LEARN SMART CHAPTER 13 ACCT 121

Determining budgeted production requirements and the cost of goods sold is generally ______ for manufacturing companies.

complex

Statistical methods of forecasting economic data using regression analysis is called _______ models.

econometric

Melon Company estimates 20,000 pounds of beginning inventory and 15,000 pounds of ending inventory. Required production from the production budget is 200,000 units and each unit requires 2 pounds of material per unit at a cost of $4 per pound. The estimated cost of materials to be purchased equals ______.

((200,000 x 2) + 15,000 - 20,000) x $4 = $1,580,000

Which of the following statements are correct?

- Budgeting is an ongoing process in most companies - Final budget approvals are made shortly before the fiscal year begins.

Budgeting overhead requires an estimate based on ______.

- Production levels - Management descretion - Long-range capacity

Terms for a master budget include ______.

- Static budget - Budget plan - Planning budget

Major components of a master budget are the ______.

- Tactical short-range profit plan - Organizational goals - Strategic long-range profit plan

Transactions that reduce collections of accounts receivable include ______.

- cash discounts - bad debts

When budgeting for the amount of marketing and administrative costs required to operate the company at its projected level of sales and production, management should start with the previous period's actual or budgeted amounts and adjust for ______.

- changes in operation - inflation

Budgeting ______.

- derives a master budget based on expectations for the current year - ties together goals, plans, decision making and employee performance evaluation

Strategic long-range plans discuss ______.

- diversifying processes - major capital investments - developing particular markets

The predicted sales for the coming period can be related to such factors as ______.

- econometric indicators - consumer-confidence indexes

Information needed to calculate cost of goods sold includes ______.

- ending finished goods inventory - cost of goods manufactured - beginning finished goods inventory

The budgeted balance sheets are the result of the ______.

- estimate of financial position at the beginning of the period - estimated results of operations for the period - estimated changes in assets and liabilities

Organization goals include ______.

- financial goals - innovation - employee learning

The sales staff ______

- is generally evaluated, at least in part, on the sales budget - may possess the best information about customer needs

Complexity is added and budgets are often required to be reworked due to ______.

- labor shortages - material availability - production capacity

The purpose of cash budgeting is to ______.

- maximize interest earned on cash balances - determine whether enough cash is available for present and future operations - ensure company solvency

Budgets for marketing and administrative costs ______.

- may include costs that are related to compensation packages - are often more difficult to create than production cost budgets - may include costs that appear unnecessary

To simplify the budgeting process, overhead costs are usually divided into ______.

-Fixed -Variable

Accounts receivable had a beginning balance of $600,000, and an ending balance of $1,000,000. Calculate total sales if the transferred out amount totaled $5,000,000.

1,000,000 + 5,000,000 - 600,000 = $5,400,000

Devito Pool projects sales of 100,000 units. Management estimates that 10,000 units will be in beginning inventory at an estimated costs of $200,000 and required ending inventory is estimated to be 20,000 units. The budgeted level of production is ______ units.

100,000 + 20,000 - 10,000 = 110,000

Brooklyn plant projects sales of 150,000 units. Management estimates that 40,000 units will be in beginning inventory at an estimated costs of $400,000 and required ending inventory is estimated to be 20,000 units. The budgeted level of production is ______ units.

150,000 + 20,000 - 40,000 = 130,000

Morris Company is planning on producing 200,000 units. Direct labor is estimated at 0.25 hours per unit at a cost of $10 per hour. The total direct labor needed is ______ hours.

200,000 units x 0.25 hours per unit = 50,000

Morris Company is planning on producing 200,000 units. Direct labor is estimated at 0.25 hours per unit at a cost of $10 per hour. The total direct labor cost is ______.

200,000 units x 0.25 hours per unit x $10 per hour = $500,000

Melon Company estimates 20,000 pounds of beginning inventory and 15,000 pounds of ending inventory. Required production from the production budget is 200,000 units and each unit requires 2 pounds of material. The required materials purchases is ______ pounds.

200,000 x 2 + 15,000 - 20,000 = 395,000

Given the following information, calculate cash disbursements for February: January purchases = $200,000 February purchases = $300,000 March purchases = $350,000 Assumptions for the budget: • 55 percent is paid in the month of purchase • 43 percent is paid in the month following the purchase • 2 percent taken as a cash discount for early payment

200,000 x.43 + 300,000 x.55 = $251,000

Based on the following information, cash disbursements for March equals $Blank 1Blank 1 251,000, Incorrect Unavailable. (Enter you answer as a whole number.) January purchases = $200,000 February purchases = $300,000 March purchases = $350,000 Assumptions for the budget: • 55 percent is paid in the month of purchase • 43 percent is paid in the month following the purchase • 2 percent taken as a cash discount for early payment

321,500

Given the following information, how much cash is collected in February? January Total Sales = $500,000 February Total Sales = $400,000 Assumptions for the budget: • 20 percent is collected in the month of sales • 75 percent is collected in the next month • 2 percent is taken as a cash discount • 3 percent will not be collected because accounts are written off as bad debts

500,000 x.75 + 400,000 x.20 = $455,000

The basic cost flow equation is ______,

BB + TI - TO = EB

The statement of financial position is also called the budgeted ______________.

Balance sheet

Units in ____________ inventory + Required production (units) - Budgeted ______________ (units) = Units in ____________ inventory.

Beginning; Sales; Ending

A plan stated in financial terms of how the organization expects to carry out its activities and meet the financial goals established in the planning process is called a(n) _________________ .

Budget

The financial plan of the revenues and resources needed to carry out activities and meet financial goals is called a(n)_________ .

Budget

All revenues, costs and other transactions are examined in terms of their effects on cash in order to prepare a(n) ________ - ___________.

Cash Budget

The strengths of a company that enable it to outperform competitors are their________ - __________ - __________ .

Critical success factors

Forecasting method where individual forecasts of group members are submitted anonymously and evaluated by the group as a whole is called the __________ - ___________.

Delphi technique

Budgeting is a ______ process that ties together goals, plans, decision making and employee performance evaluation.

Dynamic

True or false: Incentive compensation plans do not motivate behaviors.

False

A financial plan of an organization for the coming year or other planning period is called a(n) static _________ budget.

Master

A company's broad objectives established by management that employees work to achieve are called ___________ - __________ .

Organizational goals

A plan of resources needed to meet current sales demand and ensure that inventory levels are sufficient for future sales is the ________ - __________ .

Production budget

The income statement portion of the master budget is often called the __________- ______ .

Profit plan

Materials to be used in production + estimated ending materials inventory - estimated beginning materials inventory equals _______________ - _______________ - ________.

Required material purchases

A statement detailing steps to take to achieve a company's organization goals is called a(n) - _________ - _______ - _______ plan.

Strategic long-range

Which of the following is not true about the development of the master budget?

The bulk of the work of developing a budget happens one month preceding the beginning of the coming fiscal year.

True or false: Critical success factors are responsible for making the strategic planning process successful.

True

True or false: Determining which method(s) to use for sales forecasting should include cost-benefit tests.

True

True or false: In many organizations, the sales staff has the best information available to develop the sales budget.

True

Many companies begin preparation of the Master Budget with the sales budget because, for many organizations, sales are most ______.

Uncertain

Cost of goods sold =

beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory

The budget is not formally adopted until the ______ approves the master budget.

board of directors

Required materials purchases = materials to be used in production + estimated ______.

ending materials inventory - estimated beginning materials inventory

Bonuses based on sales is an example of a(n) ________ - _________plan.

incentive compensation

To provide a check on forecasts from local sales personnel, management often turns to ______.

market researchers

A cash budget does NOT report the ______.

non-cash transactions for cash receipts and disbursements

If production is more uncertain than sales, it is reasonable to start the master budget with a forecast of ______.

production

The first-draft budget usually ______.

requires revision before being finalized

In most firms, forecasting ______ is the most difficult aspect of budgeting.

sales

When it comes to sales forecast predictors, management has often found _____ to be better.

sales personnel intuition

Market researchers generally do not predict ______.

short-term trends in potential markets

Forecasting sales is difficult due to ______.

subjectivity

The group method used to enhance forecasting and reduce bias in estimates is ______.

the Delphi technique

Optimal levels of capital investment in long-term assets, investment in working capital and financing decisions fall under the ______ function.

treasurer's

The forecasting method that ranges from a simple visual extrapolation of points on a graph to a highly sophisticated computerized time series analysis is called ______.

trend analysis