Ch. 8 ADM SB

If a cash budget is prepared by quarter,the ending cash balance for the year is the same as the ending cash for the

4th quarter

sales

Because all other parts of the budget depend on it, if the ______ budget is inaccurate, the rest of the budget will be inaccurate.

motivation will suffer

If a budget initiated by top management has targets that are set too high, ______.

top managers

In companies that do not use a self-imposed budgeting process, profit targets are generally set by

Highly achievable budget targets

are used in most companies may generate greater management commitment to the budget may help build manager confidence

The annual master budget file includes the ______ from last year because it is needed for the schedule of expected cash collections.

balance sheet

To prepare a budgeted balance sheet as of December 31, 2021, data is needed from the ______ December 31, 2020.

balance sheet as of

Because it is needed for the schedule of expected cash collections, the annual master budget file includes the

balance sheet from last year

A budgeted balance sheet is developed using data from the ______ of the budget period and data contained in the various schedules

beginning

When creating an Excel budget and performing what-if analysis, it is generally easiest to

create the budget with a budgeting assumption tab

predetermined overhead rate includes

depreciation

Risks of not knowing in advance how much labor time will be needed throughout the budget period includes ______.

labor shortages erratic layoffs low employee morale

Highly achievable budget targets ______.

may generate greater management commitment to the budget may help build manager confidence are used in most companies

The amount of goods to be acquired from suppliers during the period is shown on the _______ budget.

merchandise purchases

The first step in the budgeting process

preparation of the sales budget

In a manufacturing company, the ______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

In a manufacturing company, the budget is prepared right after the sales budget.

production

In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget?

production

A likely consequence of excessive inventory levels is ______.

storage problems

A company can consider making investments or repay outstanding principal and interest when

the cash excess is greater than the minimum required cash balance

Production budget

used to determine the DM and DL budget and the MOH budget

The direct labor budget is based directly on the ______ budget.

production

The direct materials budget directly relies on the ______ budget.

production

Budgeted expenses for areas other than manufacturing are shown on the ______ budget.

selling and administrative

In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the ______ budget.

selling and administrative

Variable selling and administrative expenses are calculated by multiplying the budgeted units ______ by the variable selling and administrative expense per unit.

sold

The budgeted income statement does NOT rely on information from

the production budget

When profit targets are set by top managers, ______.

too much slack may be allowed goals may be unrealistically high

top down appraoch

top level managers initiate the budgeting process by issuing profit targets. Lower-level managers are directed to prepare budgets that meet those targets (demoralizes lowlevel managers by ignoring their opinions)

The ending finished goods inventory budget computes the cost of ______ units.

unsold

purposes of budgets

planning and control

self imposed budget (participative)

prepared with the full cooperation and participation of managers at all levels

The first line of the direct labor budget consists of the budgeted units expected to be ______ during the period.

produced

sales budget

Both the production and selling and administrative expense budgets are prepared using information directly from the

Which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?

Budgeted income statement

On the cash budget, what is subtracted from total cash available to find the cash excess or deficiency?

Cash disbursements

planning

Developing goals and preparing various budgets to achieve those goals is part of the ___________ process

Which of the following budgets are needed to calculate unit product costs?

Direct materials Direct labor Manufacturing overhead

True or false: Challenging but highly achievable budgets increase the likelihood that lower-level managers will engage in undesirable behavior to secure their desired compensation.

False

True or false: For most companies a single, annual cash budget is sufficient.

False

True or false: The amounts under the Year column in the cash budget always equal the sum of the amounts for the months or quarters of the budget.

False

What is added to the variable selling and administrative expenses to get the total selling and administrative expenses?

Fixed selling and administrative expenses

participative

More accurate estimates and higher motivation are generally the result of using a(n) ______ budget.

Which budget is NOT used to prepare the cash budget

Production

Which of the following is needed to calculate raw materials to be purchased on the direct materials budget?

Raw materials required per unit Beginning inventory of raw materials

What number does the direct materials budget take directly from the production budget?

Required production

True or false: Many of the schedules in a master budget are based on a variety of management estimates and assumptions.

True

False

True or false: Challenging but highly achievable budgets increase the likelihood that lower-level managers will engage in undesirable behavior to secure their desired compensation.

master budget

a number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals

Required borrowings on a cash budget is calculated by ______.

adding the desired ending cash balance to the amount of the cash deficiency

Master budget schedules ______.

are based on estimates and assumptions answer several key questions for a company

If inventory levels are ______, the result can lead to lost sales or last-minute, high-cost production efforts.

insufficient

planning

involves developing goals and preparing various budgets to achieve those goals

control

involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.

The cash budget

is prepared near the end of the master budget process

budgets that are directly based on the information from the sales budget

production budget & selling and admin expense budgets

Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ______ units.

13000

If a cash budget is prepared by quarter, the beginning cash balance for the year is the same as the beginning cash balance for the

1st quarter

Limitations of self-imposed budgeting include ______.

budgetary slack suboptimal budget recommendations

Final schedule of the master budget

budgeted balance sheet

The final schedule of the master budget is the ______.

budgeted balance sheet

When creating an Excel budget and performing what-if analysis, it is generally easiest to ______.

create the budget with a budgeting assumption tab

Working hours required to satisfy the production budget are shown on the

direct labor budget

In a manufacturing company, the budget that details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories

direct materials budget

limitations of self-imposed budgeting

lower level managers may make suboptimal budgeting estimates if they lack the broad strategic perspective possessed by top-level managers. and if the budget is used to reward employees, then lower-level managers may create too much budgetary slack in an effort to ensure their actual result exceed the plan

Using budgeting assumptions when preparing the master budget, ______.

makes it easier to answer "what-if" questions

The calculation of unit product cost requires information from the ______ budget

manufacturing overhead

advantages of involving lower-level managers in the budgeting process

1. shows respect for their opinions 2. leverages their knowledge to provide more accurate estimates than those imposed by top-level managers who have less intimate knowledge of day-to-day operations 3.It increases their motivation to achieve their own self-imposed goals 4.Empowers them to take ownership of the budget and be accountable

Why do organizations create budgets? Planning Standpoint

1.Engcourage managers to think about the plan for the future 2.communicate financial goals throughout the organization 3.Allocate resources within the organization where they can be used most effectively 4.Coordinate the plans and activities of departmental managers 5.uncover potential bottlenecks before they occur

Why do organizations create budgets? control standpoint

1.improve the efficiency and effectiveness of operations 2.Evaluate and reward employees

master budget

An integrated business plan that formally lays out the company's goals is called the

Edison Corporation's variable manufacturing overhead rate is $5.00 per direct labor-hour. Total budgeted fixed overhead is $25,000 per month. The $25,000 per month includes $7,000 in depreciation expense. Total budgeted direct labor-hours for the month of July is 20,000. Budgeted cash disbursements for manufacturing overhead for July equals ______.

Variable overhead (20,000 × $5.00) $100,000 + fixed overhead $25,000 - non-cash (depreciation) expenses $7,000 = $118,000

budgets

communicate management's plan throughout the organization

The cost of unsold units is computed on the ______ budget.

ending finished goods inventory

A company with adequate cash balances at the beginning and end of the year, ______.

may still have cash deficiency issues during the year

The amount of goods for resale to be acquired from suppliers during the period is shown on the

merchandise purchases budget

Facing labor shortages or having to hire or lay off workers at awkward times are consequences of ______.

neglecting to budget the amount of labor time that will be needed