Exam 8: Budgeting for Planning and Control

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 supplies is

A continuous budget is a moving twelve-month budget.

Sales for October, November, and December are expected to be $200,000, $180,000, and $220,000, respectively, for the Gurumai Company. All sales are on account (terms 2/15, net 30 days) and are collected 50 percent in the month of sale and 50 percent in the following month. One-half of all sales discounts are taken on the average. Materials are purchased one month before being needed, and all purchases and expenses are paid for as incurred. Activities for the quarter are expected to be: Required: Using the given information, prepare a cash budget for November.

Mikhail Corporation has the following sales forecasts for the first three months of 2016: Sixty-five percent of sales are collected in the month of the sale and the remainder are collected in the following Month. Mikhail will borrow from its bank to maintain its minimum cash balance. Accounts receivable balance (January 1, 2016) $16,000 Cash balance (January 1, 2016) 12,000 Minimum cash balance needed 20,000 What is the cash balance at the end of January, assuming that cash is received only from customers and that $48,000 is paid out during January?

A functional-based approach to budgeting compares costs for functional line items such as

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 machining in an activity-based performance report?

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 rent is

Myopic behavior occurs when

The income statement is the culmination of the operating budget.

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. The expected cash collections of Discus Productions for June are

Define budgeting and control. How are budgets used in planning? How are budgets used to control? What are some of the reasons for budgeting?

Figure 8-6 The records of Morgantown, Inc. show the following forecasted sales: Collection pattern: 60 percent in month of sale 40 percent in month following the sale Accounts receivable as of August 31 $70,000 Finished goods inventory as of August 31 8,000 units The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 20 percent of next month's sales. -Refer to Figure 8-6. How many dollars are expected to be collected in October?

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 purchasing in an activity-based performance report?

Which of the following statement is correct regarding a continuous budget?

Which of the following is NOT a potential disadvantage of participative budgeting?

If production was budgeted at 400 units and the actual production was 420 units, what would be the static budget variance for materials if the actual cost of materials was $4,150 and the budgeted cost per unit is $10?

Thunderbolt Corporation is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 60 percent of sales. Merchandise purchases are to be made during the month preceding the month of the sales. Thunderbolt pays 60 percent in the month of purchase, and 40 percent in the month following. Wages are estimated at 20 percent of sales and are paid during the month of sale. Other operating costs amounting to 10 percent of sales are to be paid in the month following the sale. The accounts payable balance on June 30 was $48,000. Required: Prepare a schedule of cash disbursements for July, August, and September.

Laramie, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels. Laramie had the following budgeted data: Budgeted variable costs per unit: Budgeted fixed overhead for 2016: What are the budgeted costs for rent if 5,000 units were produced?

The budgeted shows projected assets, liabilities, and shareholders' equity of the end of the budget period.

Villanova, Inc., has done a cost analysis for its production of rubber stamps. The following activities and cost drivers have been developed: Activity Cost Formula Design $5,000 + $0.05 per machine hour Machining $25,000 + $0.01 per machine hour Setups $35 per batch Purchasing $50 + $15 per purchase order Following are the actual costs of producing 35,000 rubber stamps: 1,000 machine hours; 5 batches; 30 purchase orders Design $5,080 Machining ? Setups ? Purchasing $600 The following variances were given in the activity performance report: Design ? Machining $40 F Setups $15 F Purchasing ? What is the activity variance for design?