ACCT 2101 Exam 2Ch. 9-11

In July, Dora Inc. had $150,000 in total available cash. Financing needs total $12,000, and cash disbursements were $50,000. What is Dora's ending cash balance for July? A. $138,000 B. $112,000 C. $150,000 D. $100,000

B. $112,000 The formula for ending cash balance is: Total available cash - Cash disbursements + Financing.Using this formula, Dora Inc. can calculate ending cash balance for July as $150,000 - $50,000 + $12,000 = $112,000.

Quality Foods has budgeted $1,500,000 in sales of ginger chicken for May. It wants to end every month with inventory equal to 10 days worth of the next month's sales (based on a 30 day month). April sales are projected at $1,400,000. The sales price is $5 per box. Inventory at the beginning of April is estimated at 93,400 boxes of ginger chicken. How many boxes of ginger chicken should Quality Foods manufacture in April? A. 280,000 boxes B. 300,000 boxes C. 293,400 boxes D. 286,600 boxes

D. 286,600 boxes

Fukui Electronics is preparing its budgeted production for the coming quarter. The company plans to produce 6,000 units and will require 18,000 pounds of direct materials for production. The total materials required for the quarter are 19,800 pounds. What are the direct materials per unit? A. 1.1 pounds B. 0.33 pounds C. 3.3 pounds D. 3 pounds

D. 3 pounds The formula for total direct materials per unit is total material required for production divided by production units. Using this formula, Fukui Electronics can calculate the direct materials per unit as 18,000 pounds / 6,000 units = 3 pounds per unit.

In early February, Heavenly Swimwear is preparing the budget for swimsuits for the summer season. Budgeted sales are 47,600 suits for May, 58,200 suits for June, and 43,500 suits for July. Each suit requires 1.3 yards of fabric. Heavenly Swimwear requires ending Finished Goods inventory equal to 30% of the following month's budgeted sales. What is Heavenly Swimwear's budgeted production for May? A. 65,060 units B. 47,600 units C. 44,420 units D. 50,780 units

D. 50,780 units

Flintstone Enterprises prepared the following cash budget for June:Cash receipts: $312,000Cash disbursements: $274,000Short-term financing: $2,000What amount will Flintstone Enterprises report for cash on the June balance sheet? A. $40,000 B.$312,000 C. $38,000 D. $140,000

A. $40,000

Budgeted production can be computed as A. Budgeted sales + Budgeted ending inventory - Budgeted beginning inventory. B. Budgeted sales - Budgeted ending inventory - Budgeted beginning inventory. C. Budgeted sales + Budgeted ending inventory + Budgeted beginning inventory. D. Budgeted sales - Budgeted ending inventory + Budgeted beginning inventory.

A. Budgeted sales + Budgeted ending inventory - Budgeted beginning inventory.

A budget that is based on research and analysis will likely result in a budget that A. closely represents the company's actual results. B. can predict market returns. C. has too much budgetary slack. D. lower-level management believes contains unreachable goals.

A. closely represents the company's actual results.

Jessica has helped develop the sales budget, the production budget, the cash budget, and several other budgets. Jessica is working on developing the ________ budget. A. operating B. master C. financial D. administrative

B. master The master budget is a collection of budgets to be used as a planning and performance evaluation tool. It has two classes, operating and financial budgets. Operating budgets include individual budgets that lead to the preparation of the budgeted income statement. Financial budgets report primarily on the cash resources needed to fund operations and capital expenditures.

Ellen is a manager who helps develop sales promotions, targets customers for upselling, and searches for potential new customers. Which of the following budgets would Ellen most likely help develop? A. selling and administrative expense budget B.sales budget C. cash budget D. manufacturing overhead budget

B.sales budget

Fox Company's static budget shows $27,000 budgeted for direct materials, $36,000 budgeted for direct labor, and $9,000 budgeted for overhead. Fox's actual direct materials were $28,000, actual direct labor was $34,000, and actual overhead was $9,200. What is the total of favorable differences between the static budget and actual? A. $1,200 B. $800 C. $2,000 D. $3,200

C. $2,000 The only favorable difference is the difference related to direct labor. The budgeted amount for direct labor was $36,000 and the actual amount for direct labor was $34,000 resulting in a $2,000 favorable difference. Direct materials and overhead both showed unfavorable variances since expenditures were higher than the static budget amount.

LDM Co. is preparing its direct labor budget. For the current month, the company has budgeted to produce 40,400 units and will sell 90% of those units during the month. LDM's total budgeted amount for direct labor is $3,848,342.40 and each unit requires 4.2 hours. What is the budgeted amount per direct labor hour? A. $20.42 B. $25.20 C. $22.68 D. $52.92

C. $22.68

Major Brands, Inc., a clothing manufacturer, is planning to sell 9,000 jackets during February and its production is estimated at 8,700 jackets during February. Each jacket requires 4.4 yards of fabric at $4.00 per yard and 0.25 direct labor hours at $12 per hour. Manufacturing overhead is applied at 110% of direct labor costs. What is the total amount to be budgeted for direct labor for February? A. $27,000 B. $104,400 C. $26,100 D. $459,360

C. $26,100

Henning Incorporated has the following values in their budgeted income statement:Sales Revenue: $1,475,000Cost of Goods Sold: $1,250,800Selling and Administrative Expenses: $325,000Interest Expense: $600If Henning Incorporated's average sales price is $25, what is the budgeted cost of goods sold per unit? A. $59.00 B. $21.20 C. $37.80 D. $13.00

B. $21.20 Sales revenue / Sales price per unit = Number of unitsCost of goods sold / Number of units = Budgeted cost of goods sold per unit.$1,250,800 / ($1,475,000/$25) = $21.20

The company that is most likely to use a budget committee when developing a company-wide budget is A. Rendon Hospitality, a regional company of small bed and breakfasts. B. Bruner Electronics, an international electronics manufacturer. C. Huntington Lumber Co., a local lumber and hardware store. D. Nancy's Noodles, an online company run by one family that sells homemade noodles.

B. Bruner Electronics, an international electronics manufacturer. Large companies are most likely to have a budget committee that coordinates the creation and preparation of budgets.

Coady Inc.'s first quarter runs from January to March. Which month's ending cash balance will be the ending cash balance for Coady's first quarter? A. January B. March C. February D. December

B. March

The Rosis Company's fiscal year runs from January to December. Which of the following month's ending cash balance will Rosis use as the beginning balance for the fourth quarter? A. October B. September C. December D. January

B. September The third quarter ending cash balance in September will be the beginning cash balance for the fourth quarter.

Vogler Furnishings designs and produces home furnishings. Vogler has a team of designers that design blueprints for each type of furniture, and they are given creative license to develop ideas for new products. The design team is integral to company revenue, as added features can increase revenue for specific products and design flaws can reduce revenue because of refunds and recalls. When assigning financial responsibility to the design team, they would best be classified as a(n) A. profit center. B. cost center. C. investment center. D. revenue center.

B. cost center.

Mulberry Company's first quarter budget reflects that direct materials are budgeted at $180,000, direct labor is budgeted at $360,000, and overhead is budgeted at $420,000. At the end of the first quarter, the total unfavorable difference between budgeted costs and actual costs is $3,400. If actual direct materials costs were $181,000 and actual overhead was $418,600, what the amount of actual direct labor costs during the first quarter? A. $361,000 B. $363,400 C. $363,800 D. $357,000

C. $363,800

S&S Cycle Shop is preparing its budgeted financial statements for 2022. The budgeted income statement shows a net loss of $9,862. Total assets on the budgeted balance sheet are $864,398. Current liabilities are $75,678. Beginning retained earnings is $577,533. S&S paid no dividends. Calculate the retained earnings balance at December 31, 2022. A. $587,395 B. $653,211 C. $567,671 D. $601,855

C. $567,671

The budgeted controllable margin for Jenkins Studio was $825,000. The actual controllable margin was $896,000. Assuming average operating assets were as budgeted, how would you rate the investment center manager's performance? A. Fair, because the contribution margin decreased. B. Poor, because the variable cost of goods sold must have increased substantially. C. Excellent, because the ROI increased substantially. D. Average, because the average assets did not increase above the budgeted amount.

C. Excellent, because the ROI increased substantially. If the actual controllable margin is higher than the original budgeted amount and the average operating assets remained the same, the actual ROI would be much higher than expected.

Naylor Industries produced a master budget that was strictly followed by all departments. At the end of the period, the actual numbers were off by less than 1% of the budgeted numbers. It is likely that Naylor Industries had a A. top-down budget. B. budget identical to the previous period. C. budget accepted by all levels of management. D. continuous budget.

C. budget accepted by all levels of management. The variance of less than 1% from the budgeted numbers reflects a master budget that was being prepared and formulated by all departments. The lower-level managers have more detailed knowledge of specific area and are able to provide a more accurate budgetary estimates.

For the past three years, Apex Industries has employed top-down budgeting. Throughout that entire period, the firm's budgeted costs and revenues have differed significantly from its actual numbers. Apex's CEO believes the best way to remedy this issue is to switch to bottom-up budgeting, and he asks your opinion of his idea. What is your best response? A. "I'm not sure if that's a good idea. Bottom-up budgeting actually decreases a budget's likelihood of accuracy in that it encourages managers to pad their estimates. Furthermore, bottom-up budgeting is usually more time consuming than top-down budgeting." B. "Bottom-up budgeting offers several benefits in that it takes less time than top-down budgeting and is more likely to ensure that lower-level managers are committed to meeting their budgeted numbers. However, there is no evidence indicating that bottom-up budgets are any more accurate than top-down budgets." C. "That sounds like a great plan. As compared to top-down budgeting, bottom-up budgeting is more accurate, more likely to produce high levels of managerial commitment, and far less time consuming." D. "Bottom-up budgeting will likely produce more accurate numbers, but only if you take care to ensure that the firm's lower-level managers are not manipulating their forecasts to make their performance look better than it really is. Also, it's important to remember that bottom-up budgeting is usually more time consuming than top-down budgeting."

D. "Bottom-up budgeting will likely produce more accurate numbers, but only if you take care to ensure that the firm's lower-level managers are not manipulating their forecasts to make their performance look better than it really is. Also, it's important to remember that bottom-up budgeting is usually more time consuming than top-down budgeting."

Philip is a manager who oversees raw materials ordering, inventory levels, employee efficiency and productivity, and assembly line maintenance. Which of the following budgets would Philip most likely help develop? A. capital expenditure budget B. manufacturing overhead budget C. sales budget D. selling and administrative expense budget

B. manufacturing overhead budget All of Philip's tasks revolve around the production of manufactured goods. Therefore, he is most likely to help develop budgets related to production, which include the production budget, the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

Nathan is working on the operating budgets for his company. He has already done the sales and production budgets, and he is now working on the direct materials, direct labor, and manufacturing overhead budgets. He decides to do the direct labor budget first, then the manufacturing overhead budget, then the direct materials budget. Do you think this is an appropriate way to prepare the budgets? Why or why not? A. Yes, because the direct materials budget depends on the direct labor and manufacturing overhead budgets so it should always be prepared last. B. No, because the direct labor budget depends on the direct materials budget so the direct materials budget should be prepared first. C. No, because the manufacturing overhead budget depends on the direct materials budget so the direct materials budget should be prepared second. D. Yes, because the manufacturing overhead budget depends on the direct labor budget but none of the other budgets depend on the direct materials budget.

D. Yes, because the manufacturing overhead budget depends on the direct labor budget but none of the other budgets depend on the direct materials budget.

The flexible budget for production of copper wire by Metalworks, Inc. includes a budget based on 50,000 units produced per month. For this level of production, indirect materials are $206,000, indirect labor is $148,000, utilities are $18,000, depreciation is $64,000, and supervision is $5,000. In the month of January, they spent $205,472 for indirect materials, $149,594 for indirect labor, and $19,650 for utilities to make 50,000 units of wire. What was the difference in variable costs for January? A. $2,716 favorable B. $1,066 favorable C. $1,066 unfavorable D. $2,716 unfavorable

D. $2,716 unfavorable

In early March, Percy's Pickled Snacks is preparing the budget for pickled beets for the upcoming quarter. Budgeted sales are 12,000 jars for April, 16,000 jars for May, and 19,000 jars for June. Each jar requires 1.2 pounds of beets. Each jar of pickled beets sells for $15. Percy requires ending Finished Goods inventory equal to 25% of the following month's budgeted sales. What is Percy's budgeted production for April? A. 11,000 units B. 12,000 units C. 16,000 units D. 13,000 units

D. 13,000 units

Last quarter, Richardson Automotive had sales of $124,000, a controllable margin of $35,000, and average operating assets of $157,000. What is Richardson's return on investment? A. 56.7% B. 28.2% C. 79.0% D. 22.3%

D. 22.3%

Which of the following represents the flow of budget data under participative budgeting? A. Department Manager to Vice President of Production to Plant Manager B. Vice President of Production to Plant Manager to Department Manager C. President to Plant Manager to Department Manager D. Department Manager to Plant Manager to Vice President of Production

D. Department Manager to Plant Manager to Vice President of Production Participative budgeting is a bottom-up approach to budgeting. The flow of budget data moves from lower level employees to top management.

Which of the following will have the greatest impact on the sales budget? A. increased gas prices that result in higher shipping charges B. union demands for higher wages and better benefits C. the increased price of raw materials D. a major customer goes out of business

D. a major customer goes out of business If a major customer goes out of business, it may distort the sales forecast and make it difficult to prepare an accurate sales budget.The increased price of direct materials will affect the production budget. Higher wages and increased gas prices will affect the operating budget.

For June, Inground Pools' static budget was based on the sale and installation of 25 pools. However, the summer was projected to be much hotter than normal and the company sold and installed 38 pools. If the actual costs for the 38 pools were compared to the budgeted costs for the 25 pools, the difference would likely be A.favorable. B. immaterial. C. zero. D. unfavorable.

D. unfavorable.