Exam 6: Master Budget and Responsibility Accounting

The master budget summarizes all the financial and nonfinancial plans into a single document.

Boone Hobbies, a wholesaler, has a sales budget for next month of $600,000.Cost of units sold is expected to be 40 percent of sales.All units are paid for in the month following purchase.The beginning inventory of units is $20,000, and an ending amount of $24,000 is desired.Beginning accounts payable is $152,000.Boone Hobbies should budget cash used to pay accounts payable for the month totalling

The financial budget is that part of the master budget that comprises

The master budget embraces the impact of both operating decisions and financing decisions as related to acquisitions and uses of scarce resources.

Use the information below to answer the following question(s).Daniel Inc.expects to sell 6,000 ceramic vases for $20 each in 2018.Direct materials costs are $2, direct manufacturing labour is $10, and manufacturing overhead is $3 per vase.Each vase requires 0.5 kilograms (kg)of material which is all added at the start of production.The units in work-in-process beginning and ending inventory were half complete as to direct labour and manufacturing overhead costs; the units in beginning inventory are completed before new units are started.Each vase requires one hour of direct labour, and manufacturing overhead is allocated based on direct labour hours.The following inventory levels are expected to apply to 2018: -What are the 2018 budgeted costs for direct manufacturing labour?

Use the information below to answer the following question(s).Copper Corporation has the following sales budget for the last six months of 2019: Historically, the cash collection of sales has been as follows: -What is the ending balance of accounts receivable at the end of September assuming uncollectible balance is written off in the third month after the sale?

Budgets that change (rolling or continuous)motivate managers to look forward.

Ferry Company has gathered the following information: Ferry desires to keep a minimum cash balance of $15,000.Required: Prepare a cash budget for May, and indicate whether or not Ferry meets minimum cash requirements.

Shamokin Manufacturing produces two products, Big and Bigger.Shamokin expects to sell 20,000 units of Big and 10,000 units of Bigger.Shamokin plans on having an ending inventory of 4,000 units of Big and 2,000 units of Bigger.Currently, Shamokin has 1,000 units of Big in its inventory and 800 units of Bigger.Each product requires two labour operations: molding and polishing.Product Big requires one hour of molding time and one hour of polishing time.Product Bigger requires one hour of molding time and two hours of polishing time.The direct labour rate for molders is $20 per molding hour, and the direct labour rate for polishers is $25 per polishing hour.Required: Prepare a direct labour budget in hours and dollars for each product.

Few costs are clearly under the sole influence of one manager.

Answer the following question(s)using the information below.Sherry and John Enterprises are using the Kaizen approach to budgeting for 2019.The budgeted income statement for January 2019 is as follows: Under the Kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month. -Stark Company is developing its budgets for 2019 and for the first time will use the Kaizen approach.The initial 2019 income statement, based on static data from 2018 is as follows: Selling prices for 2019 are expected to increase by 6 percent, and sales volume in units will decrease by 10 percent.The cost of goods sold as estimated by the Kaizen approach will decline by 10 percent per unit.Other than amortization, all other operating costs are expected to decline by 5 percent.Required: Prepare a Kaizen-based budgeted income statement for 2019.

Budgeted financial statements are also referred to as pro forma statements.

The value of budgets to managers in their strategic analysis and planning is enhanced by

The cash budget helps avoid unnecessary idle cash and at the same time maintain minimum cash balances.

The master budget embraces the impact of

Gerry Company has gathered the following information: Gerry desires to keep a minimum cash balance of $20,000.Required: Prepare a cash budget for May, and indicate whether or not Gerry meets minimum cash requirements.

Responsibility accounting focuses on information and knowledge, not control.

The direct materials usage budget is based on

Use the information below to answer the following question(s).Samson Inc.expects to sell 10,000 barbells for $18.00 each.Direct materials costs are $5.00, direct manufacturing labour is $6.00, and manufacturing overhead is $2.50 per barbell.Each barbell requires 6 kilograms (kg)of material which is all added at the start of production.The units in work-in-process beginning and ending inventory were half complete as to direct labour and manufacturing overhead costs; the units in beginning inventory are completed before new units are started..Each barbell requires one-quarter hour of direct labour, and manufacturing overhead is allocated based on direct labour hours.Marketing costs are $2.00 per barbell.The following inventory levels are expected to apply to 2019: -How many barbells need to be produced in 2019?

Winnie and Pooh 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 lack of any financial planning.The company made a good product and market potential was great.Required: Explain why a company needs a good budgeting plan.Specifically address the need for a master budget.