ACC Test 4

On January 1, Vaughn Manufacturing has a beginning cash balance of $226000. During the year, the company expects cash disbursements of $1010000 and cash receipts of $810000. If Vaughn requires an ending cash balance of $150000, Vaughn Manufacturing must borrow

$124000

In the Swifty Corporation, indirect labor is budgeted for $104000 and factory supervision is budgeted for $54000 at normal capacity of 160000 direct labor hours. If 180000 direct labor hours are worked, flexible budget total for these costs is

$171000.

A company developed the following per-unit standards for its product: 2 gallons of direct materials at $8 per gallon. Last month, 1200 gallons of direct materials were purchased for $9120. The direct materials price variance for last month was

$480 favorable.

Oriole Company's budgeted manufacturing costs for 55000 squares of shingles are: Fixed manufacturing costs $12000 Variable manufacturing costs $16 per square Oriole produced 40000 squares of shingles during March. How much are budgeted total manufacturing costs in March?

$652000

The per-unit standards for direct labor are 1.5 direct labor hours at $15 per hour. If in producing 1400 units, the actual direct labor cost was $23250 for 1500 direct labor hours worked, the total direct labor variance is

$8250 favorable.

Crane Company is preparing its direct labor budget for May. Projections for the month are that 26400 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $12, what is the total budgeted direct labor cost for May?

$950400.

The formula for the materials quantity variance is

(AQ × SP) - (SQ × SP).

BC works best when a company has a formalized reporting system which:

1. Identifies the name of the budget report. 2.States the frequency of the report. 3.Specifies the purpose of the report. 4.Indicates the primary recipient(s) of the report.

Steps in developing the flexible budget

1. Identify the activity index and the relevant range of activity (relevant range -range of activity over which a company expects to operate). 2.Identify the variable costs and determine the budgeted variable cost per unit of activity for each VC. If the VC per unit is not given, then you will need to divide. For example, the amount per DL hour. 3.Identify the fixed costs and determine the budgeted amount for each cost. If you are given annual amounts, you will need to divide by 12 if you are preparing a monthly budget. 4.Prepare the budget for selected increments of activity within the relevant range. The increments will be given.

Activities in budgetary control:

1.Develop budget 2.Analyze differences between actual and budget 3.Take corrective action and/or 4.Modify future plans

Overall goal:

A budget that is considered fair and achievable by managers while still meeting corporate goals.

A flexible budget can be prepared for which of the following budgets comprising the master budget?

All of these answers are correct.

Which one of the following is not needed in preparing a production budget?

Budgeted raw materials

participative budgeting

Each level of management should be invited to participate in preparing the budget.

Operating budgets

Establish goals for sales and production personnel. The important end-product of the operating budgets is the individual budgets that result in the preparation of the budgeted income statement

Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets?

Fixed manufacturing overhead

Financial budgets

Focus on the cash needs to fund company operations and capital expenditures; thecapital expenditures budget, the cash budget and the budgeted balance sheet.

Advantages of participative budgeting

More accurate budget estimates and the tendency to perceive the process as fair.

Budgeting is usually most closely associated with which management function?

Planning

Which is the last step in developing the master budget?

Preparing the budgeted balance sheet.

Direct Materials Budget

Shows the quantity and cost of DM to be purchased.

Production Budget

Shows units that must be produced (manufactured) to meet anticipated sales. •Important to have a realistic estimate of ending inventory.

Sales budget OB

The first budget prepared bc it sets the activity level for every other function.•It is derived from the sales forecast and is management's best estimate of sales revenue for the budget period.

Budgetary Control

The use of budgets in controlling operations

Which of the following statements is true?

Variances are the differences between total actual costs and total standard costs.

The Master Budget

a company's set of interrelated budgets that constitutes a plan of action for a specified time period.

A standard is

a level of quality or attainment; a benchmark or measure; a means of determining what a thing should be.

A standard cost is

a predetermined cost.

A static budget is appropriate in evaluating a manager's performance if

actual activity closely approximates the master budget activity.

Standard costs may be used by

all of these answers are correct

If budgets are to be effective, there must be

an organizational structure with clearly defined lines of authority and responsibility.

The comparison of differences between actual and planned results

appears on periodic budget reports.

Cash budget formula

beggining cash balance + cash receipts = total available cash - cash disbursements = excess of available cash over cash disbursements

The projection of financial position at the end of the budget period is found on the

budgeted balance sheet

Production Budget Formula

budgeted sales in units + desired ending inventory in units = total units needed - beginning inventory in units = units to be produced

Cash Budget 3 sections

cash receipts, cash disbursments, financing

The purpose of the sales budget report is to

determine whether sales goals are being met.

Beginning cash balance plus total receipts

equals total available cash.

Variances from standards are

expressed in total dollars.

Accounting generally has the responsibility for

expressing the budget in financial terms.

A static budget ignores data for different levels of activity. In other words, a static budget does not modify or adjust data regardless of changes in the activity level. So, is a static budget appropriate for variable costs, fixed costs or both?

fixed

To develop the flexible budget, management takes all of the following steps except identify the

fixed costs and determine the budgeted fixed cost per unit.

A favorable variance

implies a positive result if quality control standards are met.

A Static budget

is a projection of budget data at one level of activity (what we did in Chapter 22 was at one activity level when preparing the budgets).

The flexible budget

is a series of static budgets at different levels of activity.

A budget

is an aid to management.

Labor efficiency is measured by the

labor quantity variance.

Another name for the static budget is

master budget

Management by exception

means that material differences will be investigated

The master budget contains two classes of budgets:

operating and financial

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

production budget.

Using standard costs

provides a basis for evaluating cost control.

Normal standards

represent efficient levels of performance that are attainable under expected operating conditions. Most companies set standards at the normal level.

Ideal standards

represent optimum levels of performance under perfect operating conditions.

For a merchandiser, the starting point in the development of the master budget is the

sales budget.

Manufacturing overhead costs are applied to work in process on the basis of

standard hours allowed.

A static budget is not appropriate in evaluating a manager's effectiveness if a company has

substantial variable costs.

If actual direct materials costs are greater than standard direct materials costs, it means that

the actual unit price of raw materials or the actual quantities of raw materials used was greater than the standard unit price or standard quantities of raw materials expected.

direct labor budget formula

units to be produced x direct labor hours per unit= total required DL hours x direct labor cost per hour = total direct labor cost

Direct Materials Budget formula

units to be produced x dm per unit = total dm needed for production + desired ending direct materials = total materials required - beginning direct materials = direct materials units to be purchased x cost per unit = total cost of dm purchases

Budgetary control involves all but one of the following:

using static budgets

Flexible Budgets

•A flexible budget projects budget data for various levels of activity. •The budgetary process is more useful if it is adaptable to changes in operating conditions. A FB takes into account that the activity level will most likely change. •Can be prepared for each type of budget in the master budget and for any activity level.

The difference is in standards and budgets how they are expressed:

•A standard is a unit amount. •A budget is a total amount.

Flexible Budget Reports

•An internal report that shows cost data for variable and fixed costs. •Widely used in production and service departments to evaluate a managers performance •Notice the difference: if is says REPORT, then you are comparing budget and actual. •Contains three columns: Budget, Actual and Difference.

Budgeted Income Statement

•Important end-product of the operating budgets •Indicates expected profitability of operations and provides a basis for evaluating company performance. •It is prepared from the other operating budgets.

Cash Budget FB

•Shows anticipated cash flows -all cash receipt and cash disbursements.•Considered to be the most important output in preparing financial budgets.

Direct Labor Budget

•Shows both the quantity of hours and cost of DL necessary to meet production requirements. •Critical in maintaining a labor force that can meet expected production.

Budgetary Control 2

•This control take place by means of budget reports which compare actual results to planned objectives (planned objectives or planned results is the same thing as the budget). •Provides management with feed back on operations. •Budget reports are prepared as frequently as needed; top management's reaction to a difference between budget and actual usually depends on the materiality of the difference.