AC222

Manhattan Enterprises manufactures cookware sets and sells the sets to department stores. Manhattan expects to sell 2,800 cookware sets for $280 each in April and 4,000 cookware sets for $295 each in May. Sales are 30% cash and 70% on account. Compute the total budgeted sales for May.

$1,180,000

Which of the following is a variable cost? Select one: A. salary of plant manager B. straight-line depreciation expense C. property taxes D. direct materials cost

Direct Materials Cost

Which of the following will lower the breakeven point? Select one: A. an increase in the variable cost per unit B. an increase in the sales price per unit C. an increase in total fixed costs D. a decrease in the sales price per unit

an increase in the sales price per unit

The final step in the process of creating the master budget is the preparation of the ________.

budgeted statement of cash flows

Which of the following is useful to combine the data of different segments using different software for the purpose of creating companywide budgets?

budgeting software

When preparing the budgeted balance sheet of a merchandising company, the amount of Merchandise Inventory can be obtained from the ________.

inventory, purchases, and cost of goods sold budget

The forecast of sales revenue is the cornerstone of the master budget.

true

The manufacturing overhead budget calculates the budgeted overhead cost for the year and also the predetermined overhead allocation rate for the year.

true

The breakeven point represents the sales level at which the company's operating income is zero.

true

The budgeted income statement shows operating income and net income.

true

The budgeted income statements of both manufacturing and merchandising companies include the calculation of gross profit.

true

The capital expenditures budget is completed before the preparation of the cash budget.

true

The production budget determines the number of units to be produced during the period.

true

The sales level at which operating income is zero is called the breakeven point.

true

Ron Moss, a manager of Waterworks, Inc., was reviewing the water bills of a dog daycare and spa. He determined that its highest and lowest bills of $3,600 and $2,800 were incurred in the months of May and November, respectively. If 500 dogs were washed in May and 200 dogs were washed in November, what was the variable cost per dog associated with the company's water bill? (Round your answer to the nearest cent.) Select one: A. $2.67 B. $4.00 C. $7.20 D. $14.00

$2.67

Maywood Company sells hand-knit scarves. Each scarf sells for $40. The company pays $60 to rent vending space for one day. The variable costs are $15 per scarf. How many scarves should the company sell each day in order to break even? (Round your answer up to the nearest whole scarf.) Select one: A. 2 scarves B. 4 scarves C. 3 scarves D. 20 scarves

3 scarves

The last step in the preparation of the master budget is the budgeted income statement.

False

When the sales price per unit decreases, the breakeven point ________. Select one: A. decreases B. decreases proportionately C. remains the same D. increases

Increase

In the budgeted statement of cash flows, all cash receipts and payments are categorized into operating, financing, and ________ activities.

Investing

Which of the following describes the cash budget?

It helps in planning to ensure the business has adequate cash.

Which of the following statements is true of the operating budget?

It includes the sales budget

Which of the following statements is true of the capital expenditures budget?

It is a part of the financial budget.

A ________ groups cost by behavior; costs are classified as either variable costs or fixed costs. Select one: A. contribution margin income statement B. absorption costing income statement C. traditional income statement D. balance sheet

contribution margin income statement

When the total fixed costs decrease, the breakeven point ________. Select one: A. decreases B. increases C. remains the same D. increases proportionately

decrease

The budget process is a loop that consists of ________.

developing strategies, planning, acting, and controlling

A strategic budget will be as detailed as an operational budget.

false

Costs that have both variable and fixed components are called ________. Select one: A. fixed costs B. mixed costs C. variable costs D. contribution costs

mixed costs

The starting point in developing the master budget is the preparation of the ________.

sales budget

A budget represents the plans that a company has in place to achieve its goals.

true

A static budget is a financial plan for only one level of sales volume.

true

A strategic budget is a long-term financial plan used to coordinate the activities needed to achieve the long-term goals of the company.

true

After comparing budgets with the actual results, the feedback allows managers to determine what, if any, corrective action should be taken.

true

Amounts needed for the preparation of the budgeted balance sheet are taken from various operating and financial budgets.

true

An operational budget is a short-term financial plan that coordinates activities needed to achieve short-term goals.

true

Budgeted financial statements are financial statements based on budgeted amounts rather than actual amounts.

true

CVP analysis assumes that the sales price per unit does not change as volume changes.

true

Contribution margin is the amount that contributes to covering the fixed costs and then to providing operating income.

true

Contribution margin is the difference between net sales revenue and variable costs.

true

Fixed costs divided by contribution margin per unit equals the breakeven point in unit sales.

true

To develop the cost of goods sold budget, it is necessary to start by calculating the projected cost to produce each unit.

true

Total fixed costs can change from one relevant range to another.

true

When the variable cost per unit increases, the contribution margin on each unit decreases.

true

When the variable cost per unit increases, the total number of units required to break even also increases.

true

Fixed costs per unit is inversely proportional to the volume of units produced.

true

For manufacturing companies, the primary source of cash is from its customers.

true

If all other factors remain constant, an increase in fixed costs will increase the breakeven point.

true

If fixed costs increase, and all other factors remain the same, the margin of safety will become larger.

true

If the volume of activity doubles in the relevant range, total variable costs will also double. T/F

true

Managers can use CVP relationships to conduct sensitivity analysis.

true

Sensitivity analysis allows managers to see how various business strategies will affect profit levels.

true

Sensitivity analysis is a what-if technique.

true

Target profit is the operating income that results when sales revenue minus variable and fixed costs equals management's profit goal.

true

The Raw Materials Inventory account is must be considered when calculating the amount of materials to be purchased.

true

The breakeven point is the point where the sales revenues are equal to the total variable costs plus the total fixed costs.

true

Jupiter, Inc. incurred fixed costs of $300,000. Total costs, both fixed and variable, are $500,000 when 59,000 units are produced. It sold 35,000 units during the year. Calculate the variable cost per unit. (Round your answer to the nearest cent.) Select one: A. $3.39 B. $8.47 C. $5.08 D. $14.29

$3.39

Young Company has provided the following information: Sales price per unit $52Variable cost per unit 16Fixed costs per month $14,000 Calculate the contribution margin per unit. Select one: A. $36.00 B. $16.00 C. $52.00 D. $68.00

$36,000

Winter Wonderland sells hand-knit scarves. Each scarf sells for $50. The company pays $30 to rent a vending space for one day. The variable costs are $10 per scarf. What total revenue amount does the company need to earn to break even? (Round any percentages to two decimal places and your final answer to the nearest cent.) Select one: A. $50.00 B. $12.50 C. $66.67 D. $37.50

$37.50

June sales were $27,000, while projected sales for July and August were $51,000 and $69,000, respectively. Sales are 60% cash and 40% credit. All credit sales are collected in the month following the sale. Calculate expected collections for July.

$41,400

Pluto Hand Blenders Company sold 3,000 units in October at a sales price of $45 per unit. The variable cost is $25 per unit. Calculate the total contribution margin. Select one: A. $37,500 B. $75,000 C. $135,000 D. $60,000

$60,000

If variable costs increase, and all other factors remain the same, the margin of safety will become smaller.

true

When a company is preparing a budgeted statement of cash flows, the payments to suppliers for purchases of direct materials can be obtained from the ________.

Cash budget

Which of the following statements regarding the capital expenditures budget is correct?

The decision to purchase long-term assets is part of a strategic plan.

Which of the following is true of the sales budget?

It is used in the production budget.

Which of the following describes the production budget?

It provides the quantity of finished goods to be produced during a budget period.

Which of the following would not appear on a multiple-step budgeted income statement?

Salaries payable

________ is a "what if" technique that estimates profit or loss results if sales price, costs, volume, or underlying assumptions change. Select one: A. Contribution margin B. Operating leverage C. Sensitivity analysis D. High-low method of analysis

Sensitivity analysis

Regarding the sales budget, which of the following statements is incorrect?

The budgeted sales are carried from the sales budget to the balance sheet.

Which of the following is not an assumption of cost-volume-profit (CVP) analysis? Select one: A. The price per unit does not change as volume changes. B. The price per unit changes as volume changes. C. The only factor that affects total costs is a change in volume, which increases or decreases variable and mixed costs. D. Fixed costs do not change.

The price per unit changes as volume changes.

Which of the following statements is true of the behavior of total fixed costs, within the relevant range? Select one: A. They will decrease as production decreases. B. They will decrease as production increases. C. They will remain the same as production levels change. D. They will increase as production decreases.

They will remain the same as production levels change.

Which of the following costs change in total in direct proportion to a change in volume? Select one: A. variable costs B. period costs C. fixed costs D. mixed costs

Variable costs

A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. While doing so, the Cash balance can be taken from the ________.

cash budget

Contribution margin ratio is equal to ________. Select one: A. net sales revenue minus variable costs B. net sales revenue per unit minus variable costs per unit C. fixed costs divided by contribution margin per unit D. contribution margin divided by net sales revenue

contribution margin divided by net sales revenue

The degree of operating leverage can be measured by ________. Select one: A. dividing the fixed costs by contribution margin B. multiplying the contribution margin by sales revenue C. dividing the contribution margin by operating income D. dividing the fixed costs by the sales price per unit

dividing the contribution margin by operating income

The production budget is the first component of the operating budget.

false

A company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. The balance of Finished Goods Inventory can be taken from the ________.

production budget and cost of goods sold budget

When the total fixed costs increase, the contribution margin per unit ________. Select one: A. decreases B. increases C. increases proportionately D. remains the same

remains the same

Projected manufacturing cost per unit of product sold does not include ________ cost per unit.

sales commission

When the total fixed costs increase, the contribution margin per unit ________. Select one: A. decreases B. increases C. increases proportionately D. remains the same

sales volume changes

Emara Company sells two generatorsModel A and Model Bfor $456 and $394, respectively. The variable cost of Model A is $406 and of Model B is $304. The company will generate lower revenues but a higher net income if it sells more of Model B than Model A.

true

Fixed costs divided by the contribution margin ratio equals the breakeven point in sales dollars.

true