Chapter 8 review

control or controlling

Gathering feedback to ensure that the plan is being followed is referred to as

Sales

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

beginning

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

the cash excess is greater than the minimum required cash balance

A company can repay outstanding principal and interest when ______.

Budget

A detailed plan for the future that is usually expressed in formal quantitative terms is a(n)

Master

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

Sales

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

balance sheet

Because it is needed for the schedule of expected cash collections, and the cash budget the annual master budget file generally starts with the beginning

Costs of Goods Sold

The first line of a merchandise purchases budget expressed in dollars is budgeted ______.

Produced

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

Sales

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

balance sheet

The first tab included in the master budget file is generally a(n) ______ because it is needed for the schedule of expected cash collections.

all cash inflows except borrowings

The receipts section of the cash budget lists Blank______.

Cash

The receipts, disbursements, excess or deficiency, and financing section are all parts of the ______ budget.

Disbursements

The section on the cash budget that summarizes all cash payments except principal and interest repayments is the cash (Blank) section.

Direct Materials

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

production

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

ending balance sheet

The budgeted income statement does not contain data from the ______.

Manufacturing Overhead

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

Production

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

Participatory

A budget that is prepared with the full cooperation of managers at all levels is a self-imposed or (Blank) budget.

Budgetary Slack

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

True

(T/F) Many of the schedules in a master budget are based on a variety of management estimates and assumptions.

False

(T/F) Most companies rely solely on self-imposed budgeting when creating budgets.

False

(T/F) Total sales for the year reported on the Sales Budget will always be equal to expected cash collections for the year.

- the cash excess is less than the minimum required cash balance - there is a cash deficiency

Borrowing money is required whenever ______. - the cash excess is less than the minimum required cash balance - the cash excess equals the minimum required cash balance - the cash excess is greater than the minimum required cash balance - there is a cash deficiency

Selling and Administrative

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

lower-level managers

More accurate estimates are generally the result of having profit targets set by ______.

- is divided into variable and fixed components - estimates nonmanufacturing expenses

The selling and administrative expense budget Blank______. - begins with budgeted quarterly unit production - is divided into variable and fixed components - estimates nonmanufacturing expenses - excludes all noncash expenses

balance sheet as of

To prepare a budgeted balance sheet as of December 31, 20x4, data is needed from the ______ December 31, 20x3.

makes it easier to answer "what-if" questions

Using budgeting assumptions when preparing the master budget, ______.

Sales

What is usually the major source of receipts in the receipts section of the cash budget?

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

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

Cash disbursements

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

$135,000 ($140,000*0.75)+($120,000*0.25)

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.

Merchandise purchases

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

lower-level managers use them to prepare budgets, goals may be too high or low

When profit targets are set by top managers, ______ - strategic direction may be insufficient - cooperation and commitment should increase - lower-level managers use them to prepare budgets - goals may be too high or low

- Production - Selling & administrative expense

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

Budgeted income statement

Which of the following budgets shows the company's planned profit?

operating activities

activities involve purchasing goods from suppliers, designing and manufacturing products, and selling products to

production

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 (Blank) 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?

- motivation - accountability - accuracy

Involving lower-level managers increases ______ in the budgeting process. - strategic vision - motivation - accountability - accuracy

- suboptimal budget recommendations - budgetary slack

Limitations of self-imposed budgeting include ______. - suboptimal budget recommendations - a broad strategic perspective - budgetary slack - unrealistic profit targets

Production

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget? Production Direct labor Sales Selling and administrative

create the budget with a budgeting assumption tab

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

Manufacturing Overhead

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

Master

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

- Direct labor - Manufacturing overhead - Direct materials

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

Desired ending inventory of units

Which of the following is NOT included on the sales budget? Selling price per unit Expected cash collections Budgeted number of units to be sold Desired ending inventory of units

Cash deficiency

Which of the following is not found in the financing section of the cash budget? Repayments Cash deficiency Interest Borrowings

may feel demoralized and resentful

With a top-down approach to budgeting, lower-level managers ______.

Top-level managers

With a top-down approach to budgeting, profit targets are issued by ______.

Direct Labor

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

cash budget

_____ _______ is prepared near the end of the master budget process

Budgets ______.

communicate management's plan throughout the organization

- 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 - define goals and objectives that can serve as benchmarks for evaluating subsequent performance

Budgets Blank______. - 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 - provide each department with the same amount of money to spend, so that all departments are treated fairly - define goals and objectives that can serve as benchmarks for evaluating subsequent performance

12

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

Planning

Developing goals and preparing various budgets to achieve those goals is part of the (Blank) process