Exam 6: Master Budget and Responsibility Accounting

Bob and Dale have just purchased a small honey manufacturing company that was having financial difficulties. After a brief operating period, they decided that the company's main problem was an improper budgeting function. The company made a good product and market potential was great. Required: Describe the usual budgeting cycle that well-managed companies adopt?

Nantucket Industries manufactures and sells two models of watches, Prime and Luxuria. It expects to sell 3,800 units of Prime and 1,300 units of Luxuria in 2019.The following estimates are given for 2019: Nantucket had an inventory of 240 units of Prime and 125 units of Luxuria at the end of 2018. It has decided that as a measure to counter stock outages it will maintain ending inventory of 350 units of Prime and 230 units of Luxuria. Each Luxuria watch requires one unit of Crimpson and has to be imported at a cost of $13. There were 140 units of Crimpson in stock at the end of 2018. The management does not want to have any stock of Crimpson at the end of 2019. What is the total budgeted cost of goods manufactured in 2019?

Describe operating and financial budgets and give at least two examples of each discussed in the textbook.

Budgeting is a mechanical tool because the budgeting techniques are free of emotions.

A budget is a communication aid, informing staff of expectations and providing information that is essential to coordinating what needs to be done to implement the proposed plan.

Estate Corp., has the following information: Purchases are paid for in the following manner: 15% of the purchase amount in the month of purchase 35% of the purchase amount in the month after purchase 50% of the purchase amount in the second month after purchase What is the expected Accounts Payable balance as of May 31?

Even in the face of changing conditions, attaining the original budget is critical and is the only true measure of success.

Estate Corp., has the following information: Purchases are paid for in the following manner: 10% of the purchase amount in the month of purchase 50% of the purchase amount in the month after purchase 40% of the purchase amount in the second month after purchase What is the expected balance in Accounts Payable as of April 30?

Responsibility accounting focuses on control, NOT on information and knowledge.

Bradford, Inc., expects to sell 9,000 ceramic vases for $21 each. Direct materials costs are $3, direct manufacturing labor is $12, and manufacturing overhead is $3 per vase. The following inventory levels apply to 2019: What are the 2019 budgeted production costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively?

Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows: What is the projected decline in operating income if the direct materials costs of T-Shirts increase to $3.50 per unit and direct labor costs of Sweatshirts increase to $14.00 per unit?

A company using responsibility accounting system decides to exclude all uncontrollable costs from a manager's performance report. Jenson is the machine supervisor. Which of the following costs will impact Jenson's performance report?

The operating budget process generally concludes with the preparation of the ________.

The number of units in the sales budget and the production budget may differ because of a change in ________.

A limitation of using past performance as a basis for judging actual results is that ________.

Decentralized operations organized by brand or product line might result in some inefficiencies as support functions may be duplicated.

A responsibility center is a part, segment, or subunit of an organization whose manager is accountable for a specified set of activities.

One of the benefits of a well implemented and executed budget is communication. Which of the following best describes communication within the budgetary cycle?

Research shows that the performance of employees falls when they are asked to adhere to challenging budgets.

Advanced Enterprises reports year-end information from 2018 as follows: Advanced is developing the 2019 budget. In 2019 the company would like to increase selling prices by 13.5%, and as a result expects a decrease in sales volume of 9%. All other operating expenses are expected to remain constant. Assume that cost of goods sold is a variable cost and that operating expenses are a fixed cost. What is budgeted sales for 2019?