Chapter 8 Managerial Accounting

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

What would happen if a company penalized individuals for not meeting budgeted goals?

Individuals would add too much budgetary slack and individuals would focus too much on meeting goals.

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

Insufficient

Which of the following is true of a self-imposed budget?

Managers at all levels participate in preparing the budget.

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

An essential management tool used to communicate management plans throughout the organization, allocates resources and coordinates activities is the:

Master budget

A budget prepared with full cooperation of management at all levels is a _________________ budget.

Participative or self-imposed

The first step in the budgeting process is preparing the ____________________ budget.

Sales

A manager cannot explain that the budget was unrealistic and impossible to meet when an ________________________ budget is in place.

Self-imposed

In a production budget, the production needs for the year equals ______.

The sum of production needs for the four quarters

What is the purpose of preparing a direct materials budget?

To estimate the quantity of raw materials to be purchased

True/False: Continuous budgets ensure that managers do not become too narrowly focused on short-term results and keep them focused for at least one year ahead.

True

What are used to calculate unit product costs?

- Direct labor budget, - Manufacturing overhead budget, and - Direct materials budget.

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

- Direct labor budget, - Manufacturing overhead budget, and - Direct materials budget.

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

- Erratic layoffs, - Low employee morale, and - Labor shortages

The purpose of a budget should be to:

- Establish goals, - Isolate areas needing attention, and - Measuring operating results

Starg Corporation, a retailer, plans to sell 25,000 units of Product X during the month of August. If the company has 9,000 units on hand at the start of the month, and plans to have 7,000 units on hand at the end of the month, how many units of Product X must be purchased from the supplier during the month?

23,000

Master budget schedules:

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

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

Beginning

For a production budget, the ______ is the beginning inventory for the year.

Beginning inventory for the first quarter

What is needed to calculate raw materials to be purchased on the direct materials budget?

Beginning inventory of raw materials and raw materials materials required per minute.

A quantitative plan for requiring and using resources over a specified time period is an ___________________.

Budget

What is related to submitting a budget that is too easy to attain?

Budgetary slack

Collections on credit sales made to customers in prior periods plus collections on sales made in the current budget period equals expected _________________ collections.

Cash

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

Cash deficiency

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

Cash disbursements

Which of the following explains why operating budgets generally span a period of one year?

Companies choose a span of one year to correspond to their fiscal years.

When a company does not use self-imposed budgeting, top managers initiate the budgeting process by issuing profit targets and direct ______________________-managers to prepare budgets that meet those targets.

Lower

What types of budgets keep managers focused one year ahead, so they do not become too narrowly focused on short-term results?

Perpetual and continuous

Developing goals and preparing various budgets to achieve these goals is apart of the ______________ process.

Planning

True/False: The direct materials budget is typically prepared before the production budget.

False

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

Financing

The desired ending raw materials inventory for the year is the same as the desired ending inventory for the:

Fourth

The cash budget:

Is prepared near the end of the master budget process.

Developing goals for the budget is ___________________, while __________________ involves steps taken to ensure steps towards meeting the goal are being followed.

Planning, Control

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 ___________________ budget is prepared right after the sales budget.

Production

The idea that a manager should be held accountable for only the items the manager can actually control is the basis of:

Responsibility accounting

Both the production of selling and administrative expense budgets are prepared using information directly from the ___________________ budget.

Sales

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

Selling and administrative

Variable selling and administrative expenses are calculated by multiplying the budgeted units _________________ by the variable selling and administrative expense per unit.

Sold

In a direct materials budget, the beginning raw materials inventory for the year is the same as:

The beginning raw materials inventory for the first period

What is required to prepare a sales budget?

The budgeted number of units to be sold

The schedule of expected cash disbursements for raw materials helps in the preparation of:

The cash budgets

In a direct materials budget, the desired ending raw materials inventory for the year is equal to:

The desired ending raw materials inventory for the last period

True/False: The sales budget is usually prepared before the production budget.

True

True/False: Only variable manufacturing overhead costs are included in the manufacturing overhead budget.

False

True/False: The budgeting process begins with the preparation of the production budget.

False

True/False: The cash budget is usually prepared after the budgeted income statement.

False

Gathering feedback to ensure the plan is being followed is referred to as:

Control

Which of the following is a major factor that should be taken into consideration while planning the desired level of inventories?

Costs of carrying inventory

The most common significant non cash manufacturing overhead cost in most companies is:

Depreciation

To obtain the total number of units to be produced, add ___________________ to budgeted unit sales.

Desired ending inventory

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 materials

Payments for direct materials, direct labor, and manufacturing overhead costs are all listed in the _____________ section of the cash budget.

Disbursements

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

Ending finished goods inventory

True/False: A continuous or perpetual budget is a budget that almost never needs to be revised.

False