Exam 6: Master Budget and Responsibility Accounting

Use the information below to answer the following question(s). Grinnell Manufacturing Company has the following information for 2012: Budget Expenses per Month Note: All cash expenses are paid as incurred; Collections from sales are 50% in the month of sale and 50% in the month following the sale; December 2011 sales were $110,000. -What is the expected total cash disbursements for expenses in February?

The usual starting point in budgeting is to forecast net income.

Management at all levels should understand and support the budget and all aspects of the management control system.

A production budget expressed in units is equal to

The budget constraint describes only financial limitations that are within the company's control.

Frame Antique manufactures picture frames. Sales for May are expected to be 20,000 units of various sizes. Historically, the average frame requires three metres of framing, one square metre of glass, and two square metres of backing. Beginning inventory includes 3,000 metres of framing, 1,000 square metres of glass, and 1,000 square metres of backing. Current prices are $0.20 per metre of framing, $4.00 per square metre of glass, and $1.50 per square metre of backing. Ending inventory should be 150 percent of beginning inventory. Purchases are paid for in the month acquired. Required: a. Determine the quantity of framing, glass, and backing that is to be purchased during May. b. Determine the total costs of direct materials for May purchases.

A limitation of comparing a company's performance against actual results of last year is that

The budgeted balance sheet must be prepared prior to the cash budget so that the required cash balance can be determined.

The reason for tracing a cost in responsibility accounting is to determine which of the following?

Use the information below to answer the following question(s). Grinnell Manufacturing Company has the following information for 2012: Budget Expenses per Month Note: All cash expenses are paid as incurred; Collections from sales are 50% in the month of sale and 50% in the month following the sale; December 2011 sales were $110,000. -What are the expected total cash receipts for February?

The master budget embraces the impact of

Beginning with the cash budget, each budget supporting the master budget follows step by step in logical fashion.

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

Allscott Company is developing its budgets for 2013 and for the first time will use the Kaizen approach. The initial 2013 income statement, based on static data from 2012, is as follows: Selling prices for 2013 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 2013.

A master budget

A rolling budget is a budget or plan that

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: -What are the 2012 budgeted costs for direct manufacturing labour?

Budgets can play both planning and control roles for management.

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

In going from the sales budget to the production budget, adjustments need to be made for