Exam 6: Master Budget and Responsibility Accounting

A key type of sensitivity analysis for managers is to play "what-if" with the cash budget so as to anticipate outcomes and take steps to minimize the effects of shortfalls in cash balances.

A company usually prepares a budget for nonmanufacturing costs after preparing all operating budgets.

In a revenue center, a manager is responsible for investments, revenues, and costs.

Picture Pretty manufactures picture frames. Sales for August are expected to be 10,000 units of various sizes. Historically, the average frame requires four feet of framing, one square foot of glass, and two square feet of backing. Beginning inventory includes 1,500 feet of framing, 500 square feet of glass, and 500 square feet of backing. Current prices are $0.90 per foot of framing, $8.00 per square foot of glass, and $4 per square foot of backing. Ending inventory of materials should be 150% of beginning inventory. Purchases are paid for in the month acquired. Required: a.Determine the quantity of framing, glass, and backing that is to be purchased during August. b.Determine the total costs of direct materials for August purchases.

Which of the following is a limitation of using past performance as a basis for judging actual results?

When administered wisely, budgets promote communication and coordination among the various subunits of the organization.

Best products, an Atlanta based company, is in the midst of its budgeting process. It has already prepared its direct materials usage budget and is now in the process of preparing its direct material purchase budget. In addition to the details gathered to prepare the direct materials usage budget, Best also must know ________.

Kaizen budgeting involves ________.

Freemore Company has the following sales budget for the last six months of 2018: Sales are immediately due, however the cash collection of sales, historically, has been as follows: 55% of sales collected in the month of sale, 35% of sales collected in the month following the sale, 7% of sales collected in the second month following the sale, and 3% of sales are uncollectible. What is the ending balance of accounts receivable for the end of September, assuming uncollectible balances are written off at the end of the second month following the sale?

The practice of developing reasonably challenging budgets tend to help:

Kaizen budgeting encourages dramatic improvements and substantial reduction in costs.

The following information pertains to the January operating budget for Casey Corporation. -Budgeted sales for January $209,000 and February $108,000. -Collections for sales are 50% in the month of sale and 50% the next month. -Gross margin is 30% of sales. -Administrative costs are $13,000 each month. -Beginning accounts receivable is $28,000. -Beginning inventory is $16,000. -Beginning accounts payable is $70,000. (All from inventory purchases.) -Purchases are paid in full the following month. -Desired ending inventory is 20% of next month's cost of goods sold (COGS). For January, budgeted cash payments for purchases are ________.

Which of the following statements is true about activity-based budgeting?

The cost of goods sold budget is calculated by deducting beginning finished-goods from cost of goods available for sale.

Sensitivity analysis is a useful tool that helps managers evaluate risks.

As budgeting is not a cross-functional activity, it tends to be accurate and reliable with regard to forecasts.

Three Bears Manufacturing produces an auto-quartz watch movement called OM362. Three Bears expects to sell 20,000 units of OM362 and to have an ending finished inventory of 5,000 units. Currently, it has a beginning finished inventory of 1,100 units. Each unit of OM362 requires two labor operations, two labor hour(s) of assembling and three labor hour(s) of polishing. The direct labor rate for assembling is $11 per assembling hour and the direct labor rate for polishing is $14.50 per polishing hour. The expected number of hours of direct labor for OM362 is ________.

The budgeting process is most strongly influenced by ________.

Cost-based budgeting is a budgeting method that focuses on the budgeted cost of the activities necessary to produce and sell products and services.

Administration of budgets is free of emotions as budgets are mechanical tools.