Exam 13: Planning and Budgeting

Selana Company's total costs of operating five sales offices last year were $500,000,of which $70,000 represented fixed costs.Selana has determined that total costs are significantly influenced by the number of sales offices operated.Last year's costs and number of sales offices can be used as the basis for predicting annual costs.What would be the budgeted cost for the coming year if Selana were to operate seven sales offices? (CPA adapted)

Ethical conflicts can occur in the budgeting process because managers supply information for the budgets that are then used to evaluate their performance.There is an incentive to bias the estimates,which is a disadvantage of participatory budgeting.

Which of the following budgets is not required in a service organization?

Lynndorf Corporation is a manufacturer of tables sold to schools,restaurants,hotels,and other institutions.The table tops are manufactured by Lynndorf,but the table legs are purchased from an outside supplier.The Assembly Department takes a manufactured table top and attaches the four purchased table legs.It takes 20 minutes of labor to assemble a table.The company follows a policy of producing enough tables to insure that 40% of next month's sales are in the finished goods inventory.Lynndorf also purchases sufficient raw materials (legs)to insure that raw materials (legs)inventory is 60% of the following month's scheduled production needs.Lynndorf's sales budget in units for the next quarter is as follows: (CMA adapted) Lynndorf's ending inventories in units for June 30 are: Disregarding your response to the previous question,assume the required production for August and September is 1,600 and 1,800 units,respectively,and the July 31 raw materials (legs)inventory is 4,200 units.The number of table legs to be purchased in August is:

Which of the following is not correct regarding the manufacturing overhead budget?

Estimates for direct labor costs are obtained from the engineering and production management,as well as from the Personnel Department.Time estimates come from engineering and production,wage rates from personnel.

The sales budget drives the rest of the budgeting process for both manufacturers and merchandisers.The sales budget sets the tone for the entire budget,or,looking at it another way - the rest of the budget supports the accomplishment of the sales budget.

Rizzo Corporation had 17,000 units of brake calipers on hand at the end of 2012.The company's inventory policy was to maintain an ending inventory equal to 15% of the current year's sales.During 2012,Rizzo sold 210,000 units of calipers.How many units did Rizzo purchase in 2012?

ABC Company has 10,000 units on hand at the beginning of the year and plans to sell 100,000 units during the year.If the ending inventory needs to be twice the beginning inventory,ABC will need to produce 90,000 units during the year.The production will need to be 110,000 units (10,000 + 110,000 - 100,000 = 20,000)

The Sledge Hammer Company manufactures a line of high quality tools.The company sold 1,000,000 hammers at a price of $4 per unit last year.The company estimates that this volume represents a 20% share of the current hammers market.The market is expected to increase by 5%.Marketing specialists have determined that,as a result of a new advertising campaign and packaging,the company will increase its share of this larger market to 24%.Due to changes in prices,the new price for the hammer will be $4.30 per unit.This new price is expected to be in line with the competition and have no effect on the volume estimates.What are the estimated sales revenues in the coming year?

The following budgeted information is provided: One pound of material is required for each finished unit.The inventory of materials at the end of each month should equal 20% of the following month's production needs.At the beginning of Month 1,there was 3,200 lbs.of materials on hand.Purchases of raw materials for Month 1 would be (in pounds):

The manufacturing overhead budget requires that costs be separated into their fixed and variable components.Another budget that has this requirement is the:

The Sun Company manufactures a special line of graphic tubing items.The company estimates it will sell 75,000 units of this item in 2012.The beginning finished goods inventory contains 20,000 units.The target for each year's ending inventory is 10,000 units.Each unit requires five feet of plastic tubing.The tubing inventory currently includes 70,000 feet of the required tubing.Materials on hand are targeted to equal three months' production.Any shortage in materials will be made up by the immediate purchase of materials.Sales take place evenly throughout the year.What is the production budget (in units)for 2012?

The cash budget is normally prepared before the budgeted income statement.The cash budget can be assembled as various items are completed that feed into it;this may or may not be in conjunction with the income statement.

Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared?

Which of the following budgets is not required in a wholesale organization?

Bottlenecks in the production process can be discovered by the budgeting process before they occur.The budget will expose capacity problems before they occur.This is one of the advantages of budgeting.

Which one of the following budgets would be the last one prepared in the master budget preparation process?

In effect,the cash budget simply restates the budgeted income statement to the cash basis.The income statement reflects accrual accounting while the cash budget emphasizes when cash is received or paid.

National Telephone Company has been forced by competition to put much more emphasis on planning and controlling its costs.Accordingly,the company's controller has suggested initiating a formal budgeting process.Which of the following steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system? (CMA adapted)