Chapter 8

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

Sales

What is usually the major source of receipts in the receipts section of the cash budget? Multiple choice question. Insurance proceeds Gains Interest received Sales

Sales

To calculate total sales on the sales budget, multiply budgeted sales in units by ______.

Sales price per unit

Which of the following is needed to prepare a sales budget?

The budgeted number of units to be sold

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

True

Required borrowings on a cash budget is calculated by ______. Multiple choice question. adding the desired ending cash balance to the amount of cash excess subtracting the beginning cash balance from the amount of the cash deficiency subtracting the desired ending cash balance from the amount of cash excess adding the desired ending cash balance to the amount of the cash deficiency

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

The final schedule of the master budget is the ______.

budgeted balance sheet

The receipts, disbursements, excess or deficiency, and financing section are all parts of the ______ budget. Multiple choice question. production cash sales selling and administrative expense

cash

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

create the budget with a budgeting assumption tab

A company can repay outstanding principal and interest when ______. Multiple choice question. the cash excess is greater than the minimum required cash balance the cash excess is less than the minimum required cash balance there is a cash deficiency the cash excess equals the minimum required cash balance

the cash excess is greater than the minimum required cash balance

In companies that do not use a self-imposed budgeting process, profit targets are generally set by ______. lower-level managers the board of directors top managers employees

top managers

The ending finished goods inventory budget computes the cost of ______ units. Multiple choice question. unsold sold

unsold

All costs of production other than direct materials and direct labor are shown on the ______ budget. Multiple choice question. cash manufacturing overhead ending finished goods inventory merchandise purchases

manufacturing overhead

The calculation of unit product cost requires information from the ______ budget Multiple choice question. cash selling and administrative manufacturing overhead ending finished goods inventory

manufacturing overhead

In a manufacturing company, the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget are all based on the ______ budget

master

The receipts section of the cash budget lists ______. Multiple choice question. total credit sales total sales for the period all cash inflows all cash inflows except borrowings

all cash inflows except borrowings

Because it is needed for the schedule of expected cash collections, the annual master budget file includes the _____ _____ from last year.

balance sheet

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

balance sheet

All costs of production other than direct materials and direct labor are shown on the _____ ____ budget.

manufacturing overhead

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

False

For most companies a single, annual cash budget is sufficient. True false question. True False

False

Highly achievable budget targets Blank______. Multiple select question. - may generate greater management commitment to the budget - are used in most companies - should not be used when budgets are tied to bonuses - may help build manager confidence - may increase the likelihood that managers will engage in undesirable behavior

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

Davidson Corporation's master budget shows expected direct labor cost of $90,000 for the month of May. During May, the company's expected sales equal 12,000 units and expected production is 15,000 units. If each unit requires 1/2 hour of direct labor, the budgeted direct labor rate is $_____ per hour.

12

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. Multiple choice question. 15,000 7,000 13,000 10,000

13,000

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. Based on the month of July only, the predetermined overhead rate is $_____.

6.25

When a manager creates a budget that is too easy to attain, ______ occurs.

Budgetary slack

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 _____ quarter and the ending cash balance for the year is the same as the ending cash for the _____ quarter.

First fourth

What is added to the variable selling and administrative expenses to get the total selling and administrative expenses? Multiple choice question. Fixed selling and administrative expenses Direct materials Non-cash selling and administrative expenses Merchandise purchases

Fixed selling and administrative expenses

Which of the following budgets are needed to calculate unit product costs? Multiple select question. Cash Manufacturing overhead Direct labor Selling and administrative Direct materials

Manufacturing overhead Direct labor Direct materials

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the _____ budget.

Master

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

Master

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

Motivation will suffer

What is subtracted from total budgeted selling and administrative expenses to determine the cash disbursements for selling and administrative expenses? Multiple choice question. Non-cash expenses Manufacturing overhead Ending finished goods inventory Direct labor costs

Non-cash expenses

A budget that keeps managers focused at least one year ahead is a continuous or ______ budget.

Perpetual

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

The number of working hours required to satisfy the production budget is shown on the ______ ______ budget.

direct labor

Working hours required to satisfy the production budget are shown on the ______ budget. Multiple choice question. direct labor merchandise purchases direct materials cash

direct labor

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

direct materials

In a manufacturing company, the ______ budget details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories Multiple choice question. production merchandise purchases sales direct materials

direct materials

The section on the cash budget that summarizes all cash payments that are planned for the budget period is the cash _____ section.

disbursements

The cost of unsold units is computed on the ______ budget. Multiple choice question. production sales ending finished goods inventory manufacturing overhead

ending finished goods inventory

Risks of not knowing in advance how much labor time will be needed throughout the budget period includes ______. Multiple select question. erratic layoffs labor shortages low employee morale excessive inventory levels

erratic layoffs labor shortages low employee morale

If inventory levels are Blank______, the result can lead to lost sales or last-minute, high-cost production efforts. Multiple choice question. appropriate insufficient excessive

insufficient

The cash budget ______.

is prepared near the end of the master budget process

Using budgeting assumptions when preparing the master budget, ______.

makes it easier to answer "what-if:" questions

Facing labor shortages or having to hire or lay off workers at awkward times are consequences of ______. Multiple choice question. neglecting direct labor budgeting a decrease in sales having a small human resources department excess beginning inventory

neglecting direct labor budgeting

Operating budgets generally cover a ______ period.

one year

The first line of the direct labor budget consists of the budgeted units expected to be ______ during the period. Multiple choice question. produced sold

produced

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 budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget are all based on the budget.

production

The direct labor budget is based directly on the ______ budget. Multiple choice question. manufacturing overhead production raw materials sales

production

The direct labor budget is based directly on the ______ budget. Multiple choice question. manufacturing overhead raw materials production sales

production

The first step in the budgeting process is the preparation of the ______ budget.

sales

To calculate total sales on the sales budget, multiply budgeted sales in units by ______. Multiple choice question. sales price per unit budgeted unit sales number of units

sales price per unit

S&P Enterprises has scheduled direct material purchases of $100,000 in January, $130,000 in February and $150,000 in March. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of February. Multiple choice question. $130,000 $122,500 $135,000 $107,500

$122,500

S&P Enterprises has scheduled direct material purchases of $120,000 in April, $140,000 in May and $160,000 in June. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of May. Multiple choice question. $145,000 $135,000 $105,000 $125,000

$135,000 Reason: May purchases ($140,000 x 75%) $105,000 + April purchases ($120,000 x 25%) $30,000 = $135,000

ABC, Inc.'s expected sales for the first six month of the year are as follows. Month Expected Sales January $120,000 February $150,000 March $160,000 April $200,000 May $220,000 June $250,000 Experience has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of March. Multiple choice question. $176,000 $156,000 $160,000 $154,000

$156,000

ABC, Inc.'s expected sales for the first six month of the year are as follows. Month Expected Sales January $120,000 February $150,000 March $160,000 April $200,000 May $220,000 June $250,000 Experience has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of March. Multiple choice question. $176,000 $160,000 $156,000 $154,000

$156,000 Reason: 60% of March sales ($96,000) + 40% of February sales ($60,000) = $156,000

Madison Corporation's expected beginning cash balance is $35,000. Cash collections are budgeted at $50,000 and cash disbursements are estimated to be $80,000. The minimum required cash balance is $20,000 and the company can borrow as much as needed in increments of $10,000. Calculate the expected ending cash balance for the month. Multiple choice question. $25,000 $5,000 $20,000

$25,000

Which of the following is needed to calculate raw materials to be purchased on the direct materials budget? Multiple select question. Raw materials required per unit Beginning inventory of raw materials Ending finished goods inventory Budgeted unit sales

- Raw materials required per unit - Beginning inventory of raw materials

Master budget schedules ______. Multiple select question. are based on estimates and assumptions answer several key questions for a company may be prepared in any order

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

Budgets ______. Multiple select question. - define goals and objectives that can serve as benchmarks for evaluating subsequent performance - and the budgeting process can uncover potential bottlenecks before they occur - encourage managers to think about and plan for the future - provide each department with the same amount of money to spend, so that all departments are treated fairly - coordinate the activities of the entire organization by integrating the plans of its various parts

- define goals and objectives that can serve as benchmarks for evaluating subsequent performance - and the budgeting process can uncover potential bottlenecks before they occur - encourage managers to think about and plan for the future - coordinate the activities of the entire organization by integrating the plans of its various parts

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget?

Production

What number does the direct materials budget take directly from the production budget? Multiple choice question. Beginning raw materials inventory Ending inventory of finished goods Budgeted sales Required production

Required production

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

Sales

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

Sales

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

Sales

The first step in the budgeting process is preparing the ______ budget.

Sales

A manager cannot complain that the budget was unrealistic and impossible to meet when a(n) _____ - _____ budget is in place.

Self-imposed

A company with adequate cash balances at the beginning and end of the year, ______. Multiple choice question. may still have cash deficiency issues during the year will have a positive net income for the year does not need a financing section on their cash budget only needs to prepare a single annual cash budget

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 _______ _______ budget.

merchandise purchase

The amount of goods to be acquired from suppliers during the period is shown on the ______ budget. Multiple choice question. sales merchandise purchases direct labor manufacturing overhead

merchandise purchases

Recognizing individuals at all levels of the organization as team members whose views and judgments are valued by top management is an advantage of ______.

self-imposed budgeting

Budgeted expenses for areas other than manufacturing are shown on the ______ budget. Multiple choice question. cash ending finished goods inventory manufacturing overhead selling and administrative

selling and administrative

In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the ______ budget. Multiple choice question. selling and administrative cash ending finished goods inventory manufacturing overhead

selling and administrative

Variable selling and administrative expenses are calculated by multiplying the budgeted units ______ by the variable selling and administrative expense per unit. Multiple choice question. produced sold purchased

sold

A likely consequence of excessive inventory levels is ______.

storage problems

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 ______. Multiple choice question. $125,000 $118,000 $132,000 $100,000

$18,000

ABC, Inc.'s expected sales for the first six month of the year are as follows. Month Expected Sales January $120,000 February $150,000 March $160,000 April $200,000 May $220,000 June $250,000 Experience has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of April. Multiple choice question. $176,000 $184,000 $200,000 $208,000

$184,000

Sperling Company's master budget shows expected sales of 10,000 units and expected production of 11,000 units for the month of March. Each unit requires 1/2 hour of direct labor. The direct labor rate is $15.00 per hour. Calculate the expected total direct labor cost for the month of March. Multiple choice question. $150,000 $165,000 $75,000 $82,500

$82,500

Which of the following budgets are directly based on information from the sales budget? Multiple select question. Direct materials Production Selling & administrative expense Manufacturing overhead

- Production - Selling & administrative expense

Which of the following budgets are directly based on information from the sales budget? Multiple select question. Direct materials Manufacturing overhead Selling & administrative expense Production

- Production - Selling & administrative expense

The budgeted income statement does NOT rely on information from the ______budget.

Production