Exam 23: Operational Budgeting

Which element of a master budget would normally be prepared first?

A cash budget is affected directly by each of the following except:

Under the "total quality management" philosophy,budgeted amounts should be set at realistic and achievable levels rather than at levels representing absolute efficiency.

A performance report can be easily adjusted to show budgeted revenues and costs at different levels of activity.

Mentha Company currently has the following statistics: Days in inventory - 80 Days in accounts receivable - 68 What is Mentha's operating cycle?

A budget that can be easily adjusted to show budgeted revenues,costs,and cash flows at different levels of activity is known as:

Flexible budget-variances The cost accountant for Bradley,Inc.,prepared the following monthly performance report relating to the Finishing Department: (a)Compute the amounts that should be included for each of the following in a flexible budget prepared for a 6,500-unit level of production: (1)Direct materials: $_______________ (2)Direct labor: $_______________ (3)Fixed manufacturing overhead: $_______________ (b)Assume that a revised performance report is prepared for the 6,500-unit level of production using a flexible budget approach.Compute the cost variances for each of the following.Indicate whether each variance is favorable (F)or unfavorable (U).

Once a company determines its desired production level,it uses that estimated production level to forecast sales for the period.

If the behavioral approach is employed to determine the levels at which budgeted amounts are set,then reasonable and achievable levels should be used.

Flexible budgeting may be viewed as combining the concepts of budgeting with cost-volume-profit analysis.

Establishing budgeted amounts (a)The text discusses two basic philosophies as to the levels at which budgeted amounts should be set.Identify and describe briefly each of these two philosophies. (b)Which of the two management philosophies would be more likely to elicit the following comment? "At our company,budgeted revenue is set so high and budgeted costs so low that no department can ever meet the budget.This way,department managers can never relax; they are motivated to keep working harder no matter how well they are already doing."

The sales forecast directly affects many elements of the master budget.Which of the following would be least affected by short-term fluctuations in the sales forecasts?

Mentha Company currently has the following statistics: Days in inventory - 80 Operating cycle - 148 What is Mentha's days in accounts receivable?

In a cash budget,the budgeted level of cash receipts depends on all of the following except:

Preparation of a budgeted income statement does not require:

In a flexible budget,both variable and fixed costs will vary with the level of activity.

If a budget is to provide a basis for evaluating departmental performance,departmental managers should not know what their budget targets are until after the budget period has ended.

A master budget usually includes all of the following except:

A master budget actually includes a number of related budgets.