2010-02-23_031249_Week_7_Homework

8/9/2019 2010-02-23_031249_Week_7_Homework

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Week 7 Homework

8/9/2019 2010-02-23_031249_Week_7_Homework


Week 7 Lesson Synopsis The master budget can be a powerful tool for successful planning and control. Organizations benefit from aneffective budgeting process in several ways. First, the budget assigns responsibility for decision-making tospecific managers. Second, it enhances the degree of planned coordination among organizational units. Third, performance evaluation is improved since the budget assigns responsibility and allows comparison betweenactual and epected outcomes.

8/9/2019 2010-02-23_031249_Week_7_Homework


The master budget is developed as a set of interrelated plans. These are derived se!uentially beginning with asales forecast. The sales forecast leads to a production schedule and an integrated set of manufacturing cost budgets. " plan for ending inventory then leads to a budget for the cost of goods sold. #udgeting for operatingepenses completes the operating budget. $ith the operating budget in hand, we net prepare a budgetedincome statement. One of the ob%ectives in so doing is to emphasize that a firm may be profitable but cash poordue to the length of its operating cycle.

The cash budget is the key to identifying the points in the operating cycle causing the cash flow problem.

&evelopment of the cash budget re!uires assumptions regarding the timing of cash receipts and payments.These assumptions combined with the operating budget yield the cash budget.

The chapter concludes with an illustration of fleible budgeting. This analysis emphasizes that the fleible budget improves performance evaluation by isolating the effects of unanticipated volume changes.

Chapter 23 Learning Objectives '. (plain how a company can be )profit rich, yet cash poor.)*. &iscuss the benefits that a company may derive from a formal budgeting process.+. (plain two philosophies that may be used in setting budgeted amounts.. &escribe the elements of a master budget.

. repare the budgets and supporting schedules included in a master budget./. repare a fleible budget and eplain its uses.

Week 7 Practice Quiz

Question 1 0' point1 Save

" budget that adds a new month when the current month ends is called a

2olling budget

3apital budget

4aster budget

There is no such budget


5une 3orporation had planned to produce /6,666 units of product during the first !uarter of the current year. Thecompany prepared the above budget on 4ay '7

&uring the first !uarter, 5une produced 86,666 units and incurred total manufacturing costs of 9':6,666.

The cost-volume relationship used to prepare 5une;s fleible budget for various production levels includes7

8/9/2019 2010-02-23_031249_Week_7_Homework


Total cost of 9*.86 per unit.

Fied cost of 96.<: per unit.

=ariable costs of 9'.8+ per unit.

4anufacturing overhead costs of 9'.+ per unit.


" fleible budget7

>s designed to be ad%usted at fre!uent intervals for changes in the general price level.

>s better suited for use with a %ob cost system than a standard cost system.

3onsists of advance estimates of costs and epenses for various possible levels of activity.

3annot be prepared when a standard cost system is in use.

Question 40' point1Save

" master budget usually includes all of the following ecept

" sales forecast

" cash budget

" pro%ected ta return

ro%ected financial statements


4onroe romotions, >nc. sells T-shirts decorated for a variety of concert performers. The company hasdeveloped the above budget for the coming year based on a sales forecast of :6,666 T-shirts7

3ost of goods sold and variable operating epenses vary directly with sales, and the income ta rate is +6? atall levels of operating income.

>f the concert season is slow due to poor weather, 4onroe estimates that sales could fall to as low as /6,666 T-shirts.

"ssume 4onroe actually achieves the /6,666 unit sales level, and that net income actually earned at this levelwas 986,666. " performance report would indicate that net income was7

96,66 under budget.

9<6,666 under budget.

8/9/2019 2010-02-23_031249_Week_7_Homework


9',66 over budget.

"t the budgeted level.

Question 0' point1 Save

$hich of the following is considered a financial budget estimate@

The cost of goods sold budget.

The prepayments budget.

The operating epense budget.

The manufacturing cost budget.


>f the volume of output of a factory for the month of 5une is 6,666 units, while the budgeted output was 6,666units7

"ctual fied costs per unit may be epected to eceed budgeted levels.

3omparison of budgeted results and actual results will be misleading unless the companyuses a fleible budget.

"ctual cost per unit will be higher than standard cost per unit.

#oth total production costs and unit production costs should be approimately *? above budgeted levels.

Question

!0' point1Save

(agle 3ompany has budgeted sales for the upcoming !uarter as above7

The desired ending finished goods inventory for each month is one-half of net month;s budgeted sales. Three pounds of direct material are re!uired for each unit produced. >f direct material costs 9 per pound, and must be paid for in the month of purchase, the budgeted direct materials purchases 0in dollars1 for "pril are7

9'<,<:6.

9':,666.

9*6,866.

9'<,:66.Question " 0' point1 Save

" segment of a master budget relating to that portion of a business under the control of a particular manager istermed a7

3ash budget.

2esponsibility budget.

erformance report.

8/9/2019 2010-02-23_031249_Week_7_Homework


roduction report.

Question 1# 0' point1 Save

Skyways, >nc. uses a fleible budget. Skyways produced ',666 units in 4ay incurring direct materials cost of9'<,*66. >ts master budget for the year pro%ected direct materials cost of 9+/6,666, at a production volume of*::,666 units. " fleible budget for 4ay should reflect direct materials cost of7

9':,86.

9*',666.

9'<,*66.

9':,'6.

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2010-02-23_031249_Week_7_Homework