Exam 6: Master Budget and Responsibility Accounting

Allscott Company is developing its budgets for 2012 and, for the first time, will use the kaizen approach. The initial 2012 income statement, based on static data from 2011, is as follows: Selling prices for 2012 are expected to increase by 8%, and sales volume in units will decrease by 10%. The cost of goods sold as estimated by the kaizen approach will decline by 10% per unit. Other than depreciation, all other operating costs are expected to decline by 5%. Required: Prepare a kaizen-based budgeted income statement for 20X5.

Duffy Corporation has prepared the following sales budget: Collections are 40% in the month of sale, 45% in the month following the sale, and 10% two months following the sale. The remaining 5% is expected to be uncollectible. Required: Prepare a schedule of cash collections for July through September.

Answer the following questions using the information below: Kason, Inc., expects to sell 20,000 pool cues for $24.00 each. Direct materials costs are $4.00, direct manufacturing labor is $8.00, and manufacturing overhead is $1.60 per pool cue. The following inventory levels apply to 2011: -On the 2012 budgeted income statement, what amount will be reported for sales?

Answer the following questions using the information below: Kramer Enterprises reports year-end information from 2010 as follows: Kramer is developing the 2011 budget. In 2011 the company would like to increase selling prices by 8%, and as a result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain constant. Assume that COGS is a variable cost and that operating expenses are a fixed cost. -Should Kramer increase the selling price in 2011?

Financial planning models:

Answer the following questions using the information below: Wallace Company provides the following data for next year: The gross profit rate is 40% of sales. Inventory at the end of December is $21,600 and target ending inventory levels are 30% of next month's sales, stated at cost. -St. Claire Manufacturing expects to produce and sell 6,000 units of Big, its only product, for $20 each. Direct material cost is $2 per unit, direct labor cost is $8 per unit, and variable manufacturing overhead is $3 per unit. Fixed manufacturing overhead is $24,000 in total. Variable selling and administrative expenses are $1 per unit, and fixed selling and administrative costs are $3,000 in total. According to generally accepted accounting principles, inventoriable cost per unit of Big would be:

Answer the following questions using the information below: Elton, Inc., expects to sell 6,000 ceramic vases for $40 each. Direct materials costs are $4, direct manufacturing labor is $20, and manufacturing overhead is $6 per vase. The following inventory levels apply to 2011: -What are the 2012 budgeted costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively?

The sales forecast should primarily be based on statistical analysis with secondary input from sales managers and sales representatives.

Nittany Company sells three products with the following seasonal sales pattern: The annual sales budget shows forecasts for the different products and their expected selling price per unit as follows: Required: Prepare a sales budget, in units and dollars, by quarters for the company for the coming year.

Distinguish between controllable and uncontrollable aspects of revenue and costs. Can a manager totally control all revenue and costs? Why or why not?

Because of the possibility of exchange rate fluctuations, managers of multinational corporations should ignore subjective factors in their performance evaluations.

Answer the following questions using the information below: Bear Company has the following information: Purchases are paid for in the following manner: -What is the expected Accounts Payable balance as of May 31?

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 the 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.

Answer the following questions using the information below: The following information pertains to the January operating budget for Casey Corporation. -For January, budgeted cost of goods sold is:

Even in the face of changing conditions, attaining the original budget is critical.

Wilcox Company has budgeted sales volume of 60,000 units and budgeted production of 54,000 units, while 10,000 units are in beginning finished goods inventory. How many units are targeted for ending finished goods inventory?

A primary consideration in assigning a cost to a responsibility center is:

Steve Corporation is using the kaizen approach to budgeting for 2011. The budgeted income statement for January 2011 is as follows: Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month. Required: Prepare a kaizen-based budgeted income statement for March of 2011.

A key use of sensitivity analysis is for cash-flow budgeting.

Christy Enterprises reports the year-end information from 2011 as follows: Christy is developing the 2012 budget. In 2012 the company would like to increase selling prices by 10%, and as a result expects a decrease in sales volume of 5%. Cost of goods sold as a percentage of sales is expected to increase to 62%. Other than depreciation, all operating costs are variable. Required: Prepare a budgeted income statement for 2012.