Exam 24: The Budgeting Process

The Budget Committee oversees each stage in the preparation of a master budget.

Zero-based budgeting requires the preparation of budget from scratch.

Fantastic Futons goes through two departments in the production process. Each futon requires two direct labor hours in Department A and one hour in Department B. Labor cost is $8 per hour in Department A and $10 per hour in Department B. Assuming the amount budgeted to be produced in January is 30,000 units, what is the budgeted direct labor cost for January?

Ceiling Fans by Ike's overhead budget for 2009 was as follows: Factory supervision \ 300,000 Utilities costs 150,000 Insurance 28,000 Property taxes 22,000 Depreciation 100,000 Total \ 600,000 600,000 units were produced in 2009. Direct labor cost is $18,000,000. For both 2009 and 2010, each unit required 3 direct labor hours at $10 per hour. In 2010, property taxes, insurance, and depreciation are expected to stay at 2009 levels. Utilities costs vary proportionally with units produced. Factory supervision increases by increments of $30,000 for every 200,000 increase in direct labor hours. The 2010 expected production is 1,200,000 units. If the expected 2010 expense for factory supervision and for utilities costs is $500,000 and $250,000, respectively, then the total for the 2010 overhead budget is

Fallgatter, Inc., expects to sell 18,000 units. Each unit requires 3 pounds of direct materials at $12 per pound and 2 direct labor hours at $10 per direct labor hour. The overhead rate is $8 per direct labor hour. The beginning inventories are as follows: direct materials, 2,000 pounds; finished goods, 2,500 units. The planned ending inventories are as follows: direct materials, 3,900 pounds; finished goods, 3,000 units. Given a planned production of 10,000 units, what are the planned direct materials purchases?

In the development of a cash budget, which of the following elements must be determined first?

Only the lowest levels of management can be evaluated by the use of a budget.

The first budget to be prepared when making a master budget is the

The short-term plan or budget involves every part of the enterprise and is much more detailed than the long-term plan.

Mi Casa Corporation wishes to prepare a cash budget for November 2010. Sales, purchases, and expenses for October (actual) and November and December (estimated) are as follows: Sales Purchases Expenses October \ 48,000 \ 35,000 \ 14,000 November 40,000 30,000 11,000 December 45,000 22,000 9,500 Sales: All sales are on credit, and the company's experience shows that, on the average, 80 percent of sales are collected in the month of sale and the balance in the following month. A 2 percent discount is allowed on all collections in the month of sale. Purchases: The company pays 60 percent of purchases in the month of purchase and the balance in the following month. The company is allowed an average discount of 1 percent on payments made in the month of purchase. Expenses: The monthly expenses for November include charges for depreciation amounting to $1,000 and $100 of prepaid expenses, which will expire. All other expenses are paid as incurred. Other: On September 1, 2010, a new machine was purchased for $5,000. A down payment of $500 was made, and it was agreed that the balance would be paid in equal installments in the following three months. The cash payments in November for payment for the new machine are expected to be

Which budgets must managers prepare before they can prepare a direct materials purchases budget?

Operating budgets are plans used in daily operations.

The direct labor budget is needed to prepare the production budget.

The following information is available from the controller's records for Penelope, Ltd.: Sales Purchases May \ 60,000 \ 20,000 June 70,000 30,000 July 80,000 25,000 All sales are on credit. Records show that 80 percent of the customers pay during the month of the sale, 15 percent pay the month after the sale, and the remaining 5 percent pay the second month after the sale. Purchases are all paid the following month at a 1 percent discount. Cash disbursements for operating expenses in July were $8,000. Prepare a cash budget for July.

A master budget consists of a set of operating budgets and a set of financial budgets for a specific accounting period.

A continuous budget is prepared

Which of the following is prepared directly after the cash budget?

The main difference in the master budget process for manufacturing, retail, and service organizations is found in the preparation of the operating budgets.

Projected financial statements are the final product of the budgeting process.

Ceiling Fans by Ike's overhead budget for 2009 was as follows: 600,000 units were produced in 2009. Direct labor cost is $18,000,000. For both 2009 and 2010, each unit required 3 direct labor hours at $10 per hour. In 2010, property taxes, insurance, and depreciation are expected to stay at 2009 levels. Utilities costs vary proportionally with units produced. Factory supervision increases by increments of $30,000 for every 200,000 increase in direct labor hours. The 2010 expected production is 1,200,000 units. What will be the value for utilities costs in the 2010 overhead budget?