net income for April is budgeted at $160,000, budgeted selling and administrative expenses must be: $408,000 $312,000 $200,000 $533,332

$47.32

The Schaumburg Company makes and sells a single product. Each unit of product requires 5.2 hours of labor at a labor rate of $9.10 per hour. The company needs to prepare a Direct Labor Budget for the second quarter of next year. The budgeted direct labor cost per unit of product would be: $41.60 $28.00 $47.32 $37.40

b) production budget

The budget or schedule that provides the required data for the preparation of the direct materials budget is the: a) raw materials purchases budget b) production budget c) cash budget d) schedule of cash collections

c) 9,375 Explanation: First quarter sales = 1,500 units × $25 per unit = $37,500 Amount of cash expected to be collected during the second quarter from sales made during the first quarter = First quarter sales of $37,500 × 25% = $9,375

The following is a schedule of the projected unit sales of Western Company, which manufactures casual wear. Each unit sells for $25. The company began the period with a beginning accounts receivable balance of $10,000. Budgeted Unit Sales 1st= 1,500 2nd= 1,300 3rd=1,400 4th= 1,300 Year= 5,500 % of sales collected in the quarter of the sale = 75% % of sales collected in the quarter after the sale 25% What is the amount of cash that is expected to be collected during the second quarter as a result of sales made during the first quarter? a) 8, 125 b) 8, 750 c) 9,375 d) 28, 125

c) $34,375 Explanation: Second quarter sales = 1,300 units × $25 per unit = $32,500 Third quarter sales = 1,400 units × $25 per unit = $35,000 Total expected cash collections during the third quarter = Amount collected from second quarter sales of $8,125 (or $32,500 × 25%) + Amount collected from third quarter sales of $26,250 (or $35,000 × 75%) = $34,375

The following is a schedule of the projected unit sales of Western Company, which manufactures casual wear. Each unit sells for $25. The company began the period with a beginning accounts receivable balance of $10,000. Budgeted Unit Sales 1st= 1,500 2nd= 1,300 3rd=1,400 4th= 1,300 Year= 5,500 % of sales collected in the quarter of the sale = 75% % of sales collected in the quarter after the sale 25% What is the total amount of expected cash collections for the third quarter? a) $33,125 b) $33,750 c) $34,375 d) $38,125

c) estimate the quantity of raw materials to be purchased Explanation: The purpose of the direct materials budget is to determine the quantity of raw materials to be purchased each period to fulfill the production needs and to provide for adequate inventories.

The purpose of preparing a direct materials budget is to________. a) allocate the cost of raw materials to production departments b)estimate the manufacturing overhead c) estimate the quantity of raw materials to be purchased d) estimate the unit cost of direct materials to be purchased

a) unit product cost Explanation: The value of ending inventory is calculated by multiplying the unit product cost by the number of units in ending inventory. The unit product cost includes the direct material cost per unit, the direct labor cost per unit, and the manufacturing overhead cost per unit.

The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the ________. a) unit product cost b) variable overhead cost per unit c) total overhead cost per unit d) the sum of the direct materials and direct labor cost per unit

c) 25,000 Bottles Explanation: The desired ending inventory for the second quarter = Third quarter sales of 250,000 bottles × Ending inventory percentage of 10% = 25,000 bottles

Vineyard Corporation, a manufacturer of fine wines, began the year with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of the current year to be 200,000 bottles, 150,000 bottles, 250,000 bottles, and 400,000 bottles, respectively. The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate. What is the desired ending inventory for the second quarter? a) 15,000 Bottles b) 20,000 Bottles c) 25,000 Bottles d) 40,000 Bottles

c) Companies choose a span of one year to correspond to their fiscal years. Explanation: Operating budgets generally cover a one-year period to correspond to the company's fiscal year.

Which of the following explains why operating budgets generally span a period of one year? a) Accounting regulations mandate that all operating budgets be prepared for one year. b) Operating budgets, by definition, are prepared for one-year periods. c) Companies choose a span of one year to correspond to their fiscal years. d) Operating budgets need to correspond with the calendar year.

a) Costs of carrying inventory Explanation: Factors considered for planning the desired level of inventories are costs of carrying inventory and costs of lost sales.

Which of the following is a major factor that should be taken into consideration while planning the desired level of inventories? a) Costs of carrying inventory b) General administrative policy of the company c) Selling price of the finished product. d) Statutory requirements.

b) Depreciation Expense Explanation: Depreciation expense is a noncash expense that is deducted from the total selling and administrative expense budget to determine the cash disbursements for the selling and administrative expense budget.

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? a) Advertising expense b) Depreciation Expense c) Selling Commissions d) Utilities Expense

c) Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations. Explanation: One of the limitations of self-imposed budgeting is that it may allow lower-level managers to create too much budgetary slack. Because the manager who creates the budget will be held accountable for actual results that deviate from the budget, the manager will have a natural tendency to submit a budget that is easy to attain (i.e., the manager will build slack into the budget).

Which of the following is not a benefit of self-imposed budgets? a) A manager who is not able to meet a budget that has been imposed from above can always say that the budget was unrealistic and impossible to meet. b) Budget estimates prepared by front-line managers are often more accurate and reliable. c) Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations. d) Motivation is generally higher.

c) $480,000 Explanation: Even though the total direct labor-hours worked in the fourth quarter were 39,000 hours, William's contract with the labor union guarantees its workers pay for at least 40,000 hours every quarter. As a result: Fourth quarter total direct labor cost = 40,000 hours × $12 = $480,000

William Corporation has a contract with the labor union which guarantees its workers pay for at least 40,000 hours every quarter. Based on its direct labor budget for the current year, the company estimated it will need 39,000 direct labor-hours during the fourth quarter to produce 13,000 units of finished goods. Each unit requires 3 direct labor-hours (DLHs) and the cost of direct labor per hour is $12 per hour. What is the total direct labor cost for the fourth quarter? a) $432,000 b) $468,000 c) $480,000 d) $540,000