Exam 22: The Master Budget and Responsibility Accounting

Dahl Manufacturing is making its operating budget for the 4^th quarter of 2012. Sales are forecast at $60,000 in October, $65,000 in November, and $70,000 in December. Cost of goods sold it 40% of sales. Expenses are budgeted as follows: Variable: Miscellaneous: 5\% of sales Fixed: Salary expense: \ 12,600 per month Rent expense: \ 5,200 per month Depreciation expense: \ 4,000 per month Admin expense: \ 5,000 per month - How much is the net operating income/(loss) in November?

Bartholomew Manufacturing Company is preparing the operating budget for the first quarter of 2012. They forecast sales of $50,000 in January, $60,000 in February, and $70,000 in March. Cost of goods sold is budgeted at 40% of Sales. Variable and fixed expenses are as follows: Variable: $\quad$ Miscellaneous expenses : $20 \%$ of Sales Fixed: $\quad$$\quad$ Salary expense: $\$ 11,000$ per month $\quad$$\quad$$\quad$$\quad$ Rent expense: $\$ 5,000$ per month $\quad$$\quad$$\quad$$\quad$ Depreciation expense: $\$ 1,200$ per month $\quad$$\quad$$\quad$$\quad$ Miscellaneous expenses/fixed portion: $\$ 3,300$ per month - How much is the operating net income/(loss) for March?

There are five types of responsibility centers cost centers, revenue centers, profit centers, investment centers, and financial centers.

AAA Company is preparing its 3rd quarter budget and provides the following data: Jul Aug Sep Cash collections \ 50,000 \ 40,000 \ 48,000 Cash payments: Purchases of inventory 31,000 22,000 18,000 Operating expenses 12,000 9,000 11,600 Capital expenditures 13,000 25,000 0 Cash balance at June 30 is projected to be $4,000. The company is required to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash. - What is the final projected cash balance at the end of September?

Felton Manufacturing provides the following data excerpted from its 3rd quarter budget: Jul Aug Sep Cash collections \ 50,000 \ 40,000 \ 48,000 Cash payments: Purchases of inventory 31,000 22,000 18,000 Operating expenses 12,000 9,000 11,600 Capital expenditures 0 25,000 0 The cash balance at June 30 is projected to be $4,000.Based on the above data, how much cash shortfall is the company projected to have at the end of August?

June sales were $40,000 while projected sales for July and August were $50,000 and $60,000, respectively. Sales are 40% cash and 60% credit. All credit sales are collected in the month following the sale. What are the expected collections for July?

Which of the following statements about budgeting is INCORRECT?

Hi-value Products Company is creating an operating budget for the 3^rd quarter, and is now preparing the operating expense budget. Assumptions for operating expenses are as follows: Miscellaneous expense - variable portion: 10% of sales revenue Miscellaneous expense - fixed portion: $4,200 per month Salary expense - fixed: $12,000 per month Rent expense - fixed: $8,000 per month Depreciation expense - fixed: $5,600 per month Sales for July, August and September were budgeted at $100.000, $120,000, and $160,000. Using the format below, please prepare an operating expense budget. Operating Expenses Budget Jul Aug Sep Variable operating expenses: Misc. expense(10\% of sales) Total variable expenses Fixed operating expenses: Salary expense Rent expense Depreciation expense Misc. expense(fixed portion) Total fixed expenses Total operating expenses

John McGee is responsible for managing the Midwest sales region of a home health care service company. His business unit would most accurately be described as a(n):

Which of the following BEST describes a business unit where the manager is primarily responsible for cost control?

The master budget includes 3 components-the operating budget, the capital expenditures budget and the financial budget.

Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions-Construction, Manufacturing, and Military. The Construction Division has been allocated a total of $192,000 of costs from the procurement department. Of that amount, 75% is considered traceable to the three product types within the division-Civil Construction, Residential Construction, and Commercial Construction. The division will calculate an allocation rate to assign traceable costs to each of the three product types based on number of purchase orders processed within each product type. Please refer to the following information: Construction Division Product lines Revenues Variable Expenses Purchase Orders Civil \ 36,000 \ 24,000 450 Residential \ 98,000 \ 41,000 900 Commercial \ 216,000 \ 60,000 1,860 Total \ 360,000 \ 125,000 3,200 -The amount allocated to the Civil Construction Product Line should be:

Budgeted operating expenses for the current year include the expiration of insurance that was paid for in a previous period.

Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions-Construction, Manufacturing, and Military. The Construction Division has been allocated a total of $192,000 of costs from the procurement department. Of that amount$144,000 is considered traceable to the three product types within the division-Civil Construction, Residential Construction, and Commercial Construction. The traceable amounts are further allocated to the three product types within the division as shown here: Construction Division Variable Product lines Revenues Expenses Assigned Costs Civil \ 36,000 \ 24,000 \ 20,250 Residential \ 98,000 \ 41,000 \ 40,500 Commercial \ 216,000 \ 60,000 \ 83,250 Total \ 350,000 \ 125,000 \ 144,000 Please complete a performance report, the divisional income statement, for the Construction Division, using the format shown here: Construction Division Income Statement Division Total Civil Residential Commercial Sales revenue Variable expenses Contributionmargin Traceable fixed expenses Product margin Non-traceable expenses Division margin

If an operating division or a product line of a company was eliminated, which of the following statements would be TRUE?

Which of the following describes the inventory, purchases, and cost of goods sold budget?

Della Company prepared the following purchases budget: Month Budgeted Purchases June \ 67,000 July \ 72,500 August \ 76,300 September \ 73,700 October \ 69,200 All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after purchase. - What are the total cash payments made in August for purchases?

Assume that AAA Company's Accounting Department is a centralized service department serving all the various business units of the company. If AAA wished to assign the costs of the department to the company's various business units, which of the following would be the MOST appropriate cost driver or assignment basis?

Liu Electronics budgeted sales of $400,000 for the month of November; cost of goods sold is equal to 65% of sales. Beginning inventory for November was $80,000 and ending inventory for November should be $72,000. How much are the budgeted purchases for November?

One of the key functions of responsibility accounting is to evaluate the performance of company managers and the units they manage.