ACCT 2101 Exam 2
operating budget
A collection of smaller budgets that leads to budgeted financial statements is the
$420,264.00
Alonzo Company expects to produce 5,000 units in the first quarter of 2022, and they expect that to increase by 5% in each succeeding quarter. Each unit requires 1.5 labor hours at a cost of $13 per hour. What will Alonzo's direct labor costs be for the year? (Round each quarter's production to the nearest whole number when determining your answer.)
not-for-profit
An organization is planning their master budget. They begin by listing all of their expected cash outflows, including employee salaries and benefits, utilities, program expenses, insurance, vehicle registration and maintenance, and rent expenses. This organization is likely a
$29,000
Katie's Cleaning Service has cleaning contracts for 15 apartments, 45 family homes, and 25 office buildings. She estimates that an apartment takes 4 hours to clean, a home takes 6 hours to clean, and an office building takes 10 hours to clean. Katie pays her cleaning staff $12.50/hour. If each location is cleaned once per week, how much does Katie need to budget for direct labor each month? Assume there are four weeks per month.
$22.68
LDM Co. is preparing its direct labor budget. For the current month, the company has budgeted to produce 40,400 units and will sell 90% of those units during the month. LDM's total budgeted amount for direct labor is $3,848,342.40 and each unit requires 4.2 hours. What is the budgeted amount per direct labor hour?
$26,100 (solution: 8700 jackets x 0.25 hours x $12 hour =$26,100)
Major Brands, Inc., a clothing manufacturer, is planning to sell 9,000 jackets during February and its production is estimated at 8,700 jackets during February. Each jacket requires 4.4 yards of fabric at $4.00 per yard and 0.25 direct labor hours at $12 per hour. Manufacturing overhead is applied at 110% of direct labor costs. What is the total amount to be budgeted for direct labor for February?
$225,450
Rose Company is preparing its direct labor budget for May. Projections for the month show that 8,350 units are to be produced and that direct labor time is 3 hours per unit. If the direct labor cost per hour is $9, what is the total budgeted direct labor cost for May?
$138,680 (solution: $174,800 x 10%) + ($202,000 x 60%) = $138,680
Sally Automotive is preparing the budget for the first quarter and estimates that budgeted cash purchases will be $106,000, $98,400, and $103,600 for January, February, and March, respectively. The company also purchases on credit and historically pays 40% of its credit purchases in the month of purchase, 50% in the month following purchase, and 10% in the second month after the purchase. Credit purchases during this time are expected to be $186,000, $174,800, and $202,000 for January, February, and March, respectively. What amount will be reported for accounts payable on the March balance sheet?
$36,000
Sophia, Inc., is preparing its cash budget for the fourth quarter. The inventory manager advises that materials purchases will be $40,000 in October and will increase by 25% for each month thereafter because of the holiday season. Sophia's purchases in September were $32,000. Sophia pays for purchases 50% in the month after sale and 50% in the second month after the sale. What are Sophia's budgeted cash payments for purchases in November?
lower-level managers felt the budget was unfair
Sotelo Restaurants produced a one-year budget. At the end of the year, top managers and executives were disappointed to find that they had spent 8% more than they had planned without a compensating increase in sales. The most likely reason for this is that
Spencer Accountants bases their budget on expected input, whereas Weaver Carpet Cleaners bases their budget on expected output.
Spencer Accountants provides accounting services to businesses and individuals. They build their budget around the number of hours each accountant expects to bill their clients. In contrast, Weaver Carpet Cleaners provides carpet cleaning services to businesses and individuals. They build their budget around the estimated square feet of carpet that they will clean. What is the difference between these two companies?
number of occupied houses in the HOA
The Ridgeview neighborhood has a not-for-profit homeowners association (HOA) that maintains a pool and playground as well as pays for maintenance of land in the neighborhood that is not individually owned. Which of the following activity indexes might the Ridgeview neighborhood association use when developing their budget?
September
The Rosis Company's fiscal year runs from January to December. Which of the following month's ending cash balance will Rosis use as the beginning balance for the fourth quarter?
Budgeted income statement
The ____ is the end product of the operating budgets
merchandise purchases
The ________ budget shows the estimated cost of goods to be purchased to meet expected sales.
Fixed costs do not change when more units are sold.
When developing the selling and administrative expense budget, how do fixed costs change with an increase in units sold?
Betty's Bakery, a small-town bakery that has been open for three years
Which of the following companies is likely to have the least formal budget process?
at the end of the budgeting period
Michael was asked to collect the financial data from all the different departments so that top management could determine if they met their goals. What point is the at company in its budgeting process?
Interest Payable - $10,000
On September 1, 2015, Barclay Spa borrowed $500,000 to renovate the massage therapy area of the facility. The terms of the loan were 6% annually over 10 years. Determine how the accrued interest would appear on Barclay's budgeted balance sheet at December 31, 2015.
Distinguish between fixed and variable costs
The manufacturing overhead budget and the selling and administrative expense budget both
budgeted sales + budgeted ending inventory - budgeted beginning inventory
budgeted production can be computed as
budgeted production
budgeted sales + budgeted ending inventory - budgeted beginning inventory is used to determine
plan and control the direction of a company's operations
budgets are a management tool used to _____
budget committee
coordinating the preparation of the budget is the responsibility assigned to the______
end up with too much inventory
if a company sales budget is too optimistic, the company may
includes both quantity and cost of direct labor necessary to meet production
the direct labor budget
the increased cost of shipping
the event that will have the least impact on the sales budget is_____
"Bottom-up budgeting will likely produce more accurate numbers, but only if you take care to ensure that the firm's lower-level managers are not manipulating their forecasts to make their performance look better than it really is. Also, it's important to remember that bottom-up budgeting is usually more time consuming than top-down budgeting."
For the past three years, Apex Industries has employed top-down budgeting. Throughout that entire period, the firm's budgeted costs and revenues have differed significantly from its actual numbers. Apex's CEO believes the best way to remedy this issue is to switch to bottom-up budgeting, and he asks your opinion of his idea. What is your best response?
$842,469 solution= 736,234 + 106,235 = 842,469
George's Gems' December 31, 2021 balance sheet shows retained earnings of $736,234. Its 2022 budgeted income statement shows net income of $106,235. The cash budget for 2022 shows financing of $20,000. Determine the retained earnings balance on George's December 31, 2022 budgeted balance sheet.
They are incorporated into the unit cost that is used to calculate the cost of goods sold of the income statement.
How do the direct materials budget, direct labor budget, and manufacturing overhead budget relate to the budgeted income statement?
The not-for-profit usually starts with expenditures rather than sales
How is the budgeting process for not-for-profit organizations different than the budgeting process for for-profit organizations?
50,780 units
In early February, Heavenly Swimwear is preparing the budget for swimsuits for the summer season. Budgeted sales are 47,600 suits for May, 58,200 suits for June, and 43,500 suits for July. Each suit requires 1.3 yards of fabric. Heavenly Swimwear requires ending Finished Goods inventory equal to 30% of the following month's budgeted sales. What is Heavenly Swimwear's budgeted production for May?
13,000 units (solution: 12,000 + (16,000 x 25%) - (12,000 X 25%) = 13,000 units
In early March, Percy's Pickled Snacks is preparing the budget for pickled beets for the upcoming quarter. Budgeted sales are 12,000 jars for April, 16,000 jars for May, and 19,000 jars for June. Each jar requires 1.2 pounds of beets. Each jar of pickled beets sells for $15. Percy requires ending Finished Goods inventory equal to 25% of the following month's budgeted sales. What is Percy's budgeted production for April?
the number of units to be produced each period
Jackie and Carolyn are working together to develop the operating budgets. If Jackie is working on the direct materials budget and Carolyn is working on the direct labor budget, what common information will they both need to complete their budgets?
10,845
Jasper Coils manufactures components for electrical transformers. An average transformer requires 45 yards of copper wire. Jasper plans to manufacture 240 transformers this month and 250 transformers next month. The company requires ending inventory equal to 10% of the next month's production. How many yards of wire does it need to purchase this month?
continuous
Masters, Inc. prepares a budget that always includes 12 months of data. As each month ends, it is removed from the budget, and another month is added. Masters uses which type of budget?
Service: yes not for profit: yes
In which of the following entities is budgeting necessary?
march
Coady Inc.'s first quarter runs from January to March. Which month's ending cash balance will be the ending cash balance for Coady's first quarter?
$42,800
Exceptional Cleaners is a commercial cleaning company. When developing their cash budget, they identified the following budgeted items: What amount will it include as cash outlays on the cash budget?
$40,000 (solution: 312,000 - 274,000 + 2,000 = 40,000
Flintstone Enterprises prepared the following cash budget for June:Cash receipts: $312,000Cash disbursements: $274,000Short-term financing: $2,000What amount will Flintstone Enterprises report for cash on the June balance sheet?
limits
the line item authorization of governmental budgets significantly _______ the amount of discretion management can exercise.
it is likely understaffed
when a service firm's staff has an exercise work load,
governmental
The budgets of ________ entities tend to be authorized on a line-by-line basis.
operating budget
To plan its sales and production for the upcoming year, a company creates a(n) ________ budget.
both
Which of the following individuals would normally be included on the budget committee? 1. Company president 2. Sales manager
the projected financial position at the end of the period
Which of the following is shown on the budgeted balance sheet
1,3,2
Which of the following is the correct sequencing of the following budgets? Budgeted income statement Budgeted balance sheet Cash budget
a sales budget that is too optimistic
Which of the following may cause a company to end up with too much inventory?
participative
____ budgets are most likely to include budgetary slack.
fixed expenses
_____in the selling and administrative expense budget remain the same as more units are sold
