Chapter 6 Test Bank
58 Pages

Chapter 6 Test Bank

Course Number: ACCT 4121, Spring 2012

College/University: LSU

Word Count: 10761

Rating:

Document Preview

CHAPTER 6 MASTER BUDGET AND RESPONSIBILITY ACCOUNTING TRUE/FALSE 1. Few businesses plan to fail, but many of those that don't succeed have failed to plan. Answer: True Difficulty: Terms to Learn: master budget 2. 1 Objective: 1 The master budget reflects the impact of operating decisions, but not financing decisions. Answer: False Difficulty: 1 Objective: 1 Terms to Learn: master budget The master budget reflects...

Unformatted Document Excerpt
Coursehero >> Louisiana >> LSU >> ACCT 4121

Course Hero has millions of student submitted documents similar to the one
below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

Course Hero has millions of student submitted documents similar to the one below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.

6 CHAPTER MASTER BUDGET AND RESPONSIBILITY ACCOUNTING TRUE/FALSE 1. Few businesses plan to fail, but many of those that don't succeed have failed to plan. Register to View AnswerDifficulty: Terms to Learn: master budget 2. 1 Objective: 1 The master budget reflects the impact of operating decisions, but not financing decisions. Register to View AnswerDifficulty: 1 Objective: 1 Terms to Learn: master budget The master budget reflects the impact of operating decisions and financing decisions. 3. Budgeted financial statements are also referred to as pro forma statements. Register to View AnswerDifficulty: Terms to Learn: financial budget 1 Objective: 1 4. Budgeting includes only the financial aspects of the plan and not any nonfinancial aspects such as the number of physical units manufactured. Register to View AnswerDifficulty: 2 Objective: Terms to Learn: financial budget Budgeting includes both financial and nonfinancial aspects of the plan. 1 5. Budgeting helps management anticipate and adjust for trouble spots in advance. Register to View AnswerDifficulty: Terms to Learn: financial budget 1 Objective: 1 6. Budgets can play both planning and control roles for management. Register to View AnswerDifficulty: Terms to Learn: financial budget 1 Objective: 1 6-1 7. Long-run planning and short-run planning are best performed independently of each other. Register to View AnswerDifficulty: 2 Objective: 1 Terms to Learn: master budget Long-run planning and short-run planning are best performed as a part of an overall strategic planning process since they influence each other. 8. After a budget is agreed upon and finalized by the management team, the amounts should not be changed for any reason. Register to View AnswerDifficulty: 2 Objective: 2 Terms to Learn: master budget Budgets should not be administered rigidly, but rather should be adjusted for changing conditions. 9. Even in the face of changing conditions, attaining the original budget is critical. Register to View AnswerDifficulty: 3 Objective: 2 Terms to Learn: master budget Changing conditions usually call for a change in plans. Attaining the budget should not be an end in itself. 10. A four-quarter rolling budget encourages management to be thinking about the next 12 months. Register to View AnswerDifficulty: Terms to Learn: rolling budget 2 Objective: 2 11. Research has shown that challenging budgets (rather than budgets that can be easily attained) are energizing and improve performance. Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 12. It is best to compare this year's performance with last year's actual performance rather than this year's budget. Register to View AnswerDifficulty: 3 Objective: 2 Terms to Learn: master budget It is best to compare this year's performance with this year's budget because inefficiencies and different conditions may be reflected in last year's actual performance amounts. 6-2 13. When administered wisely, budgets promote communication and coordination among the various subunits of the organization. Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 14. Preparation of the budgeted income statement is the final step in preparing the operating budget. Register to View AnswerDifficulty: Terms to Learn: operating budget 1 Objective: 3 15. The sales forecast should primarily be based on statistical analysis with secondary input from sales managers and sales representatives. Register to View AnswerDifficulty: 3 Objective: 3 Terms to Learn: operating budget The sales forecast should be primarily based on input from sales managers and sales representatives with secondary input from statistical analysis. 16. The usual starting point in budgeting is to forecast net income. Register to View AnswerDifficulty: 2 Objective: 3 Terms to Learn: operating budget The usual starting point in budgeting is to forecast sales demand and revenues. 17. The revenues budget should be based on the production budget. Register to View AnswerDifficulty: 1 Objective: Terms to Learn: operating budget The production budget should be based on the revenues budget. 3 18. The operating budget is that part of the master budget that includes the capital expenditures budget, cash budget, budgeted balance sheet, and the budgeted statement of cash flows. Register to View AnswerDifficulty: 1 Objective: 3 Terms to Learn: operating budget Described is the financial budget part of the master budget, not the operating budget. 6-3 19. Since fixed manufacturing overhead is fixed, it is not normally included in the operating budget. Register to View AnswerDifficulty: 2 Objective: Terms to Learn: operating budget Fixed manufacturing is normally included in the operating budget. 3 20. The manufacturing labor budget does not depend on wage rates, production methods, and hiring plans. Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 21. The manufacturing labor budget depends on wage rates, production methods, and hiring plans. Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 22. If inventoriable costs in the operating budget are going to be in accordance with Generally Accepted Accounting Principles (GAAP), they include only variable manufacturing costs. Register to View AnswerDifficulty: 3 Objective: 3 Terms to Learn: operating budget If inventoriable costs in the operating budget are going to be in accordance with Generally Accepted Accounting Principles (GAAP), they include both variable and fixed manufacturing costs. 23. If budgeted amounts change, the kaizen approach can be used to examine changes in the budgeted results. Register to View AnswerDifficulty: 2 Objective: 4 Terms to Learn: kaizen budgeting, sensitivity analysis If budgeted amounts change, sensitivity analysis can be used to examine changes in the budgeted results. 24. Computer-based financial planning models are mathematical statements of the interrelationships among operating activities, financial activities, and other factors that affect the budget. Register to View AnswerDifficulty: 1 Terms to Learn: financial planning models Objective: 4 6-4 25. Most computer-based financial planning models have difficulty incorporating sensitivity (what-if) analysis. Register to View AnswerDifficulty: 2 Objective: Terms to Learn: financial planning models, sensitivity analysis Computer-based financial planning models easily assist management with sensitivity (what-if) analysis. 4 26. If we increase the selling price of our product, we should probably expect a decline in the number of these products sold. Register to View AnswerDifficulty: Terms to Learn: sensitivity analysis 2 Objective: 4 27. If we increase the selling price of our product, we can always expect an increase in total revenue. Register to View AnswerDifficulty: 2 Objective: 4 Terms to Learn: sensitivity analysis If we increase the selling price of our product, we may experience either an increase in total revenue or a decrease in total revenue due to the uncertain effect of the price increase on the quantity demanded. 28. Sensitivity analysis incorporates continuous improvement into budgeted amounts. Register to View AnswerDifficulty: 1 Objective: 5 Terms to Learn: sensitivity analysis, kaizen budgeting Kaizen budgeting incorporates continuous improvement into budgeted amounts. 29. The Japanese use kaizen to mean financing alternatives. Register to View AnswerDifficulty: 1 Terms to Learn: kaizen budgeting The Japanese use kaizen to mean continuous improvement. Objective: 5 30. Kaizen budgeting does not make sense for profit centers. Register to View AnswerDifficulty: 2 Objective: Terms to Learn: kaizen budgeting Kaizen budgeting can be used in any type of responsibility center. 5 31. Kaizen budgeting encourages small incremental changes, rather than major improvements. Register to View AnswerDifficulty: Terms to Learn: kaizen budgeting 1 Objective: 5 6-5 32. Kaizen budgeting allows for budgeting of small incremental increases in costs each budgeting period to allow for the effects of normal inflation. Register to View AnswerDifficulty: 2 Objective: 5 Terms to Learn: kaizen budgeting Kaizen budgeting allows for budgeting of small incremental decreases in costs each budgeting period. 33. Activity-based budgeting provides better decision-making information than budgeting based solely on output-based cost drivers (units produced, units sold, or revenues). Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 2 Objective: 6 34. Activity-based costing analysis takes a long-run perspective and treats all activity costs as variable costs. Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 3 Objective: 6 35. Activity-based budgeting (ABB) focuses on the budgeting cost of activities necessary to produce and sell products and services. Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 1 Objective: 6 36. Activity-based budgeting would permit the use of multiple drivers and multiple cost pools in the budgeting process. Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 2 Objective: 6 37. Activity-based budgeting and kaizen budgeting are really equivalent in meaning. Register to View AnswerDifficulty: 2 Objective: 6 Terms to Learn: activity-based budgeting, kaizen budgeting Activity-based budgeting and kaizen budgeting are not equivalent in meaning. 38. A responsibility center is a part, segment, or subunit of an organization, whose manager is accountable for a specified set of activities. Register to View AnswerDifficulty: Terms to Learn: responsibility center 1 Objective: 7 6-6 39. Each manager, regardless of level, is in charge of a responsibility center. Register to View AnswerDifficulty: Terms to Learn: responsibility center 2 Objective: 7 40. In a profit center, a manager is responsible for investments, revenues, and costs. Register to View AnswerDifficulty: 1 Objective: 7 Terms to Learn: profit center In a profit center, a manager is responsible for revenues, and costs, but not investments. 41. A packaging department is MOST likely a profit center. Register to View AnswerDifficulty: 2 Terms to Learn: profit center A packaging department is most likely a cost center. Objective: 7 42. Variances between actual and budgeted amounts inform management about performance relative to the budget. Register to View AnswerDifficulty: Terms to Learn: responsibility accounting 1 Objective: 7 43. An organization structure is an arrangement of lines of responsibility within the entity. Register to View AnswerDifficulty: Terms to Learn: organization structure 1 Objective: 8 44. A responsibility center can be structured to promote better alignment of individual and company goals. Register to View AnswerDifficulty: Terms to Learn: responsibility center 2 Objective: 7 45. Management will most likely behave the same way if a department is structured as a revenue center or if the same department is structured as a profit center. Register to View AnswerDifficulty: 2 Objective: 7 Terms to Learn: revenue center, profit center Management will most likely behave differently if a department is structured as a revenue center than if the same department is structured as a profit center due to the incentives to control costs as well as revenues in a profit center. 6-7 46. Responsibility accounting focuses on control, not on information and knowledge. Register to View AnswerDifficulty: 2 Objective: 8 Terms to Learn: responsibility accounting Responsibility accounting focuses on information and knowledge, not on control. 47. The fundamental purpose of responsibility accounting is to fix blame when budgets are not achieved. Register to View AnswerDifficulty: 2 Objective: 8 Terms to Learn: responsibility accounting The fundamental purpose of responsibility accounting is to gather information when budgets are not achieved. 48. Human factors are crucial parts of budgeting Register to View AnswerDifficulty: Terms to Learn: responsibility accounting 2 Objective: 8 49. Budgetary slack provides management with a hedge against unexpected adverse circumstances. Register to View AnswerDifficulty: Terms to Learn: responsibility accounting 2 Objective: 8 50. Most costs can be easily controlled because they are under the sole influence of one manager. Register to View AnswerDifficulty: 3 Objective: Terms to Learn: controllable cost Few costs are clearly under the sole influence of one manager. 8 51. Performance reports of responsibility centers may include uncontrollable items to influence behavior that is in alignment with corporate strategy. Register to View AnswerDifficulty: Terms to Learn: controllable cost 2 Objective: 8 52. When the operating budget is used as a control device, managers are more likely to be motivated to budget higher sales than actually anticipated. Register to View AnswerDifficulty: 3 Objective: 8 Terms to Learn: operating budget, budgetary slack When the operating budget is used as a control device, managers are less likely to be motivated to budget higher sales than actually anticipated. 6-8 53. Budgeting slack is most likely to occur when a firm uses the budget only as a planning device and not for control. Register to View AnswerDifficulty: 3 Objective: 8 Terms to Learn: controllable cost, budgetary slack Budgeting slack is most likely to occur when a firm uses the budget for control. 54. If a cost is considered controllable, it indicates that all aspects of the cost are under the control of the manager of the responsibility center to which that cost is assigned. Register to View AnswerDifficulty: 2 Objective: 8 Terms to Learn: controllable cost A controllable cost is any cost that is primarily subject to the influence of a given responsibility manager. 55. To create greater commitment to the budget, top-management should create the budget and then share it with lower-level managers. Register to View AnswerDifficulty: 3 Objective: Terms to Learn: responsibility accounting To create greater commitment to the budget, lower-level managers should participate in creating the budget. 8 56. Budgeting for a multinational company is made more complex due to the possibility of exchange rate fluctuations. Register to View AnswerDifficulty: Terms to Learn: responsibility accounting 2 Objective: 8 57. The possibility of exchange rate fluctuations does not influence the budgeting procedures in a multinational corporation. Register to View AnswerDifficulty: 2 Objective: 8 Terms to Learn: responsibility accounting The possibility of exchange rate fluctuations influences the budgeting procedures in a multinational corporation. 58. Because of the possibility of exchange rate fluctuations, managers of multinational corporations should ignore subjective factors in their performance evaluations. Register to View AnswerDifficulty: 2 Objective: 8 Terms to Learn: responsibility accounting The possibility of exchange rate fluctuations increases the importance of subjective factors in performance evaluations of multinational corporations. 6-9 59. A key use of sensitivity analysis is for cash-flow budgeting. Register to View AnswerDifficulty: 1 Terms to Learn: sensitivity analysis, cash budget Objective: A 60. The self-liquidating cycle is the movement from cash to inventories to receivables and back to cash. Register to View AnswerTerms to Learn: cash budget Difficulty: 1 Objective: A MULTIPLE CHOICE 61. Budgeting is used to help companies: a. plan to better satisfy customers b. anticipate potential problems c. focus on opportunities d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: master budget 62. 2 Objective: 1 A master budget: a. includes only financial aspects of a plan and excludes nonfinancial aspects b. is an aid to coordinating what needs to be done to implement a plan c. includes broad expectations and visionary results d. should not be altered after it has been agreed upon Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 1 63. Operating decisions PRIMARILY deal with: a. the use of scarce resources b. how to obtain funds to acquire resources c. acquiring equipment and buildings d. satisfying stockholders Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 1 64. Financing decisions PRIMARILY deal with: a. the use of scarce resources b. how to obtain funds to acquire resources c. acquiring equipment and buildings d. preparing financial statements for stockholders Register to View AnswerDifficulty: Terms to Learn: financial budget 6-10 2 Objective: 1 65. Budgeting provides all of the following EXCEPT: a. a means to communicate the organization's short-term goals to its members b. support for the management functions of planning and coordination c. a means to anticipate problems d. an ethical framework for decision making Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 1 66. If initial budgets prove unacceptable, planners achieve the MOST benefit from: a. planning again in light of feedback and current conditions b. deciding not to budget this year c. accepting an unbalanced budget d. using last year's budget Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 1 67. Operating budgets and financial budgets: a. combined form the master budget b. are prepared before the master budget c. are prepared after the master budget d. have nothing to do with the master budget Register to View AnswerDifficulty: 1 Objective: Terms to Learn: operating budget, financial budget, master budget 1 68. A good budgeting system forces managers to examine the business as they plan, so they can: a. detect inaccurate historical records b. set specific expectations against which actual results can be compared c. complete the budgeting task on time d. get promoted for doing a good job Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 1 6-11 69. A budget should/can do all of the following EXCEPT: a. be prepared by managers from different functional areas working independently of each other b. be adjusted if new opportunities become available during the year c. help management allocate limited resources d. become the performance standard against which firms can compare the actual results Register to View AnswerDifficulty: Terms to Learn: master budget 3 Objective: 2 70. A limitation of comparing a company's performance against actual results of last year is that: a. it includes adjustments for future conditions b. feedback is no longer a possibility c. past results can contain inefficiencies of the past year d. the budgeting time period is set at one year Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 71. Challenging budgets tend to: a. decrease line-management participation in attaining corporate goals b. increase failure c. increase anxiety without motivation d. motivate improved performance Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 72. A company's actual performance should be compared against budgeted amounts for the same accounting period so that: a. adjustments for future conditions can be included b. no feedback is possible c. inefficiencies of the past year can be included d. a rolling budget can be implemented Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 6-12 73. It is advantageous to coordinate budgets with: a. suppliers b. customers c. the marketing and production departments d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: master budget 3 Objective: 2 74. A budget can help implement: a. strategic planning b. long-run planning c. short-run planning d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 75. To gain the benefits of budgeting __________ must understand and support the budget. a. management at all levels b. customers c. suppliers d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: master budget 3 Objective: 2 76. Participation of line managers in the budgeting process helps to create: a. greater commitment b. greater anxiety c. more fraud d. better past performance Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 77. Line managers who feel that top management does not believe in the budget are MOST likely to: a. pick up the slack and participate in the budgeting process b. be motivated by the budget c. spend little time on the budgeting process d. convert the budget to a shorter more reasonable time period Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 6-13 78. The time coverage of a budget should be: a. one year b. guided by the purpose of the budget c. cover design through manufacture and sale of the product d. shorter rather than longer Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 79. Rolling budgets help management to: a. better review the past calendar year b. deal with a 5-year time frame c. focus on the upcoming budget period d. rigidly administer the budget Register to View AnswerDifficulty: Terms to Learn: rolling budget 2 Objective: 2 80. Budgets should: a. be flexible b. be administered rigidly c. only be developed for short periods of time d. include only variable costs Register to View AnswerDifficulty: Terms to Learn: master budget 2 Objective: 2 81. Operating budgets include all of the following EXCEPT: a. the revenues budget b. the budgeted income statement c. the administrative costs budget d. the budgeted balance sheet Register to View AnswerDifficulty: Terms to Learn: operating budget 1 Objective: 3 82. Operating budgets include the: a. budgeted balance sheet b. budgeted income statement c. capital expenditures budget d. budgeted statement of cash flows Register to View AnswerDifficulty: Terms to Learn: operating budget 1 Objective: 3 6-14 83. The operating budget process generally concludes with the preparation of the: a. production budget b. distribution budget c. research and development budget d. budgeted income statement Register to View AnswerDifficulty: Terms to Learn: operating budget 1 Objective: 3 84. Financial budgets include the: a. capital expenditures budget b. production budget c. marketing costs budget d. administrative costs budget Register to View AnswerDifficulty: Terms to Learn: financial budget 1 Objective: 3 85. __________ includes a budgeted statement of cash flows and a budgeted balance sheet. a. An annual report b. The financial budget c. The operating budget d. The capital expenditures budget Register to View AnswerDifficulty: Terms to Learn: financial budget 1 Objective: 3 86. The order to follow when preparing the operating budget is: a. revenues budget, production budget, and direct manufacturing labor costs budget b. costs of goods sold budget, production budget, and cash budget c. revenues budget, manufacturing overhead costs budget, and production budget d. cash expenditures budget, revenues budget, and production budget. Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 6-15 87. In which order are the following developed? First to last: A = Production budget B = Direct materials costs budget C = Budgeted income statement D = Revenues budget a. ABDC b. DABC c. DCAB d. CABD Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 88. The budgeting process is MOST strongly influenced by: a. the capital budget b. the budgeted statement of cash flows c. the sales forecast d. the production budget Register to View AnswerDifficulty: Terms to Learn: operating budget 89. 2 Objective: 3 __________ is the usual starting point for budgeting. a. The revenues budget b. Net income c. The production budget d. The cash budget Register to View AnswerDifficulty: Terms to Learn: operating budget 1 Objective: 3 90. The sales forecast should be PRIMARILY based on: a. statistical analysis. b. input from sales managers and sales representatives c. production capacity d. input from the board of directors Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 91. The sales forecast is influenced by: a. advertising and sales promotions b. competition c. general economic conditions d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 6-16 92. A sales forecast is: a. often the outcome of elaborate information gathering and discussions among sales managers b. developed primarily to prepare next year's marketing campaign c. solely based on sales of the previous year d. a summary of product costs that influence pricing decisions Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 93. The revenues budget identifies: a. expected cash flows for each product b. actual sales from last year for each product c. the expected level of sales for the company d. the variance of sales from actual for each product Register to View AnswerDifficulty: Terms to Learn: operating budget 1 Objective: 3 94. The number of units in the sales budget and the production budget may differ because of a change in: a. finished goods inventory levels b. overhead charges c. direct material inventory levels d. sales returns and allowances Register to View AnswerDifficulty: Terms to Learn: operating budget 3 Objective: 3 95. Production is primarily based on: a. projected inventory levels b. the revenues budget c. the administrative costs budget d. the capital expenditures budget Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 96. Budgeted production depends on: a. the direct materials usage budget and direct material purchases budget b. the direct manufacturing labor budget c. budgeted sales and expected changes in inventory levels d. the manufacturing overhead costs budget Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 6-17 97. The direct materials usage budget is based on: a. the units to be produced during a period b. budgeted sales dollars c. the predetermined factory overhead rate d. the amount of labor-hours worked Register to View AnswerDifficulty: Terms to Learn: operating budget 1 Objective: 3 98. Direct material purchases equal: a. production needs b. production needs plus target ending inventories c. production needs plus beginning inventories d. production needs plus target ending inventories less beginning inventories Register to View AnswerDifficulty: Terms to Learn: operating budget 1 Objective: 3 99. Individual budgeted amounts included in the manufacturing overhead costs budget are based on input from: a. operating personnel b. costs incurred in prior years c. cost changes expected in the future d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: operating budget 3 Objective: 3 100. The manufacturing overhead costs budget includes budgeted amounts for: a. direct materials b. direct manufacturing labor c. indirect manufacturing labor d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: operating budget 3 Objective: 3 101. Budgeted manufacturing overhead costs include all types of factory expenses EXCEPT: a. fixed items such as depreciation of manufacturing machinery b. variable items such as plant supplies c. indirect labor such as the salary of the plant supervisor d. direct labor and direct materials Register to View AnswerDifficulty: Terms to Learn: operating budget 2 Objective: 3 6-18 102. Schultz Company expects to manufacture and sell 30,000 baskets in 20X4 for $6 each. There are 3,000 baskets in beginning finished goods inventory with target ending inventory of 4,000 baskets. The company keeps no work-in-process inventory. What amount of sales revenue will be reported on the 20X4 budgeted income statement? a. $174,000 b. $180,000 c. $186,000 d. $204,000 Register to View AnswerDifficulty: Terms to Learn: operating budget 30,000 x $6 = $180,000 3 Objective: 3 103. DeArmond Corporation has budgeted sales of 18,000 units, target ending finished goods inventory of 3,000 units, and beginning finished goods inventory of 900 units. How many units should be produced next year? a. 21,900 units b. 20,100 units c. 15,900 units d. 18,000 units Register to View AnswerDifficulty: Terms to Learn: operating budget 18,000 + 3,000 900 = 20,100 units 2 Objective: 3 104. For next year, Galliart, Inc., has budgeted sales of 60,000 units, target ending finished goods inventory of 3,000 units, and beginning finished goods inventory of 1,800 units. All other inventories are zero. How many units should be produced next year? a. 58,800 units b. 60,000 units c. 61,200 units d. 64,800 units Register to View AnswerDifficulty: Terms to Learn: operating budget 60,000 + 3,000 1,800 = 61,200 units 2 Objective: 3 6-19 105. Wilgers Company has budgeted sales volume of 30,000 units and budgeted production of 27,000 units, while 5,000 units are in beginning finished goods inventory. How many units are targeted for ending finished goods inventory? a. 5,000 units b. 8,000 units c. 3,000 units d. 2,000 units Register to View AnswerDifficulty: Terms to Learn: operating budget 5,000 + 27,000 30,000 = 2,000 2 Objective: 3 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 106 THROUGH 109: Marguerite, Inc., expects to sell 20,000 pool cues for $12.00 each. Direct materials costs are $2.00, direct manufacturing labor is $4.00, and manufacturing overhead is $0.80 per pool cue. The following inventory levels apply to 20X4: Direct materials 24,000 units Work-in-process inventory Finished goods inventory Beginning inventory 24,000 units 0 units 2,000 units Ending inventory 0 units 2,500 units 106. On the 20X5 budgeted income statement, what amount will be reported for sales? a. $246,000 b. $240,000 c. $312,000 d. $318,000 Register to View AnswerDifficulty: Terms to Learn: operating budget 20,000 x $12 = $240,000 2 Objective: 3 107. How many pool cues need to be produced in 20X5? a. 22,500 cues b. 22,000 cues c. 20,500 cues d. 19,500 cues Register to View AnswerDifficulty: Terms to Learn: operating budget 20,000 + 2,500 2,000 = 20,500 cues 2 Objective: 3 6-20 108. On the 20X5 budgeted income statement, what amount will be reported for cost of goods sold? a. $139,400 b. $136,000 c. $132,600 d. $153,000 Register to View AnswerDifficulty: 3 Terms to Learn: operating budget 20,000 x ($4.00 + $2.00 + $0.80) = $136,000 Objective: 3 109. What are the 20X5 budgeted costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively? a. $0; $96,000; $19,200 b. $39,000; $78,000; $15,600 c. $80,000; $40,000; $16,000 d. $41,000; $82,000; $16,400 Register to View AnswerDifficulty: 3 Objective: 3 Terms to Learn: operating budget 20,500 x $2.00 = $41,000; 20,500 x $4.00 = $82,000; 20,500 x $0.80 = $16,400 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 110 THROUGH 113: Daniel, Inc., expects to sell 6,000 ceramic vases for $20 each. Direct materials costs are $2, direct manufacturing labor is $10, and manufacturing overhead is $3 per vase. The following inventory levels apply to 20X4: Direct materials 1,000 units Work-in-process inventory Finished goods inventory Beginning inventory 1,000 units 0 units 400 units Ending inventory 0 units 500 units 110. On the 20X5 budgeted income statement, what amount will be reported for sales? a. $122,000 b. $118,000 c. $140,000 d. $120,000 Register to View AnswerDifficulty: Terms to Learn: operating budget 6,000 x $20 = $120,000 2 Objective: 3 6-21 111. How many ceramic vases need to be produced in 20X5? a. 5,900 vases b. 6,100 vases c. 7,000 vases d. 6,000 vases Register to View AnswerDifficulty: Terms to Learn: operating budget 6,000 + 500 400 = 6,100 vases 2 Objective: 3 112. On the 20X5 budgeted income statement, what amount will be reported for cost of goods sold? a. $91,500 b. $105,000 c. $90,000 d. $88,500 Register to View AnswerDifficulty: Terms to Learn: operating budget 6,000 x ($2 + $10 + $3) = $90,000 3 Objective: 3 113. What are the 20X5 budgeted costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively? a. $12,200; $61,000; $18,300 b. $12,000; $60,000; $18,000 c. $2,000; $10,000; $3,000 d. $2,000; $0; $18,000 Register to View AnswerDifficulty: 3 Objective: Terms to Learn: operating budget 6,100 x $2 = $12,200; 6,100 x $10 = $61,000; 6,100 x $3 = $18,300 3 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 114 THROUGH 116: The following information pertains to the January operating budget for Casey Corporation, a retailer: Budgeted sales are $200,000 for January Collections of sales are 50% in the month of sale and 50% the next month Cost of goods sold averages 70% of sales Merchandise purchases total $150,000 in January Marketing costs are $3,000 each month Distribution costs are $5,000 each month Administrative costs are $10,000 each month 6-22 114. For January, budgeted gross margin is: a. $100,000 b. $140,000 c. $60,000 d. $50,000 Register to View AnswerDifficulty: Terms to Learn: operating budget $200,000 (.70 x $200,000) = $60,000 3 Objective: 3 115. For January, the amount budgeted for the nonmanufacturing costs budget is: a. $78,000 b. $10,000 c. $168,000 d. $18,000 Register to View AnswerDifficulty: Terms to Learn: operating budget $3,000 + $5,000 + $10,000 = $18,000 116. For January, budgeted net income is: a. $42,000 b. $60,000 c. $50,000 d. $52,000 Register to View AnswerDifficulty: 3 Objective: Terms to Learn: operating budget $200,000 (.70 x $200,000) $3,000 $5,000 $10,000 = $42,000 3 2 Objective: 3 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 117 THROUGH 120: Konrade, Inc., expects to sell 30,000 athletic uniforms for $80 each in 20X5. Direct materials costs are $20, direct manufacturing labor is $8, and manufacturing overhead is $6 for each uniform. The following inventory levels apply to 20X4: Direct materials 12,000 units Work-in-process inventory Finished goods inventory Beginning inventory 9,000 units 0 units 6,000 units Ending inventory 0 units 5,000 units 6-23 117. How many uniforms need to be produced in 20X5? a. 26,000 uniforms b. 34,000 uniforms c. 30,000 uniforms d. 29,000 uniforms Register to View AnswerDifficulty: Terms to Learn: operating budget 30,000 + 5,000 6,000 = 29,000 uniforms 2 Objective: 3 118. What is the amount budgeted for direct material purchases in 20X5? a. $520,000 b. $600,000 c. $580,000 d. $760,000 Register to View AnswerDifficulty: 3 Objective: 3 Terms to Learn: operating budget (30,000 + 5,000 6,000) units + 9,000 units 12,000 units = Purchases 26,000 units x $20 = $520,000 119. What is the amount budgeted for cost of goods manufactured in 20X5? a. $1,020,000 b. $986,000 c. $1,156,000 d. $1,190,000 Register to View AnswerDifficulty: 3 Terms to Learn: operating budget (30,000 + 5,000 6,000) x ($20 + $8 + $6) = $986,000 120. What is the amount budgeted for cost of goods sold in 20X5? a. $1,156,000 b. $986,000 c. $1,020,000 d. $2,400,000 Register to View AnswerDifficulty: Terms to Learn: operating budget 30,000 x ($20 + $8 + $6) = $1,020,000 3 Objective: 3 Objective: 3 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 121 AND 122: Furniture, Inc., estimates the following number of mattress sales for the first four months of 20X5: Month Sales January 5,000 February 7,000 March 6,500 April 8,000 6-24 Finished goods inventory at the end of December is 1,500 units. Target ending finished goods inventory is 30% of the next month's sales. 121. How many mattresses need to be produced in January 20X5? a. 4,400 mattresses b. 5,600 mattresses c. 6,500 mattresses d. 7,100 mattresses Register to View AnswerDifficulty: 2 Terms to Learn: operating budget 5,000 + (7,000 x 0.30) 1,500 = 5,600 mattresses Objective: 3 122. How many mattresses need to be produced in the first quarter (January, February, March) of 20X5? a. 18,500 mattresses b. 19,400 mattresses c. 20,900 mattresses d. 22,400 mattresses Register to View AnswerDifficulty: 2 Objective: Terms to Learn: operating budget 5,000 + 7,000 + 6,500 + (8,000 x 0.30) 1,500 = 19,400 mattresses 3 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 123 AND 124: Wallace Company provides the following data for next year: Month January February March April Budgeted Sales $120,000 108,000 132,000 144,000 The gross profit rate is 40% of sales. Inventory at the end of December is $21,600 and target ending inventory levels are 30% of next month's sales, stated at cost. 123. Purchases budgeted for January total: a. $130,800 b. $72,000 c. $69,840 d. $74,160 Register to View AnswerDifficulty: 3 Objective: Terms to Learn: operating budget ($120,000 x 0.6) + ($108,000 x 0.6 x 0.3) $21,600 = $69,840 3 6-25 124. Purchases budgeted for February total: a. $69,120 b. $60,480 c. $115,200 d. $64,800 Register to View AnswerDifficulty: 3 Objective: 3 Terms to Learn: operating budget ($108,000 x 0.6) + ($132,000 x 0.6 x 0.3) ($108,000 x 0.6 x 0.3) = $69,120 125. Shamokin Manufacturing produces two products, Big and Bigger. Shamokin expects to sell 10,000 units of product Bigger and to have an inventory of 2,000 units of Bigger on hand at the end of the period. Currently, Shamokin has 800 units of Bigger on hand. Bigger requires two labor operations, molding and polishing. Each unit of Bigger requires one hour of molding and two hours of polishing. The direct labor rate for molding is $20 per molding hour and the direct labor rate for polishing is $25 per polishing hour. The expected cost of direct labor for Bigger is: a. $224,000 b. $560,000 c. $616,000 d. $784,000 Register to View AnswerDifficulty: 3 Terms to Learn: operating budget 10,000 + 2,000 800 = 11,200 (11,200 x 1 x $20) + (11,200 x 2 x $25) = $784,000 Objective: 3 126. Shamokin Manufacturing produces two products, Big and Bigger. Shamokin expects to sell 10,000 units of product Bigger and to have an inventory of 2,000 units of Bigger on hand at the end of the period. Currently, Shamokin has 800 units of Bigger on hand. Bigger requires two labor operations, molding and polishing. Each unit of Bigger requires one hour of molding and two hours of polishing. The direct labor rate for molding is $20 per molding hour and the direct labor rate for polishing is $25 per polishing hour. The expected number of hours of direct labor for Bigger is: a. 8,800 hours of molding; 17,600 hours of polishing b. 11,200 hours of molding; 22,400 hours of polishing c. 17,600 hours of molding; 8,800 hours of polishing d. 22,400 hours of molding; 11,200 hours of polishing Register to View AnswerDifficulty: 2 Objective: 3 Terms to Learn: operating budget 10,000 + 2,000 800 = 11,200 (11,200 x 1) = 11,200 hours of molding; (11,200 x 2) = 22,400 hours of polishing 6-26 127. St. Claire Manufacturing expects to produce and sell 6,000 units of Big, its only product, for $20 each. Direct material cost is $2 per unit, direct labor cost is $8 per unit, and variable manufacturing overhead is $3 per unit. Fixed manufacturing overhead is $24,000 in total. Variable selling and administrative expenses are $1 per unit, and fixed selling and administrative costs are $3,000 in total. According to generally accepted accounting principles, inventoriable cost per unit of Big would be: a. $13.00 per unit b. $14.00 per unit c. $17.00 per unit d. $18.50 per unit Register to View AnswerDifficulty: Terms to Learn: operating budget $2 + $8 +$3 +($24,000 / 6,000) = $17 2 Objective: 3 128. Financial planning software packages assist management with: a. assigning responsibility to various levels of management b. identifying the target customer c. sensitivity analysis in their planning and budgeting activities d. achieving greater commitment from lower management Register to View AnswerDifficulty: 2 Terms to Learn: financial planning models Objective: 4 129. __________ uses a "what-if" technique that examines how results will change if the originally predicted data changes. a. A sales forecast b. A sensitivity analysis c. A pro forma financial statement d. The statement of cash flows Register to View AnswerDifficulty: Terms to Learn: sensitivity analysis 1 Objective: 4 130. When performing a sensitivity analysis, if the selling price per unit is increased, then the: a. per unit fixed administrative costs will increase b. per unit direct materials purchase price will increase c. total volume of sales will increase d. total costs for sales commissions and other nonmanufacturing variable costs will increase Register to View AnswerDifficulty: Terms to Learn: sensitivity analysis 3 Objective: 4 6-27 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 131 THROUGH 133: Ossmann Enterprises reports year-end information from 20X4 as follows: Sales (80,000 units) Cost of goods sold Gross margin Operating expenses Operating income $480,000 320,000 160,000 130,000 $ 30,000 Ossmann is developing the 20X5 budget. In 20X5 the company would like to increase selling prices by 8%, and as a result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain Assume constant. that COGS is a variable cost and that operating expenses are a fixed cost. 131. What is budgeted sales for 20X5? a. $518,400 b. $533,333 c. $466,560 d. $432,000 Register to View AnswerDifficulty: Terms to Learn: sensitivity analysis $480,000 x 1.08 x 0.90 = $466,560 3 Objective: 4 132. What is budgeted cost of goods sold for 20X5? a. $311,040 b. $288,000 c. $345,600 d. $320,000 Register to View AnswerDifficulty: Terms to Learn: sensitivity analysis $320,000 x 0.90 = $288,000 3 Objective: 4 133. Should Ossmann increase the selling price in 20X5? a. Yes, because operating income is increased for 20X5. b. Yes, because sales revenue is increased for 20X5. c. No, because sales volume decreases for 20X5. d. No, because gross margin decreases for 20X5. Register to View AnswerDifficulty: 3 Objective: 4 Terms to Learn: sensitivity analysis $466,560 $288,000 130,000 = $48,560; Yes, because it would result in an increase in operating income compared to 20X4. 6-28 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 134 THROUGH 136. Katie Enterprises reports the year-end information from 20X4 as follows: Sales (70,000 units) Cost of goods sold Gross margin Operating expenses Operating income $560,000 210,000 350,000 200,000 $ 150,000 Katie is developing the 20X5 budget. In 20X5 the company would like to increase selling prices by 4%, and as a result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain constant. Assume that COGS is a variable cost and that operating expenses are a fixed cost. 134. What is budgeted sales for 20X5? a. $582,400 b. $524,160 c. $504,000 d. $560,000 Register to View AnswerDifficulty: Terms to Learn: sensitivity analysis $560,000 x 1.04 x 0.90 = $524,160 3 Objective: 4 135. What is budgeted cost of goods sold for 20X5? a. $189,000 b. $196,560 c. $218,400 d. $210,000 Register to View AnswerDifficulty: Terms to Learn: sensitivity analysis $210,000 x 0.90 = $189,000 3 Objective: 4 136. Should Katie increase the selling price in 20X5? a. Yes, because sales revenue is increased for 20X5. b. Yes, because operating income is increased for 20X5. c. No, because sales volume decreases for 20X5. d. No, because gross margin decreases for 20X5. Register to View AnswerDifficulty: 3 Objective: 4 Terms to Learn: sensitivity analysis $524,160 $189,000 = $335,160 gross margin $200,000 = $135,160 operating income. No, because there would be a decrease in gross margin and operating income compared to 20X4. 6-29 137. The Japanese use the term kaizen when referring to: a. scarce resources b. pro forma financial statements c. continuous improvement d. the sales forecast Register to View AnswerDifficulty: Terms to Learn: kaizen budgeting 1 Objective: 5 138. Kaizen refers to incorporating cost reductions: a. in each successive budgeting period b. in each successive sales forecast c. in all customer service centers d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: kaizen budgeting 2 Objective: 5 139. All of the following are encouraged with kaizen budgeting EXCEPT: a. better interactions with suppliers b. large discontinuous improvements c. cost reductions during manufacturing d. systematic monthly cost reductions Register to View AnswerDifficulty: Terms to Learn: kaizen budgeti 3 Objective: 5 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 140 AND 141: Dan and Donna Enterprises are using the kaizen approach to budgeting for 20X5. The budgeted income statement for January 20X5 is as follows: Sales (84,000 units) Less: Cost of goods sold Gross margin Operating expenses (includes $50,000 of fixed costs) Operating income $500,000 300,000 200,000 150,000 $ 50,000 Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month. 6-30 140. What is budgeted cost of goods sold for March 20X5? a. $294,030 b. $294,000 c. $300,000 d. $297,000 Register to View AnswerDifficulty: Terms to Learn: kaizen budgeting $300,000 x 0.99 x 0.99 = $294,030 3 Objective: 5 141. What is budgeted gross margin for March 20X5? a. $196,020 b. $198,000 c. $204,020 d. $205,970 Register to View AnswerDifficulty: 3 Terms to Learn: kaizen budgeting $500,000 ($300,000 x .99 x .99) = $205,970 142. The use of activity-based budgeting is growing because of: a. the increased use of activity-based costing b. the increased use of kaizen costing c. increases in work-in-process inventory d. increases in direct materials inventory Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 1 Objective: 6 Objective: 5 143. Activity-based budgeting would separately estimate: a. the cost of overhead for a department b. a plant-wide cost-driver rate c. the cost of a setup activity d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 2 Objective: 6 144. Activity-based-costing analysis makes no distinction between: a. direct-materials inventory and work-in-process inventory b. short-run variable costs and short-run fixed costs c. parts of the supply chain d. components of the value chain Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 3 Objective: 6 6-31 145. Activity-based budgeting makes it easier to: a. determine a rolling budget b. prepare pro forma financial statements c. determine how to reduce costs d. execute a financial budget Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 3 Objective: 6 146. Activity-based budgeting does NOT require: a. knowledge of the organization's activities b. specialized expertise in financial management and control c. knowledge about how activities affect costs d. the ability to see how the organization's different activities fit together Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 3 Objective: 6 147. Activity-based budgeting: a. uses one cost driver such as direct labor-hours b. uses only output-based cost drivers such as units sold c. focuses on activities necessary to produce and sell products and services d. classifies costs by functional area within the value chain Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 1 Objective: 6 148. Activity-based budgeting includes all the following steps EXCEPT: a. determining demands for activities from sales and production targets b. computing the cost of performing activities c. determining a separate cost-driver rate for each department d. describing the budget as costs of activities rather than costs of functions Register to View AnswerDifficulty: Terms to Learn: activity-based budgeting 2 Objective: 6 149. Variances between actual and budgeted amounts can be used to: a. alert managers to potential problems and available opportunities b. inform managers about how well the company has implemented its strategies c. signal that company strategies are ineffective d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: responsibility accounting 2 Objective: 7 6-32 150. A maintenance manager is MOST likely responsible for a(n): a. revenue center b. investment center c. cost center d. profit center Register to View AnswerTerms to Learn: cost center Difficulty: 1 Objective: 7 151. The regional sales office manager of a national firm is MOST likely responsible for a(n): a. revenue center b. investment center c. cost center d. profit center Register to View AnswerDifficulty: Terms to Learn: revenue center 1 Objective: 7 152. A regional manager of a restaurant chain in charge of finding additional locations for expansion is MOST likely responsible for a(n): a. revenue center b. investment center c. cost center d. profit center Register to View AnswerDifficulty: Terms to Learn: investment center 1 Objective: 7 153. The manager of a hobby store that is part of a chain of stores is MOST likely responsible for a(n): a. revenue center b. investment center c. cost center d. profit center Register to View AnswerTerms to Learn: profit center Difficulty: 1 Objective: 7 6-33 154. A manager of a revenue center is responsible for all of the following EXCEPT: a. service quality and units sold b. the acquisition cost of the product or service sold c. price, product mix, and promotional activities d. investments of excess cash Register to View AnswerDifficulty: Terms to Learn: revenue center 2 Objective: 7 155. A manager of a profit center is responsible for all of the following EXCEPT: a. sales revenue b. the cost of merchandise purchased for resale c. expanding into new geographic areas d. selling and marketing costs Register to View AnswerTerms to Learn: profit center Difficulty: 2 Objective: 7 156. A controllable cost is any cost that can be _________ by a responsibility center manager for a period of time. a. controlled b. influenced c. segregated d. excluded Register to View AnswerDifficulty: Terms to Learn: controllable cost 2 Objective: 8 157. Controllability may be difficult to pinpoint because of all the following EXCEPT: a. some costs depend on market conditions b. current managers may have inherited inefficiencies of a previous manager c. the current use of stretch or challenge targets d. few costs are under the sole influence of one manager Register to View AnswerDifficulty: Terms to Learn: controllable cost 2 Objective: 8 158. Responsibility accounting: a. emphasizes controllability b. focuses on whom should be asked about the information c. attempts to assign blame for problems to a specific manager d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: responsibility accounting 3 Objective: 8 6-34 159. A PRIMARY consideration in assigning a cost to a responsibility center is: a. whether the cost is fixed or variable b. whether the cost is direct or indirect c. who can best explain the change in that cost d. where in the organizational structure the cost was incurred Register to View AnswerDifficulty: Terms to Learn: responsibility center 3 Objective: 8 160. Building in budgetary slack includes: a. overestimating budgeted revenues b. underestimating budgeted costs c. making budgeted targets more easily achievable d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: budgetary slack 2 Objective: 8 161. To reduce budgetary slack management may: a. incorporate stretch or challenge targets b. use external benchmark performance measures c. award bonuses for achieving budgeted amounts d. reduce projected cost targets by 10% across all areas Register to View AnswerDifficulty: Terms to Learn: budgetary slack 3 Objective: 8 162. A stretch budget is a budget that: a. crosses more than one responsibility center b. represents a challenging, but achievable level of performance c. is impossible to implement in a cost center d. is designed to include the effects of exchange rate fluctuations Register to View AnswerDifficulty: Terms to Learn: responsibility accounting 2 Objective: 8 163. Multinational budgeting is more complex than budgeting in a domestic environment due to the possibility of: a. exchange rate fluctuations b. sophisticated techniques used by multinationals such as forward, future, and options contracts c. different political, legal, and economic environments faced by multinationals d. All of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: responsibility accounting 2 Objective: 8 6-35 164. Financial analysts use the projected cash flow statement to do all of the following EXCEPT: a. plan for when excess cash is generated b. plan for short-term cash investments c. project cash shortages and plan a strategy to deal with the shortages d. project depreciation expense Register to View AnswerTerms to Learn: cash budget Difficulty: 2 Objective: A 165. The cash flow statement does NOT include: a. cash inflows from the collection of receivables b. cash outflows paid toward raw material purchases c. all sales revenues d. interest paid and received Register to View AnswerTerms to Learn: cash budget Difficulty: 2 Objective: A 166. The cash budget is a schedule of expected cash receipts and disbursements that: a. requires an aging of accounts receivable and accounts payable b. is a self-liquidating cycle c. is prepared immediately after the sales forecast d. predicts the effect on the cash position at given levels of operations Register to View AnswerTerms to Learn: cash budget Difficulty: 1 Objective: A 6-36 THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 167 THROUGH 170: The following information pertains to Tiffany Company: Month January February March Sales $30,000 $40,000 $50,000 Purchases $16,000 $20,000 $28,000 Cash is collected from customers in the following manner: Month of sale 30% Month following the sale 70% 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. Labor costs are 20% of sales. Other operating costs are $15,000 per month (including $4,000 of depreciation). Both of these are paid in the month incurred. The cash balance on March 1 is $4,000. A minimum cash balance of $3,000 is required at the end of the month. Money can be borrowed in multiples of $1,000. 167. How much cash will be collected from customers in March? a. $47,000 b. $43,000 c. $50,000 d. None of these answers are correct. Register to View AnswerDifficulty: 2 Terms to Learn: cash budget ($40,000 x 70%) + ($50,000 x 30%) = $43,000 168. How much cash will be paid to suppliers in March? a. $23,200 b. $28,000 c. $44,000 d. None of these answers are correct. Register to View AnswerDifficulty: 2 Terms to Learn: cash budget ($20,000 x 60%) + ($28,000 x 40%) = $23,200 Objective: A Objective: A 6-37 169. How much cash will be disbursed in total in March? a. $21,000 b. $25,000 c. $44,200 d. $48,200 Register to View AnswerDifficulty: 2 Objective: A Terms to Learn: cash budget ($20,000 x 60%) + ($28,000 x 40%) + ($50,000 x 20%) + ($15,000 $4,000) = $44,200 170. What is the ending cash balance for March? a. ($25,000) b. $3,000 c. $3,200 d. $3,800 Register to View AnswerDifficulty: 2 Terms to Learn: cash budget $4,000 + $43,000 $44,200 + $1,000 = $3,800 Objective: A THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 171 THROUGH 173: Fiscal Company has the following sales budget for the last six months of 20X5: July $100,000 August 80,000 September 110,000 October November December $ 90,000 100,000 94,000 Historically, the cash collection of sales has been as follows: 65% of sales collected in the month of sale, 25% of sales collected in the month following the sale, 8% of sales collected in the second month following the sale, and 2% of sales are uncollectible. 171. Cash collections for September are: a. $71,500 b. $86,700 c. $99,500 d. $102,000 Register to View AnswerDifficulty: 2 Objective: Terms to Learn: cash budget ($110,000 x 0.65) + ($80,000 x 0.25) + ($100,000 x 0.08) = $99,500 A 6-38 172. What is the ending balance of accounts receivable for September, assuming uncollectible balances are written off during the second month following the sale? a. $99,500 b. $48,500 c. $44,900 d. $46,500 Register to View AnswerDifficulty: 2 Terms to Learn: cash budget ($110,000 x 0.35) + ($80,000 x 0.10) = $46,500 173. Cash collections for October are: a. $58,500 b. $92,400 c. $99,500 d. $88,200 Register to View AnswerDifficulty: 2 Objective: Terms to Learn: cash budget ($90,000 x 0.65) + ($110,000 x 0.25) + ($80,000 x 0.08) = $92,400 A Objective: A THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 174 THROUGH 176: Bear Company has the following information: Month January February March April May Budgeted Purchases $26,800 29,000 30,520 29,480 27,680 Purchases are paid for in the following manner: 10% of the purchase amount in the month of purchase 50% of the purchase amount in the month after purchase 40% of the purchase amount in the month after purchase 174. What is the expected balance in Accounts Payable as of March 31? a. $39,068 b. $18,312 c. $2,900 d. $30,520 Register to View AnswerDifficulty: 2 Terms to Learn: cash budget ($30,520 x 0.9) + ($29,000 x 0.4) = $39,068 Objective: A 6-39 175. What is the expected balance in Accounts Payable as of April 30? a. $26,532 b. $38,740 c. $12,208 d. $17,688 Register to View AnswerDifficulty: 2 Terms to Learn: cash budget ($29,480 x 0.9) + ($30,520 x 0.4) = $38,740 176. What is the expected Accounts Payable balance as of May 31? a. $11,792 b. $24,912 c. $36,704 d. $2,948 Register to View AnswerDifficulty: 2 Terms to Learn: cash budget ($27,680 x 0.9) + ($29,480 x 0.4) = $36,704 Objective: A Objective: A THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 177 THROUGH 182: The following information pertains to the January operating budget for Casey Corporation. Budgeted sales for January $100,000 and February $200,000. Collections for sales are 60% in the month of sale and 40% the next month. Gross margin is 30% of sales. Administrative costs are $10,000 each month. Beginning accounts receivable is $20,000. Beginning inventory is $14,000. Beginning accounts payable is $60,000. (All from inventory purchases.) Purchases are paid in full the following month. Desired ending inventory is 20% of next month's cost of goods sold (COGS). 177. For January, budgeted cash collections are: a. $20,000 b. $60,000 c. $80,000 d. None of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: cash budget $20,000 + ($100,000 x 60%) = $80,000 3 Objective: A 6-40 178. At the end of January, budgeted accounts receivable is: a. $20,000 b. $40,000 c. $60,000 d. None of these answers are correct. Register to View AnswerTerms to Learn: cash budget $100,000 x 40% = $40,000 Difficulty: 2 Objective: A 179. For January, budgeted cost of goods sold is: a. $20,000 b. $30,000 c. $40,000 d. None of these answers are correct. Register to View AnswerTerms to Learn: cash budget $100,000 x 70% = $70,000 Difficulty: 3 Objective: A 180. For January, budgeted net income is: a. $20,000 b. $30,000 c. $40,000 d. None of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: cash budget $100,000 $70,000 $10,000 = $20,000 3 Objective: A 181. For January, budgeted cash payments for purchases are: a. $14,000 b. $70,000 c. $60,000 d. None of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: cash budget Accounts payable, $60,000 as stated 2 Objective: A 6-41 182. At the end of January, budgeted ending inventory is: a. $20,000 b. $28,000 c. $40,000 d. None of these answers are correct. Register to View AnswerDifficulty: Terms to Learn: cash budget $200,000 x 70% x 20% = $28,000 EXERCISES AND PROBLEMS 183. Spirit Company sells three products with the following seasonal sales pattern: Quarter 1 2 3 4 A 40% 30% 20% 10% Products B 30% 20% 20% 30% C 10% 40% 40% 10% 3 Objective: A The annual sales budget shows forecasts for the different products and their expected selling price per unit as follows: Product A B C Required: Prepare a sales budget, in units and dollars, by quarters for the company for the coming year. Units 50,000 125,000 62,500 Selling Price $4 10 6 6-42 Answer: First Quarter Product A: Sales (units) Price Sales $200,000 Product B: Sales (units) 125,000 Price Sales $1,250,000 Product C: Sales (units) Price Sales $375,000 Total $1,825,000 20,000 x $4 $80,000 Second Quarter 15,000 x $4 $60,000 Third Quarter 10,000 x $4 $40,000 Fourth Quarter Total 5,000 50,000 x $4 x $4 $20,000 37,500 x $10 $375,000 25,000 x $10 $250,000 25,000 x $10 $250,000 37,500 x $10 x $10 $375,000 6,250 x $6 $37,500 $492,500 25,000 x $6 $150,000 $460,000 25,000 x $6 $150,000 $440,000 6,250 62,500 x $6 x $6 $37,500 $432,500 Difficulty: 2 Objective: 3 Terms to Learn: operating budget 6-43 184. Lubriderm Corporation has the following budgeted sales for the next six-month period: Month June July August September October November Unit Sales 90,000 120,000 210,000 150,000 180,000 120,000 There were 30,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month. Five pounds of materials are required for each unit produced. Each pound of material costs $8. Inventory levels for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 15,000 pounds. Required: a. Prepare production budgets in units for July, August, and September. b. Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month. Register to View AnswerBudgeted sales Add: Required ending inventory Total inventory requirements Less: Beginning inventory Budgeted production b. Production in units Targeted ending inventory in lbs. Production needs in lbs. *** * July 120,000 42,000 162,000 24,000 138,000 July 138,000 297,000 690,000 **** August 210,000 30,000 240,000 42,000 198,000 August 198,000 234,000 990,000 1,224,000 297,000 927,000 x $8 $7,416,000 September 150,000 36,000 186,000 30,000 156,000 September 156,000 ** 252,000 780,000 Total requirements in lbs. Less: Beginning inventory in lbs. Purchases needed in lbs. Cost ($8 per lb.) Total material purchases * ** *** 987,000 207,000 780,000 x $8 1,032,000 234,000 798,000 x $8 $6,384,000 $6,240,000 0.3 times next month's needs (180,000 + 24,000 - 36,000) times 5 lbs. x 0.3 5 lbs. times units to be produced, across row 6-44 **** (690,000 x .3) = 207,000 lbs., etc. row across Difficulty: 3 Objective: 3 Terms to Learn: operating budget 185. Gerdie Company has the following information: Month March April May June July Budgeted Sales $50,000 53,000 51,000 54,500 52,500 In addition, the gross profit rate is 40% and the desired inventory level is 30% of next month's cost of sales. Required: Prepare a purchases budget for April through June. Answer: Desired ending inventory 9,450 Plus COGS Total needed 104,550 Less beginning inventory Total purchases 95,010 Difficulty: 2 Objective: 3 Terms to Learn: operating budget April $ 9,180 31,800 40,980 9,540 $31,440 May $ 9,810 30,600 40,410 9,180 $31,230 June Total $ 9,450 $ 32,700 95,100 42,150 9,810 9,540 $32,340 $ 6-45 186. Picture Pretty manufactures picture frames. Sales for August are expected to be 10,000 units of various sizes. Historically, the average frame requires four feet of framing, one square foot of glass, and two square feet of backing. Beginning inventory includes 1,500 feet of framing, 500 square feet of glass, and 500 square feet of backing. Current prices are $0.30 per foot of framing, $6.00 per square foot of glass, and $2.25 per square foot of backing. Ending inventory should be 150% of beginning inventory. Purchases are paid for in the month acquired. Required: a. b. Determine the quantity of framing, glass, and backing that is to be purchased during August. Determine the total costs of direct materials for August purchases. Framing 2,250 40,000 42,250 1,500 40,750 Glass 750 10,000 10,750 500 10,250 $12,225.00 61,500.00 45,562.50 $119,287.50 Backing 750 20,000 20,750 500 20,250 Register to View AnswerDesired ending inventory* Production needs (10,000 units)** Total needs Less: Beginning inventory Purchases planned b. Cost of direct materials: Framing (40,750 x $0.30) Glass (10,250 x $6.00) Backing (20,250 x $2.25) Total *1,500 x 1.5 = 2,250 framing 500 x 1.5 = 750 glass 500 x 1.5 = 750 backing **10,000 x 4 = 40,000 framing 10,000 x 1 = 10,000 glass 10,000 x 2 = 20,000 backing Difficulty: 2 Objective: 3 Terms to Learn: operating budget 6-46 187. Michelle Enterprises reports the year-end information from 20X5 as follows: Sales (100,000 units) Less: Cost of goods sold Gross profit Operating expenses (includes $10,000 of Depreciation) Net income $250,000 150,000 100,000 60,000 $ 40,000 Michelle is developing the 20X6 budget. In 20X6 the company would like to increase selling prices by 10%, and as a result expects a decrease in sales volume of 5%. Cost of goods sold as a percentage of sales is expected to increase to 62%. Other than depreciation, all operating costs are variable. Required: Prepare a budgeted income statement for 20X6. Answer: Michelle Enterprises Budgeted Income Statement For the Year 20X6 Sales (95,000 x $2.75) Cost of goods sold (20X6 sales x 62%) Gross profit Less: Operating expenses [($0.50 x 95,000] + $10,000) Net income Difficulty: 2 Objective: 3 Terms to Learn: operating budget $261,250 161,975 99,275 57,500 $ 41,775 6-47 188. Brad Corporation is using the kaizen approach to budgeting for 20X5. The budgeted income statement for January 20X5 is as follows: Sales (240,000 units) Less: Cost of goods sold Gross margin Operating expenses (includes $64,000 of fixed costs) Net income $720,000 480,000 240,000 192,000 $ 48,000 Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month. Required: Prepare a kaizen-based budgeted income statement for March of 20X5. Answer: Sales Less: Cost of goods sold ($480,000 x 0.99 x 0.99) Gross margin Operating expenses [($128,000 x 0.99 x 0.99) + $64,000] Net income Difficulty: 2 Objective: 5 Terms to Learn: kaizen budgeting $720,000 470,448 249,552 189,453 $ 60,099 6-48 189. Allscott Company is developing its budgets for 20X5 and, for the first time, will use the kaizen approach. The initial 20X5 income statement, based on static data from 20X4, is as follows: Sales (140,000 units) Less: Cost of goods sold Gross margin Operating expenses (includes $28,000 of depreciation) Net income $420,000 280,000 140,000 112,000 $28,000 Selling prices for 20X5 are expected to increase by 8%, and sales volume in units will decrease by 10%. The cost of goods sold as estimated by the kaizen approach will decline by 10% per unit. Other than depreciation, all other operating costs are expected to decline by 5%. Required: Prepare a kaizen-based budgeted income statement for 20X5. Answer: Sales (126,000 x $3.24) Less: COGS (126,000 x $1.80) Gross margin 181,440 Operating expenses ($28,000 + $79,800) Net income $408,240 226,800 107,800 $ 73,640 Difficulty: 2 Objectives: 4, 5 Terms to Learn: kaizen budgeting, sensitivity analysis 6-49 190. Russell Company has the following projected account balances for June 30, 20X5: Accounts payable Accounts receivable Depreciation, factory Inventories (5/31 & 6/30) Direct materials used Office salaries Insurance, factory Plant wages Bonds payable $40,000 100,000 24,000 180,000 200,000 80,000 4,000 140,000 160,000 Sales $800,000 Capital stock 400,000 Retained earnings ? Cash 56,000 Equipment, net 240,000 Buildings, net 400,000 Utilities, factory 16,000 Selling expenses 60,000 Maintenance, factory 28,000 Required: a. Prepare a budgeted income statement for June 20X5. b. Prepare a budgeted balance sheet as of June 30, 20X5. Register to View AnswerSales Cost of goods sold: Materials used Wages Depreciation Insurance Maintenance Utilities Gross profit Operating expenses: Selling expenses Office salaries Net income b. Russell Company Income Statement For the Month of June 20X5 $800,000 $200,000 140,000 24,000 4,000 28,000 16,000 $60,000 80,000 Russell Company Balance Sheet June 30, 20X5 $ 56,000 100,000 180,000 240,000 400,000 $976,000 Liabilities and Owners' Equity: Accounts payable $ 40,000 Bonds payable 160,000 Capital stock 400,000 Retained earnings* 376,000 Total $976,000 412,000 388,000 140,000 $248,000 Assets: Cash Accounts receivable Inventories Equipment, net Buildings, net Total *$976,000 ($40,000 + $160,000 + $400,000) = $376,000 Difficulty: 2 Objectives: 3, A Terms to Learn: operating budget 6-50 191. Shamokin Manufacturing produces two products, Big and Bigger. Shamokin expects to sell 20,000 units of Big and 10,000 units of Bigger. Shamokin plans on having an ending inventory of 4,000 units of Big and 2,000 units of Bigger. Currently, Shamokin has 1,000 units of Big in its inventory and 800 units of Bigger. Each product requires two labor operations: molding and polishing. Product Big requires one hour of molding time and one hour of polishing time. Product Bigger requires one hour of molding time and two hours of polishing time. The direct labor rate for molders is $20 per molding hour, and the direct labor rate for polishers is $25 per polishing hour. Required: Prepare a direct labor budget in hours and dollars for each product. Desired Production: Expected sales Desired ending inventory Production needs Less: beginning inventory Desired production Big 20,000 4,000 24,000 1,000 23,000 Bigger 10,000 2,000 12,000 800 11,200 Polishing 23,000 1 23,000 $25 $575,000 Polishing 11,200 2 22,400 $25 $560,000 $1,135,000 Total Direct Labor Budget for Big: Molding Desired Production of Big 23,000 Hours of Labor Required per unit 1 Total Hours of Labor Required 23,000 Direct Labor Rate $20 Cost of Direct Labor for Big $460,000 Direct Labor Budget for Bigger: Molding Desired Production of Bigger 11,200 Hours of Labor Required per unit 1 Total Hours of Labor Required 11,200 Direct Labor Rate $20 Cost of Direct Labor for Bigger $224,000 Total Direct Labor Costs Difficulty: 2 Objective: 3 Terms to Learn: operating budget $684,000 $1,035,000 $784,000 $1,819,000 6-51 192. Duffy Corporation has prepared the following sales budget: Month May June July August September Cash Sales $16,000 20,000 18,000 24,000 22,000 Credit Sales $68,000 80,000 74,000 92,000 76,000 Collections are 40% in the month of sale, 45% in the month following the sale, and 10% two months following the sale. The remaining 5% is expected to be uncollectible. Required: Prepare a schedule of cash collections for July through September. Answer: Cash sales $64,000 July $18,000 August $24,000 September Total $22,000 Collections of credit sales from: Current month 29,600 Previous month 36,000 110,700 Two months ago 6,800 Total collections $293,700 Difficulty: 2 Objective: A Terms to Learn: cash budget $90,400 36,800 33,300 8,000 $102,100 30,400 96,800 41,400 7,400 22,200 $101,200 6-52 193. The following information pertains to Amigo Corporation: Month July August September October November December Sales $30,000 34,000 38,000 42,000 48,000 60,000 Purchases $10,000 12,000 14,000 16,000 18,000 20,000 Cash is collected from customers in the following manner: Month of sale (2% cash discount) 30% Month following sale 50% Two months following sale 15% Amount uncollectible 5% 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. Required: a. Prepare a summary of cash collections for the 4th quarter. b. Prepare a summary of cash disbursements for the 4th quarter. Register to View AnswerCash collections Oct $36,448 + Nov $40,812 + Dec $47,940 = $125,200 August September October November December October $ 5,100 19,000 12,348 -------$36,448 November 5,700 21,000 14,112 --------$40,812 December 6,300 24,000 17,640 -------$47,940 b. Cash disbursements Oct $14,800 + Nov $16,800 + Dec $18,800 = $50,400 September October November December October 8,400 6,400 -------$14,800 Difficulty: 2 Terms to Learn: cash budget November 9,600 7,200 --------$16,800 Objective: A December 10,800 8,000 -------$18,800 6-53 CRITICAL THINKING 194. Describe the benefits to an organization of preparing an operating budget. Register to View Answerwell-prepared operating budget should serve as a guide for a company to follow during the budgeted period. It is not "set in stone." If new information or opportunities arise, the budget should be adjusted. A well-prepared operating budget assists management with the allocation of scarce resources. It can help management see trouble spots in advance, and then management can decide where to allocate its limited resources. A well-prepared operating budget fosters communication and coordination among various segments of the company. The process of preparing a budget requires managers from different functional areas to work together and communicate performance levels they both want and can attain. A well-prepared operating budget can become the performance standard against which firms can compare the actual results. Difficulty: 2 Objective: Terms to Learn: operating budget 1 195. Bob and Dale have just purchased a small honey manufacturing company that was having financial difficulties. After a brief operating period, they decided that the company's main problem was the lack of any financial planning. The company made a good product and market potential was great. Required: Explain why a company needs a good budgeting plan. Specifically address the need for a master budget. Answer: The master budget is a series of interrelated budgets that quantify management's expectations about a company's revenues, expenses, net income, cash flows, and financial position. When administered wisely, a budget: 1. 2. 3. provides a framework for judging performance, motivates managers and employees, and promotes coordination and communication among subunits within the company. Difficulty: 2 Objective: 1 Terms to Learn: operating budget 6-54 196. Describe operating and financial budgets and give at least two examples of each discussed in the textbook. Answer: Operating budgets specify the expected outcomes of any selling, manufacturing, purchasing, labor management, R&D, marketing, distribution, customer service, and administrative activities during the planning period. Operations personnel use these plans to guide and coordinate activities during the planning period. Examples of operating budgets include the revenues budget, production budget, direct materials costs budget, direct manufacturing labor costs budget, manufacturing overhead budget, and budgets for R&D, marketing, distribution, customer service, and administrative activities. Financial budgets are used to evaluate the financial consequences of a proposed decision. Examples of financial budgets include the capital expenditures budget, cash budget, budgeted balance sheet, and the budgeted statement of cash flows. Difficulty: 2 Objective: 3 Terms to Learn: operating budget, financial budget 197. Discuss the importance of the sales forecast and items that influence its accuracy. Answer: All other budgets are based on information from the sales forecast. The sales forecast is a challenge to predict because its accuracy depends on the ability to forecast the state of the general economy, changes in the industry, actions of the competition, and developments in technology. Each of these items affects individual products or product lines and are quantified and aggregated to obtain the sales forecast. Difficulty: 2 Objective: 3 Terms to Learn: operating budget 6-55 198. Explain what is meant by sensitivity analysis in budgeting, and discuss how managers might use sensitivity analysis in practice. Answer: Sensitivity analysis is a "what-if" technique that examines how results will change if the original predicted data are not achieved or if an underlying assumption changes. Managers often use financial planning models, which are mathematical representations of relationships among the factors that influence the master budget. It is possible, using these models, to examine the financial impact of one or more parameters that influence a master budget, for example selling price and material cost. Management could consider three levels of each of these two parameters, resulting in nine scenarios of different selling prices and material costs. The financial model could then present a master budget based on each of these changes, and demonstrate the financial impact on the original data given changes in selling prices and/or material costs. Management could use these predictions to make contingency plans, change their strategies, or simply update the budgets as environmental conditions change. Difficulty: 2 Objective: 4 Terms to Learn: sensitivity analysis 199. Distinguish between controllable and uncontrollable aspects of revenue and costs. Can a manager totally control all revenue and costs? Why or why not? Answer: Although no revenue or cost can be totally controlled, a cost or revenue is a controllable item when a manager has significant influence over the amount of a cost or revenue. It is uncontrollable if this is not the case. A manager's ability to influence costs and revenues depends on two factors: (1) the manager's level of authority, and (2) the time period involved. Costs and revenue contracts, the economic costs of disposing of fixed assets, and the economy are three conditions that are likely to affect the period of time during which an item is not controllable. Difficulty: 2 Objective: 8 Terms to Learn: controllable cost 6-56 200. Describe some of the drawbacks of using the operating budget as a control device. Answer: When the operating budget is used as a control device it can lead to behavior that is actually detrimental to the organization. The major problem with the budget performance report is not the report itself, but rather the way it is used. In general, managers are rewarded for favorable variances, and disciplined for unfavorable variances. This encourages managers to set lax standards for both sales and costs so favorable variances result. It can also lead to "budget games." Another drawback is that once the budget is established, if there is any variance between budget and actual, it is assumed to be because of actual. However, as we know, the budget will never be totally accurate due to the uncertainties of predicting the future. If used properly, however, the operating budget can be a tremendous benefit to any company. Difficulty: 2 Objective: 8 Terms to Learn: operating budget 201. What is budget slack? What are the pros and cons of building slack into the budget from the point of view of (a) an employee and (b) a senior manager? Answer: Budget slack occurs when subordinates (a) ask for excess resources above and beyond what they need to accomplish budget objectives and (b) distort information by claiming they are not as efficient or effective at what they do, thus lowering management's performance expectations of them. Employee's point of view: There are two benefits from this point of view. First, the subordinate may be able to obtain excess resources to achieve desired goals. This may take a lot of pressure off the subordinate and reduce job anxiety. Second, the subordinate may be able to convince senior management to lower their work expectations of him or her. This may also lead to lower pressure on the subordinate to perform. Both of these types of slack building are designed to reduce job stress for the subordinate. However, if incentives are graduated in such a way that achieving higher and higher goals provides the subordinate with more and more compensation in the form of bonuses, then the subordinate may lose income by selecting lower goals. 6-57 Senior management's point of view: When subordinates build in slack, they are either using unnecessary resources to achieve a goal that they should have been able to achieve with fewer resources, or they are understating their performance capabilities. Thus, the organization is either not running as efficiently as it can, or is losing potential productivity from employees who are not working as hard as they can. In some cases, senior management may believe that subordinates build in slack to relieve job pressure. If burnout of employees has been happening in the organization, then perhaps senior management may be more forgiving and view some slack building as necessary to keep their employees from quitting. Difficulty: 2 Objective: 8 Terms to Learn: budgetary slack 202. How is budgeting for a multinational corporation different than budgeting for a corporation that is strictly domestic? Answer: Budgeting for a multinational corporation is made far more complex than budgeting for a domestic corporation because the multinational corporation often has subunits operating in many different countries, resulting in less familiar business environments and many different currencies. Multinational corporations need to understand many different business environments with significant political, legal, and economic environments. Multinational companies earn their revenues and incur their expenses in many different currencies, and must report their results a single currency. Additionally, management accountants in different countries need to budget for foreign exchange rates and anticipate changes that might take place during the year in the face of constantly fluctuating exchange rates. Difficulty: 2 Objective: 8 Terms to Learn: responsibility accounting 6-58

Find millions of documents on Course Hero - Study Guides, Lecture Notes, Reference Materials, Practice Exams and more. Course Hero has millions of course specific materials providing students with the best way to expand their education.

Below is a small sample set of documents:

LSU - ACCT - 4121
CHAPTER 7 FLEXIBLE BUDGETS, DIRECT-COST VARIANCES, AND MANAGEMENT CONTROLTRUE/FALSE 1. The master budget is one type of flexible budget. Answer: Terms to Learn: 2. False Difficulty: flexible budget 1 Objective: 1The master budget is a static budget.A f
LSU - ACCT - 4121
CHAPTER 8 FLEXIBLE BUDGETS, OVERHEAD COSTS, VARIANCES, AND MANAGEMENT CONTROLTRUE/FALSE 1. Overhead costs are a major part of costs for most companies - more than 50% of all costs for some companies. Answer: Terms to Learn: 2. True Difficulty: total-over
LSU - ACCT - 4121
CHAPTER 9 INVENTORY COSTING AND CAPACITY ANALYSISTRUE/FALSE 1. Absorption costing "absorbs" only variable manufacturing costs. Answer: False Difficulty: 1 Objective: 1 Terms to Learn: absorption costing Absorption costing "absorbs" all manufacturing cost
LSU - ACCT - 4121
DECISION MAKING AND RELEVANT INFORMATIONBy :Dr. Suyanto, SE, MM, M.Ak TRUE/FALSE 1. A decision model is a formal method for making a choice, frequently involving both quantitative and qualitative analyses. Answer: Terms to Learn: 2. True Difficulty: 1 Ob
LSU - ACCT - 4121
CHAPTER 13 STRATEGY, BALANCED SCORECARD, AND STRATEGIC PROFITABILITY ANALYSISTRUE/FALSE 1. Strategy describes how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its overall objectives. Answer: Terms t
LSU - ACCT - 4121
CHAPTER 20 INVENTORY MANAGEMENT, JUST-IN-TIME, AND SIMPLIFIED COSTING METHODSTRUE/FALSE 1. Retailers generally have a high percentage of net income to revenues. Answer: False Difficulty: 2 Terms to Learn: inventory management Retailers have a low percent
LSU - ACCT - 4121
CHAPTER 21 CAPITAL BUDGETING AND COST ANALYSISTRUE/FALSE 1. Capital budgeting focuses on projects over their entire lives to consider all the cash flows or cash savings from investing in a single project. Answer: Terms to Learn: 2. True Difficulty: capit
LSU - ACCT - 4121
CHAPTER 22 MANAGEMENT CONTROL SYSTEMS, TRANSFER PRICING, AND MULTINATIONAL CONSIDERATIONSTRUE/FALSE 1. The goal of a management control system is to improve the collective decisions in an organization in an economically feasible way. Answer: Terms to Lea
LSU - ACCT - 4121
CHAPTER 23 PERFORMANCE MEASUREMENT, COMPENSATION, AND MULTINATIONAL CONSIDERATIONSTRUE/FALSE 1. Many common performance measures, such as customer satisfaction, rely on internal financial accounting information. Answer: False Difficulty: 1 Objective: 1 T
VCU - MATH - 532
Guide to Commonly Used NotationSymbol R Rn t u, v x, y x0 , y0 x , y f A, M, P D N tr( A) det( A) , Es , Eu , Ec Ws, Wu, Wc AB spancfw_v1 , v2 , . . . vn t (x0 ) t f : Rn Rm f Jf uv v 2 u-v 2 B(x, ) V (x) (t)Usual Meaning the set of real numbers n-dime
VCU - MATH - 532
Ordinary and Partial Differential EquationsAn Introduction to Dynamical SystemsJohn W. Cain, Ph.D. and Angela M. Reynolds, Ph.D.Mathematics Textbook Series. Editor: Lon Mitchell 1. Book of Proof by Richard Hammack 2. Linear Algebra by Jim Hefferon 3. A
VCU - MATH - 532
CHAPTER 1 IntroductionThe mathematical sub-discipline of differential equations and dynamical systems is foundational in the study of applied mathematics. Differential equationsarise in a variety of contexts, some purely theoretical and some of practic
VCU - MATH - 532
CHAPTER 2 Linear, Constant-Coefficient SystemsThere are few classes of ode s for which exact, analytical solutions can be obtained by hand. However, for many systems which cannot be solvedexplicitly, we may approximate the dynamics by using simpler sys
VCU - MATH - 532
CHAPTER 3 Nonlinear Systems: Local Theorysystems is usually impossible, so we must settle for qualitative descriptions of the dynamics. On the other hand, nonlinear systems can exhibit a wide variety of behaviors that linear systems cannot. Moreover, mos
VCU - MATH - 532
CHAPTER 4 Periodic, Heteroclinic, and Homoclinic OrbitsIn this chapter, we shift our attention away from equilibria, instead seeking more "interesting" solutions of nonlinear systems x = f (x). Much of ourdiscussion involves planar systems (i.e., f : R
VCU - MATH - 532
CHAPTER 5 BifurcationsIn practice, we often deal with ode s which contain parameters (unspecified constants) whose values can profoundly influence the dynamical behavior ofthe system. For example, suppose we model population changes for a species. The
VCU - MATH - 532
CHAPTER 6 Introduction to Delay Differential EquationsIn this Chapter, we turn our attention to delay differential equations (dde s), a major departure from the ordinary differential equations that were consideredup to now. A basic reference for this m
VCU - MATH - 532
CHAPTER 7 Introduction to Difference EquationsThis Chapter concerns the dynamical behavior of systems in which time can be treated as a discrete quantity as opposed to a continuous one. Forexample, some mathematical models of the onset of cardiac arrhy
VCU - MATH - 532
CHAPTER 8 Introduction to Partial Differential Equationsperature T depends not only upon time, but also upon spatial location. If x and y denote latitude and longitude and t denotes time, then the function T ( x, y, t) describes how temperature varies in
VCU - MATH - 532
CHAPTER 9 Linear, First-Order Partial Differential EquationsIn this chapter, we will discuss the first of several special classes of pde s that can be solve via analytical techniques. In particular, we will investigate linear,first-order pde s a( x, t)
VCU - MATH - 532
CHAPTER 10 The Heat and Wave Equations on an Unbounded DomainAt first glance, the heat equation ut - u xx = 0 and the wave equationto be positive constants, the only apparent distinction is between the ut in theutt - c2 u xx = 0 appear very similar. S
VCU - MATH - 532
CHAPTER 11 Initial-Boundary Value ProblemsThe infinite spatial domains considered in the previous chapter give insight regarding the behavior of waves and diffusions. However, since suchdomains are not physically realistic, we need to develop new techn
VCU - MATH - 532
CHAPTER 12 Introduction to Fourier SeriesIn each example, we were able to construct series representations of the solutions provided that the initial conditions themselves had special series representations (i.e., Fourier sine and cosine series). In this
VCU - MATH - 532
CHAPTER 13 The Laplace and Poisson EquationsUp to now, we have dealt almost exclusively with pde s for which one independent variable corresponds to time. Now, we will analyze a pdefor which this is not the case: Laplace's equation. To motivate where L
Lincoln U. MO - ECON - 101
05 HW7-2_solutions.gwb - Tuesday, March 10, 2009 - Page 1 of 6Captured on Tue Mar 10 2009 10:06:2905 HW7-2_solutions.gwb - Tuesday, March 10, 2009 - Page 2 of 6When you rub your sock on the carpet, your sock picks up extra electrons, which then spread
Lincoln U. MO - ECON - 101
#_NAME_PERIOD_DATE_Conservation of Momentum HW 6-21. Old cannons were built on carts with wheels. The wheels helped when moving the cannon and they would allow the cannon to recoil when fired. When a 150 kg cannon and cart recoils at 1.5 m/s, at what ve
Lincoln U. MO - ECON - 101
Periodic Table of Elements1112Atomic #34C Solid5678Metals91011Nonmetals1213141516172182 K1H3SymbolName Atomic Mass2 1HeHelium 4.002602Hydrogen 1.00794Alkali metalsAlkaline earth metalsTransition metalsPoor metalsOthe
Central Washington University - ECON - 462
MGTOP 491 Professor: Dr, Arthurs Date: Individual Case analysis: Under Armour: working to stay on top of its game Overview Under Armour, was founded by Kevin Plank, in 1996, one of the major sports clothing and accessories companies in all over the world.
Alliant - ECON - 101
Project Name: Company Name: Project Manager: Date of Report: Task Task A Task B Task C Task D Task E Task FSample Excel Gantt Chart Bright Hub Project Management Michele McDonough July 1, 2008 Start Date End Date 12/15/07 01/05/08 02/01/08 03/30/08 06/01
Colby - PSYCHOLOGY - PS215
Introduction to ANOVABring calculator on Thursday Reading in HowellRecap from last lecture Review t-testHypothesis testing Type I and II errorsIntroduction to ANOVA"Moral Blame" StudyThreat: RegressionTest-retest reliability is not perfect Error in
Stanford - STATS - 315a
ESL Chapter 7 - Model SelectionTrevor Hastie and Rob TibshiraniModel SelectionTopics Bias variance trade-off Optimism of training error Estimates of in sample prediction error BIC VC dimension Cross-validation (chapter 3), bootstrap1ESL Chapter 7 -
Stanford - STATS - 315a
ESL Chapter 5 - Basis Expansions and RegularizationTrevor Hastie and Rob TibshiraniBasis Expansions and RegularizationFor a vector X, we consider models of the formMf (X) =m=1m hm (X)Examples of hm :2 hm (X) = Xj , Xj X , . . . hm (X) = |X|, log
Stanford - STATS - 315a
ESL Chapter 4 - Linear Methods for ClassificationTrevor Hastie and Rob TibshiraniLinear Methods for Classification Linear regression linear and quadatric discriminant functions example: gene expression arrays reduced rank LDA logistic regression separa
Stanford - STATS - 315a
ESL Chapter 1 - IntroductionTrevor Hastie and Rob TibshiraniStatistical Learning Problems Identify the risk factors for prostate cancer (Fig 1.1). Classify a recorded phoneme (Fig 5.5) based on a log-periodogram. Predict whether someone will have a hea
Stanford - STATS - 315a
ESL Chapter 3 - Linear Methods for RegressionTrevor Hastie and Rob TibshiraniLinear Methods for RegressionOutline The simple linear regression model Multiple linear regression Model selection and shrinkage-the state of the art1ESL Chapter 3 - Linear
Stanford - STATS - 315a
SLDM III c Hastie & Tibshirani - March 18, 2010Dimension Reduction and SVD194Principal ComponentsSuppose we have N measurements on each of p variables Xj , j = 1, . . . , p. There are several equivalent approaches to principal components: Produce a de
Stanford - STATS - 315a
ESL Chapter 2 - Overview of Supervised LearningTrevor Hastie and Rob TibshiraniOverview of Supervised LearningNotation X: inputs, feature vector, predictors, independent variables. Generally X will be a vector of p real values. Qualitative features ar
Stanford - STATS - 315a
Notes on Statistical LearningJohn I. Marden Copyright 20062Contents1 Introduction 2 Linear models 2.1 Good predictions: Squared error loss and 2.2 Matrices and least-squares estimates . . 2.3 Mean vectors and covariance matrices . . 2.4 Prediction usi
Stanford - STATS - 315a
AgendaRegularization: Ridge Regression and the LASSOStatistics 305: Autumn Quarter 2006/2007Wednesday, November 29, 2006Statistics 305: Autumn Quarter 2006/2007Regularization: Ridge Regression and the LASSOAgendaAgenda1 2The Bias-Variance Tradeof
Stanford - STATS - 315a
Welcome to Q&A for statisticians, data analysts, data miners and data visualization experts - check out the FAQ!Stack Exchangelog in | blog | meta | about | faqStatistical Analysis Questions Tags Users Badges Unanswered Ask QuestionLeast angle regres
Stanford - STATS - 315a
Regularization and Variable Selection via the Elastic NetHui Zou and Trevor Hastie Journal of Royal Statistical Society, B, 2005 Presenter: Minhua Chen, Nov. 07, 2008 p. 1/1AgendaIntroduction to Regression Models. Motivation for Elastic Net. Naive Ela
Stanford - STATS - 315a
Linear, Ridge Regression, and Principal Component AnalysisLinear, Ridge Regression, and Principal Component AnalysisJia LiDepartment of Statistics The Pennsylvania State UniversityEmail: jiali@stat.psu.edu http:/www.stat.psu.edu/jialiJia Lihttp:/www
Stanford - STATS - 315a
Lecture 5: Multiple Linear RegressionNancy R. ZhangStatistics 203, Stanford UniversityJanuary 19, 2010Nancy R. Zhang (Statistics 203)Lecture 5January 19, 20101 / 25AgendaToday: multiple linear regression. This week: comparing nested models in mul
Stanford - STATS - 315a
Nearest Neighbor ClassificationCharles Elkan elkan@cs.ucsd.edu January 11, 2011What is called supervised learning is the most fundamental task in machine learning. In supervised learning, we have training examples and test examples. A training example i
Stanford - STATS - 315a
Locally Weighted LearningMachine Learning Dr. Barbara HammerLocally Weighted LearningInstance-based Learning ("Lazy Learning")Local Models k-Nearest Neighbor Weighted Average Locally weighted regressionCase-based reasoningWhen to consider Nearest
Stanford - STATS - 315a
Conditional Expectations and Linear RegressionsWalter Sosa-EscuderoEcon 507. Econometric Analysis. Spring 2009March 31, 2009Walter Sosa-EscuderoConditional Expectations and Linear Regressions`All models are wrong, but some are useful' (George E. P.
Berkeley - BUSINESS - 103
Short SalesAn OverviewAD.6Short SalesAn OverviewThis handout is a reproduction of section 2.4.2 (pages 25-30) of Sharpe, William F., and Gordon J. Alexander, 1990, Investments, Prentice-Hall, New Jersey.IntroductionAn old adage from Wall Street is
Berkeley - BUSINESS - 103
Frequently Asked Questions about CalculatorsCalculators are useful, but can behave in unexpected ways (at least if, like me, you don't like reading the instructions first). Here are some questions that people often have. I'm just starting this list, and
Berkeley - BUSINESS - 103
HP 12C CalculationsThis handout has examples for calculations on the HP12C: 1. Present Value (PV) 2. Present Value with cash flows and discount rate constant over time 3. Present Value with uneven cash flows but constant discount rate 4. Annuity 5. Loan
Berkeley - BUSINESS - 103
UGBA 103 Introduction to FinanceDmitry LivdanWalter A. Haas SchoolFall 2011Dmitry Livdan (Haas)UGBA 103Fall 20111 / 1790. IntroductionDmitry Livdan (Haas)UGBA 103Fall 20112 / 1790. IntroductionReadings: Berk and DeMarzo: Chapter 1.Dmitry Li
Berkeley - BUSINESS - 103
UGBA 103 Introduction to FinanceDmitry LivdanWalter A. Haas SchoolFall 2011Dmitry Livdan (Haas)UGBA 103Fall 20111 / 339I.4 The Valuation of Risky Cash FlowsDmitry Livdan (Haas)UGBA 103Fall 20112 / 339MotivationWe have by now developed a fair
Berkeley - BUSINESS - 103
UGBA 103 2010 Midterm Solutions 1. (a) 10K today: P V (11K) = (b) 1 + rnom = (1 + i)(1 + rreal ) rreal = 1.1/1.05 - 1 = 4.7619% 2. The mortgage has 17 years left, so there are N = 17 12 = 204 payments of C = 1500 remaining. The effective monthly interest
Berkeley - BUSINESS - 103
Syllabus (tentative) UGBA 103 Introduction to Finance -Fall 2011instructor: office: email: office hours: class time:ProfessorDmitry Livdan F473 livdan@haas.berkeley.edu Wednesday: 10:00 -11:30 AMUGBA103-1 MW 8:00AM-9:30AM F295 (Anderson Auditorium) UGB
Virtual University of Pakistan - BBA - 3
How to Write a Memo: Standard Conventions for Inter-Office Business Correspondence Emily Thrush March 4, 2000 MEMORANDUM TO: Mr. and Ms. Business Communicator FROM: Emily A. Thrush, Column Editor SUBJECT: Memo writing -This memo outlines how to write an e
John Wood CC - ECO - 101
Chapter 16. A Macroscopic Description of Matter Macroscopic systems are characterized as being either solid, liquid, or gas (water). These are called the phases of matter. In this chapter we'll be interested in when and how a system changes from one phas
John Wood CC - ECO - 101
Starting Monday, the Physics Learning Center (223 Kinard) will be open: M: 8:00am 9:00pm T: 8:00am 8:00pm W: 10:00am 12:00pm, 1:00pm 8:00pm TH: 8:00am 9:00pm F: 8:00am 12:00pm, 2:00pm 9:00pm There will be a homework help session on Thursday, September 1 a
John Wood CC - ECO - 101
Chapter 18. The Micro/Macro ConnectionHeating the air in a hot-air balloon increases the thermal energy of the air molecules. This causes the gas to expand, lowering its density and allowing the balloon to float in the cooler surrounding air. Chapter Goa
John Wood CC - ECO - 101
Chapter 19. Heat Engines and Refrigerators IS THERE A WAY TO TRANSFORM HEAT INTO WORK? Thermodynamics is the branch of physics that studies the transformation of energy.Copyright 2008 Pearson Education, Inc., publishing as Pearson Addison-Wesley. What
John Wood CC - ECO - 101
Chapter 26 Electric Charges and ForcesSample question:In electrophoresis, what force causes DNA fragments to migrate through the gel? How can an investigator adjust the migration rate?Copyright 2007, Pearson Education, Inc., Publishing as Pearson Addis
John Wood CC - ECO - 101
Chapter 27. The Electric FieldWhat makes the electrons flow (current) in your computer and the nerves in your body? ANS: Electric fields Electric fields also line up polymer molecules to form the images in a liquid crystal display (LCD). Chapter Goal: To
John Wood CC - ECO - 101
EG 210: CAD and Engineering Application Sections 30, 31 & 32 Fall 2011HW #1: Download AutoCAD 2010 Date Assigned: 08/25/2011 Due Date: 08/30/2011 in the beginning of the class No late submissionEx1: Download AutoCAD 2010. You can go to CCIT or download