ACCT 202: Chapter 8

Budgets ______.

communicate management's plan throughout the organization

Many managers believe that being empowered to create their own self-_____ budgets is the most effective method of budget preparation.

imposed

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted _____ _____.

income statement

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

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

manufacturing overhead

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

manufacturing overhead

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 to be acquired from suppliers during the period is shown on the _______ budget.

merchandise purchases

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.

selling and administrative

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

the cash excess is greater than the minimum required cash balance

Budgetary slack occurs when a manager submits a budget that is ______.

too easy to attain

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

top managers

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

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

In a manufacturing company, the _____ budget is used to determine the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

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

production

Master budget schedules ______.

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

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

Cash disbursements

For most companies a single, annual cash budget is sufficient.

False Monthly cash budgets are common and some companies may need budgets for shorter time periods to capture major cash fluctuations.

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

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

True

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

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

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

direct labor

Budgets are used for two distinct purposes: ______ and ______.

planning; control

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

production

During May, Davidson Corporation's expected sales equal 12,000 units and expected production is 15,000 units. If each unit requires 1/2 hour of direct labor and the direct labor rate is $12.00 per hour, the expected total direct labor cost for the month of May is $_____.

90,000

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

direct labor

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

selling and administrative

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

A detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period is called a(n) _____ _____ budget.

merchandise purchases

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

participative

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

planning

Limitations of self-imposed budgeting include ______.

- suboptimal budget recommendations - budgetary slack

Borrowing money is required whenever ______.

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

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

ending finished goods inventory

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.

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

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

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

beginning

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

direct materials

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

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

sales

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

self-imposed

When profit targets are set by top managers, ______.

- goals may be unrealistically high - too much slack may be allowed

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.

$184,000 60% of April sales ($120,000) + 40% of March sales ($64,000) = $184,000

Which of the following budgets are directly based on information from the sales budget?

- Production budget - Selling and administrative expense budget

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

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

produced

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

participative

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

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?

Required production

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

unsold

Identify the true statements about budgets.

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

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

Sales

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.

$82,500 11,000 × 1/2 × $15 = $82,500