A306 Exam 3

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 (aka static or planning)

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

sales

The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) ________ variance.

spending

The amount of direct-labor hours that should be used to produce one unit of finished goods is the ______ hours per unit.

standard

Material requirements plus an allowance for normal inefficiencies are added together to determine the _____ _______ per unit of output for direct materials

standard quantity

An unchanged planning budget is known as a(n) _____ planning budget.

static

Companies use the ______ _____cycle to evaluate and improve performance.

variance analysis

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

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

When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is ______. a. favorable b. unfavorable

b. unfavorable

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

balance sheet

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.

$122,500 January Purchases (100,000*.25) + February Purchases (130,000*.75)

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.

$25,000 35,000+50,000-80,000 = 5,000. since you can borrow increments of 10,000 they must borrow 20,000 to meet or exceed the minimum cash balance, making the ending balance 25,000. (beginning cash+cash collection)-cash disbursement = what you got - then add any increments if needed

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

13,000 10,000 + 5,000 - 2,000 (budgeted sales + ending inventory) - beginning inventory

A performance report shows that the planning revenue was $240,000, the flexible budget revenue was $225,000, and actual revenue was $230,000. The activity variance is $ ________ (Favorable or Unfavorable)

15000 Unfavorable

Which of the following budgets are directly based on information from the sales budget? (multiple) a. direct materials b. selling and administrative expense c. production d. direct labor

B. Selling and administrative expense budget c. Production budget

T/F 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 Beginning cash for the year equals beginning cash of the first month or quarter and ending cash for the year equals ending cash of the last month or quarter.

T/F - The standard hours per unit includes both direct and indirect labor hours

False only includes direct labor hours

T/F Activity variances help managers understand why actual net income differs from what it should have been at the actual level of activity.

False revenue and spending variances help explain the difference

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

T/F fixed costs are often more controllable than variable costs.

True

The planning budget, based on 1,000 units, shows revenue of $24,000 and $6,250 for supplies. A total of 1,200 units were actually produced and sold. The flexible budget will show ______. (multiple) a. $7,500 for supplies b. $6,250 for supplies c. $28,800 revenue d. $24,000 revenue

a. $7,500 for supplies c. $28,800 revenue

Which of the following are used to calculate the standard quantity per unit of direct materials? (multiple) a. Allowance for waste and spoilage b. Direct materials requirements per unit of finished product c. Freight and transportation costs

a. Allowance for waste and spoilage b. Direct materials requirements per unit of finished product

Which of the following statements are true? (multiple) a. Standards provide information for measuring performance. b. When actual results depart significantly from the standard, the reasons why should be investigated. c. Standards are only used in managerial accounting. d. The purpose of using standards is to assess blame and responsibility.

a. Standards provide information for measuring performance. b. When actual results depart significantly from the standard, the reasons why should be investigated.

One option to generate a favorable Blank______ variance for net operating income is to increase the number of clients. a. activity b. revenue and spending

a. activity

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

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

When preparing a flexible budget, the level of activity ______. a. affects variable costs only b. has no effect on costs c. affects fixed costs only d. affects both fixed and variable costs

a. affects variable costs only

Standards are ______. (multiple) a. benchmarks for measuring performance b. set for each major production input or task c. compared to the actual quantities and costs of inputs d. rarely used outside of management accounting

a. benchmarks for measuring performance b. set for each major production input or task c. compared to the actual quantities and costs of inputs

Which of the following is not found in the financing section of the cash budget? a. Cash deficiency b. Repayments c. Borrowings d. Interest

a. cash deficiency

Possible causes of a spending variance include ______. (multiple) a. changes in technology b. using too many inputs for the actual level of activity c. producing more or less product than expected d. paying less than expected for inputs

a. changes in technology b. using too many inputs for the actual level of activity d. paying less than expected for inputs

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

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

The cash budget ________. a. is prepared near the end of the master budget process b. is the first budget prepared in the master budget process c. uses information from the budgeted balance sheet and income statement

a. is prepared near the end of the master budget process

Using budgeting assumptions when preparing the master budget, ______. a. makes it easier to answer "what-if" questions b. increases the complexity of the process c. involves adjusting data inputs within each master budget schedule

a. makes it easier to answer "what-if" questions

Which of the following is needed to prepare a sales budget? a. The budgeted number of units to be sold b. Beginning inventory of finished goods c. Desired ending inventory of raw materials d. Desired ending inventory

a. the budgeted number of units to be sold

A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total ______. (multiple) a. variable cost b. fixed cost c. revenue

a. variable cost c. revenue

The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) _______ variance.

activity

Which of the following budgets are needed to calculate unit product costs? (multiple) a. Cash b. Manufacturing overhead c. Selling and administrative d. Direct materials e. Direct labor

b. Manufacturing overhead d. direct materials e. direct labor

A performance report shows that the planning revenue was $200,000, the flexible budget revenue was $225,000, and actual revenue was $223,000. Which of the following statements are true? (multiple) a. The activity variance is $25,000 Unfavorable. b. The revenue variance is $2,000 Unfavorable. c. The activity variance is $25,000 Favorable. d. The revenue variance is $2,000 Favorable.

b. The revenue variance is $2,000 Unfavorable. c. The activity variance is $25,000 Favorable.

A detailed plan for the future that is usually expressed in formal quantitative terms is _____. a. the budget period b. a budget c. profit planning d. responsibility accounting

b. a budget

The flexible budget performance report consists of ______. (multiple) a. the manager's performance evaluations b. activity variances c. revenue and spending variances d. the planning budget, flexible budget and actual results

b. activity variances c. revenue and spending variances d. the planning budget, flexible budget and actual results

Which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured? a. Manufacturing overhead budget b. Budgeted income statement c. Budgeted balance sheet d. Budgeted selling and administrative expenses

b. budgeted income statement

Revenue variances can be caused by ______. (multiple) a. changes in the level of activity b. changes in the mix of products sold c. poor accounting controls d. changes in selling price

b. changes in the mix of products sold c. poor accounting controls d. changes in selling price

When actual revenue ______ what the revenue should have been, the variance is labeled favorable. a. is equal to b. exceeds c. is less than

b. exceeds

Fancy Nail's monthly rent is $2,500. The company's static budget for March was based on the activity level of 2,000 manicures. Total sales was budgeted at $40,000 and nail technician wages (a variable cost based on the number of manicures) was budgeted at $20,000. Actual manicures in March totaled 2,200. Assuming no other expenses, Fancy Nails' flexible budget will show ______. (multiple) a. wages of $20,000 b. net operating income of $19,500 c. rent expense of $2,750 d. sales of $44,000

b. net operating income of 19,500 d. sales of 44,000

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

b. produced labor requirements are based on production, not sales

Because all other parts of the budget depend on it, if the ______ budget is inaccurate, the rest of the budget will be inaccurate. a. direct materials b. sales c. production d. cash

b. sales

Budgeted expenses for areas other than manufacturing are shown on the ______ budget. a. manufacturing overhead b. selling and administrative c. cash d. ending finished goods inventory

b. selling and administrative

Planning budgets are sometimes called ______ budgets. a. flexible b. static

b. static

The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ______ variance. a. revenue b. spending c. activity

c. activity

A price variance is the difference between the ______. a. standard quantity allowed and the actual quantity used multiplied by the actual price b. actual price and the standard price multiplied by the standard amount allowed c. actual price and the standard price multiplied by the actual amount of the input d. standard quantity allowed and the actual quantity used multiplied by the standard price

c. actual price and the standard price multiplied by the actual amount of the input

The variance analysis cycle ______. a. begins with the preparation of the budget b. is used to assign blame for poor performance c. begins with the preparation of performance reports d. includes the investigation of all variances

c. begins with the preparation of performance reports

A quantity variance is ______. a. calculated using the actual price of the input b. based only on the actual quantity of inputs c. calculated using the standard price of the input d. based only on the standard quantity of inputs

c. calculated using the standard price of the input

On the cash budget, what is subtracted from total cash available to find the cash excess or deficiency? a. Selling and administrative expenses b. Cash inflows c. Cash disbursements d. Non-cash items

c. cash disbursements

Unfavorable activity variances may not indicate bad performance because ______. a. costs should not change as activity changes b. increased activity should result in higher fixed costs c. increased activity should result in higher variable costs

c. increased activity should result in higher variable costs

All costs of production other than direct materials and direct labor are shown on the ______ budget. a. cash b. merchandise purchases c. manufacturing overhead d. ending finished goods inventory

c. manufacturing overhead

The calculation of unit product cost requires information from the ______ budget. a. ending finished goods inventory b. selling and administrative c. manufacturing overhead d. cash

c. manufacturing overhead

A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget. a. strategic b. flexible c. planning

c. planning

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. a. direct materials b. cash c. production d. sales

c. production

The budgeted income statement does NOT rely on information from the ______ budget. a. selling and administrative expense b. ending finished goods inventory c. production d. sales

c. production

To understand why actual net operating income differs from what it should have been at the actual level of activity, the ______ variances should be analyzed. a. both revenue and spending and activity b. activity c. revenue and spending

c. revenue and spending

Gathering feedback to ensure that the plan is being followed is referred to as_____.

control

The spending variance is labeled as favorable when the ______. a. amount spent is less than what was spent last period b. actual cost is more than what the cost should have been at the actual level of activity c. actual cost is less than what the cost should have been at the planned level of activity d. actual cost is less than what the cost should have been at the actual level of activity

d. actual cost is less than what the cost should have been at the actual level of activity

The final schedule of the master budget is the ______. a. cash budget b. sales budget c. budgeted income statement d. budgeted balance sheet

d. budgeted balance sheet

A revenue variance is the ______. a. difference between total revenue in the planning budget and actual total revenue b. actual total revenue earned c. difference between what a cost should have been at the actual level of activity and the actual amount of the cost d. difference between what revenue should have been at the actual level of activity and the actual revenue

d. difference between what revenue should have been at the actual level of activity and the actual revenue

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

d. direct materials

The cost of unsold units is computed on the ______ budget. a. sales b. production c. manufacturing overhead d. ending finished goods inventory

d. ending finished goods inventory

Facing labor shortages or having to hire or lay off workers at awkward times are consequences of _______ a. a decrease in sales b. excess beginning inventory c. companies having a small human resources department d. neglecting to budget the amount of labor time that will be needed

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

The direct materials budget directly relies on the ______ budget. a. merchandise purchases b. sales c. direct labor d. production

d. production

The number of working hours required to satisfy the production budget is shown on the _____ ____ budget

direct labor

A budget that takes into account how costs are affected by changes in level of activity is a(n) ______ budget.

flexible