CH 15 SB

A firm's budgeted sales for the month of September is 10,000 units, for the month of October is 12,000 units, and for the month of November is 14,000 units. The budgeted ending inventory must equal 25 percent of the next month's sales. Based on the given information, the production budget for the month of October is Blank______ units.

12,500

ABC Company's production standards for Product Z indicate that each unit requires 6 hours of direct labor time. Union labor wage rates are currently $24 per hour. ABC's production manager earns a salary of $1,000 per week overseeing all units produced. The standard direct labor cost for Product Z is

144

ABC Company's budgeted production is as follows: January = 5,000 units; February = 8,000 units. Each unit produced requires 3 pounds of raw material. January beginning inventory = 3,000 pounds. Budgeted ending inventory must equal 20 percent of next month's production. Raw material purchases budgeted for January would equal

16800

BC Company's budgeted production is as follows: January = 5,000 units; February = 8,000 units. Each unit produced requires 3 pounds of raw material. January beginning inventory = 3,000 pounds. Budgeted ending inventory must equal 20 percent of next month's production. Raw material purchases budgeted for January would equal pounds.

16800

ABC Company collects sales as follows: 30 percent in the month of sale, 60 percent in the next month, and 8 percent in the second month after the sale; 2 percent is uncollectable. Budgeted sales are as follows: March = $22,000; April = $19,000; May = $23,000. Budgeted cash collections for May are

20060

ABC Company's budgeted sales are as follows: July = 3,000 units; August = 2,500 units. June ending inventory = 1,200 units. Budgeted ending inventory must equal 40 percent of next month's budgeted sales. Production budgeted for July would equal units.

2800

From the following list, identify the costs that would be classified as discretionary fixed costs.

Charitable contributions Student internship program Staff development funds

Budgeting is the process of planning.

financial

ABC Company has identified the following information related to its cash budget for October: Beginning cash balance = $20,000; Cash receipts from sales = $100,000; Cash payments for purchases = $50,000; Proceeds from borrowings = $25,000; Payments for other manufacturing expenses = $40,000; Payments for operating expenses = $35,000; Dividend payment = $10,000; Ending cash balance = $

10000

A firm's budgeted production for the month of May is 6,000 units and for the month of June is 10,000 units. Each unit produced requires 5 pounds of raw material. The budgeted ending inventory must equal 30 percent of next month's budgeted production. If the raw materials purchases budgeted for the month of May is 25,000 pounds, the beginning inventory for the month of May i

4,000

ABC Company pays for raw material purchases as follows: 75 percent in the month of purchase; 25 percent in the subsequent month. Budgeted purchases are as follows: June = $56,000; July = $60,000. Cash disbursement forecast for the purchases budgeted for the month of June will be anticipated as follows: June = $

42000 14000

ABC Company requires a minimum cash balance of $15,000 at the end of each month and has identified the following information related to its cash budget for October: Beginning cash balance = $20,000; Cash receipts = $125,000; Cash disbursements = $135,000; Required short-term borrowing = $

5000 15000

ABC Company currently pays $5 per gallon for raw material X and $3 per pound for raw material Y. Product Z production standard requires 5 gallons of raw material X and 10 pounds of raw material Y. The standard raw material cost for Product Z

55

ABC Company pays for raw material purchases as follows: 75 percent in the month of purchase; 25 percent in the subsequent month. Budgeted purchases are as follows: June = $56,000; July = $60,000. Budgeted cash payment to be made in the month of July is $

59000

ABC Company collects sales as follows: 30 percent in the month of sale, 60 percent in the next month, and 8 percent in the second month after the sale; 2 percent is uncollectable. Budgeted sales are as follows: March = $22,000; April = $19,000; May = $23,000. Budgeted cash collections for March sales will be anticipated as follows: March = $

6600 13200 1760

Identify the expense items that would be included in the operating expense budget.

Advertising expense Sales commissions Depreciation of office equipment Delivery expense

Which management needs does a cash budget specifically support?

Anticipate need for short-term borrowing. Know when temporary excess cash is available to invest.

Arrange the cash budget elements and mathematical operations in the correct order as used in the preparation of a cash budget. Place the first item at the top.

Beginning Plus Cash receipts minus cash disbursements equals

In regard to using a model to calculate the quantity of merchandise to be purchased or manufactured, place the steps in order, with the first step at the top.

Enter the beginning enter the quantity Calculate Subtract

True or false: A cash receipts analysis of customer payment patterns will always reflect the collection of 100 percent of the sales dollars identified in the sales forecast.

False

True or false: Managers have the option to reduce committed fixed costs during the annual budget planning process.

False

Which costs remain constant in total as the budgeted volume of activity changes, but they could change as a result of the managerial decision-making process?

Fixed costs

As budgeted activity increases, a variable cost will increase (in total/per unit) but will remain constant (in total/per unit).

In total Per unit

Identify a true statement about variable overhead. Multiple choice question.

It is expressed in terms of physical measure, such as machine hour, that reflects the causes of overhead expenditures.

Identify a true statement about a past experience standard. Multiple choice question.

It is not likely to provide much incentive for improvement.

Which statements regarding a sales or revenue forecast are true?

It is the key to the overall operating budget. It is developed using an estimate of the physical quantity of goods or services to be sold, multiplied by the expected selling price per unit. It is the forecast of "activity" that is expected during the budget period.

Identify the items that would be included in a cash budget.

Payment of dividends Sale of common stock Collection of sales

Identify the logical sequence flow of management activities in the management planning and control cycle concept. Place the first step at the top.

Planning Managing Controlling

Identify the characteristics of the budgeting process.

Provides a benchmark in order to compare actual performance results. Uses managerial accounting concepts. Creates a financial plan for the organization. Uses financial accounting concepts.

Which of these is the correct equation used to calculate the quantity of merchandise to be purchased or manufactured?

Purchases or production = Ending inventory + Quantity sold - Beginning inventory

Which of these are elements of product cost for which individual standard costs are developed?

Raw materials Direct labor Manufacturing overhead

From the following list, identify the costs that would be classified as committed fixed costs.

Real estate taxes Depreciation Executive management compensation

What type of budget involves planning for segments of a year on a repetitive basis, such as every quarter? Multiple choice question.

Rolling

What type of budget is also known as multiperiod or continuous?

Rolling

Which of the following lists the budgets of a manufacturing firm in the correct sequence based on the budget dependencies? Multiple choice question.

Sales budget, production budget, raw materials budget

Identify the expense items that would be included in the operating expense budget. Multiple select question.

Sales commissions Advertising expense Depreciation of office equipment Delivery expense

What is the key budgeting element on which the entire operating budget is based? Multiple choice question.

Sales/revenue forecast

Which of the following are important factors to consider when preparing a sales forecast?

Seasonal demand variations The state of the economy New competitors in the market

Identify the key factors that will lead to an accurate cash receipt forecast.

The accuracy of the estimated collection patterns for sales The accuracy of the sales forecast

Identify the keys to estimating an accurate amount of cash to be disbursed from the raw material purchases.

The accuracy of the estimated payment patterns for purchases The accuracy of the sales forecast

Regarding the development of the standard cost for each unit of input, which of these statements are true?

The purchasing agent will provide input for raw material costs. The human resources department will be involved in establishing standard labor rates. The production and purchasing departments will provide data for estimating the various overhead costs.

Identify the elements used to prepare a production budget.

The quantity of ending inventory The quantity of beginning inventory The inventory policy The sales budget

Why is a cash disbursement forecast affected by the sales forecast?

The sales forecast affects the finished goods budget and the raw materials purchases budget.

Identify the true statements about budgeting techniques.

The service sector uses these techniques for nonfinancial measures, such as the utilization of productive capacity.

Which statements are true of fixed costs?

They can change from year to year, sometimes due to managerial decisions. They do not change as the volume of activity changes. They include costs such as property taxes, executive salaries, and plant depreciation.

True or false: "Padding the budget" is another phrase used to describe the practice of creating budget slack.

True

True or false: In addition to manufacturing companies, budgeting techniques can be very useful to many other types of organizations.

True

True or false: Managers have the option to reduce discretionary fixed costs during the annual budget planning process.

True

What type of costs increase or decrease in total with the budgeted volume of activity but remain constant when expressed on a per unit basis? Multiple choice question.

Variable costs

A standard that is based on historical data and includes all the inefficiencies that have crept into the operation over time is known as:

a past experience standard

The cash budget is especially important to an organization in order to:

anticipate a need to secure a short-term bank loan

In comparison to ideal standards, attainable standards Blank______.

are more likely to motivate employees

A standard cost or production standard that is achievable under actual operating conditions is known as an

attainable

A fixed cost that has been incurred to provide the capacity resources necessary to carry out the long-range plans of an organization is known as a:

committed cost

Another term used to describe a rolling budget time frame is a Blank______ budget.

continuous

A (single-period/continuous) budget is generally more expensive to maintain than a (single-period/continuous) budget because more time and effort is required in its preparation.

continuous single-period

Operating expense budgets are organized by:

cost behavior patterns

A standard cost or a production standard that assumes maximum operating condition efficiency at all times is known as an

ideal

A production standard that assumes maximum operating conditions and 100 percent efficiency at all times is called a(n): Multiple choice question.

ideal standard

An organization's master budget is also referred to as its Blank______ budget. Multiple choice question.

operating

Depreciation of delivery trucks, which are used to deliver the final product to the customers, appears in the Blank______ budget.

operating expense

A budgeting process that involves the input and negotiation of several layers of management describes the management philosophy of Blank______ budgeting.

participative

An interactive, collaborative approach in which lower-level managers provide significant input describes (top-down/participative) budgeting.

participative

The management process of identifying and quantifying the goals of the organization is known as:

planning.

A raw materials purchases budget is completed immediately after preparing the Blank______ budget.

production

The (sales/production) budget depends on the (sales/production) budget, and the raw materials budget depends on the (sales/production) budget.

production sales production

Organizations require a minimum cash balance in the cash budget in order to:

provide a cushion that can absorb forecast errors

The key information necessary for developing an organization's operating budget is found in the: Multiple choice question.

sales forecast

The key budgeting element on which the entire operating budget is based is the:

sales/revenue forecast

When a budget is prepared only once prior to the budget period, it is called a Blank______ budget.

single-period

While preparing a budget, there are some estimates that must be made more than a year in advance. This particular aspect is not considered while preparing a Blank______ budget.

single-period

When managers submit budget requests that include allowances for contingencies that are higher than what costs are really expected to be, the intent is to create budget

slack

A budgeting approach that implies little or no input from lower levels of management describes the management philosophy of Blank______ budgeting.

top-down

An authoritarian approach describes the management philosophy of Blank______ budgeting.

top-down