Exam 8: Budgeting for Planning and Control

The sales forecast is the basis for the sales budget.

Foremost Corporation manufactures boxes. The estimated number of boxes sold for the first three months of 2016 are as follows: Finished goods inventory at the end of December was 900 units. Ending finished goods inventory is equal to 20 Percent of the next month's sales. General Corporation expects to sell the boxes for $5 each. April 2016 sales is projected at 4,500 boxes. How many boxes should be produced in January?

The condition that exists when managers deliberately underestimate revenues or overestimate costs to provide flexibility is called:

The process of setting standards, receiving feedback, and taking corrective action whenever performance deviates from standards is called __________ .

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. After preparing a finished goods inventory budget for August, what is the total ending inventory cost?

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 purchasing?

The capital expenditures budget is a long-term financial plan.

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 machining cost for production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

With an activity flexible budget, a budget variance is calculated

Which of the following factors is NOT an advantage of preparing operating budgets?

Wheeling Company produces and sells bikes. It expects to sell 20,000 bikes in April 2016 and had 1,200 bikes in finished goods inventory at the end of March 2016. Wheeling Company would like to complete operations in April with at least 1,500 completed bikes in inventory. The bikes sell for $100 each. What would be the total sales for April 2016?

Incentives are the means used to encourage managers to achieve goals.

The type of budget that is a moving twelve-month budget is called the:

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 materials if 5,000 units were produced?

Which of the following is NOT an advantage of budgeting?

Operating expense budgets include the marketing expense budget and the __________ expense budget.

High Life Corporation has the following sales budget for the last four months of 2016: Historically, the following trend has been established regarding cash collection of sales: 65 percent in month of sale 25 percent in month following sale 8 percent in second month following sale 2 percent uncollectible The company allows a 2 percent cash discount for payments made by customers during the month of the sale. July and August sales were $400,000 and $240,000, respectively. Required: Prepare a schedule of budgeted cash collections from sales for September, October, and November.

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 November?

Figure 8-1 Armando Company produces and sells mattresses. It expects to sell 10,000 mattresses in the year 2017 and had 1,000 mattresses in finished goods inventory at the end of 2016. Armando would like to complete operations in the year 2017 with at least 1,250 completed mattresses in inventory. There is no ending work-in-process inventory. The mattresses sell for $300 each. -Refer to Figure 8-1. What would be the total sales for the year 2017?

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. The cost of goods sold for next month is expected to be