Accounting Chapter 8

what is subtracted from the total budgeted selling and admin expenses to determine cash disbursements for selling and admin expenses

non-cash expenses

operating budgets generally cover a _ period

one-year

developing goals and preparing various budgets to achieve these goals is part of

planning

payment for direct materials, direct labor, and manufacturing overhead costs are all listed in the ___ section of the cash budget

disbursements

t/f: control involves developing goals and preparing various budgets to achieve those goals

false

if a cash budget is prepared by quarter, the beginning cash balance for the year is the same as the beginning cash balance for the 1st quarter and the ending cash balance for the year is the same as the ending cash for the 4th quarter

faxx

Budgets:

force managers to think about and plan for the future define goals and objectives that can serve as benchmarks for evaluating subsequent performance coordinate the activities of the entire organization by integrating the plans of its various parts and the budgeting process can uncover potential bottlenecks before they occur

what is needed to calculate raw materials to be purchased on direct materials budget

raw materials required per unit beginning inventory of raw materials

under the concept of ___ ___, managers should only be held accountable for the items they can actually control

responsibility accounting

what is usually the major source of receipts in the receipts section of the cash budget?

sales

budgetary slack occurs when a manager submits a budget that is

too easy to attain

a budgeted balance sheet is developed using data from the beginning of the budget period and data contained in the various schedules

ye

the annual master budget file includes the balance sheet from last year because it is needed for the schedule of expected cash collections

yessir

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

produced

Budgeted expenses for areas other than manufacturing are shown on the ____ budget:

selling and administrative

a likely consequence of excessive inventory levels is

storage problems

what is needed to prepare a sales budget

the budgeted number of units to be sold

a company can consider making payments or repay outstanding principal and interest when

the cash excess is greater than the minimum required cash balance

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

Low employee morale Labor shortages. Erratic layoffs.

merchandise purchasing budget

a detailed plan used by a merchandising company that shows the amount of goods that must be purchased from suppliers during the period.

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

beginning raw m

a detailed plan for the future that is usually expressed in formal quantitative terms

budget

limitations of self-imposed budgeting include

budgetary slack suboptimal budget recommendations

final schedule of the master budget

budgeted balance sheet

which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?

budgeted income statement

variable selling and admin expenses

budgeted units sold * variable selling and admin expense per unit

gathering feedback to ensure that the plan is being followed is referred to as

controlling

the ending finished goods inventory budget computes the

cost of unsold units

a significant noncash manufacturing overhead cost for many companies is

depreciation

what is needed to calculate unit product costs

direct materials direct labor manufacturing overhead

when profit targets are set by top managers

goals may be unrealistically high waste may occur too much slack may be allowed

the cash budget

is prepared near the end of the master budget process

using budget 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

an essential management tool that communicates management's plans throughout the organization, allocates resources and coordinates activities.

master budget

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 is the month after january so, the company will be paying for 75% of february purchases + 25% of january purchases.: february purchases ($130,000 x75%)$97,500+ january purchases($100,000 x 25%) 25,000= $122,500

Madison Corporation's expected beginning balance is $35,000. Cash collections are budgeted at $50,000 and cash disbursements are estimated to be $80,000. The minimum required cash balance is $20,000 and the company can borrow as much as needed in increments of $10,000. Calculate the expected ending cash balance for the month.

$25,000 $35,000 + $50,000 - $5,000.Since they can borrow in increments of $10,000 they must borrow $20,000 to meet or exceed the minimum cash balance, making the ending balance $25,000.

which of the following budgets are directly based on information from the sales budget

1. Production budget 2. Selling and administrative expense budget

ABC, Inc's expected sales for the first six months of the year are:jan 12,000feb 15,000Mar 16,000apr 20,000may 22,000june 25,000If desired ending inventory is 25% of next month's sales, the number of units to be produced in March is:

17,000 16,000 + ending inventory (25% of April sales) 5,000 - beginning inventory (25% of march sales) 4,000 = 17,000

sales budget

A detailed schedule showing the expected sales for the budget period

direct labor budget is based on production budget

big faxx

the section on cash budget summarizing all cash payments planned for the budget period

cash disbursements section

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

cash budget has four major sections

receipts, disbursements, cash excess or deficiency, financing

total sales on sales budget =

budget sales in units * sales price per unit

the number of working hours required to satisfy the production budget is shown on the __ __ budget

direct labor

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 25000/20000 + 5 = 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 per hour. Calculate the expected total direct labor cost for the month of March

82500 units to be produced * time per unit * rate per hour = 11000*1/2*15

Highly achievable budget targets:

may generate greater management commitment to the budget, may help build manager confidence, are used in most companies