Managerial Accounting Chapter 8

When creating an Excel budget and performing what-if analysis, it is generally easiest to ______.

Creates 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

Highly achievable budget targets ______.

May help build manager confidence Are used in most companies May generate greater management commitment to the budget.

The amount of goods to be acquired from suppliers during the period is shown on the _______ budget.

Merchandise purchases

Facing labor shortages or having to hire or lay off workers at awkward times are consequences of ______.

Neglecting to budget the amount of labor time that will be needed

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

Produced

In a manufacturing company, the ______ budget is prepared right after the sales 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

The budgeted income statement does NOT rely on information from the ______ budget.

Production

Edison Corporation's variable manufacturing overhead rate is $5.00 per direct labor-hour. Total budgeted fixed overhead is $25,000 per month. The $25,000 per month includes $7,000 in depreciation expense. Total budgeted direct labor-hours for the month of July is 20,000. Budgeted cash disbursements for manufacturing overhead for July equals ______.

$118,000 [Variable overhead (20,000 × $5.00) $100,000 + fixed overhead $25,000 - non-cash (depreciation) expenses $7,000 = $118,000]

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

Ending finished goods inventory

Risks of not knowing in advance how much labor time will be needed throughout the budget period includes ______.

Erratic layoffs Labor shortages Low employee morale

Challenging but highly achievable budgets increase the likelihood that lower-level managers will engage in undesirable behavior to secure their desired compensation.

False

If inventory levels are ______, the result can lead to lost sales or last-minute, high-cost production efforts.

Insufficient

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

Unsold

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

Direct Labor

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

In a manufacturing company, the _______ _______ budget details the raw materials that must be purchased to fulfill the production

Direct materials

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

The calculation of unit product cost requires information from the ______ budget

Manufacturing overhead

Davidson Corporation's master budget shows expected direct labor cost of $90,000 for the month of May. During May, the company's expected sales equal 12,000 units and expected production is 15,000 units. If each unit requires 1/2 hour of direct labor, the budgeted direct labor rate is $_______ per hour.

12

Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ______ units.

13,000 (10,000 + 5,000 - 2,000 = 13,000)

Edison Corporation's variable manufacturing overhead rate is $5.00 per direct labor-hour. Total budgeted fixed overhead is $25,000 per month. The $25,000 per month includes $7,000 in depreciation expense. Total budgeted direct labor-hours for the month of July is 20,000. Based on the month of July only, the predetermined overhead rate is $_____ .

6.25

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]

Which of the following is needed to calculate raw materials to be purchased on the direct materials budget?

Beginning inventory of raw materials Raw materials required per unit

The final schedule of the master budget is the ______.

Budgeted balance sheet

The direct materials budget directly relies on the ______ budget.

Production

S&P Enterprises has scheduled direct material purchases of $100,000 in January, $130,000 in February and $150,000 in March. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of February.

$122,500 [February purchases ($130,000 X 75%) $97,500 + January purchases ($100,000 X 25%) $25,000 = $122,500]

S&P Enterprises has scheduled direct material purchases of $120,000 in April, $140,000 in May and $160,000 in June. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of May.

$135,000 [May purchases ($140,000 x 75%) $105,000 + April purchases ($120,000 x 25%) $30,000 = $135,000]

To calculate total sales on the sales budget, multiply budgeted sales in units by ______.

Sales price per unit

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

Selling and Administrative

In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the ______ budget.

Selling and administrative

A likely consequence of excessive inventory levels is ______.

Storage Problems

Which of the following is needed to prepare a sales budget?

The budgeted number of units to be sold

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

True

The amount of goods for resale to be acquired from suppliers during the period is shown on the ________ _______ budget.

merchandise, purchases

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

Production

Which of the following budgets are needed to calculate unit product costs?

Direct Materials Direct labor Manufacturing overhead