Exam 6: Master Budget and Responsibility Accounting

Direct material purchases equal

Use the information below to answer the following question(s). Daniel Inc. expects to sell 6,000 ceramic vases for $20 each in 2012. 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 2012: -On the 2012 budgeted income statement, what amount will be reported for cost of goods sold?

Lubriderm Corporation has the following budgeted sales for the next six-month period: There were 30,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20 percent of the unit sales for the next month. Five pounds of materials are required for each unit produced. Each pound of material costs $8. Inventory levels for materials are equal to 30 percent of the needs for the next month. Materials inventory on June 1 was 15,000 pounds. Required: a. Prepare production budgets in units for July, August, and September. b. Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month.

Describe the four types of responsibility centres. Give a specific example of each of the four types of responsibility centres.

Budgets are advantageous because they

The cash cycle describes the movement of cash from producing inventories to receivables from sales and back to cash from collections.

Use the information below to answer the following question(s). Daniel Inc. expects to sell 6,000 ceramic vases for $20 each in 2012. 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 2012: -How many kilograms of material will need to be purchased for 2012 production and inventory requirements?

Long-run planning (strategic plans) involves the preparation of the

A criticism of traditional budgeting is "Excessive reliance on extrapolating past trends". Which of the following is a proposal for change to address this criticism?

Performance reports for responsibility centres may include uncontrollable costs if they are segregated from controllable costs.

The revenue budget and the budgeted income statement are used to prepare the budgeted balance sheet and the budgeted statement of cash flows.

Disk Company was very profitable for the first ten years of its existence, but the company has fallen on hard times with the growth of compact disks. In 2007 Jean Adams was appointed head of the Product Research Department. She began a number of product development projects. Although the department has developed several good ideas that led to the introduction of several promising products, Ms. Adams was criticized for poor cost control. The financial performance reports of the department under Ms. Adams leadership were consistently unfavourable. Management was quite concerned about cost control because profits for the company were low and the cash budget indicated that additional borrowing would be required during the next year. Because of her inability to control costs, Ms. Adams was relieved of her responsibilities in 2008 and Fran Jones became head of the department. Ms. Jones promised to improve performance of Product Research and scaled back the developmental activities to obtain favourable financial performance. By the end of 2008 Ms. Jones was showing a favourable financial variance. Required: If the Product Research Department is classified as a responsibility centre, what unique problems are associated with evaluating its financial performance?

What will be the Fair Score Company budgeted amount of cost of goods sold?

Responsibility accounting is a system that

Use the information below to answer the following question(s). Konrade Inc. expects to sell 30,000 athletic uniforms for $80 each in 2012. Direct materials costs are $20, direct manufacturing labour is $8, and manufacturing overhead is $6 for each uniform. Each uniform requires 2.0 square metres (sq. m.) of material which is all added at the start of production. The following inventory levels are expected to apply to 2012: -What is the amount budgeted for cost of goods manufactured in 2012?

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.

Cash receipts depend on collections of accounts payable, cash sales, and miscellaneous sources, such as rental income.

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.

What will be Fair Score Company's budgeted total cost of direct materials used in 2012?

Tripp 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 revenue budget in dollars for each quarter. Present each quarter in a separate column and add a column to show total year sales.