ACCT EXAM 2

Participative budgeting

Lower-level managers are more likely to perceive results as fair and achievable under a

Merchandise purchases budget

The estimated cost of goods to be purchased by a merchandiser to meet expected sales.

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. Each swimsuit sells for $22. Heavenly Swimwear requires ending Finished Goods inventory equal to 30% of the following month's budgeted sales. If the price of fabric is $2 per yard, what is Heavenly Swimwear's budgeted cost for fabric for June? $162,786 $107,580 $125,220 $139,854

$139,854

Goldie Gold Jewelry uses direct labor hours to apply overhead and estimated total overhead costs at $52,500 and direct labor hours at 12,500 for the second quarter. The direct labor quantity standard is 1.75 direct labor hours per unit, and the company produced 5,250 units in the second month of the second quarter. This required 2,625 direct labor hours. What was the overhead rate for the second quarter? $20.00 per direct labor hour. $4.20 per direct labor dollar. $4.20 per direct labor hour. $10.00 per unit.

$4.20 per direct labor hour.

Anderson Manufacturing incurred variable overhead costs of $14,500 and fixed overhead costs of $12,600. How much actual overhead will be used in the total overhead variance calculation? $12,600 $14,500 $1,900 $27,100

27100 add them toether

Cara's Wedding Designs makes and sells bridal dresses, bridesmaid dresses, tuxedos, and suits. The company plans to produce 60 dresses during the next month and will require 390 yards of fabric for production. The total fabric required for the month is 429 yards. What are the direct materials per dress? 0.65 yards 6.5 yards 7.15 yards 1.1 yards

6.5

budgeted income statement

An estimate of the expected profitability of operations for the budget period.

When developing the selling and administrative expense budget, how do fixed costs change with an increase in units sold? Fixed costs do not change when more units are sold. Fixed costs vary each period regardless of the number of units sold. Fixed costs decrease linearly as more units are sold. Fixed costs increase linearly as more units are sold.

Fixed costs do not change when more units are sold.

The ___________ is the end product of the operating budgets. sales budget budgeted income statement production budget budgeted balance sheet

budgeted income statement

standards differ from budgets in that

budgets are the total amounts and standards are a unit amount

controllable margin

contribution margin less controllable fixed costs

Captain Candy Company allocates corporate indirect costs on the basis of revenues. Its chocolate division had revenues of $8,525,000 and a contribution margin of 45% of sales. If the direct fixed costs were $725,000 and corporate allocated overhead costs were $906,000, what will be the chocolate division's controllable margin if it has an 8% increase in revenues? $4,143,150 $3,418,150 $3,816,900 $3,360,150

$3,418,150

The accounting department of a manufacturing company is an example of: -a cost center. -a profit center. -an investment center. -a contribution center.

-a cost center

Responsibility centers include: cost centers. profit centers. investment centers. All of the answer choices are correct.

-all of the above

Selling and administrative expense budget

A projection of anticipated selling and administrative expenses for the budget period.

If a company's sales budget is too optimistic, the company may end up with too little inventory. exceed its profit forecast. beat its operating cash forecast. end up with too much inventory.

end up with too much inventory.

A static budget is useful in controlling costs when cost behavior is: mixed. fixed. variable. linear.

fixed

Responsibility accounting cannot be used effectively -for costs that can be directly associated with the specific level of responsibility. -for costs allocated to the responsibility level. -when budgeted data can be developed for evaluating the manager's effectiveness in controlling costs. -for costs controllable at the level of responsibility with which they are associated.

for costs allocated to the responsibility level

Joan is a manager with Steel Works, Inc. Joan would love to beat the budget this year. She believes that revenues for the coming year will be $200,000 and expenses will be $120,000. To build in budgetary slack, Joan is least likely to budget for $110,000 of expenses. $190,000 of revenue. $70,000 of income. $130,000 of expenses.

$110,000 of expenses.

At 9,000 direct labor hours, the flexible budget for indirect materials (a variable cost) is $27,000. If $28,000 of indirect materials costs are incurred at 9,200 direct labor hours, the flexible budget report should show the following difference for indirect materials: $1,000 unfavorable. $1,000 favorable. $400 favorable. $400 unfavorable.

$400 unfavorable.

Village Manufacturing's most popular product has the following direct labor standards: 3 direct labor hours/unit and $30/direct labor hour. During September, Village produced 2,400 units and used 7,000 direct labor hours. The company's direct labor cost was $252,000. What is the labor price variance for September? $6,000 unfavorable $6,000 favorable $36,000 unfavorable $42,000 unfavorable

$42,000 unfavorable

Which of the following is NOT a benefit of budgeting? -Management can plan ahead. -An early warning system is provided for potential problems. -It enables disciplinary action to be taken at every level of responsibility. -The coordination of activities is facilitated.

It enables disciplinary action to be taken at every level of responsibility.

controllable cost

a cost over which a manger has control

the setting of a standard is

a management decision

the accounting depeartmenr of a manufactURING CENTER IS an ex of

a profit center

cash flow

a projection of anticipated cash flows

flexible budget

a projection of budget data for various levels of activity

cost center

a responsibility venter that incurs costs but does not directly generate revenues

normal standards

allow for rest periods machine breakdowns and setup time

Segment (or division)

an area of responsibility in decentralized operations

standard cosrs

are predetermined unit costs which companies use as measures of performance

operating budgets

are used as the basis for the preparation of the budgeted income statement.

Non controllable costs

costs incurred indirectly and allocated to a responsibility center that are not controllable at that level

indirect fixed costs

costs that are incurred for the benefit of more than one profit center

direct fixed costs

costs that relate specifically to a responsibility center and are incurred for the sole benefit of the center

Under responsibility accounting, the evaluation of a manager's performance is based on matters that the manager: -directly controls. -directly and indirectly controls. -indirectly controls. -has shared responsibility for with another manager.

directly controls The evaluation of a manager's performance is based only on matters that the manager directly controls. The other choices are therefore incorrect as they include indirect controls and shared responsibility.

Financial budgets

focus primarily on the cash resources needed to fund expected operations and planned capital expenditures.

A sales budget is: -derived from the production budget. -management's best estimate of sales revenue for the year. -not the starting point for the master budget. -prepared only for credit sales.

management's best estimate of sales revenue for the year. The other choices are incorrect because a sales budget (a) is the first budget prepared and is the one budget that is not derived from any other budget, (c) is the starting point for the master budget, and (d) is prepared for both cash and credit sales.

what is correct about total overhead variance

standard hors allowed for the work done is the measure used in computing the variance

budget variance

the diffrence between budget and actual is called

the budgeted income statement is the

the end-product of the operating budget

responsibility reporting system

the preparation of reports for each level of responsibility in the company's organization chart

budgertary control

the use of budgets to control operations

The essentials of effective budgeting do not include: -top-down budgeting. -management acceptance. -research and analysis. -sound organizational structure.

top-down budgeting.

The equation for computing the direct labor budget is to multiply the direct labor cost per hour by the: -total required direct labor hours. -physical units to be produced. equivalent units to be produced. -No correct answer is given.

total required direct labor hours.

budgetary control involves all but one of the following: -modifying future plans. -analyzing differences. -using static budgets but not flexible budgets. -determining differences between actual and planned results.

using static budgets but not flexible budgets. c. Budgetary control involves using flexible budgets and sometimes static budgets. The other choices are all part of budgetary control.

return on investment

A measure of management's effectiveness in utilizing assets at its disposal in an investment center.

Responsibility accounting

A part of management accounting that involves identifying and reporting revenues and costs on the basis of the manager who has the authority to make the day-to-day decisions about the items.

budgeted balance sheet

A projection of financial position at the end of the budget period.

profit center

A responsibility center that incurs costs and also generates revenues.

investment center

A responsibility center that incurs costs, generates revenues, and has control over decisions regarding the assets available for use.

budget

A formal written statement of management's plans for a specified future time period, expressed in financial terms.

Depending on the nature of the report, budget reports are prepared: -daily. -weekly. -monthly. -All of the answer choices are correct.

-all of the answers are correct

budgetery slack

The amount by which a manager intentionally underestimates budgeted revenues or overestimates budgeted expenses in order to make it easier to achieve budgetary goals.

residual income

The income that remains after subtracting from the controllable margin the minimum rate of return on a company's average operating assets.

Management by exception

The review of budget reports by top management focused entirely or primarily on differences between actual results and planned objectives.

Long-range planning

identifies long-term goals, selects strategies to achieve these goals, and develops policies and plans to implement the strategies.

master budget

is a set of interrelated budgets that constitutes a plan of action for a specified time period.

A budget: -is the responsibility of management accountants. -is the primary method of communicating agreed-upon objectives throughout an organization. -ignores past performance because it represents management's plans for a future time period. -may promote efficiency but has no role in evaluating performance.

is the primary method of communicating agreed-upon objectives throughout an organization. -a budget is a responsibility for all levels of management -past performances are not ignored they are the starting point for the future budget goals -the budget not only may promote efficiency but is an important tool for evaluating performance.

decentralization

organizational structure in which control of operations is delegated to many managers throughout the organization

responsibility center includes

profit center, investment center, cost centers

sales forecast

shows potential sales for the industry and a companys expected share of such sales

High Country Home Decor has three divisions: Traditional, Contemporary, and Rustic. High Country had sales of $7,100,000 during the most recent fiscal period. Fixed costs totaled $1,520,000. Sales were $3,100,000 for the Traditional division, $2,400,000 for the Contemporary division, and $1,600,000 for the Rustic division. Controllable fixed costs were $700,000 for Traditional division, $310,000 for the Contemporary division, and $210,000 for the Rustic division. Variable costs were $1,240,000 for the Traditional division, $960,000 for the Contemporary division, and $820,000 for the Rustic division. What is the controllable margin for the Rustic division? $273,000 $570,000 $470,000 $670,000

$570,000

Fox Run Co. manufactures a product with a direct labor quantity standard of 6 hours per unit and a direct labor price standard of $25.60 per hour. During October, Fox Run's actual direct labor payroll was $314,496 and the company used 12,600 direct labor hour to produce 2,000 units of the product. What is Fox Run's direct labor price variance for October? $8,064 favorable $7,296 unfavorable $8,064 unfavorable $15,360 unfavorable

$8,064 favorable

Fox Company's static budget shows $27,000 budgeted for direct materials, $36,000 budgeted for direct labor, and $9,000 budgeted for overhead. Fox's actual direct materials were $28,000, actual direct labor was $34,000, and actual overhead was $9,200. What is the total difference between the static budget and actual, and is the difference favorable or unfavorable? $800, favorable $3,200, unfavorable $800, unfavorable $3,200, favorable

$800, favorable

The format of a cash budget is: -Beginning cash balance + Cash receipts + Cash from financing − Cash disbursements = Ending cash balance. -Beginning cash balance + Cash receipts − Cash disbursements +/− Financing = Ending cash balance. -Beginning cash balance + Net income − Cash dividends = Ending cash balance. -Beginning cash balance + Cash revenues − Cash expenses = Ending cash balance.

-Beginning cash balance + Cash receipts − Cash disbursements +/− Financing = Ending cash balance.

How do the direct materials budget, direct labor budget, and manufacturing overhead budget relate to the budgeted income statement? -They are incorporated into the unit cost that is used to calculate the cost of goods sold of the income statement. -They are incorporated into the machine hours that are used to calculate the selling and administrative expenses of the income statement. -They are incorporated into the selling price that is used to calculate the sales of the income statement. -They are incorporated into the variable expenses that are used to calculate the expenses of the income statement.

-They are incorporated into the unit cost that is used to calculate the cost of goods sold of the income statement.

Nathan is working on the operating budgets for his company. He has already done the sales and production budgets, and he is now working on the direct materials, direct labor, and manufacturing overhead budgets. He decides to do the direct labor budget first, then the manufacturing overhead budget, then the direct materials budget. Do you think this is an appropriate way to prepare the budgets? Why or why not? -Yes, because the direct materials budget depends on the direct labor and manufacturing overhead budgets so it should always be prepared last. -No, because the manufacturing overhead budget depends on the direct materials budget so the direct materials budget should be prepared second. -Yes, because the manufacturing overhead budget depends on the direct labor budget but none of the other budgets depend on the direct materials budget. -No, because the direct labor budget depends on the direct materials budget so the direct materials budget should be prepared first.

-Yes, because the manufacturing overhead budget depends on the direct labor budget but none of the other budgets depend on the direct materials budget.

Controllable costs for responsibility accounting purposes are those costs that are directly influenced by which of the following? -a change in activity -sales volume -a given manager within a given period of time -production volume

-a given manager within a given period of time

A static budget is: -a projection of budget data at several levels of activity within the relevant range of activity. -a projection of budget data at a single level of activity. -compared to a flexible budget in a budget report. -never appropriate in evaluating a manager's effectiveness in controlling costs.

-a projection of budget data at a single level of activity.

Each of the following budgets is used in preparing the budgeted income statement except the: -sales budget. -selling and administrative expense budget. -capital expenditure budget. -direct labor budget.

-capital expenditure budget.

To evaluate the performance of a profit center manager, upper management needs detailed information about: -controllable costs. -controllable revenues. -controllable costs and revenues. -controllable costs and revenues and average operating assets.

-controllable costs and revenues.

In the equation for return on investment (ROI), the factors for controllable margin and operating assets are, respectively: -controllable margin percentage and total operating assets. -controllable margin dollars and average operating assets. -controllable margin dollars and total assets. -controllable margin percentage and average operating assets.

-controllable margin dollars and average operating assets.

In a responsibility report for a profit center, controllable fixed costs are deducted from contribution margin to show: -profit center margin. -controllable margin. -net income. -income from operations.

-controllable margin.

The budgeted balance sheet is: -developed from the budgeted balance sheet for the preceding year and the budgets for the current year. -the last operating budget prepared. -used to prepare the cash budget. -All of the answer choices are correct.

-developed from the budgeted balance sheet for the preceding year and the budgets for the current year.

Differences between budgeted and actual costs are labeled as -committed or discretionary. -positive or negative -.avoidable or unavoidable. -favorable or unfavorable.

-favorable or unfavorable.`

Responsibility reports for cost centers: -distinguish between fixed and variable costs. -use static budget data. -include both controllable and noncontrollable costs. -include only controllable costs.

-include only controllable costs use flexible budget data

Compared to budgeting, long-range planning generally has the: -same amount of detail. -longer time period. -same emphasis. -same time period.

-longer time period usually is a period of at least 5 years whereas budgeting usually covers a period of one year.

Philip is a manager who oversees raw materials ordering, inventory levels, employee efficiency and productivity, and assembly line maintenance. Which of the following budgets would Philip most likely help develop? -sales budget -selling and administrative expense budget -manufacturing overhead budget -capital expenditure budget

-manufacturing overhead budget All of Philip's tasks revolve around the production of manufactured goods. Therefore, he is most likely to help develop budgets related to production, which include the production budget, the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

A production manager in a manufacturing company would most likely receive a: -sales report. -income statement. -scrap report. -shipping department overhead report.

-scrap report

The budgeted income statement is: -the end-product of the operating budgets. -the end-product of the financial budgets. -the starting point of the master budget. -dependent on cash receipts and cash disbursements.

-the end-product of the operating budgets.

Direct materials inventories are kept in pounds in Byrd Company, and the total pounds of direct materials needed for production is 9,500. If the beginning inventory is 1,000 pounds and the desired ending inventory is 2,200 pounds, the total number of pounds to be purchased is: 9,400. 9,500. 9,700. 10,700.

10700

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? 12,000 units 11,000 units 16,000 units 13,000 units

13000

The static budget for production of swimwear by Russell Aquatics is based on 10,000 units produced per month. For this level of production, indirect materials are $64,000, indirect labor is $57,000, utilities are $9,000, depreciation is $14,000, and supervision is $3,000. What would the company's total budget be if they produced a flexible budget for 12,000 units? $173,000 $145,200 $159,600 $176,400

173000

Dobbins Resources pays sales commissions of $2 per unit and shipping costs of $0.75 per unit. If Dobbins expects to sell 12,000 units in the third quarter, what will their total variable expenses be? $42,000 $33,000 $9,000 $24,000

2+.75=2.75 2.75x12000=33000

Fukui Electronics sells 15,000 units in their slow months and 75,000 units in their busy months. If Fukui wanted to develop a flexible budget, what interval should they use between each activity index? 50,000 units 1,000 units 20,000 units 5,000 units

20000

budget comittee

A group responsible for coordinating the preparation of the budget.

Bears Unlimited produces children's teddy bears. The company has projected sales of 97,000 bears for the month. Each bear requires 3 buttons for eyes and nose. The company has projected beginning inventory of 18,000 buttons and it plans to have 8% less than that in ending inventory. What are the standard direct materials for buttons needed for the month to meet production and achieve the desired inventory reduction? 309,000 buttons 291,000 buttons 289,560 buttons 292,440 buttons

Production = Sales + Desired Ending inventory - Beginning inventorySales = 97,000 bears x 3 buttons = 291,000 buttonsBeginning inventory = 18,000 buttonsEnding inventory = 0.92 x 18,000 = 16,560 buttonsProduction = 291,000 + 16,560 - 18,000 = 289,560 buttons

Static budget

projection of budger data at a single level of activity before actual activity occurs -these budgets do not consider data for different levels of activity -as result companies compare actua; results with budget data at the activity level that was used in developing the master budget

A manager of an investment center can improve ROI by: -increasing average operating assets. -reducing sales. -increasing variable costs. -reducing variable and/or controllable fixed costs.

reducing variable and/or controllable fixed costs. Reducing variable or controllable fixed costs will cause the controllable margin to increase, which is one way a manager of an investment center can improve ROI.

Ellen is a manager who helps develop sales promotions, targets customers for upselling, and searches for potential new customers. Which of the following budgets would Ellen most likely help develop? cash budget manufacturing overhead budget sales budget selling and administrative expense budget

sales budget all of ellens tasks revolve around increasing sales of finished products