Question 1

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

Accepted Answer

A)  $10 U. 
B)  $10 F. 
C)  $50 U. 
D)  $50 F.

Question 2

A continuous budget is a moving twelve-month budget.

Accepted Answer

A) True 
 B)False

Question 3

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.

Accepted Answer

The answer of Sales for October, November, and December are...

Question 4

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?

Accepted Answer

A)  $19,400 
B)  $23,400 
C)  $20,000 
D)  $21,000

Question 5

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

Accepted Answer

A)  setups. 
B)  direct materials. 
C)  ordering. 
D)  inspections.

Question 6

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?

Accepted Answer

A)  $1,000 U 
B)  $2,000 U 
C)  $3,000 U 
D)  none of these

Question 7

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

Accepted Answer

A)  $100 F. 
B)  $100 U. 
C)  $-0-. 
D)  $50 U.

Question 8

Myopic behavior occurs when

Accepted Answer

A)  actions improve budgetary performance in the short-run but are harmful in the long run. 
B)  there is uncertainty. 
C)  there is focus on immediate costs. 
D)  actions improve budgetary performance in the distant time horizon.

Question 9

The income statement is the culmination of the operating budget.

Accepted Answer

The answer of The income statement is the culmination of...

Question 10

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

Accepted Answer

A)  $48,000. 
B)  $98,000. 
C)  $68,000. 
D)  $89,000.

Question 11

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

Accepted Answer

The answer of Define budgeting and control. How are budgets...

Question 12

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?

Accepted Answer

A)  $420,000 
B)  $460,000 
C)  $240,000 
D)  $510,000

Question 13

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?

Accepted Answer

A)  $1,000 U 
B)  $2,000 U 
C)  $3,000 U 
D)  none of these

Question 14

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

Accepted Answer

A)  The budget is prepared for a one­year period that corresponds to the company's fiscal year. 
B)  A continuous budget is a monthly budget. 
C)  As a month/period expires in the budget, an additional month/period in the future is added so the company always has a 12-month budget on hand. 
D)  None of these

Question 15

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

Accepted Answer

A)  pseudoparticipation 
B)  performance feedback 
C)  unrealistic standards 
D)  budgetary slack

Question 16

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?

Accepted Answer

A)  $50 F 
B)  $200 U 
C)  $100 F 
D)  $150 U

Question 17

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.

Accepted Answer

The answer of Thunderbolt Corporation is in the process of...

Question 18

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?

Accepted Answer

A)  $2,000 
B)  $100,000 
C)  $9,000 
D)  $45,000

Question 19

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

Accepted Answer

The answer of The budgeted shows projected assets, liabilities, and...

Question 20

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?

Accepted Answer

A)  $40 F 
B)  $30 U 
C)  $15 F 
D)  $100 U

Exam 8: Budgeting for Planning and Control