Acc exam 3
what is a planning budget
original budget created in advance
what are activity variances
difference between budgeting amounts in the flexible budget and the planning budget
for a flexible budget
-calculate all variable and mixed costs based on the actual level of activity -leave fixed costs as they were in the planning budget
advantages of budgeting
-define goals -communicates plans -coordinate activities -provides a means of allocating resources -identifies bottlenecks
advantages of a self imposed budget
-individuals of all levels feel valued -more accurate and reliable data -greater motivation -no excuses
Litzinger Corporation makes one product. The ending raw materials inventory should equal 20% of the following month's raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $1.00 per pound. The company estimates that it will need 53,720 pounds of raw material to satisfy production needs in June. The raw materials inventory balance at the end of May should be closest to: A) $10,744 B) $7,984 C) $50,664 D) $42,680
A) $10,744
Arciba Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,400 direct labor-hours will be required in January. The variable overhead rate is $9.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $130,980 per month, which includes depreciation of $10,360. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for January should be: A) $27.20 B) $25.80 C) $17.70 D) $9.50
A) $27.20
Sill Corporation makes one product. Budgeted unit sales for January, February, March, and April are 9,900, 11,400, 11,900, and 13,400 units, respectively. The ending finished goods inventory equals 20% of the following month's sales. The ending raw materials inventory equals 40% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. If 61,000 pounds of raw materials are required for production in March, then the budgeted raw material purchases for February is closest to: A) 58,900 pounds B) 104,900 pounds C) 57,500 pounds D) 81,900 pounds
A) 58,900 pounds
When preparing a direct materials budget, the required purchases of raw materials in unit equals A) raw materials needed to meet the production schedule + desired ending inventory of raw materials - beginning inventory of raw materials B) raw materials needed to meet the production schedule - desired ending inventory of raw materials - beginning inventory of raw materials C) raw materials needed to meet the production schedule - desired ending inventory of raw materials + beginning inventory of raw materials D) raw materials needed to meet the production schedule + desired ending inventory of raw materials + beginning inventory of raw materials
A) raw materials needed to meet the production schedule + desired ending inventory of raw materials - beginning inventory of raw materials
which of the following statements is NOT correct concerning the cash budget A)it is not necessary to prepare any other budgets before preparing the cash budget B) the cash budget should be prepared before the budgeted income statement C) the cash budget should be prepared before the budgeted balance sheet D) the cash budget builds on earlier budgets and schedule as well as additional data
A)it is not necessary to prepare any other budgets before preparing the cash budget
Petersheim Snow Removal's cost formula for its vehicle operating cost is $1,750 per month plus $484 per snow-day. For the month of November, the company planned for activity of 15 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $8,360. The vehicle operating cost in the flexible budget for November would be closest to: A. $8,526 B. $8,409 C. $9,010 D. $8,360
A. $8,526
The general model for calculating a price variance is: A. actual quantity of inputs X (actual price - standard price). B. standard price X (actual quantity of inputs - standard quantity allowed for output). C. (actual quantity of inputs at actual price) - (standard quantity allowed for output at standard price). D. actual price X (actual quantity of inputs - standard quantity allowed for output).
A. actual quantity of inputs X (actual price - standard price).
Which of the following comparisons best isolates the impact of a change in activity on performance? A. static planning budget and flexible budget B. static planning budget and actual results C. flexible budget and actual results D. master budget and static planning budget
A. static planning budget and flexible budget
Labor rate variance
AH ( AR-SR)
variable manufacturing overhead rate variance
AH (AR-SR)
Materials Price variance
AQ ( AP-SP)
Magno Cereal Corporation uses a standard cost system for its "crunchy pickle" cereal. The materials standard for each batch of cereal produced is 1.4 pounds of pickles at a standard cost of $3.00 per pound. During the month of August, Magno purchased 78,000 pounds of pickles at a total cost of $253,500. Magno used all of these pickles to produce 60,000 batches of cereal. What is Magno's materials quantity variance for August? A) $1,500 Unfavorable B) $18,000 Favorable C) $19,500 Unfavorable D) $54,000 Unfavorable
B) $18,000 Favorable
Magno Cereal Corporation uses a standard cost system for its "crunchy pickle" cereal. The materials standard for each batch of cereal produced is 1.4 pounds of pickles at a standard cost of $3.00 per pound. During the month of August, Magno purchased 78,000 pounds of pickles at a total cost of $253,500. Magno used all of these pickles to produce 60,000 batches of cereal. What is Magno's materials quantity variance for August? A)1,500 unfavorable B)18,000 favorable C) 19,500 unfavorable D) 54,000 unfavorable
B) 18,000 favorable
Which of the following statements is NOT correct concerning the Manufacturing Overhead Budget? A) The Manufacturing Overhead Budget provides a schedule of all costs of production other than direct materials and labor costs. B) The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead. C) The Manufacturing Overhead Budget shows the expected cash disbursements for manufacturing overhead. D) The Manufacturing Overhead Budget is prepared after the Sales Budget
B) The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead.
Pabon Corporation makes one product. Budgeted unit sales for August and September are 11,100 and 12,600 units, respectively. The ending finished goods inventory equals 40% of the following month's sales. The direct labor wage rate is $19.00 per hour. Each unit of finished goods requires 2.5 direct labor-hours. The estimated direct labor cost for August is closest to: A)389,000 B)555,750 C)29,250 D)222,300
B)555,750
The general model for calculating a quantity variance is A)Actual quantity of inputs used × (Actual price − Standard price). B)Standard price × (Actual quantity of inputs used − Standard quantity allowed for output) C) (Actual quantity of inputs used × Actual price) − (Standard quantity allowed for output × Standard price). D)Actual price × (Actual quantity of inputs used − Standard quantity allowed for output).
B)Standard price × (Actual quantity of inputs used − Standard quantity allowed for output)
Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance will be: A. favorable. B. unfavorable. C. either favorable or unfavorable. D. zero.
B. unfavorable.
Sleeter Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: a. Budgeted unit sales for April, May, June, and July are 7,500, 11,900, 10,800, and 14,800 units, respectively. All sales are on credit. b. The ending finished goods inventory equals 30% of the following month's sales. c. The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 6 pounds of raw materials. The raw materials cost $5.00 per pound. If 72,000 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to: A) $559,230 B) $455,100 C) $350,970 D) $347,100
C) $350,970
Jeanclaude Corporation produces and sells one product. The budgeted selling price per unit is $105. Budgeted unit sales for July, August, September, and October are 7,400, 7,500, 13,800, and 15,300 units, respectively. All sales are on credit. Regarding credit sales, 40% are collected in the month of the sale and 60% in the following month. The budgeted accounts receivable balance at the end of August is closest to: A) $525,000 B) $315,000 C) $472,500 D) $787,500
C) $472,500
Sparks Corporation has a cash balance of $18,000 on April 1. The company must maintain a minimum cash balance of $10,000. During April, expected cash receipts are $98,000. Cash disbursements during the month are expected to total $112,000. Ignoring interest payments, during April the company will need to borrow: A) $8,000 B) $2,000 C) $6,000 D) $4,000
C) $6,000
Piper Corporation's standards call for 1,000 direct labor-hours to produce 250 units of product. During October the company worked 1,250 direct labor-hours and produced 300 units. The standard hours allowed for October would be: A) 1,250 hours B) 1,000 hours C) 1,200 hours D) 1,300 hours
C) 1,200 hours
There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget? A) It details the required direct labor hours. B) It details the required raw materials purchases. C) It is calculated based on the sales budget and the desired ending inventory. D) It summarizes the costs of producing units for the budget period.
C) It is calculated based on the sales budget and the desired ending inventory
The usual starting point for a master budget is: A) the direct materials purchase budget B) the budgeted income statement C) the sales forecast or sales budget D) the production budget
C) the sales forecast or sales budget
Clovis Midwifery's cost formula for its wages and salaries is $2,680 per month plus $245 per birth. For the month of September, the company planned for activity of 118 births, but the actual level of activity was 121 births. The actual wages and salaries for the month was $33,290. The wages and salaries in the flexible budget for September would be closest to: A. $32,393 B. $31,590 C. $32,325 D. $33,290
C. $32,325
Stuchlik Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $430 per month plus $80 per job plus $14 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in January to be 20 jobs and 190 meals, but the actual activity was 21 jobs and 194 meals. The actual cost for catering supplies in January was $4,850. The catering supplies in the planning budget for January would be closest to: A. $4,850 B. $4,619 C. $4,690 D. $4,826
C. $4,690
Farver Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $44,420 per month plus $2,008 per flight plus $1 per passenger. The company expected its activity in May to be 80 flights and 281 passengers, but the actual activity was 81 flights and 277 passengers. The actual cost for plane operating costs in May was $199,650. The spending variance for plane operating costs in May would be closest to: A. $5,691 F B. $7,695 U C. $7,695 F D. $5,691 U
C. $7,695 F
Gradert Framing's cost formula for its supplies cost is $1,540 per month plus $12 per frame. For the month of September, the company planned for activity of 668 frames, but the actual level of activity was 666 frames. The actual supplies cost for the month was $9,980. The supplies cost in the planning budget for September would be closest to: A. $10,010 B. $9,532 C. $9,556 D. $9,980
C. $9,556
A static budget A. should be compared to actual costs to assess how well costs were controlled. B. should be compared to a flexible budget to assess how well costs were controlled. C. is valid for only one level of activity. D. represents the best way to set spending targets for managers.
C. is valid for only one level of activity
Which of the following would not appear on a flexible budget performance report as shown in the text? A. Variable costs. B. Mixed costs. C. A flexible budget adjusted to the actual level of activity. D. The previous year's actual costs.
D. The previous year's actual costs.
Schuepfer Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 1,300 units are planned to be sold in March. The variable selling and administrative expense is $4.20 per unit. The budgeted fixed selling and administrative expense is $19,240 per month, which includes depreciation of $3,380 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the March selling and administrative expense budget should be: A) $15,860 B) $5,460 C) $24,700 D) $21,320
D) $21,320
Douglas Corporation plans to sell 24,000 units of Product A during July and 30,000 units during August. Sales of Product A during June were 25,000 units. Past experience has shown that end-of-month inventory should equal 3,000 units plus 30% of the next month's sales. On June 30 this requirement was met. Based on these data, how many units of Product A must be produced during the month of July? A) 28,800 B) 22,200 C) 24,000 D) 25,800
D) 25,800
A favorable labor rate variance indicates that A) actual hours exceed standard hours. B) standard hours exceed actual hours. C) the actual rate exceeds the standard rate. D) the standard rate exceeds the actual rate.
D) the standard rate exceeds the actual rate.
Douglas Corporation plans to sell 24,000 units of Product A during July and 30,000 units during August. Sales of Product A during June were 25,000 units. Past experience has shown that end-of-month inventory should equal 3,000 units plus 30% of the next month's sales. On June 30 this requirement was met. Based on these data, how many units of Product A must be produced during the month of July? A) 28,800 B)22,200 C)24,000 D)25,800
D)25,800
Fussner Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,610 patient-visits and the actual level of activity was 1,670 patient-visits. The cost formula for administrative expenses is $3.30 per patient-visit plus $17,900 per month. The actual administrative expense was $24,600. In the clinic's flexible budget performance report for last month, the spending variance for administrative expenses was: A. $1,387 U B. $198 U C. $69 U D. $1,189 U
D. $1,189 U
Thomasson Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $36,160 per month plus $2,038 per flight plus $1 per passenger. The company expected its activity in April to be 73 flights and 223 passengers, but the actual activity was 72 flights and 228 passengers. The actual cost for plane operating costs in April was $179,020. The activity variance for plane operating costs in April would be closest to: A. $6,137 U B. $6,137 F C. $2,033 U D. $2,033 F
D. $2,033 F
Schlick Framing's cost formula for its supplies cost is $1,770 per month plus $12 per frame. For the month of August, the company planned for activity of 628 frames, but the actual level of activity was 631 frames. The actual supplies cost for the month was $9,790. The activity variance for supplies cost in August would be closest to: A. $36 F B. $484 F C. $484 U D. $36 U
D. $36 U
Whit Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $380 per month plus $94 per job plus $11 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in October to be 20 jobs and 216 meals, but the actual activity was 19 jobs and 221 meals. The actual cost for catering supplies in October was $4,790. The catering supplies in the flexible budget for October would be closest to: A. $4,404 B. $4,790 C. $4,636 D. $4,597
D. $4,597
Bargas Framing's cost formula for its supplies cost is $2,240 per month plus $6 per frame. For the month of May, the company planned for activity of 808 frames, but the actual level of activity was 810 frames. The actual supplies cost for the month was $7,090. The supplies cost in the flexible budget for May would be closest to: A. $7,088 B. $7,090 C. $7,106 D. $7,100
D. $7,100
Bolick Midwifery's cost formula for its wages and salaries is $1,800 per month plus $152 per birth. For the month of May, the company planned for activity of 119 births, but the actual level of activity was 114 births. The actual wages and salaries for the month was $19,980. The activity variance for wages and salaries in May would be closest to: A. $760 U B. $92 U C. $92 F D. $760 F
D. $760 F
Wadhams Snow Removal's cost formula for its vehicle operating cost is $1,900 per month plus $430 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 21 snow-days. The actual vehicle operating cost for the month was $11,470. The vehicle operating cost in the planning budget for December would be closest to: A. $10,930 B. $11,470 C. $8,739 D. $8,780
D. $8,780
Which department should usually be held responsible for an unfavorable materials price variance? A. Production. B. Materials Handling. C. Engineering. D. Purchasing.
D. Purchasing.
materials quantity variance
SP (AQ-SQ)
labor efficiency variance
SR (AH-SH)
variable manufacturing overhead efficiency variance
SR (AH-SH)
what is a flexible budget
a re-drawn budget on actual levels of activity- drawn after a period budget
budgeting
act of preparing a budget
standards of price
amount for inputs / hourly wage rates/ voh rate
standards of quantity
amount of material/ # of hours / amount of allocation base
what are standards
benchmark for measuring performance
performance reports for cost centers
cost centers cannot control revenue, so the performance analysis will omit that component
continuous
covers a rolling 12 month period- everytime a month ends, a new one is added to the end
operating
covers one 12- month period
planning
develop objectives and budget for them
responsibility accounting
idea that manages should only be held responsible for budget any items over which they have significant control
what is an unfavorable variance
revenue < budget expenses > budget
what is a favorable variance
revenue > budget expenses < budget
control
steps taken by management to ensure that these objectives are reached
self imposed budget
the act of allowing supervisors and managers to participate in the budgeting process
what is a spending variance
the difference between flexible budgeted expenses and actual expenses
what is a revenue variance
the difference between flexible budgeted revenue and actual revenue
flexible budget with multiple cost drivers
the more variables we introduce into our formula, the more accurate the budgeting
T/FThe standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period.
true
budgetary control
use of a budget to control activities
