characteristics of budgets include:
typically span 1 year
expressed in monetary terms
a focus on the future
list the individual budgets of the master budget in the order in which they are
prepared:
sales budgets
production budget
various expense budgets
capital expenditures budget
financial budgets
A company has the following loan activity- additional loan from bank: $19,000;
ending cash balances $5,600. the preliminary cash balance is:
-$13,400
true or false: Interest expense and income tax expense are considered
general and administrative expenses and, therefore, are included on the
general administrative expense budget.
false
a merchandising company would typically prepare which of the following
operating budgets in the process of preparing the master budget?
purchases budget
general and administrative expense budget
selling expense budget
sales budget
the purpose of the budget committee is to help ensure
that all departments accept the budget as reasonable
participation from all departments
that budgeted amounts are realistic and coordinated
to calculate the inventory to be purchased in a purchases budget, the formula
is:
budgeted ending inventory
plus
budgeted cost of sales for the period
minus
budgeted beginning inventory
A ____ is a formal statement of a company's future plans, usually expressed
in monetary terms.
budget
most companies prepare a ___ budget that is separated into ____ budgets
annual; quarterly or monthly
the most useful budgets are developed through a ___ process
bottom-up
bench marking involves comparing actual results against either past
performance or expected (budgeted) performance. which is considered
superior?
expected performance
potential negative outcomes of budgeting include:
budgetary slack
unethical behavior
unnecessary spending
list the individual budgets of the master budget in the order in which they are
prepared
sales
production budget
various expense budgets
capital expenditures budget
financial budgets
the first step in preparing the master budget is planning the ___ budget
sales
the financial budgets include the:
budgeted balance sheet
budgeted income statement
cash budget
a manufacturing budget consists of the:
factory overhead budget
direct labor budget
direct materials budget
true or false: a production budget is unique in that it does not show costs; it is
always expressed in units of product
true
budgeting process guidelines include;
participatory budgeting
the opportunity to explain failures
attainable goals
which of the following items would be included on the capital expenditures
budget?
disposal of plant assets
plant asset purchases
the financial budgets include the:
budgeted balance sheet
budgeted income statement
cash budget
potential negative outcomes of budgeting include:
unnecessary spending
unethical behavior
budgetary slack
the budgeting process that involves adding a quarter or month to the end of
the budget period at the end of each quarter or month, therefore creating a
rolling budget is called;
continuous budgeting
the managerial accounting report showing predicted amount of the company's
assets, liabilities, and equity as of the end of the budget period is the:
budgeted balance sheet
in small companies, budgeting plans are usually communicated via
conversations
activity-based budgeting is a budget system based on expected
activities
a manufacturing budget consists of the:
-direct materials budget
-direct labor budget
-factory overhead budget
budgeting is used by management to ensure that activities of all departments
contribute to meeting the company's overall goals. This aspect of budgeting is
called:
-coordination
which of the following items would be included on the capital expenditures
budget?
-plant asset purchases
-disposal of plant assets
the financial budgets include the:
-budgeted income statement
-cash budget
-budgeted balance sheet
true or false: small companies do not need to prepare budgets because
informal communication between management and employees is sufficient
-false
a quantity of inventory that provides protection against lost sales caused by
unfulfilled demands from customers or delays in shipments is called ___ stock
-safety
the process of evaluating and planning for plant asset expenditures is called
___ budgeting
-capital
the process of planning future business actions and expressing them as
formal plans is called ____
-budgeting
A ___ is the difference between actual amounts and budgeted amounts
-variance
Characteristics of budgets include: (Check all that apply.)
expressed in monetary terms.
typically span a month, quarter or one year.
formal statement of a company's plans.
To ______ is to use the control function that evaluates business operations against
some norm.
benchmark
All of the following are guidelines for budgeting except:
budgets should be prepared using a top-down approach
Most companies prepare a(n) ______ budget that is separated into ______ budgets.
annual; quarterly or monthly
A manufacturing company would typically prepare all of the following budgets except:
Merchandise Purchases budget
A(n) ______ is a formal statement of a company's plans, usually expressed in monetary
terms.
budget
A manufacturer's operating budgets consists of the: (Check all that apply.)
selling expense budget.
production budgets
sales budget.
Budgeted performance considers all of the following in relation to a benchmark: (Select
all that apply).
Company factors
Industry factors
Economic factors
A company expects to sell 400 units of Product X in January and then expects sales to
increase by 10% per month. If Product X sells for $10 each, the total sales for the first
quarter of the year will be $______.
13,240
January Sales in Units = 400 Units
February Sales Units = 400 x 110% or 1.1= 440 units
March Sales Unites = 440 x 110% or 1.1. = 484 units
Total Sales = 1,324 x $10 = $13, 240
Budgeting process guidelines include: (Check all that apply.)
the opportunity to explain differences between actual and budgeted amounts.
participatory budgeting.
attainable goals.
True or false: A production budget is unique in that it does not show costs; it is always
expressed in units of product.
True
A production budget shows the number of units to be produced, not dollar amounts.
The primary purpose of using short-term budgets is to:
evaluate performance and take necessary corrective action
A quantity of inventory that provides protection against lost sales caused by unfulfilled
demands from customers is called
safety stock
List the individual budgets of the master budget in the order in which they are prepared,
with the first on top.
1- sales budget
2- production budget
3- direct materials, direct labor and factory overhead
4- cash budgets
A company expects to sell 500 units during the second quarter and 550 units in the third
quarter. Currently, during the second quarter, they have 46 units on hand. If they desire
safety stock of 10% of the next quarter's sales, ______ units will need to be produced in
the second quarter.
509
During the second quarter, the company desires to have safety stock of 10% and since
the target of the next quarter is 550 units, the safety stock can be calculated as (550 *
10%) = 55 units.Since the company expects to sell 500 units and 46 units are
remaining, units need to be produced can be calculated as:55 (Safety stock) + 500
(Expected) - 46 (On hand) = 509
All of the following are operating budgets except:
merchandising budget
After determining the budgeted ending inventory, the next step in the production budget
is to:
add budgeted sales
The first step in preparing the master budget is planning the ______ budget.
sales
A manufacturing company expects to sell 12,000 units in August and 15,000 units in
September. The company desires to have an ending inventory of 80% of the next
month's sales. If inventory on August 1 is 8,000 units, then the company should produce
______ units in August.
16,000
= 80% × 15,000= 12,000 units
Let the units to be produced in August be G, then;
8000 + G - 12000 = 12000G = 12000 + 12000 - 8000= 16000 units
A manufacturer will prepare a ______ budget which shows the number of units to be
produced during a period.
production
A manufacturing company has budgeted production at 5,000 units for May and 4,400
units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On
May 1, there are 2,750 pounds of materials on hand. The company desires an ending
inventory of 60% of the next month's materials requirements. The total cost of direct
materials purchases for May will be $______
201,700
Direct material:Production= 50003= 15,000Ending inventory= (4,4003)0.6=
7,920Beginning inventory= (2,750)Total= 20,170 poundsTotal cost= 20,17010=
$201,700
A quantity of inventory that provides protection against lost sales caused by unfulfilled
demands from customers or delays in shipments is called ______ stock.
safety
A manufacturing company has budgeted production at 940 units for the month. Each
unit requires 3.5 hours of labor to produce. The average labor rate is $15 per hour. The
total cost of direct labor for the month will be $______
49,350
940 units × 3.5 × $15
A company's sales budget indicates the following sales: January: 25,000; February:
30,000; March: 35,000. Beginning inventory is 12,000 and the company's ratio of
inventory to future sales is estimated at 45%. Units to be produced in January will be
______
26,500
formula: next months budgeted sales + present months sales budget - budgeted
inventoryFirst step: finding February´s budgeted salesNext months (February) budgets
sales=45/100 x 30000 = 135000Now, putting values in the formula to find unit to be
produced.Unit to be produced in January= (13500+ 25000-12000) = 38500 - 12000 =
26500
A manufacturing company has budgeted production of 600 units for the month. Each
unit requires $1.00 in variable overhead cost. The budgeted fixed cost is $500 per
month. The total budgeted overhead cost will be $______
1,100
(600 x 1.00) + 500
The three steps to complete the production budget include: (Check all that apply.)
1- compute budgeted ending inventory
2- add budgeted sales
3- subtract beginning inventory
If direct materials per unit are $20, direct labor per unit is $10, variable overhead per
unit is $2, and fixed overhead per unit is $1, total product cost per unit is $______.
33
20+10+2+1 = 33
A manufacturer requires ending inventory of 5,000 units. Their budgeted unit sales are
20,000 units and beginning finished goods inventor is 3,000 units. The units to be
produced is
22,000
5000+20000-3000=22000
A merchandising company's sales budget indicates the following sales: January:
$25,000; February: $30,000; March: $35,000. Sales personnel are paid a salary plus
commission. Salaries are expected to be $5,000 per month and the commission is 10%
of sales. Additionally, advertising is expected to be $600 per month. The total selling
expenses for the quarter will be $______.
25,800
(25,000 x 10%)+(30,000 x 10%)+(35,000 x 10%)+(5,000x3)+(600x3)= $25,800
The formula to determine the materials to be purchased is
(budgeted production times materials required for each unit) plus budgeted ending
materials inventory minus beginning materials inventory
A budget which estimates the types of selling expenses expected during the budget
period is called a
selling expense budget
Reason:
A budget which estimates the types of selling expenses expected during the budget
period is called a selling expense budget.
The formula to compute the budgeted direct labor cost is
budgeted production times direct labor required per unit times direct labor cost per hour
True or false: Interest expense and income tax expense are considered general and
administrative expenses and, therefore, are included on the general and administrative
expense budget.
True
Reason:
Interest expense and taxes are general and administrative expenses.
A manufacturing company has budgeted production of 940 units for the month. Each
unit requires $1.25 in variable overhead cost. The budgeted fixed cost is $950 per
month. The total budgeted overhead cost will be $______
2,125
Answer:-Total budgeted overhead costs =Variable overhead cost+ Fixed costs=(940
units*$1.25 per unit)+ $950=$1175+$950 =$2125
Direct materials are $15 per unit; direct labor is $7 per unit and variable overhead costs
are $2 per unit. If total product costs are $27, what are fixed costs per unit?
$3
Reason:
Total unit cost is $27. Direct materials $15 + direct labor $7 + variable overhead $2 =
$24. Therefore, fixed costs per unit = $27 - 24 = $3.00.
The general and administrative budget includes all of the following except:
sales commissions
Reason:
Sales commissions belong on the selling expenses budget.
A merchandising company's budget includes the following data for January: Sales:
$400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of
sales; Advertising: $10,000; Salary for sales manager: $30,000; Miscellaneous
administrative expenses: $5,000. The total selling expenses on the January selling
expense budget will be $______
60,000
Salary for sales manager + (budgeted sales x commissions) +
Advertising30,000+(400,000 x 5%) + 10,000 = $60,000
The process of evaluating and planning for plant asset expenditures is called ______
expenditures budgeting.
capital
Sales commissions are 10% of budgeted sales and the sales manager's salary is
$1,000 per month. If budgeted sales are $50,000 for January, the total selling expenses
budget for January is $______
6,000
(50,000 x 10%) + 1,000= $6,000
ABC Company prepared a cash budget for the month. The company has outstanding
loans and desires a minimum cash balance of $10,000. If the company has a
preliminary cash balance of $25,000, the company should:
use $15,000 to repay loans
A merchandising company's budget includes the following data for January: Sales:
$400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of
sales; Advertising: $10,000; Depreciation on store equipment: $25,000; Rent on
administrative building: $30,000; Miscellaneous administrative expenses: $5,000. The
total general and administrative expenses on the January general and administrative
expense budget will be $______.
61,250
25,000+1,250+5,000+30,000
A merchandising company's sales budget indicates the following sales: January:
$25,000; February: $30,000; March: $35,000. The company expects 70% of the sales to
be on account and the remainder to be cash sales. Credit sales are collected in the
month following the sale. The total cash collected during March will be $______
31,500
A manufacturing company has budgeted production of 600 units for the month. Each
unit requires $1.00 in variable overhead cost. The budgeted fixed cost is $500 per
month. The total budgeted overhead cost will be $______.
1,100
(600 x 1.00) + 500
A company budgets the following merchandising purchases: April: $70,000; May
$90,000; June: $60,000. All purchases are on account and the company pays 25% of
purchases in the month of the purchase and the remaining amount in the following
month. Cash disbursements for June for merchandise is $______.
82,500
(90,000x25%) + 60,000
A budget that includes the office manager's salary and other administrative expenses is
called the:
general and administrative budget
A company pays all selling expenses in the month incurred. Budget information
includes: Administrative salaries: $50,000; Sales commissions: $20,000; Advertising:
$10,000; Depreciation on store equipment: $25,000; Rent on administrative building:
$30,000; Miscellaneous administrative expenses: $5,000. Total cash disbursements for
administrative expenses is $______.
85,000
50,000+30,000+5,000= $85,000
Which of the following items would be included on the capital expenditures budget?
(Check all that apply.)
Disposal of plant assets
Plant asset purchases
A company has the following loan activity—Additional loan from bank: $19,000; Ending
cash balance: $5,600. The preliminary cash balance is:
($13,400)
They had to borrow $19,000 to have an ending cash balance of $5,600, so they had a
negative preliminary cash balance. $5,600 - $19,000 = ($13,400)
The ______ budget shows the expected cash inflows and cash outflows during the
budget period.
cash
The financing budgets include the:
budgeted balance sheet
A merchandising company's sales budget indicates the following sales: January:
$30,000; February: $20,000; March: $15,000. The company expects 80% of the sales to
be on account. Credit sales are collected 30% in the month of the sale and 70% in the
month following the sale. The total cash receipts collected during March will be $______
17,800
= March cash sale + February credit sale + March credit sale20% of march sale is cash
sale80% of march sale is credit saleThe credit sale of march month :February sale =
80% × 70% of February saleMarch credit sale = 80% × 30% of march salewhere,Cash
sale = $15,000 × 20 = $3,000February credit sale = 80% × $20,000 × 70% =
$11,200March credit sale = 80% × $15,000 × 30% = $3,600Now,Put the above values
in the given question which is equals to= $3,000 + $11,200 + $3,600= $17,800
A company budgets the following merchandising purchases: April: $70,000; May
$90,000; June: $60,000. All purchases are on account and the company pays 25% of
purchases in the month of the purchase, 50% in the month after the purchase, and the
remaining balance in the second month after the purchase. Cash disbursements for
June for merchandise is $______.
77,500
25% of April=$17,50050% of May=$45,00025% of June=$15,000
A company has the following budget information: Sales: $118,800; COGS: $48,500;
Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the
company budgets 40% for income tax expense, the amount of budgeted income tax
expense will be $______
10,668
$118,800 - $48,500 = $70,300 - $1,500 - $250 - $41,880 = $26,670 x 40% = $10,668
A company pays all selling expenses in the month incurred. Budget information
includes: Administrative salaries: $50,000; Sales commissions: $20,000; Advertising:
$10,000; Depreciation on store equipment: $25,000; Rent on administrative building:
$30,000; Miscellaneous administrative expenses: $5,000. Total cash disbursements for
selling expenses is $______
30,000
20,000 (sales commission)+ 10,000 (advertising) = $30,000
A company has the following budgeted information: Cash receipts: $542,000; Beginning
cash balance: $10,000; Cash payments (including interest payments): $560,000;
Outstanding loan balance: $100,000; Desired ending cash balance: $50,000. In order to
maintain the desired cash balance, the company will need to:
borrow $58,000
Reason:
Beginning balance $10,000 + cash receipts $542,000 - cash payments $560,000 =
-8,000. Desired cash balance $50,000 + 8000 negative preliminary balance = $58,000
needed to borrow.
The managerial accounting report showing predicted amounts of the company's assets,
liabilities, and equity as of the end of the budget period is the:
budgeted balance sheet
Reason:
Assets, liabilities and equity are included in the budgeted balance sheet.
The managerial accounting report showing predicted amounts of sales and expenses
for the budget period is the:
budgeted income statement
All of the following are ways that managers use the master budget except:
to place blame on managers
A company has the following budget information: Sales: $118,800; COGS: $48,500;
Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the
company budgets 40% for income tax expense, the budgeted net income will be
$______.
16,002
Match each figure on the budgeted balance sheet to the previously prepared budget
from which the figure is derived.
Accounts receivable
Sales budget
Match each figure on the budgeted balance sheet to the previously prepared budget
from which the figure is derived.
Income tax payable
Income statement budget
Match each figure on the budgeted balance sheet to the previously prepared budget
from which the figure is derived.
Bank loan payable
Cash budget
Which of the following describe management's use of a master budget: (Select all that
apply).
Helps analyze differences between actual and budgeted results
Helps in planning and control activities
Helps reveal undesirable outcomes
To calculate the inventory to be purchased in a merchandise purchases budget, the
formula is...
-Budgeting ending inventory + budgeted cost of sales for the period - budgeted
beginning inventory
