Exam 8: Budgeting for Planning and Control

In a for-profit service firm, the sales budget is also the production budget.

Alpha Beta Company has a sales budget for next month of $50,000. Cost of goods sold is expected to be 60 percent of sales. All goods are purchased in the month used and paid for in the month following their purchase. The beginning inventory of merchandise is $1,500 and an ending inventory of $2,000 is desired. Beginning accounts payable is $13,000. How much merchandise inventory will Alpha Beta Company need to purchase next month?

When the reaction to a budget is negative, resulting in managerial behavior that is negative for the organization, the resulting behavior is known as

Figure 8-7 Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below: The June 30th balance sheet follows: Actual sales for June and budgeted sales for July, August, and September are given below: Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000. -Refer to Figure 8-7. What is the balance of the inventory account at the end of July?

Realistic budgets reflect

The sales budget shows the expected sales quantity and price of each product or service.

A budget that is developed around one particular level of activity is

Which of the following is NOT a responsibility of the budget committee?

Firefly Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale. Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March, $90,000. Accounts receivable on December 31 were $45,000. The expected cash collections of Firefly Manufacturing Company for March are

Static budgets show costs for varying levels of activities.

Control can be defined as

Colorado Corporation has the following sales forecast for the next quarter: July, 4,000 units; August, 4,800 units; September, 5,600 units Sales totaled 3,200 units in June. The June ending finished goods inventory was 800 units. End-of-month finished goods inventory levels are planned to be equal to 30 percent of the next month's planned sales. Records showed that each unit is budgeted at 2 pounds of materials costing $3 per pound. Direct labor was budgeted at .5 direct labor hours per unit at a wage of $20 per hour. Budgeted variable overhead is $1.50 per direct labor hour. Fixed overhead is budgeted at $250,000 for the year, and 50,000 units are expected to be produced. The beginning finished inventory is valued at $31,320. After preparing a finished goods inventory budget for August, what is the cost of goods sold for August?

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 indirect labor for 2016 is

Figure 8-5 The following forecasted sales pertain to Spyware Corporation: 65 percent in month of sale 35 percent in month following sale Accounts receivable as of August 31 $7,000 Finished goods inventory as of August 31 1,500 units Spyware Corporation has a selling price of $2.50 per unit and expects to maintain ending inventories equal to 25 percent of the next month's sales. -Refer to Figure 8-5. How many dollars are expected to be collected in September?

What is the formula used to compute the units to be produced?

Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance $11,000 + $2 per machine hour Machining $55,000 + $3 per machine hour Inspection $70,000 + $500 per batch Setups $2,000 per batch Purchasing $80,000 + $150 per purchase order Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders What is the budget variance for setups in an activity-based performance report?

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. -Olga's Company has a sales budget for next month of $150,000. Cost of goods sold is expected to be 40 percent of sales. All goods are purchased in the month used and paid for in the month following purchase. The beginning inventory of merchandise is $5,000, and an ending inventory of $6,000 is desired. Beginning accounts payable is $38,000. How much merchandise inventory will Olga's need to purchase next month?

The budgets that are concerned with the inflows and outflows of cash and with financial position are called the:

The accounts receivable aging schedule aids in determining the timing of cash __________ .

The budgeting that recognizes interdependencies among departments is called budgeting.