Exam 8: Budgeting for Planning and Control

Silver Faces, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance $15,000 + $4 per machine hour Machining $35,000 + $1 per machine hour Inspection $60,000 + $750 per batch Setups $1,000 per batch Purchasing $50,000 + $10 per purchase order What is the budgeted setup costs if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

Figure 8-3 Roaming Vehicles Company manufactures buggies. Manufacturing a buggy takes 20 units of wood and 1 unit of steel. Scheduled production of buggies for the next two months is 500 and 600 units, respectively. Beginning inventory is 4,000 units of wood and 30 units of steel. The ending inventory of wood is planned to decrease 500 units in each of the next two months, and the steel inventory is expected to increase 5 units in each of the next two months. -Moriah Manufacturing Company expects to incur the following per unit costs for 1,000 units of production: Direct materials 3 lb. @ $5 = $15 Direct labor 1 hr @ $6 = $6 Variable overhead 75% of direct labor costs Fixed overhead 50% of direct labor costs What is the total amount of overhead included in the overhead budget?

Figure 8-2 Asian Lamp Company manufactures lamps. The estimated number of lamp sales for the last three months of 2016 are as follows: Finished goods inventory at the end of September was 3,000 units. Ending finished goods inventory is budgeted to equal 25 percent of the next month's sales. Asian Lamp expects to sell the lamps for $25 each. January 2016 sales is projected at 16,000 lamps. -Refer to Figure 8-2. How many lamps should be produced in October?

Figure 8-8 Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Rammazzotti Inc., had the following budgeted data: Unit sales for 2016 26,000 Unit production for 2016 26,000 Budgeted fixed overhead for 2016: Supervision $ 800 Depreciation 2,000 Rent 100 Budgeted variable costs per unit: Direct materials $0.15 Direct labor 0.20 Supplies 0.02 Indirect labor 0.05 Power 0.02 The following actually occurred: Actual unit sales for 2016 24,000 Actual unit production for 2016 28,000 Actual fixed overhead for 2016: Supervision $ 850 Depreciation 2,000 Rent 100 Actual variable costs: Direct materials $3,500 Direct labor 4,900 Supplies 530 Indirect labor 1,250 Power 470 -Refer to Figure 8-8. The budgeted cost for direct labor for 2016 was

The process of setting standards, receiving feedback on actual performance, and taking corrective action whenever actual performance deviates significantly from planned performance.

The production budget describes how many units must be produced in order to meet sales and inventory needs.

Figure 8-8 Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Rammazzotti Inc., had the following budgeted data: Unit sales for 2016 26,000 Unit production for 2016 26,000 Budgeted fixed overhead for 2016: Supervision $ 800 Depreciation 2,000 Rent 100 Budgeted variable costs per unit: Direct materials $0.15 Direct labor 0.20 Supplies 0.02 Indirect labor 0.05 Power 0.02 The following actually occurred: Actual unit sales for 2016 24,000 Actual unit production for 2016 28,000 Actual fixed overhead for 2016: Supervision $ 850 Depreciation 2,000 Rent 100 Actual variable costs: Direct materials $3,500 Direct labor 4,900 Supplies 530 Indirect labor 1,250 Power 470 -Refer to Figure 8-8. The actual cost for direct materials for 2016 was

Figure 8-8 Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Rammazzotti Inc., had the following budgeted data: Unit sales for 2016 26,000 Unit production for 2016 26,000 Budgeted fixed overhead for 2016: Supervision $ 800 Depreciation 2,000 Rent 100 Budgeted variable costs per unit: Direct materials $0.15 Direct labor 0.20 Supplies 0.02 Indirect labor 0.05 Power 0.02 The following actually occurred: Actual unit sales for 2016 24,000 Actual unit production for 2016 28,000 Actual fixed overhead for 2016: Supervision $ 850 Depreciation 2,000 Rent 100 Actual variable costs: Direct materials $3,500 Direct labor 4,900 Supplies 530 Indirect labor 1,250 Power 470 -Refer to Figure 8-8. The flexible budget variance for total cost for 2016 is

If a static budget forecasted 100,000 units to be sold in the fiscal year and actual units sold amounted to 120,000, what assumption could be made under a flexible budget process?

Figure 8-8 Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Rammazzotti Inc., had the following budgeted data: Unit sales for 2016 26,000 Unit production for 2016 26,000 Budgeted fixed overhead for 2016: Supervision $ 800 Depreciation 2,000 Rent 100 Budgeted variable costs per unit: Direct materials $0.15 Direct labor 0.20 Supplies 0.02 Indirect labor 0.05 Power 0.02 The following actually occurred: Actual unit sales for 2016 24,000 Actual unit production for 2016 28,000 Actual fixed overhead for 2016: Supervision $ 850 Depreciation 2,000 Rent 100 Actual variable costs: Direct materials $3,500 Direct labor 4,900 Supplies 530 Indirect labor 1,250 Power 470 -Refer to Figure 8-8. The static budget variance for direct materials is

Ruger, Inc., is looking for feedback on performance. The company compares the budget for the year with the actual costs. Ruger had the following budgeted data: Budgeted variable costs per unit: Budgeted fixed overhead for 2016: Prepare a flexible budget for production costs for the following range of activity: 2,500 units; 4,000 units; 6,000 units.

Figure 8-4 Discus Productions needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 10 percent of total sales each month. Historically, sales on account have been collected as follows: 60 percent in the month of sale, 30 percent in the month after the sale, and the remaining 10 percent two months after the sale. Sales for the quarter are projected as follows: April, $120,000; May, $100,000; and June, $80,000. Accounts receivable on March 31 were $60,000. -Refer to Figure 8-4. Discus Productions would expect to have an accounts receivable balance on June 30 of

When budgets are used to evaluate performance, which factor might NOT have a significant behavioral effect?

Lumberton Company has the following projected account balances for June 30, 2016: a. Prepare a budgeted income statement for June 2016. b. Prepare a budgeted balance sheet as of June 30, 2016.

Molina Company has the following sales forecast for the next quarter: April, 20,000 units; May, 24,000 units; June, 28,000 units. Sales totaled 16,000 units in March. The March finished goods inventory was 4,000 units. End-of- month finished goods inventory levels are planned to be equal to 20 percent of the next month's planned sales. The planned production for Ben Company for April is

Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance $11,000 + $0.11 per machine hour Machining $25,000 + $0.50 per machine hour Setups $50 per batch Purchasing $200 + $45 per purchase order Following are the actual costs of producing 85,000 decals: 5,000 machine hours; 10 batches; 20 purchase orders What is the budget variance for maintenance in an activity-based performance report?

Volume variances examine differences between the budget and the __________ budget.

The cash excess or deficiency section of the cash budget compares expected available cash to the expected cash needed.

The budget director is responsible for directing and coordinating the budgeting process.

Activity-based budgeting recognizes interdependencies among departments.