Chapter 15 - Answer - MANAGEMENT ACCOUNTING - Solutions...

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MANAGEMENT ACCOUNTING - Solutions Manual CHAPTER 15 FUNCTIONAL AND  ACTIVITY-BASED BUDGETING  I. Questions 1. No. Planning and control are different, although related, concepts. Planning involves developing objectives and formulating steps to achieve those objectives. Control, by contrast, involves the means by which management ensures that the objectives set down at the planning stage are attained. 2. Budgets have a dual purpose, for planning and for following up the implementation of the plan. The great benefits from budgeting lie in the quick investigation of deviations and in the subsequent corrective action. Budgets should not be prepared in the first place if they are ignored, buried in files, or improperly interpreted. 3. Two major features of a budgetary program are (1) the accounting techniques which developed it and (2) the human factors which administer it. The human factors are far more important. The success of a budgetary system depends upon its acceptance by the company members who are affected by the budget. Without a thoroughly educated and cooperative management group at all levels of responsibility, budgets are a drain on the funds of the business and are a hindrance instead of help to efficient operations. 4. Manufacturing overhead costs are budgeted at normal operating capacity, and the costs are applied to the products using a predetermined rate. The predetermined rate is computed by dividing a factor that can be identified with both the products and the overhead into the overhead budgeted at the normal operating capacity. Budgets may also be used in costing products in a standard cost accounting system. 5. The production division operates to produce the products that are sold. Production and sales must be coordinated. Products must be manufactured so that they will be available to meet sales delivery dates. Activity of the production division will depend upon the sales that can be made. Also, the sales division is limited by the capabilities of the production department in manufacturing products. Successful operations depend upon a coordination of sales and production. 15-1
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Chapter 15 Functional and Activity-Based Budgeting 6. Labor hour required for production can be translated into labor pesos by multiplying the number of hours budgeted by the appropriate labor rates. The rates to be used will depend upon the rates established for job classifications and the policy with respect to premium pay for overtime or shift differences. 7. A long-range plan for the acquisition of plant assets is broken down and entered in the current budget as the plan unfolds. The portion of the plan which is to be executed in the next year is included in the budget for that year. 8.
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Chapter 15 - Answer - MANAGEMENT ACCOUNTING - Solutions...

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