ACCY-chapter 8

What is added to the variable selling and administrative expenses to get the total selling and administrative expenses?

Fixed selling and administrative expenses

Many managers believe that being empowered to create their own self- ..................... budgets is the most effective method of budget preparation.

imposed

The cash budget ______.

is prepared near the end of the master budget process

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

labor shortages low employee morale erratic layoffs

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

manufacturing overhead

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the ............. budget.

master

An integrated business plan that formally lays out the company's goals is called the ______ budget.

master

A company with adequate cash balances at the beginning and end of the year, ______.

may still have cash deficiency issues during the year

If a budget initiated by top management has targets that are set too high,

motivation will suffer

Developing goals and preparing various budgets to achieve those goals is part of the .......... process.

planning

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 shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

In a manufacturing company, the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget are all based on the ................. budget.

production

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

production

The direct materials budget directly relies on the _____ budget.

production

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

sales price per unit

Recognizing individuals at all levels of the organization as team members whose views and judgments are valued by top management is an advantage of

self-imposed budgeting

Budgeted expenses for areas other than manufacturing are shown on the Blank______ 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

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

True

To prepare a budgeted balance sheet as of December 31, 2020, data is needed from the ______ December 31, 2019.

balance sheet as of

A budgeted balance sheet is developed using data from the ______ of the budget period and data contained in the various schedules.

beginning

Limitations of self-imposed budgeting include ______.

budgetary slack suboptimal budget recommendations

For most companies a single, annual cash budget is sufficient.

false

The amounts under the Year column in the cash budget always equal the sum of the amounts for the months or quarters of the budget.

false

The cash budget includes four major sections: receipts, disbursements, the cash excess or deficiency, and

finance

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

A budget that is prepared with the full cooperation of managers at all levels is a self-imposed or............ budget.

participative

More accurate estimates and higher motivation are generally the result of using a(n)______ budget.

participative

Budgets are used for two distinct purposes:

planning and control

Because all other parts of the budget depend on it, if the ______ budget is inaccurate, the rest of the budget will be inaccurate.

sales

Borrowing money is required whenever______.

the cash excess is less than the minimum required cash balance there is a cash deficiency

Budgetary slack occurs when a manager submits a budget that is

too easy to attain

In companies that do not use a self-imposed budgeting process, profit targets are generally set by

top managers

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 ................. quarter and the ending cash balance for the year is the same as the ending cash for the ........... quarter.

1st,4th

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

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

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

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

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

A detailed plan for the future that is usually expressed in formal quantitative terms is ______.

a budget

Required borrowings on a cash budget is calculated by ..........

adding the desired ending cash balance to the amount of the cash deficiency

The receipts section of the cash budget lists ______.

all cash inflows, except from financing

Master budget schedules ______.

answer several key questions for a company are based on estimates and assumptions

Because it is needed for the schedule of expected cash collections, the annual master budget file includes the ............ from last year.

balance sheet

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

create 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

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 material

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

ending finished goods inventory

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.

units to be produced x time per unit x rate per hour 11,000 x 1/2 x $15 = $82,500

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

unsold

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget?

Production

On the cash budget, what is subtracted from total cash available to find the cash excess or deficiency?

cash disbursements

Madison Corporation's expected beginning cash 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.

$35,000 + $50,000 - $80,000 = $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.

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.

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

Which of the following is not found in the financing section of the cash budget?

Cash deficiency

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

Direct labor Direct materials Manufacturing overhead

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted

Income statement

All costs of production other than direct materials and direct labor are shown on the .............. budget.

Manufacturing overhead

What is subtracted from total budgeted selling and administrative expenses to determine the cash disbursements for selling and administrative expenses?

Non-cash expenses

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

The budgeted number of units to be sold

Budgets ______.

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

True or false: Control involves developing goals and preparing various budgets to achieve those goals.

False

All costs of production other than direct materials and direct labor are shown on the ______ budget.

Manufacturing overhead

The annual master budget file includes the Blank______ from last year because it is needed for the schedule of expected cash collections.

balance sheet

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

Selling and administrative expense budget Production budget

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 material

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

Using budgeting assumptions when preparing the master budget, ______.

makes it easier to answer "what-if" questions

Both the production and selling and administrative expense budgets are prepared using information directly from the

sales

The first step in the budgeting process is the preparation of the .......... budget.

sales