Exam 8: Budgeting for Planning and Control

Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance \ 15,000+\ 4 per machine hour Machining \ 35,000+\ 1 per machine hour Inspection \ 60,000+\ 750 per batch Setups \ 1,000 per batch Purchasing \ 50,000+\ 10 per purchase order What is the budgeted purchasing cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

Volume variances examine differences between

Modern Goods Corporation has the following budgeted sales for the selected six-month period: Month Unit Sales January 15,000 February 20,000 March 35,000 April 25,000 May 30,000 June 20,000 There were 7,500 units of finished goods in inventory at the beginning of January. Plans are to have an inventory of finished product equal to 20 percent of the unit sales for the next month. Three pounds of materials are required for each unit produced. Each pound of material costs $20. Inventory levels for materials equal 30 percent of the needs for the next month. Materials inventory on January 1 was 5,000 pounds. Required: a.Prepare production budgets in units for February, March, and April. b.Prepare a purchases budget in pounds and dollars for February, March, and April.

Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance \ 11,000+\ 0.11 per machine hour Machining \ 25,000+\ 0.50 per machine hour Setups \ 50 per batch Purchasing \ 200+\ 45 per purchase order Following are the actual costs of producing 85,000 decal s: 5,000 machine hours; 10 batches; 20 purchase orders Maintenance \ 11,500 Machining 28,300 Setups 550 Purchasing 1,000 What is the budget variance for maintenance in an activity-based performance report?

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. Based on this information, the number of units of A1 that needs to be purchased by Alana during the first month is

Missoula, Inc., is looking for feedback on performance. The company compares the budget for the year with the actual costs. Missoula, Inc., had the following budgeted data: Unit sales for 2018 10,000 Unit production for 2018 10,000 Budgeted fixed overhead for 2018 : Supervision \ 18,000 Depreciation 20,000 Rent 10,000 Budgeted variable costs per unit: Direct materials \ 18.00 Direct labor 25.00 Supplies 0.20 Indirect labor 1.00 Power 0.10 The following actually occurred: Actual unit sales for 2018 11,000 Actual unit production for 2018 12,000 Actual fixed overhead for 2018 : Supervision \ 17,850 Depreciation 20,000 Rent 10,000 Actual variable costs for 2018: Direct materials \ 214,000 Direct labor 320,000 Supplies 2,500 Indirect labor 10,000 Power 1,500   Required: a.Prepare a performance report for all costs showing static budget variances. b.Prepare a performance report for all costs showing flexible budget variances.

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 purchasing in an activity-based performance report?

Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost drivers have been developed: Activity Cost Formula Design \ 5,000+\ 0.05 per machine hour Machining \ 25,000+\ 0.01 per machine hour Setups \ 35 per batch Purchasing \ 50+\ 15 per purchase order Following are the actual costs of producing 35,000 rubber stamps: 1,000 machine hours; 5 batches; 30 purchase orders Design \ 5,080 Machining ? Setups ? Purchasing \ 600 The following variances were given in the activity performance report: Design ? Machining \ 40 Setups \ 15 Purchasing ? What is the actual cost of setups?

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. How much merchandise inventory will Olga's need to purchase next month?

Ruby Faces, Inc., has done a cost analysis for the production of reflectors in its factory. The following activities and cost drivers have been developed: Activity Maintenance \ 10,000+\ 3 per machine hour Machining \ 40,000+\ 2 per machine hour Inspection \ 70,000+\ 550 per batch Setups \ 2,000 per batch Purchasing \ 30,000+\ 20 per purchase order What is the machining cost for production of 60,000 reflectors that will require 6,000 machine hours, 20 batches, and 15,000 purchase orders?

Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance \ 15,000+\ 4 per machine hour Machining \ 35,000+\ 1 per machine hour Inspection \ 60,000+\ 750 per batch Setups \ 1,000 per batch Purchasing \ 50,000+\ 10 per purchase order What is the budgeted inspection cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

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. In going from the sales budget to the production budget, adjustments to the sales budget need to be made for

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 flexible budget for rent in 2018 is

Alpha Beta Company has a sales budget for next month of $50,000. Cost of goods sold is expected to be 60 percent of sales. All goods are purchased in the month used and paid for in the month following their purchase. The beginning inventory of merchandise is $1,500 and an ending inventory of $2,000 is desired. Beginning accounts payable is $13,000. How much merchandise inventory will Alpha Beta Company need to purchase next month?

The records of Morgantown, Inc.show the following forecasted sales: Month Sales September \ 400,000 October 500,000 November 300,000 December 200,000 Collection pattern: 60 percent in month of sale 40 percent in month following the sale Accounts receivable as of August 31 \ 70,000 Finished goods inventory as of August 31 8,000 units The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 20 percent of next month's sales. How many dollars are expected to be collected in October?

The sales budget shows the expected sales quantity and price of each product or service.

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 machining in an activity-based performance report?

Laramie, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels. $\text { Laramie had the following budgeted data }$ Budgeted variable costs per unit: Direct materials \ 7.00 Direct labor 10.00 Supplies 1.00 Indirect labor 0.50 Power 0.05 Budgeted fixed overhead for 2018 : Supervision \ 4,000 Depreciation 3,000 Rent 2,000 What are the budgeted costs for materials if 5,000 units were produced?

Which of the following is NOT a potential disadvantage of participative budgeting?

Static budgets show costs for varying levels of activities.