ACCT 317 CH 6

Elmhurst Corporation is considering changes to its responsibility accounting system. Which of the following statements​ is/are correct for a responsibility accounting​ system? I. In a cost​ center, managers are responsible for controlling costs but not revenue. II. The idea behind responsibility accounting is that a manager should be held responsible for those items that the manager can control to a significant extent. III. To be​ effective, a good responsibility accounting system must help managers to plan and to control. IV. Costs that are allocated to a responsibility center are normally controllable by the responsibility center manager. 1. I and II only are correct 2. II and III only are correct 3. I, II, and III are correct 4. I, II and IV are correct

3. I, II, and III are correct

Mary​ Jacobs, the controller of the Jenks Company is working on​ Jenks' cash budget year 2. She has information on each of the following​ items: I. Wages due to workers accrued as of December​ 31, year 1. II. Limits on a line of credit that may be used to fund​ Jenks' operations in year 2. III. The balance in accounts payable as of December​ 31, year​ 1, from credit purchases made in year 1. Which of the items above should Jacobs take into account when building the cash budget for year​ 2? A. I, II B. I, III C. II, III D. I, II, III

D. I, II, III

Dawson Co. produces wine. The company expects to produce 2,535,000 two-liter bottles of Chablis in 2018. Dawson purchases empty glass bottles from an outside vendor. Its target ending inventory of such bottles is 77,000​; its beginning inventory is 54,000. For​simplicity, ignore breakage. Compute the number of bottles to be purchased in 2018.

Direct materials to be used in production 2,535,000 Add target ending direct materials inventory 77,000 Total requirements 2,612,000 Deduct beginning direct materials inventory 54,000 Direct materials to be purchased 2,558,000

The McGrath Company has prepared a sales budget of 42,000 finished units for a​ 3-month period. The company has an inventory of 13,000 units of finished goods on hand at December 31 and has a target​ finished-goods inventory of 15,000 units at the end of the succeeding quarter. It takes 3 gallons of direct materials to make one unit of finished product. The company has inventory of 61,000 gallons of direct materials at December 31 and has a target ending inventory of 53,000 gallons at the end of the succeeding quarter. How many gallons of direct materials should McGrath Company purchase during the 3 months ending March​ 31?

To be used in production 132,000 Add target ending inventory 53,000 Total requirements 185,000 Deduct beginning inventory 61,000 Purchases to be made (in gallons) 124,00

Which of the following statements is correct regarding the drivers of operating and financial budgets? a. the sales budget will drive the cost of goods sold budget b. the cost of goods sold budget will drive the units of production budget c. the production budget will drive the selling and administrative expense budget d. the cash budget will drive the production and selling and administrative expense budgets

a. the sales budget will drive the cost of goods sold budget

Superior Industries sales budget shows quarterly sales for the next year as​follows: Quarter 1-10,000​; Quarter 2-8,000​; Quarter 3-12,000​; Quarter 4-14,000. Company policy is to have a target​finished-goods inventory at the end of each quarter equal to 20% of the next​quarter's sales. Budgeted production for the second quarter of next year would​ be: a. 7200 units b. 8800 units c. 12000 units d. 10400 units

b. 8800 units Budgeted sales Q2 8,000 Add target end FG inv 2,400 (12,000 x 20%) Total required units 10,400 Deduct beg FG inv (1,600) (8,000 x 20%) Units of FG to be produced 8,800

Which of the following statements is correct regarding the components of the master budget? a. the cash budget is used to create the capital budget b. operating budgets are used to create cash budgets c. the manufacturing overhead budget is used to create the production budget d. the cost of goods sold budget is used to create the selling and administrative expense budget

b. operating budgets are used to create cash budgets

The Coby Company expects sales in 2018 of 201,000 units of serving trays. Coby​'s beginning inventory for 2018 is 13,000 trays, and its target ending inventory is 29,000 trays. Compute the number of trays budgeted for production in 2018.

budgeted unit sales 201000 add target end FG inv 29000 total required units 230000 deduct beg FG inv 13000 units of FG to be produced 217000