ch 08 test bank cost acctg
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ch 08 test bank cost acctg

Course Number: ACC 4020, Summer 2012

College/University: Utah Valley University

Word Count: 10245

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Lewis, Inc. sells candles. The estimated numbers of candle sales for the last three months of 2009 are as follows: Finished goods inventory at September 30 was 5,000 units. Ending finished goods inventory is projected to be 20% of next month's sales. Lewis expects to sell each candle for $5. January 2010 sales are projected at 13,000. What is the number of expected units that should be produced in December 2009?...

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Inc. Lewis, sells candles. The estimated numbers of candle sales for the last three months of 2009 are as follows: Finished goods inventory at September 30 was 5,000 units. Ending finished goods inventory is projected to be 20% of next month's sales. Lewis expects to sell each candle for $5. January 2010 sales are projected at 13,000. What is the number of expected units that should be produced in December 2009? a. 16,600 b. 15,400 c. 16,000 d. 29,000 status: not answered () correct: b your answer: 2 Puerto Mont Company has the following budgeted data for a merchandising firm: Assuming there was inventory on hand of $70,000 (at cost) on January 1, the purchases for January (at cost) would be: a. b. $250,000. c. $263,000. d. $110,000. status: not answered () correct: c your answer: 3 Caracas Company, a merchandising firm, is preparing its master budget and has gathered the following data to help budget cash disbursements: All of the accounts payable are for inventory purchases, and all inventory is purchased on account. What are the estimated cash disbursements for inventories for the budget period? a. b. $1,600,000 c. $1,900,000 d. $1,760,000 status: not answered () correct: d your answer: 4 Chegedu Company will open a new store on January 1. Based on experience from its other retail outlets, Chegedu is making the following sales projections: Chegedu estimates that 70% of the credit sales will be collected in the month following the month of the sale, with the balance collected in the second month following the sale. Based on these data, the budgeted cash receipts for April will be: a. b. $57,000. c. $114,000. d. $97,000. status: not answered () correct: d your answer: 5 Chegedu Company will open a new store on January 1. Based on experience from its other retail outlets, Chegedu is making the following sales projections: Chegedu estimates that 70% of the credit sales will be collected in the month following the month of the sale, with the balance collected in the second month following the sale. Based on these data, the March 31 balance in accounts receivable will be: a. b. $60,000. c. $95,000. d. $75,000. status: not answered () correct: d your answer: 6 Puerto Mont Company has the following budgeted data for a merchandising firm: Assume that all purchases are paid for in the month following the purchase. The cash disbursements for purchases that would appear in the April cash budget would be: a. b. $157,500. c. $240,000. d. $217,500. status: not answered () correct: d your answer: 7 The Quito Company budgeted its activity for September according to the following information: Sales are budgeted at $392,000, and all sales are for cash. All purchases of merchandise inventory are for cash. Merchandise inventory was $150,000 on August 31, and the planned merchandise inventory on September 30 is $140,000. All merchandise is sold at 40% above cost. The selling and administrative expenses are budgeted at $92,000 for the month. All of these expenditures are paid for in cash, except for depreciation of $12,000. The budgeted net income for September is: a. b. $143,200. c. $112,000. d. $64,800. status: not answered () correct: a your answer: 8 The Quito Company budgeted its activity for September according to the following information: Sales are budgeted at $392,000, and all sales are for cash. All purchases of merchandise inventory are for cash. Merchandise inventory was $150,000 on August 31, and the planned merchandise inventory on September 30 is $140,000. All merchandise is sold at 40% above cost. The selling and administrative expenses are budgeted at $92,000 for the month. All of these expenditures are paid for in cash, except for depreciation of $12,000. The budgeted cash disbursements for September are: a. b. $270,000. c. $350,000. d. $362,000. status: not answered () correct: c your answer: 9 Campbell, Inc. has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels. Campbell had the following budgeted data: What is the difference in total budgeted costs between the volume range of 10,000 and 11,000 units? a. b. $12,000 c. $28,000 d. $380,000 status: not answered () correct: c your answer: 10 Radici, Inc. has done a cost analysis for its production of refractors. The following activities and cost drivers have been developed: What is the total budgeted batch cost if there was production of 25,000 refractors that will require 9,500 machine hours, 15 batches and 900 purchase orders? a. b. $45,000 c. $47,657.50 d. $82,657.50 status: not answered () correct: d your answer: Chapter 8The Master Budget MULTIPLE CHOICE 1. A budget aids in a. communication. b. motivation. c. coordination. d. all of the above. Register to View AnswerPTS: 1 DIF: Easy NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling OBJ: 8-1 2. Measuring the firm's performance against established objectives is part of which of the following functions? a. Planning b. Controlling c. Organizing d. Staffing Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 3. The preparation of an organization's budget a. forces management to look ahead and try to see the future of the organization. b. requires that the entire management team work together to make and carry out the yearly plan. c. makes performance review possible at all levels of management. d. all of the above. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 4. Which of the following is a basic element of effective budgetary control? a. cost behavior patterns b. cost-volume-profit analysis c. standard costing d. all of the above Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 5. When actual performance varies from the budgeted performance, managers will be more likely to revise future budgets if the variances were a. controllable rather than uncontrollable. b. uncontrollable rather than controllable. c. favorable rather than unfavorable. d. small. Register to View AnswerPTS: 1 DIF: Moderate OBJ: 8-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 6. External factors that cause the achievement of company goals are the a. annual budget. b. industry price and cost structure. c. talents possessed by its managers. d. board of directors. Register to View AnswerPTS: 1 DIF: Easy NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling 7. A budget is OBJ: 8-1 a. a planning tool. b. a control tool. c. a means of communicating goals to the firm's divisions. d. all of the above. Register to View AnswerPTS: 1 DIF: Easy NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling OBJ: 8-1 8. Ineffective budgets and/or control systems are characterized by the use of a. budgets as a planning tool only and disregarding them for control purposes. b. budgets for motivation. c. budgets for coordination. d. the budget for communication. Register to View AnswerPTS: 1 DIF: Easy NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling OBJ: 8-1 9. Strategic planning is a. planning activities for promoting products for the future. b. planning for appropriate assignments of resources. c. setting standards for the use of important but hard-to-find materials. d. stating and establishing long-term plans. Register to View AnswerPTS: 1 DIF: Easy NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling 10. Key variables that are identified in strategic planning are a. normally controllable if they are internal. b. seldom if ever controllable. c. normally controllable if they occur in a domestic market. OBJ: 8-1 d. normally uncontrollable if they are internal. Register to View AnswerPTS: 1 DIF: Easy NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling OBJ: 8-1 11. Tactical planning usually involves which level of management? a. middle b. top c. middle and top d. operational Register to View AnswerPTS: 1 DIF: Easy NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling OBJ: 8-1 12. Which of the following statements is true? a. All organizations have the same set of budgets. b. All organizations are required to budget. c. Budgets are a quantitative expression of an organization's goals and objectives. d. Budgets should never be used to evaluate performance. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 13. Which of the following is not an "operating" budget? a. sales budget b. production budget c. purchases budget d. capital budget Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 14. The master budget is a static budget because it a. is geared to only one level of production and sales. b. never changes from one year to the next. c. covers a preset period of time. d. always contains the same operating and financial budgets. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 15. The master budget is a a. static budget. b. flexible budget. c. qualitative expression of a prior goal. d. qualitative expression of a future goal. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 16. The master budget usually includes a. an operating budget. b. a capital budget. c. pro forma financial statements. d. all of the above. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 17. Which of the following is usually perceived as being the master budget's greatest advantage to management? a. performance analysis b. increased communication c. increased coordination d. required planning Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 18. Chronologically, the first part of the master budget to be prepared would be the a. sales budget. b. production budget. c. cash budget. d. pro forma financial statements. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 19. An example of a recurring short-term plan is a. a probable product line change. b. expansion of plant and facilities. c. a unit sales forecast. d. a change in marketing strategies. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 20. If the chief accountant of a firm has to prepare an operating budget for the coming year, the first budget to be prepared is the a. sales budget. b. cash budget. c. purchases budget. d. capital budget. Register to View Answer PTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 21. It is least likely that a production budget revision would cause a revision in the a. capital budget. b. cash budget. c. purchases budget. d. pro forma balance sheet. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 22. Budgeted production for a period is equal to a. the beginning inventory + sales - the ending inventory. b. the ending inventory + sales - the beginning inventory. c. the ending inventory + the beginning inventory - sales. d. sales - the beginning inventory + purchases. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 23. Chronologically, in what order are the sales, purchases, and production budgets prepared? a. sales, purchases, production b. sales, production, purchases c. production, sales, purchases d. purchases, sales, production Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 24. The material purchases budget tells a manager all of the following except the a. quantity of material to be purchased each period. b. quantity of material to be consumed each period. c. cost of material to be purchased each period. d. cash payment for material each period. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 25. Of the following budgets, which one is least likely to be determined by the dictates of top management? a. sales b. material usage c. revenues d. general and administrative Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 26. The amount of raw material purchased in a period may be different than the amount of material used that period because a. the number of units sold may be different from the number of units produced. b. finished goods inventory may fluctuate during the period. c. the raw material inventory may increase/decrease during the period. d. companies often pay for material in the period after it is purchased. Register to View AnswerPTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 27. A purchases budget a. does not reflect early payment discounts granted by vendors. b. is the same thing as a production budget. c. is needed only if a firm does not pay for its merchandise in the same period as it is purchased. d. is affected by a firm's inventory policy only if the firm purchases on credit. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 28. Which of the following equations can be used to budget purchases? (BI = beginning inventory, EI = ending inventory desired, CGS = budgeted cost of goods sold, P = budgeted purchases) a. P = CGS + BI - EI b. P = CGS + BI c. P = CGS + EI + BI d. P = CGS + EI - BI Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 29. Both the budgeted quantity of material to be purchased and the budgeted quantity of material to be consumed can be found in the a. material purchases budget. b. production budget. c. pro forma income statement. d. cash budget. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 30. A company that maintains a raw material inventory, which is based on the following month's production needs, will purchase less material than it uses in a month where a. sales exceed production. b. production exceeds sales. c. planned production exceeds the next month's planned production. d. planned production is less than the next month's planned production. Register to View AnswerPTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 31. If a company has a policy of maintaining an inventory of finished goods at a specified percentage of the next month's budgeted sales, budgeted production for January will exceed budgeted sales for January when budgeted a. February sales exceed budgeted January sales. b. January sales exceed budgeted December sales. c. January sales exceed budgeted February sales. d. December sales exceed budgeted January sales. Register to View AnswerPTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 32. Depreciation on the production equipment would appear in which of the following budgets? a. cash budget b. production budget c. selling and administrative expense budget d. manufacturing overhead budget Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 33. The selling, general, and administrative expense budget is based on the ____ budget. a. production b. sales c. cash d. purchases Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 34. The budgeted amount of selling and administrative expense for a period can be found in the a. sales budget. b. cash budget. c. pro forma income statement. d. pro forma balance sheet. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 35. Which of the following represents a proper sequencing in which the budgets below are prepared? a. Direct Material Purchases, Cash, Sales b. Production, Sales, Income Statement c. Sales, Balance Sheet, Direct Labor d. Sales, Production, Manufacturing Overhead Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 36. The detailed plan for the acquisition and replacement of major portions of property, plant, and equipment is known as the a. capital budget. b. purchases budget. c. commitments budget. d. treasury budget. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 37. The budgeted payment for labor cost each period would be found in the a. labor budget. b. pro forma income statement. c. selling, general, and administrative expense budget. d. cash budget. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 38. The cash budget ignores all a. dividend payments. b. sales of capital assets. c. noncash accounting accruals. d. sales of common stock. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 39. Which of the following items would not be found in the financing section of the cash budget? a. cash payments for debt retirement b. cash payments for interest c. cash payments for sales of investments d. payment of accounts payable Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-4 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 40. The primary reason that managers impose a minimum cash balance in the cash budget is a. because management needs discretionary cash for unforeseen business opportunities. b. managers lack discipline to control their spending. c. that it protects the organization from the uncertainty of the budgeting process. d. that it makes the financial statements look more appealing to creditors. Register to View AnswerPTS: 1 NAT: AACSB: Reflective Thinking DIF: Easy OBJ: 8-4 LOC: AICPA Functional Competencies: Measurement, Reporting 41. Chronologically, the last part of the master budget to be prepared would be the a. pro forma financial statements. b. cash budget. c. capital budget d. production budget. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 42. The pro forma income statement is not a component of the a. master budget. b. financial budgets. c. operating budgets. d. capital budget. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 43. A pro forma financial statement is a. a financial statement for past periods. b. a projected or budgeted financial statement. c. presented for the form but contains no dollar amounts. d. a statement of planned production. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 44. A master budget contains which of the following? Sales Production Pro forma statements a. yes yes yes b. no no yes c. no no no d. yes no yes Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 45. The budgeted cost of products to be sold in a future period would be found in the a. production budget. b. sales budget. c. purchases budget. d. pro forma income statement. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 46. A budget that includes a 12-month planning period at all times is called a ____ budget. a. pro forma b. flexible c. master d. continuous Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 47. The method of budgeting that adds one month's budget to the end of the plan when the current month's budget is dropped from the plan is called ____ budgeting. a. long-term b. operations c. incremental d. continuous Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 48. Slack in operating budgets a. results from unintentional managerial acts. b. makes an organization more efficient and effective. c. requires managers to work harder to achieve the budget. d. is greater when managers are allowed to participate in the budgeting process. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 49. Budget slack is a condition in which a. demand is low at various times of the year. b. excess machine capacity exists in some areas of the plant. c. there is an intentional overestimate of expenses or an underestimate of revenues. d. managers grant favored employees extra time off. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 50. Topaz Company has the following expected pattern of collections on credit sales: 70 percent collected in the month of sale, 15 percent in the month after the month of sale, and 14 percent in the second month after the month of sale. The remaining 1 percent is never collected. At the end of May, Topaz Company has the following accounts receivable balances: From April sales From May sales $21,000 48,000 Topaz's expected sales for June are $150,000. What were total sales for April? a. $150,000 b. $72,414 c. $70,000 d. $140,000 Register to View AnswerBalance in A/R from April sales: $21,000/0.15 = $140,000 15% represents the amount of April receivables uncollected at the end of May. PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting . 51. Jackson Company has a policy of maintaining an inventory of finished goods equal to 30 percent of the following month's sales. For the forthcoming month of March, Jackson has budgeted the beginning inventory at 30,000 units and the ending inventory at 33,000 units. This suggests that a. February sales are budgeted at 10,000 units less than March sales. b. March sales are budgeted at 10,000 units less than April sales. c. February sales are budgeted at 3,000 units less than March sales. d. March sales are budgeted at 3,000 units less than April sales. Register to View AnswerIncrease in inventory = 3,000 units 3,000/0.30 = 10,000 increase for April over March. PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 52. Budgeted sales for the first six months for Wardrope Corp. are listed below: JANUARY FEBRUARY MARCH APRIL MAY JUNE 6,000 7,000 8,000 7,000 5,000 4,000 UNITS: Wardrope Corp. has a policy of maintaining an inventory of finished goods equal to 40 percent of the next month's budgeted sales. If Wardrope Corp. plans to produce 6,000 units in June, what are budgeted sales for July? a. 3,600 units b. 1,000 units c. 9,000 units d. 8,000 units Register to View AnswerBeginning Inventory for June 1,600 units (4,000 * 40%) Produced in June 6,000 units Deduct: June sales (4,000) units Ending inventory for June 3,600 units 3,600/0.40 = 9,000 units PTS: 1 DIF: Difficult OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 53. Budgeted sales for the first six months for Shelton Corp. are listed below: JANUARY UNITS: FEBRUARY MARCH APRIL MAY JUNE 5,000 6,000 9,000 8,000 6,000 5,000 Shelton Corp. has a policy of maintaining an inventory of finished goods equal to 30 percent of the next month's budgeted sales. If Shelton Corp. plans to produce 8,000 units in June, what are budgeted sales for July? a. 3,000 units b. 4,500 units c. 10,000 units d. 15,000 units Register to View AnswerBeginning Inventory for June 1,500 units (5,000 * 30%) Produced in June 8,000 units Deduct: June sales (5,000) units Ending inventory for June 4,500 units 4,500/0.30 = 15,000 units PTS: 1 DIF: Difficult OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 54. Simmons Co. manufactures card tables. The company has a policy of maintaining a finished goods inventory equal to 40 percent of the next month's planned sales. Each card table requires 3 hours of labor. The budgeted labor rate for the coming year is $13 per hour. Planned sales for the months of April, May, and June are respectively 4,000; 5,000; and 3,000 units. The budgeted direct labor cost for June for Simmons Co. is $136,500. What are budgeted sales for July for Simmons Co.? a. 3,500 units b. 4,250 units c. 4,000 units d. 3,750 units Register to View AnswerCard tables to be produced in June: $136,500 / $13 = 10,500 hours 10,500 hrs/3 hrs/table = 3,500 card tables Beginning Inventory for July 1,200 units (3,000 * 40%) Produced in June 3,500 units Deduct: June sales (3,000) units Ending inventory for June 1,700 units Budgeted sales for July: 1,700/0.40 = 4,250 units PTS: 1 DIF: Difficult OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 55. Budgeted sales for Madonna Inc. for the first quarter the year are shown below: JANUARY UNITS: FEBRUARY MARCH 35,000 25,000 32,000 The company has a policy that requires the ending inventory in each period to be 10 percent of the following period's sales. Assuming that the company follows this policy, what quantity of production should be scheduled for February? a. 24,300 units b. 24,700 units c. 25,000 units d. 25,700 units Register to View AnswerEnding Inventory, February February Sales Requirements for Month Less Beginning Inventory, February Production scheduled for February 3,200 25,000 28,200 (2,500) 25,700 units units units units units PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 56. Budgeted sales for Brittany Inc. for the second quarter the year are shown below: UNITS: APRIL 40,000 MAY 30,000 JUNE 38,000 The company has a policy that requires the ending inventory in each period to be 15 percent of the following period's sales. Assuming that the company follows this policy, what quantity of production should be scheduled for May? a. 28,800 units b. 29,700 units c. 25,000 units d. 31,200 units Register to View AnswerEnding Inventory, May May Sales Requirements for Month Less Beginning Inventory, May Production scheduled for May 5,700 units 30,000 units 35,700 units (4,500) units 31,200 units PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 57. Budgeted sales for the first six months the year for Hooper Corporation are listed below: UNITS: JANUARY 5,000 FEBRUARY 6,000 MARCH 7,000 APRIL 6,000 MAY 4,000 JUNE 3,000 Hooper Corporation has a policy of maintaining an inventory of finished goods equal to 35 percent of the next month's budgeted sales. How many units has Hooper Corporation budgeted to produce in the first quarter of the year? a. 18,350 units b. 17,650 units c. 22,000 units d. 22,050 units Register to View AnswerDesired ending inventory March 31 Sales: 1st quarter Inventory needs Beginning inventory, January 1 Production 2,100 units 18,000 units 20,100 units (1,750) units 18,350 units PTS: 1 DIF: Difficult OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 58. Production of Product B has been budgeted at 200,000 units for Novenber. One unit of Product B requires 2 lbs. of raw material. The projected beginning and ending materials inventory for Novenber are: Beginning inventory: 2,000 lbs. Ending inventory: 10,000 lbs. How many lbs. of material should be purchased during Novenber? a. 192,000 b. 208,000 c. 408,000 d. 416,000 Register to View AnswerEnding inventory--Novenber Production needs: 200,000 units * 2 lbs/unit Inventory needed Beginning inventory--Novenber Total purchase requirements 10,000 lbs. 400,000 lbs. 410,000 lbs. (2,000) lbs. 408,000 lbs. PURCHASES BUDGET! (PRODUCTION NEEDS AKA # PLAN TO SELL!!!) So, production needs to satisfy current quarter sales + amt needed in EI for next quarter = TOTAL # needed BI +PURCH PRODUCTION NEEDS (PLAN TO SELL) +EI PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 59. Production of Product 101 has been budgeted at 300,000 units for June. One unit of Product 101 requires 3 lbs. of raw material. The projected beginning and ending materials inventory for June are: Beginning inventory: 4,000 lbs. Ending inventory: 16,000 lbs. How many lbs. of material should be purchased during June? a. 288,000 b. 312,000 c. 912,000 d. 936,000 Register to View AnswerEnding inventoryJune Production needs: 300,000 units * 3 lbs/unit Inventory needed Beginning inventory--June Total purchase requirements 16,000 lbs. 900,000 lbs. 916,000 lbs. (4,000) lbs. 912,000 lbs. PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Sky High Company Sky High Company manufactures toy airplanes. Information on Sky High Company's labor costs follow: Sales commissions Administration Indirect factory labor Direct factory labor $5 per plane $10,000 per month $3 per plane $5 per plane The following information applies to the upcoming month of July for Sky High Company: Budgeted production Budget sales 1,200 units 1,000 units 60. Refer to Sky High Company. What amount of budgeted labor cost would appear in the July selling, general, and administrative expense budget? a. $10,000 b. $16,000 c. $15,000 d. $23,000 Register to View AnswerSales Commissions (1,000 units * $5/plane Administration Labor in SG&A $ 5,000 $10,000 $15,000 PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 61. Refer to Sky High Company. What is Sky Highs budgeted factory labor cost for July? a. $8,000 b. $15,600 c. $25,600 d. $9,600 Register to View AnswerDirect labor per unit Indirect labor per unit Units produced Total budgeted labor cost $5.00/unit 3.00/unit 8.00/unit 1,200 units $9,600 PTS: 1 OBJ: 8-3 DIF: Moderate NAT: AACSB: Analytical Skills (factory labor costs include both DL and OH labor (direct and indirect labor)). 62. Conroy Company manufactures card tables. The company has a policy of maintaining a finished goods inventory equal to 40 percent of the next month's planned sales. Each card table requires 3 hours of labor. The budgeted labor rate for the coming year is $13 per hour. Planned sales for the months of April, May, and June are respectively 4,000; 5,000; and 3,000 units. What is Conroy Companys budgeted direct labor cost for May? a. $54,600 b. $163,800 c. $226,200 d. $179,400 Register to View AnswerEnding Inventory, May Sales: May Requirements for May Less: Beginning Inventory, May Units to be produced 1,200 units 5,000 units 6,200 units 2,000 units 4,200 units 3 hrs/unit * $13/hr $163,800 **( EI = X% of next months sales. Since EI of 1 period = BI of next period, then BI of current period is = to X% of its current period sales). PTS: 1 DIF: Difficult OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 63. Krause Company manufactures pool tables. The company has a policy of maintaining a finished goods inventory equal to 35 percent of the next month's planned sales. Each card table requires 4 hours of labor. The budgeted labor rate for the coming year is $12 per hour. Planned sales for the months of July, August, and September are respectively 6,000; 8,000; and 5,000 units. What is Krause Companys budgeted direct labor cost for August? a. $ 83,400 b. $333,600 c. $417,600 d. $434,400 Register to View AnswerEnding Inventory, August Sales: August Requirements for August Less: Beginning Inventory, August Units to be produced 1,750 units 8,000 units 9,750 units 2,800 units 6,950 units 4 hrs/unit * $12/hr $333,600 PTS: 1 DIF: Difficult OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 64. Cavanaugh Company has the following expected pattern of collections on credit sales: 70 percent collected in the month of sale, 15 percent in the month after the month of sale, and 14 percent in the second month after the month of sale. The remaining 1 percent is never collected. At the end of May, Cavanaugh Company has the following accounts receivable balances: From April sales From May sales $21,000 48,000 Cavanaughs expected sales for June are $150,000. How much cash will Cavanaugh Company expect to collect in June? a. $127,400 b. $129,000 c. $148,600 d. $152,520 Register to View AnswerJune sales ($150,000 * 70%) May sales (160,000 * 15%) April sales (140,000 * 14%) Total cash collections--June $105,000 24,000 19,600 $148,600 PTS: 1 DIF: Difficult OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 65. For the month of November, Hopkins Corporation. predicts total cash collections to be $1 million. Also for November, Hopkins Corporation. estimates that its beginning cash balance will be $50,000 and that it will borrow cash in the amount of $70,000. If Hopkins Corporation. estimates an ending cash balance of $30,000 for November, what must its projected cash disbursements be? a. $1,090,000 b. $1,120,000 c. $1,070,000 d. $1,020,000 Register to View AnswerBeginning Cash Balance Cash Collections Borrowings Cash Available Less: Ending Cash Balance Projected Cash Disbursements PTS: 1 DIF: Moderate $ 50,000 1,000,000 70,000 1,120,000 30,000 $1,090,000 OBJ: 8-3 NAT: AACSB: Analytical Skills BEG BAL + CASH COMING IN = END BAL + CASH GOING OUT 66. For the month of March, Burnham Corporation. predicts total cash collections to be $1.5 million. Also for March, Burnham Corporation. estimates that its beginning cash balance will be $60,000 and that it will borrow cash in the amount of $80,000. If Burnham Corporation. estimates an ending cash balance of $40,000 for March, what must its projected cash disbursements be? a. $1,520,000 b. $1,580,000 c. $1,600,000 d. $1,640,000 Register to View AnswerBeginning Cash Balance Cash Collections Borrowings Cash Available Less: Ending Cash Balance Projected Cash Disbursements $ 60,000 1,500,000 80,000 1,640,000 40,000 $1,600,000 PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 67. Edmond Medical Center has provided you with the following budget information for April: Cash collections April 1 cash balance Cash disbursements $876,000 23,000 978,600 Edmond has a policy of maintaining a minimum cash balance of $20,000 and borrows only in $1,000 increments. How much will Edmond borrow in April? a. $80,000 b. $79,600 c. $99,000 d. $100,000 Register to View AnswerApril 1 balance Add: Cash Collections Deduct: Cash Disbursements Cash Deficit Minimum Cash Balance Amount to Borrow $ 23,000 876,000 $899,000 978,600 $(79,600) 20,000 $ 99,600 rounded up to $100,000 PTS: 1 DIF: Moderate OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 68. Norman Medical Center has provided you with the following budget information for July: Cash collections July 1 cash balance Cash disbursements $918,000 32,000 1,020,400 Norman has a policy of maintaining a minimum cash balance of $30,000 and borrows only in $1,000 increments. How much will Norman borrow in July? a. $ 70,400 b. $ 71,000 c. $100,400 d. $101,000 Register to View AnswerJuly 1 balance Add: Cash Collections $ 32,000 918,000 $950,000 1,020,400 $(70,400) 30,000 $ (100,400) rounded up to $101,000 Deduct: Cash Disbursements Cash Deficit Minimum Cash Balance Amount to Borrow PTS: 1 DIF: Moderate OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Payne Companies CASH BUDGET Company A Company B Beginning cash balance Cash collections Cash disbursements Cash excess (shortage) Borrowing (repayments) Ending cash $100 ? 500 ? 300 200 Company C $300 400 ? ? 100 200 $700 ? 600 400 ? 100 69. Refer to Payne Companies. For Company A, what are the budgeted cash collections? a. $700 b. $500 c. $300 d. $400 Register to View AnswerEnding Cash Deduct Borrowings Cash Shortage Add Disbursements Deduct Beginning cash Budgeted cash collections PTS: 1 DIF: Moderate $ 200 (300) $(100) 500 (100) $ 300 OBJ: 8-4 NAT: AACSB: Analytical Skills MINIMUM CASH BALANCE ONLY EFFECTS EQUATION WHEN THERE IS A DEFICIT AND FUNDS NEED TO BE BORROWED TO COVER MIN CASH REQUIREMENTS!! 70. Refer to Payne Companies. For Company B, what are the budgeted cash disbursements? a. $600 b. $700 c. $500 d. $400 Register to View AnswerEnding Cash Deduct Borrowings $ 200 (100) Cash Balance Deduct collections Deduct Beginning cash Budgeted cash disbursements $ 100 (400) (300) $(600) PTS: 1 DIF: Moderate OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 71. Refer to Payne Companies. For Company C, what are the budgeted cash collections? a. $200 b. $300 c. $400 d. $500 Register to View AnswerEnding Cash Add Repayments Cash Balance Add disbursements Deduct Beginning cash Budgeted cash collections $ 100 300 $ 400 600 (700) $ 300 PTS: 1 DIF: Moderate OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Channing Company Channing Company is preparing its Manufacturing Overhead budget for the second quarter the of year. Budgeted variable factory overhead is $3.00 per unit produced; budgeted fixed factory overhead is $75,000 per month, with $16,000 of this amount being factory depreciation. 72. Refer to Channing Company. If the budgeted production for April is 6,000 units, then the total budgeted factory overhead for April is: a. $77,000 b. $82,000 c. $85,000 d. $93,000 Register to View Answer(6,000 units * $3.00/unit) + $75,000 = $93,000 Variable Fixed PTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 73. Refer to Channing Company. If the budgeted production for May is 5,000 units, then the total budgeted factory overhead per unit: a. $15 b. $18 c. $20 d. $22 Register to View Answer$3.00/unit + ($75,000/5,000 units) = $18/unit Variable Fixed PTS: 1 DIF: Easy OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 74. Refer to Channing Company. If the budgeted cash disbursements for factory overhead for June are $80,000, then the budgeted production for June must be: a. 7,400 units b. 6,200 units c. 6,500 units d. 7,000 units Register to View Answer$80,000 + $16,000 = $96,000 Budgeted Factory Overhead $96,000 - $75,000 = $21,000 Budgeted Variable Overhead/$3.00 per unit = 7,000 units PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Hilton Company Hilton Company, a reseller of womens fashions, has budgeted its activity for March. The budget information is presented below: I. II. III. IV. V. VI. VII. Sales are $550,000. All sales are cash. Merchandise inventory on February 28 is $300,000 Budgeted depreciation for March is $35,000. Cash in bank on March 1 is $25,000. Selling and administrative expenses are budgeted at $60,000 for March and are paid in cash. The planned merchandise inventory on March 31 is $270,000. The invoice cost for merchandise purchases represents 75% of sales price. All purchases are paid for in cash. 75. Refer to Hilton Company. The budgeted cash receipts for March are: a. $412,500 b. $137,500 c. $585,000 d. $550,000 Register to View AnswerCash sales = $550,000 PTS: 1 DIF: Easy OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 76. Refer to Hilton Company. The budgeted cash disbursements for March are: a. $382,500 b. $442,500 c. $472,500 d. $477,500 Register to View AnswerCost of Goods Sold = ($550,000 * .75) = $412,500 Purchases = $(270,000 + 412,500 - 300,000) = $382,500 S&A Expenses = $60,000 Cash disbursements = $382,500 + $60,000 = $442,500. PTS: 1 DIF: Difficult OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 77. Refer to Hilton Company. The budgeted net income for March is: a. $107,500 b. $137,500 c. $ 42,500 d. $ 77,500 Register to View AnswerNet Income = Sales - Cost of Goods Sold - S&A Expenses - Depreciation = $(550,000 - 412,500 - 60,000 - 35,000) = $42,500 PTS: 1 DIF: Difficult OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Gibbs Company Gibbs Company prepared a cash budget by quarters for the upcoming year. Missing data amounts are indicated with question marks or lower case letters; these lower case letters will be referred to in the questions that follow. Gibbs requires a minimum balance of $10,000 to start a quarter. All data are in thousands. Gibbs Corporation Cash Budget Cash balance, beginning Add collections from customers Total cash available Less disbursements: Purchase of inventory Operating expenses Equipment purchases Dividends Total disbursements Excess (deficiency) of cash available over disbursements Financing: QTR 1 $16 a ? QTR 2 $e 70 ? QTR 3 $13 67 80 QTR 4 $10 80 90 31 25 10 0 66 c 22 14 6 ? 40 ? 19 0 f 35 15 0 5 55 7 17 (2) 35 Borrowings: Repayments (including interest) Total financing Cash balance, ending b -? $10 ==== -d ? $? ==== 12 -12 $10 ==== -(12) (12) $23 ==== 78. Refer to Gibbs Company. The collections from customers during the first quarter (item a) are: a. $50 b. $60 c. $57 d. $73 Register to View AnswerTotal cash available = Excess of cash available over disbursements + Total disbursements = $(7 + 66) = $73 Total cash collections from customers = Total cash available - Beginning cash balance = $(73 - 16) = $57 PTS: 1 DIF: Moderate OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 79. Refer to Gibbs Company. The borrowing required during the first quarter to meet the minimum cash balance (item b) is: a. $0 b. $7 c. $10 d. $ 3 Register to View AnswerBorrowings required = Ending cash balance - Excess of cash over disbursements = $(10 - 7) = $3 PTS: 1 DIF: Easy OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 80. Refer to Gibbs Company. The cash disbursed for purchases during the second quarter (item c) is: a. $13 b. $55 c. $ 9 d. $21 Register to View AnswerTotal cash available = $80 Excess of cash available over disbursements = $17 Therefore, disbursements = $63 $(x + 22 + 14 + 6) = $63 x = $21 PTS: 1 DIF: Moderate OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 81. Refer to Gibbs Company. The repayment (including interest) of financing during the second quarter (item d) is: a. $ 4 b. $ 0 c. $17 d. $ 7 Register to View AnswerEnding balance of cash = $13 (same as beginning balance of 3rd quarter) Excess of cash available over disbursements = $17 Repayments = $4 PTS: 1 DIF: Moderate OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 82. Refer to Gibbs Company. The cash balance at the beginning of the second quarter (item e) is: a. $10 b. $14 c. $ 0 d. $ 7 Register to View AnswerBeginning cash balance for second quarter is the same as ending balance for first quarter: $10. PTS: 1 DIF: Easy OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 83. Refer to Gibbs Company. The total disbursements during the third quarter (item f) is: a. $84 b. $78 c. $82 d. $59 Register to View AnswerDeficiency of cash disbursements over cash available Cash available Cash disbursements = $(2) = $80 = $82 PTS: 1 DIF: Easy OBJ: 8-4 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting Rapid Rails Company Rapid Rails Company manufactures toy airplanes. Information on Rapid Rails Company's labor costs follow: Sales commissions Administration Indirect factory labor Direct factory labor $6 per plane $12,000 per month $4 per plane $6 per plane The following information applies to the upcoming month of July for Rapid Rails Company: Budgeted production Budgeted sales 1,500 units 1,300 units 84. Refer to Rapid Rails Company. What amount of budgeted labor cost would appear in the July selling, general, and administrative expense budget? a. $12,000 b. $21,000 c. $19,800 d. $32,800 Register to View AnswerSales Commissions (1,300 units * $6/plane Administration Labor in SG&A $ 7,800 $12,000 $19,800 PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 85. Refer to Rapid Rails Company. What is Rapid Rails budgeted factory labor cost for July? a. $13,000 b. $24,000 c. $34,000 d. $15,000 Register to View AnswerDirect labor per unit Indirect labor per unit Units produced Total budgeted labor cost $6.00/unit 4.00/unit 10.00/unit 1,500 units $15,000 PTS: 1 DIF: Moderate OBJ: 8-3 NAT: AACSB: Analytical Skills LOC: AICPA Functional Competencies: Measurement, Reporting 86. A budget manual should include which of the following? a. a list of specific budgetary activities to be performed b. original, revised, and approved budgets c. a calendar of scheduled budgetary activities d. all of the above Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-7 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 87. Managers may be more willing to accept a budget if a. it is continuous. b. it is imposed. c. it is very hard to attain. d. they can participate in its development. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 88. Which of the following is not true about an imposed budget? a. It reduces the budgeting process time frame. b. It uses the knowledge of top management as it relates to resource availability. c. It enhances coordination. d. It increases the feeling of teamwork. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 89. A disadvantage of participatory budgets is that a. there is a high degree of acceptance of the goals and objectives by operating management. b. they are usually more realistic. c. they lead to better morale and higher motivation. d. they usually require more time to prepare. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-6 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 90. The master budget a. reflects the determination of an organization's cost of capital. b. serves as a managerial tool for the organization. c. includes only an organization's pro forma financial statements. d. utilizes only information from the financial accounting system. Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-2 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting 91. Which of the following items should not be included in a companys budget manual? a. sample budgetary forms b. a statement of desired results of the budget c. a listing of budgetary activities to be performed d. financial statements for the upcoming fiscal year Register to View AnswerPTS: 1 DIF: Easy OBJ: 8-7 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Measurement, Reporting Accounting 203 Test 3 Name________________________ 1. The variance that is most useful in assessing the performance of the purchasing department manager is: A) B) C) D) A) B) C) D) the materials quantity variance. the materials price variance. the labor rate variance. the labor efficiency variance. 2. A basic idea underlying __________________ is that a manager should be held responsible only for those items that the manager can actually control to a significant extent. participative budgeting planning and control responsibility accounting the master budget 3. The following materials standards have been established for a particular product: A) B) C) D) What is the materials quantity variance for the month? $4,220 U $1,188 F $1,266 F $3,960 U 4. Traverse Company manufactures and sells women's skirts. Each skirt (unit) requires 2.5 yards of cloth. Selected data from Traverse's master budget for next quarter are shown below: A) B) C) Each unit requires 1.5 hours of direct labor, and the average hourly cost of Traverse's direct labor is $10. What is the cost of Traverse Company's direct labor in September? $135,000 $180,000 12k*1.5*10 $157,500 D) $120,000 5. The following materials standards have been established for a particular product: A) B) C) D) What is the materials price variance for the month? $6,250 U $4,030 U $8,679 U $6,575 U 6. The following costs appear in Malgorzata Company's flexible budget at an activity level of 15,000 machine-hours: A) B) C) D) Item A Item B Item C Item D 7. Riggs Enterprise's flexible budget cost formula for indirect materials, a variable cost, is $0.45 per unit of output. If the company's performance report for last month shows a $90 favorable variance for indirect materials and if 8,700 units of output were produced A) B) C) D) last month, then the actual costs incurred for indirect materials for the month must have been: $4,005 $3,915 $3,825 $3,735 8. Which of the following budgets are prepared before the sales budget? A) B) C) D) A) B) C) D) Item A Item B Item C Item D 9. A budget that is based on the actual activity of a period is known as a: continuous budget. flexible budget. static budget. master budget. 10. The following standards for variable manufacturing overhead have been established for a company that makes only one product: A) B) C) D) What is the variable overhead efficiency variance for the month? $1,680 F $2,040 U $2,110 U $3,790 U A) B) C) D) 11. The purpose of a flexible budget is to: allow management some latitude in meeting goals. eliminate fluctuations in production reports by ignoring variable costs. compare actual and budgeted results at virtually any level of activity. reduce the time to prepare the annual budget. 12. Garry Manufacturing Corporation's most recent production budget indicates the following required production: A) B) C) D) Each unit of finished product requires 5 pounds of raw materials. The company maintains raw materials inventory equal to 25% of the next month's expected production needs. How many pounds of raw material should Garry plan on purchasing for the month of November? 1,006,250 793,750 1,012,500 893,500 13. Mongelli Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: A) B) C) D) The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 99 guests? Assume that the activity levels of 90 guests and 99 guests are within the same relevant range. $7,793.90 $61,541.00 $8,512.90 $7,739.00 14. Rodriques Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,630 square feet and the actual level of activity was 1,720 square feet. The company's owner budgets for supply costs, a variable overhead cost, at $3.40 per square foot. The actual supply cost last month was $6,750. In the company's flexible budget performance report for last month, what would have been the variance for supply costs? A) $353 U B) $306 U C) $902 U D) $1,208 U Use the following to answer questions 15-16: Garrigus Corporation is developing direct labor standards. The basic direct labor wage rate is $14.00 per hour. Employment taxes are 10% of the basic wage rate. Fringe benefits are $3.53 per direct labor-hour. A particular product requires 0.74 direct labor-hours per unit. The allowance for breaks and personal needs is 0.05 direct labor-hours per unit. The allowance for cleanup, machine downtime, and rejects is 0.13 direct labor-hours per unit. A) B) C) D) 15. The standard direct labor-hours per unit should be: 0.69 0.56 0.74 0.92 A) B) C) D) 16. The standard rate per direct labor-hour should be: $9.07 $14.00 $18.93 $4.93 17. The following labor standards have been established for a particular product: A) B) C) D) What is the labor efficiency variance for the month? $3,025 U $5,400 U $3,025 F $5,475 U 18. Persechino Corporation is developing standards for its products. One product requires an input that is purchased for $82.00 per kilogram from the supplier. By paying cash, the company gets a discount of 2% off this purchase price. Shipping costs from the supplier's warehouse amount to $6.55 per kilogram. Receiving costs are $0.47 per kilogram. The standard price per kilogram of this input should be: A) $76.62 B) $87.38 C) $90.66 D) $82.00 19. Pooler Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.15 direct labor-hours. The direct labor rate is $7.00 per direct labor-hour. The production budget calls for producing 6,500 units in April and 6,200 units in May. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 1,000 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months? A) $13,825.00 B) $13,335.00 C) $14,000.00 D) $13,510.00 20. Piper Company should work 1,000 direct labor-hours to produce 250 units of product. During October the company worked 1,250 direct labor-hours and produced 300 units. The standard hours allowed for October would be: A) 1,250 hours B) 1,000 hours C) 1,200 hours D) it is impossible to determine from the data given. 21. Jeffs Corporation is developing direct labor standards. The basic direct labor wage rate is $14.00 per hour. Employment taxes are 11% of the basic wage rate. Fringe benefits are $3.24 per direct labor-hour. The standard rate per direct labor-hour should be: A) $14.00 B) $9.22 C) $4.78 D) $18.78 Use the following to answer questions 22-23: KAB Inc., a small retail store, had the following results for May. The budgets for June and July are also given. Sales are collected 80% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to sale. Suppliers of the goods are paid in the month following the sale. The "selling and administrative expenses" are paid in the month of the sale. A) B) C) D) 22. The amount of cash collected during the month of June should be: $32,000 $40,000 $40,400 $41,000 23. The cash disbursements during the month of June for goods purchased for resale and for selling and administrative expenses should be: A) $40,000 B) $41,000 C) $42,500 D) $43,500 Use the following to answer questions 24-28: Longview Hospital performs blood tests in its laboratory. The following standards have been set for each blood test performed: During May, the laboratory performed 1,500 blood tests. On May 1 there were no direct materials (plates)on hand; after a plate is used for a blood test it is discarded. Variable overhead is assigned to blood tests on the basis of direct labor hours. The following events occurred during May: - 3,600 plates were purchased for $9,540 - 3,200 plates were used for blood tests - 340 actual direct labor hours were worked at a cost of $5,550 24. The materials price variance for May is: A) $360 F B) $360 U C) $740 F D) $740 U 25. The labor efficiency variance for May is: A) $600 F B) $600 U C) $515 U D) $515 F 26. The labor rate variance for May is: A) $225 F B) $225 U C) $450 F D) $450 U A) B) C) D) 27. The materials quantity variance for May is: $1,650 F $1,650 U $550 U $720 F 28. The variable overhead efficiency variance for May is A) $350 F B) $350 U C) $280 U D) $280 F 29. The following standards for variable manufacturing overhead have been established for a company that makes only one product: A) B) C) D) What is the variable overhead rate variance for the month? $23,660 U $1,750 F $24,860 U $1,200 U 30. The following labor standards have been established for a particular product: A) B) C) D) What is the labor rate variance for the month? $687 F $2,106 F $1,410 F $2,106 U 31. Haylock Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 5,600 direct labor-hours will be required in August. The variable overhead rate is $5.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $69,440 per month, which includes depreciation of $15,680. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: $99,680 $84,000 $53,760 $30,240 A) B) C) D) 32. On October 1, The Gala Manufacturing Company has 300 units of Product XYZ on hand. The company plans to sell 1,200 units of Product XYZ during October, and plans to have 500 units on hand October 31. How many units of Product XYZ must be produced during October? A) 1,400 B) 1,500 C) 1,000 D) 2,000 A) B) C) D) 33. An organization's budget program should not be used: to motivate employees. to assign blame to managers that do not meet budgetary goals. to help evaluate managers. to allocate resources to the various parts of an organization. Answer Key 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. B C C B B D C D B B C B A C D C D B C C D 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. C B A B D C C B C B A B MULTIPLE-CHOICE QUIZ Complete each of the following statements by circling the letter of the best answer. 1. Operating budgets are: a. a forecast of expected operating expenses. b. a forecast of operating expenses. c. a forecast of units of production. d. concerned with the income-generating activities of a firm. e. concerned with the inflows and outflows of cash. 2. Which of the following is not an advantage of budgeting? a. It forces managers to plan. b. It provides resource information that can be used to improve decision making. c. It aids in the use of resources and employees by setting a benchmark that can be used for the subsequent evaluation of performance. d. It provides organizational independence. e. It improves communication and coordination. 3. Morgan Company produces and sells laptop computers. It had 2,000 computers in finished goods inventory at the end of the last year. The company expects to sell 20,000 computers and would like to complete operations in this year with at least 2,500 completed computers in inventory. There is no ending work-in-process inventory in either year. The laptop computers sell for $2,000 each. How many laptop computers would be produced for the next year? a. b. c. d. e. 20,000 20,500 22,000 22,500 24,500 4.Reid Company is budgeting production of 100,000 units of product R for the month of September this year. Production of one unit of product R requires three units of material B. For material B, the actual inventory units at September 1 were 22,000 units and budgeted inventory units at September 30 are 24,000. How many units of material B is Reid planning to purchase during September? a. 328,000 b. 302,000 c. 298,000 d. 272,000 e. 250,000 5. Which of the following factors is not a responsibility of the budget committee? a. Reviews the budget. b. Provides policy guidelines. c. Provides budgeting goals. d. Resolves differences that may arise as the budget is prepared. e. Prepares actual financial statements. 6. XYZ has forecast sales for the next three months as follows: January, 10,000 units; February, 15,000 units; and March, 20,000 units. Inventory as of January 1 is expected to be 2,000 units. Ending inventories should equal 25% of the coming months sales needs. How many units should be produced in February? a. 13,750 units b. 15,000 units c. 16,250 units d. 18,000 units e. none of the above 7. Acme Company has observed its accounts receivable collection pattern to be as follows: 40% in the month of the sale, 45% in the month following the sale, and 13% in the second month following the sale. Sales for the last three months of the year were as follows: October, $300,000; November, $450,000; and December, $625,000. Sales for January are budgeted to be $375,000. What are the budgeted cash collections for January? a. $375,000 b. $489,750 c. $495,750 d. $625,000 e. none of the above 8. Scooter Corp. has forecast sales as follows: July, 30,000 units; August, 35,000 units; and September, 40,000 units. Finished goods inventory as of July 1 is forecast to be 10,000 units. Finished goods inventory of 20% of the following months sales needs is desired. Each finished unit requires 5 pounds of raw material. The raw materials inventory level on July 1 was 202,500 pounds and the expected raw materials inventory level on July 31 will be 270,000 pounds. How many pounds of raw material should be purchased in July? a. 27,000 pounds b. 40,500 pounds c. 135,000 pounds d. 202,500 pounds e. none of the above 9. Which of the following items would have to be included for a company preparing a schedule of cash receipts and disbursements for the calendar year 2003? a. The annual depreciation for 2003. b. A purchase order issued in December 2003 for items to be delivered in February 2004. c. Dividends declared in November 2003, to be paid in January 2004 to shareholders of record as of December 2003. d. The amount of uncollectible customer accounts for 2003. e. Funds borrowed from a bank on a note payable taken out in June 2002 with an agreement to pay the principal and all of the interest owed in December 2003. 10. Individual budget schedules are prepared to develop an annual comprehensive or master budget. The budget schedule that would provide the necessary input data for the direct labor budget would be the: a. sales forecast. b. raw materials purchases budget. c. schedule of cash receipts and disbursements. d. schedule of manufacturing overhead. e. production budget. 11. In a not-for-profit service firm, the sales budget is replaced by: a. the production budget. b. the finished goods budget. c. a budget that identifies the various services and the associated funds assigned to them. d. a budget that identifies the various expenses. e. none of the above. 12. Which of the following budgets would not be present for both for-profit and not-for-profit service organizations? a. sales budget b. budgeted income statement c. budgeted balance sheet d. finished goods budget e. cash budget 13. In a for-profit service firm, the sales budget is also the: a. merchandise purchase budget. b. production budget. c. direct materials budget. d. overhead budget. e. none of the above. P RACTICE TEST EXERCISE 1 ABC Company has prepared a unit sales budget for the upcoming months as follows: Month January.................. February................. March..................... April........................ May......................... Units 5,000 7,500 10,000 15,000 20,000 Month June........................ July......................... August.................... September.............. October.................. Units 30,000 35,000 25,000 10,000 6,000 ABC has a policy to maintain inventory levels equal to 30% of the coming months sales requirements. Inventory on January 1 is projected to be 1,200 units. Required: Prepare a production budget for ABC Company for the next six months. EXERCISE 2 Resear Company sells modems. Resear desires to hold a finished goods inventory equal to 100% of the next months sales requirement of modems. The beginning finished goods inventory is 1,200 units. Forecasted unit sales for April and the next three months are as follows: April May June July 800 850 925 1,000 The production of one finished unit requires 5 pounds of raw material. The company desires to have a one-month supply of raw materials as the ending inventory for each month. The beginning inventory of raw materials is 6,190 pounds. Required: Prepare a direct materials purchases budget (in pounds) for April. EXERCISE 3 Acorn Corp. has requested a cash budget for July and August. The following information has been gathered: a. Cash balance as of July 1:$35,000. b. Actual and forecasted sales are as follows: May Cash sales................... Credit sales.................. Total.............................. $25,000 60,000 $85,000 June $30,000 80,000 $110,000 July August $40,000 100,000 $140,000 $50,000 110,000 $160,000 c. Credit sales are collected 40% in the month of the sale, 35% in the month following the sale, and 25% in the second month following the sale. d. Inventory purchases average 55% of sales. Of these purchases, 65% are paid for in the month of the purchase, with the remainder paid in the following month. e. Operating expenses are paid in the month incurred. Expenses include $2,500 in rent, $6,000 in salaries, and $750 in utilities and miscellaneous expenses. Required: 1. Prepare a schedule of cash collections on account for July and August. 2.What would the accounts receivable balance be on August 31? 3. Prepare a schedule of cash disbursements for July and August. 4. Prepare a cash budget for July and August. KEY TERMS TEST 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Operating budgets master budget sales budget direct labor budget production budget budget capital expenditures budget budget director cash budget marketing expense budget 11. 12. 13. 14. 15. 16. 17. 18. 19. administrative expense budget ending finished goods inventory budget overhead budget Control budget committee direct materials purchases budget financial budgets continuous (or rolling) budget research and development expense budget MULTIPLE-CHOICE QUIZ 1. d 2. d 3. b 4. b 5. e 6. c Sales + El BI = 15,000 + (25% 20,000) (25% 15,000) = 15,000 + 5,000 3,750 = 16,250 units 7. b (40% January) + (45% December) + (13% November) = (.40 $375,000) + (.45 $625,000) + (.13 $450,000) = $489,750 8. d Sales.............................................................. Desired finished goods ending inventory....... Less: Finished goods beginning inventory. . . Units to be produced...................................... Materials per unit (lbs.)................................... Production needs (lbs.).................................. Desired raw materials ending inventory......... Less: Raw materials beginning inventory..... July 30,000) 7,000) (10,000) 27,000) 5) 135,000) 270,000) (202,500) Raw materials to be purchased 9. e 10. e 11. 12. c d August 35,000) 8,000) (7,000) 36,000) 5) 180,000) 202,500) 13. b PRACTICE TEST EXERCISE 1 ABC Company Production Budget Sales........................................... Ending inventory.......................... Total needs.................................. Less:Beginning inventory.......... Units to be produced................... January 5,000 2,250 7,250 1,200 6,050 February 7,500 3,000 10,500 2,250 8,250 March 10,000 4,500 14,500 3,000 11,500 April 15,000 6,000 21,000 4,500 16,500 May 20,000 9,000 29,000 6,000 23,000 June 30,000 10,500 40,500 9,000 31,500 April 800 May 850 June 925 July 1,000 850 1,650 1,200 450 925 1,775 850 925 1,000 1,925 925 1,000 May 4,625 June 5,000 EXERCISE 2 Resear Company Production Budget for April Sales.................................................................................... Desired finished goods ending inventory, 100% of next months sales........................................................... Total needs........................................................................... Less:Finished goods beginning inventory.......................... Units to be produced............................................................ Resear Company Raw Materials Budget for April Production needs, 5 lbs. per finished goods unit................. Desired raw materials ending inventory............................... Total needs........................................................................... Less:Raw materials beginning inventory............................ Raw materials to be purchased........................................... April 2,250 4,625 6,875 6,190 685 EXERCISE 3 1. Acorn Corp. Cash Collections on Account Cash sales..................................................................... 50,000 Credit sales.................................................................... 110,000 Collected in the month of the sale, 40%.................. 44,000..................................................................... d Collected one month after the sale, 35%................. 35,000..................................................................... e Collected two months after the sale, 25%................ 20,000..................................................................... f Total cash collected....................................................... 259,000 a b c $100,000 0.40 $80,000 0.35 $60,000 0.25 d e f May $25,000 June $30,000 July $ 40,000 60,000 80,000 August $ 100,000 40,000 a 28,000 b 15,000 c $ 123,000 $ $110,000 0.40 $100,000 0.35 $80,000 0.25 2. Accounts receivable balance on August 31: [$100,000 (100% 40% 35%)] + [$110,000 (100% 40%)] = $91,000 3. Acorn Corp. Cash Disbursement Schedule Purchases costs at 55% of sales........................................................... 88,000............................................................................................. e Cash disbursement for purchases: Payment in the month of purchase, 65%......................................... 57,200............................................................................................. f Payment one month after purchase, 35%........................................ 26,950............................................................................................. g Operating expenses.............................................................................. 9,250............................................................................................... h Total cash disbursements...................................................................... 93,400 a b c d 4. ($40,000 + $100,000) 0.55 $77,000 0.65 $60,500 0.35 $2,500 + $6,000 + $750 e f g h June $60,500 July August $ 77,000 a $ 50,050 b 21,175 c 9,250 d $ 80,475 $ ($50,000 + $110,000) 0.55 $88,000 0.65 $77,000 0.35 $2,500 + $6,000 + $750 Acorn Corp. Cash Budget For the Months of July and August, 200X July August $35,000 $77,525 Beginning cash balance................................................................................................ Cash collections: Cash sales............................................................................................................... Credit sales: Current month..................................................................................................... One month after sales......................................................................................... Two months after sales....................................................................................... Total cash available....................................................................................................... 40,000 44,000 28,000 35,000 15,000 20,000 $158,000 $226,525 Less cash disbursements: Inventory purchases: Payment in the month of purchase..................................................................... $50,050 $57,200 40,000 50,000 Payment one month after purchase.................................................................... Operating expenses: Rent..................................................................................................................... Salaries............................................................................................................... Utilities and miscellaneous.................................................................................. Total cash disbursements.............................................................................................. 21,175 26,950 2,500 2,500 6,000 6,000 750 750 $80,475 $93,400 Ending cash balance..................................................................................................... $77,525 $133,125 Which of the following statements are characteristic of budgets? a. Budgets are financial plans for the future. b. Budgets improve decision making. c. Budgets represent an important aspect of planning. d. Budgets include actions needed to achieve objectives. e. All of the answers are correct. status: not answered () correct: e your answer: 2 Which of the following is not a component of the financial budget? a. b. Budgeted balance sheet c. Sales budget d. Capital expenditures budget e. All of the answers are components of the financial bu status: not answered () correct: c your answer: 3 A continuous budget: a. b. is a plan that is updated quarterly. c. is a plan that is continuously changing. is a plan that is continuously updated with one month d. month being added. e. All of the answers are correct. status: not answered () correct: d your answer: 4 The sales budget forecasts: a. b. the total expected sales in units. c. the total expected sales in dollars. d. seasonal fluctuations in sales. e. All of the answers are correct. status: not answered () correct: e your answer: 5 A company is planning to sell 2,000 chairs for the first quarter. Desired ending inventory is 200 chairs and beginning inventory is 300 chairs. How many chairs need to be produced during this quarter? a. b. 2,000 c. 2,100 d. 2,500 e. None of the answers is correct. status: not answered () correct: a your answer: 6 In an overhead budget: a. b. both budgeted variable and fixed overhead costs are i c. a separate budget is prepared for fixed overhead. d. several activity drivers are selected. e. separate budgets are prepared for fixed overhead and status: not answered () correct: b your answer: 7 Which of the following budgets is not considered when preparing a cost of goods sold budget? a. b. Direct labor budget c. Finished goods inventory budget d. Selling expenses budget e. All of the budgets listed are considered. status: not answered () correct: d your answer: 8 The following information is provided for preparing a cash budget: Beginning cash balance $2,800 Cash receipts $56,000 Cash payments $41,000 Minimum cash balance Loan repayments $2,000 $10,000 What is the budgeted ending cash balance for this period? a. $ 5,000 b. $ 5,800 c. $ 7,800 d. $15,800 e. $17, 800 status: not answered () correct: c your answer: 9 Which of the following statements is true about goal congruence? a. b. Encourages subversion of goals. c. Aligns management goals with personal goals. d. Guarantees control of all costs. e. All of the statements are correct. status: not answered () correct: a your answer: 10 Which of the following is not a potential problem with participative budgeting? a. b. Noncontrollable costs c. Lack of real input from lower-level management d. Standards that are set too high e. All of the answers are potential problems of participa status: not answered () correct: b
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