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Q:
A direct labor cost variance may be broken down into a controllable variance and a volume variance.
Q:
The purchasing department is often responsible for the events that create a direct materials price variance.
Q:
A flexible budget expresses variable costs on a per unit basis and fixed costs on a total basis.
Q:
Although a fixed budget is only useful over the relevant range of operations, a flexible budget is useful over all possible production levels.
Q:
A flexible budget expresses all costs on a per unit basis.
Q:
A variable or flexible budget is so named because it only focuses on variable costs.
Q:
The amounts in a flexible budget are based on one expected level of sales or production.
Q:
Sales variances may be computed in a manner similar to cost variancesthat is, computing both price and volume variances.
Q:
Sales variances allow managers to focus on sales mix as well as sales quantities.
Q:
A fixed budget performance report never provides useful information for evaluating variances.
Q:
Fixed budget performance reports compare actual results with the expected amounts in the fixed budget.
Q:
An overhead cost variance is the difference between the actual overhead incurred for the period and the standard overhead applied.
Q:
Management by exception allows managers to focus on the most significant variances in performance.
Q:
A cost variance equals the sum of the quantity variance and the price variance.
Q:
A budget performance report that includes variances can have variances caused by both price differences and quantity differences.
Q:
Within the same budget performance report, it is impossible to have both favorable and unfavorable variances.
Q:
A cost variance is the difference between actual cost and standard cost.
Q:
Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.
Q:
When standard costs are used, factory overhead is assigned to products with a predetermined standard overhead rate.
Q:
Standard costs provide a basis for assessing the reasonableness of actual costs incurred for producing a product or service.
Q:
Standard material, labor, and overhead costs can be obtained from standard cost tables published by the Institute of Management Accountants.
Q:
Standard costs can serve as a basis for evaluating actual performance.
Q:
What is a merchandise purchases budget? How is the merchandise purchases budget constructed?
Q:
Briefly describe a master budget and the sequence in which the individual budgets within the master budget are prepared.
Q:
Indicate the order in which the following budgets would be completed (1 = first and so on)
______ (A) Merchandise purchases budget
______ (B) Capital expenditures budget
______ (C) Selling expense budget
______ (D) Budgeted balance sheet
______ (E) Cash budget
Q:
Indicate the order in which the following budgets would be completed (1 = first and so on)
______ (A) Cash budget
______ (B) Budgeted income statement
______ (C) Sales budget
______ (D) Production budget
______ (E) Operating expense budget
Q:
Presented below are terms or phrases preceded by letters (a) through (j) and followed by a list of definitions 1 through 10. Match the correct definitions with the terms or phrases by placing the letter of the term or phrase in the answer space provided at the beginning of the definition.
(a) Budget
(b) Capital expenditure budget
(c) Manufacturing budget
(d) Sales budget
(e) Production budget
(f) Cash budget
(g) Budgeted balance sheet
(h) Continuous budgeting
(i) Selling expense budget
(j) Rolling budgets
_____ (1.) A plan that lists the types and amounts of selling expenses expected during the budget period.
_____ (2.) A plan that shows the predicted costs for direct materials, direct labor, and overhead costs to be incurred in manufacturing the units in the production budget.
_____ (3.) An accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period.
_____ (4.) A formal statement of future plans, usually expressed in monetary terms.
_____ (5.) A plan showing the units of goods to be sold and the sales to be derived; usually the starting point in the budgeting process.
_____ (6.) A plan that lists dollar amounts to be both received from disposing of plant assets and spent on purchasing additional plant assets to carry out the budgeted business activities.
______ (7.) The practice of preparing budgets for a selected number of several periods and revising those budgets as each period is completed.
______ (8.) A plan showing the number of units to be produced each month.
______ (9) A plan that shows the expected cash inflows and outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans.
______ (10) A new set of budgets added to replace the ones that have lapsed as each budget period goes by.
Q:
Match the definitions 1 through 9 with the term or phrase (a) through (i).
(a) Master budget
(b) General and administrative expense budget
(c) Budget
(d) Safety stock
(e) Budgeted income statement
(f) Budgeted balance sheet
(g) Sales budget
(h) Cash budget
(i) Merchandise purchases budget
______(1) A plan that shows the units or costs of merchandise to be purchased by a merchandising company during the budget period.
______(2) An accounting report that presents predicted amounts of the company's assets, liabilities, and equity balances at the end of the budget period.
______(3) A plan showing the units of goods to be sold and the sales to be derived; the usual starting point in the budgeting process.
______(4) An accounting report that presents predicted amounts of the company's revenues and expenses for the budgeting period.
______(5) A quantity of inventory or materials over the minimum to reduce the risk of running short.
______(6) A comprehensive business plan that includes specific plans for expected sales, the units of product to be produced, the merchandise or materials to be purchased, the expenses to be incurred, the long-term assets to be purchased, and the amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet.
______(7) A formal statement of a company's future plans, usually expressed in monetary terms.
______(8) A plan that shows predicted operating expenses not included in the selling expenses budget.
______(9) A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from any loans needed to maintain a minimum cash balance and repayments of such loans.
Q:
Blaircraft Company manufactures a product that requires five pounds of raw material for each unit produced. For the next year, beginning inventory of raw materials is 8,000 pounds. The raw materials inventory at the end of each quarter should be 15% of the next quarters raw materials needed for production. Given the projected production in units below, what is the quantity of raw materials that needs to be purchased for the third quarter? Quarter
1
2
3
4 Expected production Units
7,000
5,000
8,000
6,000 A. 41,500 pounds
B. 40,000 pounds
C. 38,500 pounds
D. 7,7000 pounds
E. 8,300 pounds
Q:
Big Company manufactures keyboards. Management wishes to develop budgets for the upcoming quarter based on the following data: Sales in units 800 units Selling price per unit $60 Inventory at beginning of the quarter (FG)
80 units Desired ending inventory (FG)
130 units Direct materials per unit: 4 ounces plastic Plastic inventory at beginning of quarter
136 ounces Desired ending inventory of plastic
84 ounces Plastic cost
$.18 per ounce Compute the budgeted quantity of plastic that needs to be purchased for the next quarter.
A. 850 ounces
B. 3,348 ounces
C. 3,452 ounces
D. 798 ounces
E. 902 ounces
Q:
A companys data is presented below. Desired ending inventory is a consistent percentage of the next quarters sales and the previous year's fourth quarter ending inventory of 560 units meets this requirement. Compute the expected production in the third quarter of the current year. Quarter
1
2
3
4 Expected sales units
7,000
5,000
8,000
6,000 Units produced
6,840
?
?
? A. 7,840
B. 8,160
C. 8,000
D. 8,480
E. 7,360
Q:
The budgeted purchases of pounds of raw material B during May should be:
A. 1,418 pounds
B. 1,460 pounds
C. 1,502 pounds
D. 264 pounds
E. 283 pounds
Q:
If each unit of Kyotos product takes two hours to produce and the labor rate is expected to be $10 per hour, what is the budgeted labor cost for the second quarter?
A. $16,400
B. $17,280
C. $9,840
D. $8,960
E. $17,560
Q:
If each unit of Kyotos product takes two hours to produce and the labor rate is expected to be $10 per hour, what is the budgeted labor cost for May?
A. $4,000
B. $4,240
C. $5,360
D. $5,600
E. $5,840
Q:
Kyotos budgeted production for the second quarter is:
A. 820 units
B. 864units
C. 492 units
D. 449 units
E. 878 units
Q:
Kyotos budgeted production for May is:
A. 200 units
B. 212 units
C. 268 units
D. 280 units
E. 292 units
Q:
A plan that states the number of units to be manufactured during each future period covered by the budget, based on the budgeted sales for the period and the levels of inventory needed to support future sales, is the:
A. Sales budget.
B. Merchandise purchases budget.
C. Production budget.
D. Cash budget.
E. Manufacturing budget.
Q:
A plan that shows the predicted costs for direct materials, direct labor, and overhead to be incurred in manufacturing the units in the production budget is called the:
A. Sales budget.
B. Merchandise purchases budget.
C. Production budget.
D. Rolling budget.
E. Manufacturing budget.
Q:
To determine the production budget for an accounting period, consideration is not given to which of the following:
A. Budgeted ending inventory.
B. Budgeted beginning inventory.
C. Budgeted sales.
D. Budgeted overhead.
E. Required units of inventory available.
Q:
Pecan Company had March sales and purchases of $63,000 and $47,000 respectively. The company expects April sales to increase 12% above March sales and purchases to stay consistent with March amounts. Twenty percent of the companys sales are for cash. Credit sales are collected 20% in the month of the sale and 80% in the following month. All purchases are paid for in the month following the purchase. The beginning cash balance on April 1 is $42,000. What is Pecan Companys expected cash balance on April 30?
A. $46,609.60
B. $105,880.00
C. $70,801.60
D. $60,721.60
E. $49,432.00.
Q:
Assume that total sales for January and February are budgeted to be $50,000 and $100,000, respectively. What are the expected cash receipts for February from current and past sales? Round all calculations to full dollar amounts.
A. $80,500
B. $71,500
C. $34,500
D. $61,500
E. $59,500
Q:
Assume that total sales for January are budgeted to be $50,000. What are the expected cash receipts for January from the current and past sales? Round all calculations to full dollar amounts.
A. $18,500
B. $51,500
C. $51,900
D. $55,500
E. $60,500
Q:
The Palos Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month following sale, 45% in the second month following sale, and 5% are not collected. What are the company's expected cash receipts for August from its current and past sales?
A. $29,160
B. $46,760
C. $61,160
D. $66,200
E. $78,800
Q:
A company expects its September sales to be 15% higher than its August sales of $140,000. Purchases were $75,000 in August and are expected to be $85,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $71,500. The ending cash balance on September 30 would be:
A. $121,800
B. $148,700
C. $140,300
D. $143,700
E. $135,300
Q:
Harold's expects its September sales to be 20% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $7,500. The ending cash balance on September 30 would be:
A. $31,500
B. $67,500
C. $54,000
D. $61,500
E. $136,500
Q:
In preparing financial budgets:
A. The budgeted balance sheet is usually prepared last.
B. The cash budget is usually not prepared.
C. The budgeted income statement is usually not prepared.
D. The capital expenditures budget is usually prepared last.
E. The merchandise purchases budget is key.
Q:
Long-term liability data for the budgeted balance sheet is derived from:
A. The cash budget and capital expenditures budget.
B. The cash budget and sales budget.
C. The cash budget and budgeted income statement.
D. The sales budget and production budget.
E. The asset budget and debt budget.
Q:
In preparing a budgeted balance sheet, the amount for Accounts Receivable is primarily determined from:
A. The purchase budget.
B. The sales budget.
C. The capital expenditures budget.
D. The budgeted income statement.
E. The selling expenses budget.
Q:
Lara Company has budgeted the following credit sales during the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Lara Company expect to collect in November as a result of current and past credit sales?
A. $19,700
B. $28,500
C. $30,000
D. $31,100
E. $33,900
Q:
Lara Company has budgeted the following credit sales during the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received as follows: 20% in the month of sale, 60% in the first month after sale, and 20% in the second month after sale. What will be the balance in Accounts Receivable at the end of November assuming the payment patterns have been as described?
A. $26,600
B. $31,200
C. $33,800
D. $39,600
E. $25,200
Q:
A company reports the following information from its sales account and sales budget: Sales
May
$52,000 June
47,000 Expected Sales:
July
$45,000 August
55,000 September
60,000 Cash sales are normally 30% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:
A. $58,500
B. $56,500
C. $60,000
D. $80,500
E. $55,000
Q:
If Julias pays sales commission of 10% each month, in addition to monthly fixed costs of $4,000, what are selling expenses for the third quarter?
A. $32,000
B. $36,000
C. $40,000
D. $44,000
E. $48,000
Q:
Based on the information from Julias, the total amount of cash expected to be received from customers in July is:
A. $69,750
B. $90,000
C. $92,250
D. $22,500
E. $115,500
Q:
Based on the information from Julias, the total amount of cash expected to be received from customers in September is:
A. $30,000
B. $82,500
C. $112,500
D. $120,000
E. $202,500
Q:
A Company is preparing a cash budget for June. The company has $67,000 cash at the beginning of June and anticipates $82,330 in cash receipts and $93,520 in cash disbursements during June. This company has an agreement with its bank to maintain a cash balance of at least $65,000. As of May 31, the company owes $25,000 to the bank. To maintain the $65,000 required balance, during June the company must:
A. Borrow $9,190
B. Repay $13,190
C. Borrow $25,000
D. Repay $25,000
E. Repay $9,190
Q:
Northern Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during June. Northern Company has an agreement with its bank to maintain a cash balance of at least $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:
A. Borrow $4,500
B. Borrow $2,500
C. Borrow $10,000
D. Repay $7,500
E. Repay $2,500
Q:
A managerial accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is called a(n):
A. Rolling balance sheet.
B. Continuous balance sheet.
C. Budgeted balance sheet.
D. Cash balance sheet.
E. Operating balance sheet.
Q:
A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a:
A. Budgeted income statement.
B. Budgeted balance sheet.
C. Master plan.
D. Rolling income statement.
E. Continuous income statement.
Q:
Which of the following would not be used in preparing a cash budget for October?
A. Beginning cash balance on October 1.
B. Budgeted sales and collections for October.
C. Estimated depreciation expense for October.
D. Budgeted salaries expense for October.
E. Budgeted capital equipment purchases for October.
Q:
Which budget must be completed after a cash budget is prepared?
A. Capital expenditures budget.
B. Sales budget.
C. Merchandise purchases budget.
D. General and administrative expense budget.
E. Budgeted income statement
Q:
A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is called a(n):
A. Capital expenditures budget.
B. Operating budget.
C. Rolling budget.
D. Cash budget.
E. Income statement.
Q:
When preparing the cash budget, all the following should be considered except:
A. Cash receipts from customers.
B. Cash payments for merchandise.
C. Depreciation expense.
D. Cash payments for income taxes.
E. Cash payments for capital expenditures.
Q:
Kabuki Companys policy is to have 16% of the next months sales as desired ending inventory. Estimated sales are shown in the following table. Given this data, what are Kabukis estimated purchases for April? March
April
May Expected sales units
9,400
8,900
7,300 A. 8,584
B. 9,176
C. 8,644
D. 9,256
E. 9,000
Q:
Kabuki Companys policy is to have 16% of the next months sales as desired ending inventory. Estimated sales are shown in the following table. Given this data, what are Kabukis estimated purchases for March? March
April
May Expected sales units
9,400
8,900
7,300 A. 9,400
B. 9,320
C. 8,900
D. 8,644
E. 8,820
Q:
A companys gross profit rate is 30% of sales. Expected January sales are $78,000 and desired January 31st inventory is $7,500. Assuming the December 31st inventory is $6,200 what amount of purchases should this company budget for the month of January?
A. $53,300
B. $55,900
C. $24,700
D. $22,100
E. $79,300
Q:
A Company forecasts sales of $91,500 for the quarter ended December 31. Its gross profit rate is 18% of sales, and its September 30 inventory is $25,000. If the December 31 inventory is targeted at $7,500, budgeted purchases for the fourth quarter should be:
A. $57,530
B. $107,530
C. $0
D. $82,530
E. $91,000
Q:
Barrett's Fashions forecasts sales of $125,000 for the quarter ended December 31. Its gross profit rate is 20% of sales, and its September 30 inventory is $32,500. If the December 31 inventory is targeted at $41,500, budgeted purchases for the fourth quarter should be:
A. $134,000
B. $109,000
C. $91,500
D. $25,000
E. $91,000
Q:
Lingstat Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 15% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 5,000 units, 6,000 units, and 4,000 units, respectively. How many units must be purchased in September?
A. 6,600
B. 6,150
C. 5,850
D. 5,700
E. 6,300
Q:
Stritch Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?
A. 14,000
B. 20,000
C. 22,000
D. 24,000
E. 28,000
Q:
A quantity of merchandise or materials over the minimum needed reduce the risk of running short is called:
A. Just-in-time inventory.
B. Budgeted stock.
C. Continuous inventory.
D. Capital stock.
E. Safety stock.
Q:
Budgeted purchases of Product B for the year would be:
A. 24,500 units
B. 22,500 units
C. 16,500 units
D. 26,500 units
E. 20,500 units
Q:
Budgeted purchases of Product A for the year would be:
A. 22,400 units
B. 20,400 units
C. 20,000 units
D. 19,500 units
E. 12,200 units
Q:
Total budgeted sales of both products for the year would be:
A. $42,000
B. $200,000
C. $264,000
D. $464,000
E. $500,000
Q:
Fairway's April sales forecast projects that 6,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units. Budgeted purchases of units in April would be:
A. 6,000 units
B. 7,000 units
C. 6,300 units
D. 7,300 units
E. Some other amount
Q:
Tannwin Co. sells a new product called Accountomatic and has predicted the following sales for the first four months of the current year: Jan.
Feb.
March
April Sales in units
1,700
1,900
2,100
1,600 Ending inventory for each month should be 20% of the next month's sales, and the prior December 31 inventory is consistent with that policy. How many units should be purchased in the first quarter of the year?
A. 5,100
B. 5,680
C. 6,300
D. 6,000
E. 5,700
Q:
Ecology Co. sells a biodegradable product called Dissol and has predicted the following sales for the first four months of the current year: Jan.
Feb.
March
April Sales in units
1,700
1,900
2,100
1,600 Ending inventory for each month should be 20% of the next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?
A. 1,860
B. 1,900
C. 1,940
D. 1,980
E. 2,320
Q:
A sporting goods store purchased $7,000 worth of ski boots in October. The store had $3,000 of ski boots in inventory at the beginning of October and expects to have $2,000 of ski boots in inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?
A. $5,000
B. $7,000
C. $8,000
D. $9,000
E. $10,000
Q:
A department store has budgeted sales of 12,000 men's suits in September. Management wants to have 6,000 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 suits. What is the dollar amount of purchase of suits? Each suit has a cost of $75.
A. $750,000
B. $900,000
C. $1,050,000
D. $1,200,000
E. $1,350,000
Q:
Which of the following factors is least likely to be considered in preparing a sales budget?
A. Plant capacity.
B. General economic and industry conditions.
C. Past sales volume.
D. The capital expenditures budget.
E. Proposed selling expenses, such as advertising.
Q:
A plan that lists the types and amounts of selling expenses expected during the budget period is called a(n):
A. Sales budget
B. Operating budget
C. Capital expenditures budget
D. Selling expense budget
E. Purchases budget