ACCT 202 CHAPTER 22 EXAM

a quantity of inventory that provides protection against lost sales caused by unfulfilled demands from customers is called

safety stock

the first step in preparing the master budget is planning the____________ budget

sales

The general and administrative budget includes all of the following except:

sales commissions

A budget which estimates the types of selling expenses expected during the budget period is called a

selling expense budget

True or false: Depreciation on non-manufacturing assets and property taxes are considered general and administrative expenses and, therefore, are included on the general and administrative expense budget.

true

a service provider will

typically use fewer operating budgets than a manufacturer

the formula to compute the budgeted direct labor cost is

units to produce x direct labor hours x direct labor cost per hour = cost of direct labor

The formula to determine the materials to be purchased is

units to produce x materials required per unit + desired ending materials inventory - beginning materials inventory = materials to purchase

ABC Company prepared a cash budget for the month. The company has outstanding loans and desires a minimum cash balance of $10,000. If the company has a preliminary cash balance of $25,000, the company should:

use $15,000 to repay loans

A company expects to sell 400 units of Product X in January and expects sales to increase by 10% per month. If Product X sells for $10 each, the total sales for the first quarter of the year will be $___________________

$13,240 budgeted sales unit x selling price per unity = total budgeted sales

Direct materials are $15 per unit; direct labor is $7 per unit and variable overhead costs are $2 per unit. If total product costs are $27, what are fixed costs per unit?

$3 Total unit cost is $27. Direct materials $15 + direct labor $7 + variable overhead $2 = $24. Therefore, fixed costs per unit = $27 - 24 = $3.00.

A manufacturing company has units to produce of 940 units for the month. Each unit requires 3.5 hours of labor to produce. The cost of direct labor is $15 per hour. The total cost of direct labor for the month will be $

$49350 units to produce x direct labor hours required per unit x direct labor cost per hour = cost of direct labor

A company has the following loan activity—Additional loan from bank: $19,000; Ending cash balance: $5,600. The preliminary cash balance is:

(13,400) Reason: They had to borrow $19,000 to have an ending cash balance of $5,600, so they had a negative preliminary cash balance. $5,600 - $19,000 = ($13,400)

Budgeted financial statements include:

-budgeted balance sheet -budgeted income statement

which of the following are budgets used by a service company

-capital expenditures -cash -sales -direct labor

budgeted performance considers all of the following in relation to a benchmark:

-company factors -industry factors -economic factors

The two steps to complete the production budget include: (Check all that apply.)

-compute total required units -compute units to produce

characteristic of budgets include:

-expressed in dollars -typically cover a month, quarter, or one year -formal statement of a company's plans

identify the benefits of budgeting:

-motivates employees -focuses on future opportunities -assists in the control function

Which of the following items would be included on the capital expenditures budget?

-plant asset purchases -sale of plant assets

which of the following items would be included on the capital expenditures budget?

-plant asset purchases -sale of plant assets

List the individual budgets of the master budget in the order in which they are prepared, with the first on top.

-sales budget -production budget -direct, materials, direct labor, and factory overhead budgets -cash budgets

a manufacturers operating budgets consists of the:

-selling expense budget -production budgets -sales budget

LA Company has a beginning cash balance of $6,000, cash receipts of $12,000, cash payments of $7,200 and an outstanding loan balance of $1,500. Their preliminary cash balance is $

10,800

A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the amount of budgeted income tax expense will be $

10668

A manufacturing company has budgeted direct labor hours of 600 at a variable overhead rate per direct labor hour of $20. The budgeted fixed cost is $500 per month. The total budgeted overhead cost will be $

12,500 600 x 20 + 500 =12,500

A manufacturing company has budgeted direct labor hours of 940 at a direct labor hour rate of $15. The budgeted fixed cost is $950 per month. The total budgeted overhead cost will be $

15,050 1) compute budgeted variable overhead, direct labor hours times variable overhead rate per direct labor hour 2) compute budgeted fixed overhead 3)compute budgeted overhead as the total of parts 1 and 2

A manufacturing company expects to sell 12,000 units in August and 15,000 units in September. The company desires to have an ending finished goods inventory of 80% of the next month's sales. If beginning finished goods inventory on August 1 is 8,000 units, then the company should produce ___________ units in August

16,000 1) budgeted sales units + desired ending inventory units =total required units 2)total required units - beginning inventory units = units to produce

A manufacturing company's sales budget indicates the following sales: January: $30,000; February: $20,000; March: $15,000. The company expects 80% of the sales to be on account. Credit sales are collected 30% in the month of the sale and 70% in the month following the sale. The total cash receipts collected during March will be $

17800

A manufacturing company has budgeted production of 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of materials on hand. The company desires an ending materials inventory of 60% of the next month's materials requirements. The total cost of direct materials purchases for May will be $

201,700

A manufacturing company has budgeted production of 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of materials on hand. The company desires an ending materials inventory of 60% of the next month's materials requirements. The total cost of direct materials purchases for May will be $________________

201,700

A manufacturer desires ending finished goods inventory of 5,000 units. Their budgeted unit sales are 20,000 units and beginning finished goods inventory is 3,000 units. The units to be produced is

22,000 20,000 plus 5,000 minus 3,000 equals 22,000 units.

A merchandising company's sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. Sales personnel are paid a salary plus commission. Salaries are expected to be $5,000 per month and the commission is 10% of sales. Additionally, advertising is expected to be $600 per month. The total selling expenses for the quarter will be $

25800 25000 + 30000+35000=... x 10%=... + 5000(3) + 600(3)= 25800

A company's sales budget indicates the following sales: January: 25,000; February: 30,000; March: 35,000. Beginning inventory is 12,000 units and the company desires ending inventory of 45% of the next month's sales. Units to be produced in January will be

26500

HN Company had a beginning cash balance of $50,000; cash payments of $15,000 and a loan balance with the bank of $7,000. If HN has an agreement with the bank that they will maintain a minimum cash balance of $30,000, their ending cash balance is $

30000

A manufacturing company's sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. The company expects 70% of the sales to be on account and the remainder to be cash sales. Credit sales are collected in the month following the sale. The total cash collected during March will be $

31,500

If direct materials per unit are $20, direct labor per unit is $10, variable overhead per unit is $2, and fixed overhead per unit is $1, total product cost per unit is $

33 add all costs

A company expects to sell 500 units during the second quarter and 550 units in the third quarter. Currently, during the second quarter, they have 46 units in beginning inventory. If they desire ending inventory of 10% of the next quarter's sales,___________________units will need to be produced in the second quarter.

509

A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Salary for sales manager: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be $

60,000

Sales commissions are 10% of budgeted sales and the sales manager's salary is $1,000 per month. If budgeted sales are $50,000 for January, the total selling expenses budget for January is $

6000 budgeted sales x sales commission %= sales commissions sales commissions + salary for sales manager = total selling expense

A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Depreciation on store equipment: $25,000; Rent on administrative building: $30,000; Miscellaneous administrative expenses: $5,000. The total general and administrative expenses on the January general and administrative expense budget will be $

61250

A company budgets the following direct materials purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase, 50% in the month after the purchase, and the remaining balance in the second month after the purchase. Cash payments for June for direct materials is $

77500

A company budgets the following direct materials purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase and the remaining amount in the following month. Cash payments for June for direct materials is $

82500

After determining the budgeted ending inventory units, the next step in the production budget is to:

add budgeted sales

most companies prepare a _________ budget that is separated into ___________ budgets

annual; quarterly or monthly

to ___________ is to use the control function to evaluate business operations against some norm

benchmark/evaluate

A company has the following budgeted information: Cash receipts: $542,000; Beginning cash balance: $10,000; Cash payments (including interest payments): $560,000; Outstanding loan balance: $100,000; Desired ending cash balance: $50,000. In order to maintain the desired cash balance, the company will need to:

borrow $58,000 Reason: Beginning balance $10,000 + cash receipts $542,000 - cash payments $560,000 = -8,000. Desired cash balance $50,000 + 8000 negative preliminary balance = $58,000 needed to borrow.

The process of planning future business actions and expressing them as formal plans is called

budget

a _______________ is a formal statement of a company's plans in dollars

budget

the budget which shows predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is the

budgeted balance sheet

all of the following are guidelines that should be followed for budgets to be a positive motivating force except:

budgets should be prepared using a top-down approach

The reporting of expected cash receipts and cash payments related to the sale and purchase of plant assets is reported on the __________ expenditures budget

capital

the __________ budget shows the expected cash receipts and cash payments during the budget period

cash

The budgeting process that involves adding a quarter (or month) to replace the quarter (or month) just elapsed is called:

continuous budgeting

a ___________ budget is continually revised as time passes

continuous/rolling

Budgeting is used by management to ensure that activities of all departments work toward the company's overall goals. This aspect of budgeting is called:

coordinate

budgeting is used by management to ensure that activities of all departments work toward the company's overall goals. this aspect of budgeting is called:

coordinate

the primary purpose of using short-term budgets is to:

evaluate performance and take necessary corrective action

budgeting is the process of planning future business activities and expressing them as:

formal plans

A budget that includes the office manager's salary and other administrative expenses is called the:

general and administrative budget

a manufacturing company would typically prepare all of the following budgets except:

merchandise inventory budget

all of the following are operating budgets except:

merchandising budget

All of the following are potential negative outcomes of budgeting except:

overstatement of sales and understatement of expense

all of the following are potential negative outcome of budgeting except:

overstatement of sales and understatement of expenses

a manufacturer will prepare a ___________ budget which shows the number of units to be produced during a period

production

A quantity of inventory that provides protection against lost sales caused by unfulfilled demands from customers or delays in shipments is called ____________ stock

safety

all of the following are ways that managers use the master budget EXCEPT:

to place blame on managers

True or false: A production budget is unique in that it does not show costs; it is always expressed in units of product.

true

potential negative outcomes of budgeting include:

-budgetary slack -unnecessary spending -unethical behavior

budgeting guidelines that help insure budgeting is a positive motivating force include:

1) the opportunity to explain differences between actual and budgeted amounts 2) participatory budgeting 3)attainable goals