Accounting TEST 3

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? multiple choice $18,000 $30,000 $48,000 60,000

Budgeted net income = Gross margin − Selling and administrative expenses − Interest expense Budgeted net income = $90,000 − $30,000 − $12,000 = $48,000

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 evaluate and reward employees. c) Budgets communicate financial goals throughout the organization.

Organizations use budgets to uncover potential bottlenecks before (rather than as) they occur.

For a production budget, the _________blank is the beginning inventory for the year. beginning inventory for the first quarter beginning inventory for the last quarter ending inventory for the last quarter sum of beginning inventories for the four quarters

The beginning inventory for the first quarter is the beginning inventory for the year.

Film Studio, Incorporated 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? multiple choice $80,000 $100,000 $150,000 $200,000

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

Companies prepare direct labor budgets to _________blank. multiple choice 1avoid labor shortages Correctdetermine the direct labor-hours per unitensure timely supply of raw materialsreduce inventories

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.

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? Advertising expense Depreciation expense Selling commissions Utilities expense

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.

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? $432,000 $468,000 $480,000 $540,000

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

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? multiple choice $15,000 25,000 $30,000 $40,000

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

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

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.

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.

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 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.

Operating budgets generally cover a one-year period to correspond to the company's fiscal year.

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? 3160,000 bottles 175,000 bottles 195,000 bottles 215,000 bottles

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

In a budgeted income statement, _________blank is subtracted from sales to arrive at gross margin. multiple choice cost of goods sold interest expense selling and administrative expense depreciation expense

Sales minus cost of goods sold equals the gross margin.

The budgeting process begins with the preparation of the _________blank budget cash direct materials production sales

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

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? 415,000 bottles 20,000 bottles 25,000 bottles 40,000 bottles

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

The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the _________blank. unit product cost variable overhead cost per unit total overhead cost per unit the sum of the direct materials and direct labor cost per unit

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.

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? multiple choice $20,000 $26,000 $32,000 $40,000

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

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? multiple choice 2$355,000$360,000$300,000$315,000 Correct

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