Exam 8: Budgeting for Planning and Control

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 activity variance for design?

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 rent if 5,000 units were produced?

An ideal budgeting system is one that achieves goals and encourages managers to achieve goals ethically.

A budget is a financial plan for the future used for planning, controlling, and decision making.

Realistic budgets reflect

The body responsible for reviewing the budget, providing policy guidelines and budgetary goals, resolving differences that may arise, and approving the final budget is the __________ committee.

Which of the following is NOT a component of the master budget?

With an activity flexible budget, a budget variance is calculated

Define budgeting and control. How are budgets used in planning? How are budgets used to control? What are some of the reasons for budgeting?

Feedback is not important to managers as a measuring tool of their performance.

Discus Productions needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 10 percent of total sales each month. Historically, sales on account have been collected as follows: 60 percent in the month of sale, 30 percent in the month after the sale, and the remaining 10 percent two months after the sale. Sales for the quarter are projected as follows: April, $120,000; May, $100,000; and June, $80,000. Accounts receivable on March 31 were $60,000. The expected cash collections of Discus Productions for June are

In a merchandising organization, the merchandise purchases budget replaces what budget from a manufacturing firm?

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 ? The following variances were given in the activity performance report: Design ? Machining \ 40 Setups \ 15 Purchasing ? What is the actual cost of machining?

A static budget is one developed for a single level of activity.

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 total costs in an activity-based performance report?

The production budget describes how many units must be produced in order to meet sales and inventory needs.

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 maintenance cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

The following forecasted sales pertain to Alicia Company: Month Sales April \ 200,000 May 250,000 June 150,000 July 100,000 Finished goods inventory as of March 31 4,000 units The company has a selling price of $20 per unit and expects to maintain ending inventories equal to 20 percent of the next month's sales. How many units are expected to be produced in April?

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: Unit sales for 2018 26,000 Unit production for 2018 26,000 Budgeted fixed overhead for 2018 : Supervision \ 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 \ 850 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 actual cost for direct materials for 2018 was

The activity-based budget begins with output and then determines the resources necessary to create that output.