Exam 8: Budgeting for Planning and Control

The budgeted income statement is a component of the:

Which is NOT one of the four steps needed to build an activity-based budget?

The cash budget is the least priority budget in the master budget.

Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance \ 11,000+\ 2 per machine hour Machining \ 55,000+\ 3 per machine hour Inspection \ 70,000+\ 500 per batch Setups \ 2,000 per batch Purchasing \ 80,000+\ 150 per purchase order Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders Maintenance \ 20,000 Machining 73,000 Inspection 73,000 Setups 18,000 Purchasing 82,000 What is the budget variance for maintenance in an activity-based performance report?

When budgets are used for control,

Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Rammazzotti Inc., had the following budgeted data: $\text { Rammazzotti Inc., had the following budgeted data: }$ Unit sales for 2018 26,000 Unit production for 2018 26,000 Budgeted fixed overhead for 2018 : Superrision \ 800 Depreciation 2,000 Rent 100 Budgeted variable costs per unit: Direct materials \ 0.15 Direct labor 0.20 Supplies 0.02 Indirect labor 0.05 Power 0.02 $\text { The following actually occurred: }$ Actual unit sales for 2018 24,000 Actual unit production for 2018 28,000 Actual fixed overhead for 2018 : Supervision \8 50 Depreciation 2,000 Rent 100 Actual variable costs: Direct materials \ 3,500 Direct labor 4,900 Supplies 530 Indirect labor 1,250 Power 470 The total flexible budgeted costs for 2018 are

Which of the following budgets is useful to firms with high product diversity?

Emerald, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels. Emerald has the following budgeted data Budgeted variable costs per unit: Direct materials \ 5.00 Direct labor 8.00 Supplies 2.00 Indirect labor 1.50 Power 0.02 Budgeted fixed overhead for the current year: Supervision \ 2,000 Depreciation 5,000 Rent 5,000 What are the total budgeted costs for 4,000 units?

Alana Company manufactures books. Manufacturing a book takes 10 units of A1 and 1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months. How many units of A2 are expected in the raw material inventory at the end of the second month?

The condition that exists when managers deliberately underestimate revenues or overestimate costs to provide flexibility is called:

Bronze Company's sales forecast for April is 12,000 units, for May is 22,000 units, and for June is 25,000 units. Sales totaled 10,000 units in March. The finished goods inventory for March was 2,000 units. End-of-month finished goods inventory levels are planned to be equal to 15 percent of the next month's planned sales. The planned ending inventory of finished goods for May is:

Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: $\text { Rammazzotti Inc., had the following budgeted data: }$ Unit sales for 2018 26,000 Unit production for 2018 26,000 Budgeted fixed overhead for 2018 : Superrision \ 800 Depreciation 2,000 Rent 100 Budgeted variable costs per unit: Direct materials \ 0.15 Direct labor 0.20 Supplies 0.02 Indirect labor 0.05 Power 0.02 $\text { The following actually occurred: }$ Actual unit sales for 2018 24,000 Actual unit production for 2018 28,000 Actual fixed overhead for 2018 : Supervision \8 50 Depreciation 2,000 Rent 100 Actual variable costs: Direct materials \ 3,500 Direct labor 4,900 Supplies 530 Indirect labor 1,250 Power 470 The flexible budget variance for supervision for 2018 is

Olga's Company has a sales budget for next month of $150,000. Cost of goods sold is expected to be 40 percent of sales. All goods are purchased in the month used and paid for in the month following purchase. The beginning inventory of merchandise is $5,000, and an ending inventory of $6,000 is desired. Beginning accounts payable is $38,000. The cost of goods sold for next month is expected to be

Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months for the current year are as follows: Month Sales October 10,000 November 14,000 December 13,000 Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January sales is projected at 16,000 lamps. How many lamps should be produced in November?

Ringwold, Inc., has done a cost analysis for its production of baseball cards. The following activities and cost drivers have been developed: Activity Cost Formula Photography \ 50+\ 35 per labor hour Printing \ 25,000+\ 0.01 per machine hour Setups \ 25 per batch Purchasing \ 25+\ 25 per purchase order Following are the actual costs of producing 35,000 cards: 60 labor hours; 500 machine hours; 5 batches; 30 purchase orders Photography ? Printing \ 25,000 Setups \ Purchasing \ 70 $\text { The following variances were given in the activity performance report: }$ Photography \ 10 Printing ? Setups \ 20 Purchasing ? Required: Find the missing values. Prepare an activity-based performance report in good form.

Colorado Corporation has the following sales forecast for the next quarter: July, 4,000 units; August, 4,800 units; September, 5,600 units Sales totaled 3,200 units in June. The June ending finished goods inventory was 800 units. End-of-month finished goods inventory levels are planned to be equal to 30 percent of the next month's planned sales. Records showed that each unit is budgeted at 2 pounds of materials costing $3 per pound. Direct labor was budgeted at .5 direct labor hours per unit at a wage of $20 per hour. Budgeted variable overhead is $1.50 per direct labor hour. Fixed overhead is budgeted at $250,000 for the year, and 50,000 units are expected to be produced. The beginning finished inventory is valued at $31,320. After preparing a finished goods inventory budget for August, what is the cost of goods sold for August?

Activity-based budgeting recognizes interdependencies among departments.

Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below: The June 30th balance sheet follows: Cash \ 25,000 Accounts payable \ 45,000 Accounts receivable 110,000 Capital stock 300,000 Inventory 54,000 Retained earnings 94,000 Buil ding and equipment (net) 250,000 Actual sales for June and budgeted sales for July, August, and September are given below: June \ 137,500 July 360,000 August 400,000 September 320,000 Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000. What is the balance of the cash account at the end of July?

Myopic behavior occurs when

Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: $\text { Rammazzotti Inc., had the following budgeted data: }$ Unit sales for 2018 26,000 Unit production for 2018 26,000 Budgeted fixed overhead for 2018 : Superrision \ 800 Depreciation 2,000 Rent 100 Budgeted variable costs per unit: Direct materials \ 0.15 Direct labor 0.20 Supplies 0.02 Indirect labor 0.05 Power 0.02 $\text { The following actually occurred: }$ Actual unit sales for 2018 24,000 Actual unit production for 2018 28,000 Actual fixed overhead for 2018 : Supervision \8 50 Depreciation 2,000 Rent 100 Actual variable costs: Direct materials \ 3,500 Direct labor 4,900 Supplies 530 Indirect labor 1,250 Power 470 The total actual costs for 2018 were