Accounting Chapter 20 Smartbook

A company expects to sell 400 units of Product X in January and expects sales to increase by 10% per month. If Product X sells for $10 each, the total sales for the first quarter of the year will be $

$13,240. Jan 400 Feb 400*110=440 March 440*110=484

Direct materials are $15 per unit; direct labor is $7 per unit and variable overhead costs are $2 per unit. If total product costs are $27, what are fixed costs per unit?

$3

A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Salary for sales manager: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be $

$60,000 Salary for sales manager + (budgeted sales x commissions) + Advertising30,000+(400,000 x 5%) + 10,000 = $60,000

The formula to determine the materials to be purchased is

(units to produce times materials required for each unit) plus desired ending materials inventory minus beginning materials inventory

Characteristics of budgets include: Check all that apply.-expressed in monetary terms. -typically span 5 to 10 years. -a focus on the past. -typically span a month, quarter or one year. -formal statement of a company's plans. -expressed in nonfinancial terms.

*expressed in monetary terms *typically span a month, quarter or one year. *formal statement of a company's plans.

Potential negative outcomes of budgeting include: (Check all that apply.)

*unethical behavior *budgetary slack *unnecessary spending

A company has the following loan activity—Additional loan from bank: $19,000; Ending cash balance: $5,600. The preliminary cash balance is:

-13400

A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the amount of budgeted income tax expense will be $

10668 118000-48500-1500-250-41,880=26670 26670*0.4=10668

LA Company has a beginning cash balance of $6,000, cash receipts of $12,000, cash payments of $7,200 and an outstanding loan balance of $1,500. Their preliminary cash balance is $

10800

A manufacturing company has budgeted direct labor hours of 940 at a budgeted direct labor hour rate of $15. The budgeted fixed cost is $950 per month. The total budgeted overhead cost for this month will be $

15,050 1) compute budgeted variable overhead, direct labor hours times variable overhead rate per direct labor hour 2) compute budgeted fixed overhead (950) 3)compute budgeted overhead as the total of parts 1 and 2

A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the budgeted net income will be $

16,002

A manufacturing company's sales budget indicates the following sales: January: $30,000; February: $20,000; March: $15,000. The company expects 80% of the sales to be on account. Credit sales are collected 30% in the month of the sale and 70% in the month following the sale. The total cash receipts collected during March will be $

17800

A manufacturing company has budgeted production of 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of materials on hand. The company desires an ending materials inventory of 60% of the next month's materials requirements. The total cost of direct materials purchases for May will be $

201,700 5000*3=15,000 15000-2750=12,250 12,250*10=122,500 4400*3=13,200 13,200*0.6=7,920 7,920*10=79,200 79,200+122,500

A manufacturer desires ending finished goods inventory of 5,000 units. Their budgeted unit sales are 20,000 units and beginning finished goods inventory is 3,000 units. The units to be produced is

22,000 5,000-3,000=2,000 2,000+20,000=22,000

A merchandising company's sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. Sales personnel are paid a salary plus commission. Salaries are expected to be $5,000 per month and the commission is 10% of sales. Additionally, advertising is expected to be $600 per month. The total selling expenses for the quarter will be $

25,800

HN Company had a beginning cash balance of $50,000; cash payments of $15,000 and a loan balance with the bank of $7,000. If HN has an agreement with the bank that they will maintain a minimum cash balance of $30,000, their ending cash balance is $

30,000

A company budgets the following direct materials purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase and the remaining amount in the following month. Cash payments for June for direct materials is $

82500

HA Service Company has total revenue of $8,500,000 and total employees of 100,000. HA Service Company's revenue per employee is $

85

Which of the following describe management's use of a master budget: (Check all that apply). Helps to place blame on managers who do not meet budgets Helps in determining bonuses to managers who meet budgets Helps in planning and control activities Helps analyze differences between actual and budgeted results

Helps in planning and control activities Helps analyze differences between actual and budgeted results

After determining the budgeted ending inventory units, the next step in the production budget is to:

add budgeted sales

Which of the following are budgets used by a service company: Multiple select question. Cash Direct labor Sales Capital expenditures Direct materials Production

cash, direct labor, sales, capital expenditures

A budget that includes the office manager's salary and other administrative expenses is called the:

general and administrative

List the individual budgets of the master budget in the order in which they are prepared, with the first on top.

sales budget; production budget; direct materials, direct labor, and factory overhead budget; cash budgets

The general and administrative budget includes all of the following except: administrative salaries depreciation on the administrative building taxes on the administrative building sales commissions insurance expense on the administrative building

sales commissions

A budget which estimates the types of selling expenses expected during the budget period is called a

selling expense budget

All of the following are ways that managers use the master budget except: to place blame on managers to help in controlling costs to help in the planning process to help in sensitivity analysis

to place blame on managers

The formula to compute revenue per employee is:

total revenue divided by total employees

True or false: Depreciation on non-manufacturing assets and property taxes are considered general and administrative expenses and, therefore, are included on the general and administrative expense budget.

true

True or false: A production budget is unique in that it does not show costs; it is always expressed in units of product.

true, the Production budget is that which is used for calculation of number of units produced.

A service provider will

typically use fewer operating budgets than a manufacturer

The formula to compute the budgeted direct labor cost is

units to produce times direct labor required per unit times direct labor cost per hour

A manufacturing company has budgeted direct labor hours of 600 at a variable overhead rate per direct labor hour of $20. The budgeted fixed cost is $500 per month. The total budgeted overhead cost for the month will be $

12,500

A company's sales budget indicates the following sales: January: 25,000; February: 30,000; March: 35,000. Beginning inventory is 12,000 units and the company desires ending inventory of 45% of the next month's sales. Units to be produced in January will be _______________

26,500 Computation of the desired ending inventory for January : Desired ending inventory for January=Budgeted sales for February x 45% =30,000×45%=13,500 Desired ending inventory for January = 13,500 units Computation of the Units to be produced in January : Units to be produced in January=Budgeted sales for January + Desired ending inventory − beginning inventory =25,000+13,500−12,000=26,500 Units to be produced in January = 26,500 units

A manufacturing company's sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. The company expects 70% of the sales to be on account and the remainder to be cash sales. Credit sales are collected in the month following the sale. The total cash collected during March will be $

31500

If direct materials per unit are $20, direct labor per unit is $10, variable overhead per unit is $2, and fixed overhead per unit is $1, total product cost per unit is $

33

JP Service Company has budgeted direct labor hours of 100 and direct labor cost per hour of $25 for data analysis personnel and budgeted direct labor hours of 50 and direct labor cost per hour of $30 for staff accountants. JP Service Company's cost of direct labor is $

4000

A manufacturing company has units to produce of 940 units for the month. Each unit requires 3.5 hours of labor to produce. The cost of direct labor is $15 per hour. The total cost of direct labor for the month will be $

49350

A company expects to sell 500 units during the second quarter and 550 units in the third quarter. Currently, during the second quarter, they have 46 units in beginning inventory. If they desire ending inventory of 10% of the next quarter's sales, ________________units will need to be produced in the second quarter.

509

Sales commissions are 10% of budgeted sales and the sales manager's salary is $1,000 per month. If budgeted sales are $50,000 for January, the total selling expenses budget for January is $

6,000 budgeted sales x sales commission %= sales commissions sales commissions + salary for sales manager = total selling expense

A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Depreciation on store equipment: $25,000; Rent on administrative building: $30,000; Miscellaneous administrative expenses: $5,000. The total general and administrative expenses on the January general and administrative expense budget will be $

61,250 25,000+1,250+5,000+30,000

A company budgets the following direct materials purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase, 50% in the month after the purchase, and the remaining balance in the second month after the purchase. Cash payments for June for direct materials is $

77500

To calculate the units to purchase in a merchandise purchases budget, the formula is:

Budgeted sales units + Budgeted ending merchandise inventory − Budgeted beginning merchandise inventory

Which of the following items would be included on the capital expenditures budget? (Check all that apply.) Sales Sale of plant assets Interest expense Inventory purchases Plant asset purchases

Plant asset purchases Sale of plant assets

A manufacturing company expects to sell 12,000 units in August and 15,000 units in September. The company desires to have an ending finished goods inventory of 80% of the next month's sales. If beginning finished goods inventory on August 1 is 8,000 units, then the company should produce _______ units in August

Production Budget For the Month Ended August Budgeted unit sales 12,000 Desired Ending inventory 12,000 Total required units 24,000 Beginning inventory -8,000 Budgeted production units 16,000

List the individual budgets of the master budget in the order in which they are prepared, with the first on top.

Sales budget; Production budget ; Direct materials, Direct labor and Factory Overhead budgets; Cash budgets

ABC Company prepared a cash budget for the month. The company has outstanding loans and desires a minimum cash balance of $10,000. If the company has a preliminary cash balance of $25,000, the company should:

Use $15,000 to repay loans

Match each figure on the budgeted balance sheet to the previously prepared budget from which the figure is derived.

accounts receivable - Sales budget Income tax payable - Income statement budget Bank loan payable - Cash budget

Most companies prepare a(n) ______ budget that is separated into ______ budgets.

annual; monthly or quarterly

Budgeting guidelines that help ensure budgeting is a positive motivating force include: (Check all that apply.)

attainable goals; participatory budgeting; the opportunity to explain differences between actual and budgeted amounts

A company has the following budgeted information: Cash receipts: $542,000; Beginning cash balance: $10,000; Cash payments (including interest payments): $560,000; Outstanding loan balance: $100,000; Desired ending cash balance: $50,000. In order to maintain the desired cash balance, the company will need to:

borrow 58,000

A(n) ___________ is a formal statement of a company's plans in dollars.

budget

The budget which shows predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is the:

budgeted balance sheet

Budgeted financial statements include: (Check all that apply). budgeted balance sheet budgeted income statement selling expense budget cash budget sales budget

budgeted balance sheet budgeted income statement

The formula to compute the budgeted direct labor cost for a service firm is:

budgeted direct labor hours times direct labor cost per hour

The budget which shows predicted amounts of sales and expenses for the budget period is the:

budgeted income statement

The formula to compute the units to purchase in a merchandise purchases budget is:

budgeted sales units plus desired ending merchandise inventory units minus beginning merchandise inventory units

All of the following are guidelines that should be followed for budgets to be a positive motivating force except:

budgets should be prepared using a top-down approach

The reporting of expected cash receipts and cash payments related to the sale and purchase of plant assets is reported on the ______________ expenditures budget

capital

the ________ budget shows the expected cash receipts and cash payments during the budget period.

cash

The two steps to complete the production budget include: (Check all that apply.) -enter materials cost per pound -compute units to produce -compute total required units -compute cost of materials purchases

compute total required units; compute units to produce

A(n) __________ budget is continually revised as time passes.

continuous

The budgeting process that involves adding a quarter (or month) to replace the quarter (or month) just elapsed is called:

continuous budgeting

To use the __________ function that evaluates business operations against some norm.

control

Budgeted performance considers all of the following in relation to a benchmark: (Select all that apply).

economic, company, and industry

The primary purpose of using short-term budgets is to:

evaluate performance and take necessary corrective action

A manufacturing company would typically prepare all of the following budgets except: Merchandise inventory budget Cash budget Factory overhead budget Production budget

merchandise inventory budget

All of the following are operating budgets except:

merchandising/cash budget-- this is a financial budget

All of the following are potential negative outcomes of budgeting except: employees might always spend their budgeted amount even on unnecessary items understatement of sales budgets and overstatement of expense budgets overstatement of sales and understatement of expenses employees may engage in unethical behavior

over statement of sales and understatement of expenses

A manufacturer will prepare a _____ budget which shows the number of units to be produced during a period.

production

A quantity of inventory that provides protection against lost sales caused by unfulfilled demands from customers is called

safety stock

A quantity of inventory that provides protection against lost sales caused by unfulfilled demands from customers or delays in shipments is called _________ stock

safety stock

The first step in preparing the master budget is planning the _________ budget

sales

A manufacturer's operating budgets consists of the: (Check all that apply.) cash budget selling expense budget sales budget purchases budget production budgets

sales budget, production budget, selling expense budget. Sales Budget: This budget forecasts the expected sales revenue for a specific period and is an essential part of the manufacturer's budgeting process. Selling Expense Budget: The selling expense budget details the expected expenses related to marketing, advertising, and selling products. It is another crucial component of a manufacturer's operating budgets. Production Budgets: Production budgets specify the quantity of products that need to be manufactured to meet sales targets and maintain inventory levels. They are indeed an essential part of a manufacturer's budgeting process.