Which of the following is not a benefit of budgeting?
It reduces the need for tracking actual cost activity.
It sets benchmarks for evaluation performance.
It uncovers potential bottlenecks.
It formalizes a manager’s planning efforts
National Telephone company has been forced by competition to put much more emphasis on planning and controlling its costs. Accordingly, the company’s controller has suggested initiating a formal budgeting process. Which of the following steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system?
Implementing the change quickly.
Including in departmental responsibility reports only those items that are under the department manager’s control.
Demonstrating top management support for the budgeting program.
Ensuring that favorable deviations of actual results from the budget, as well as unfavorable deviations, are discussed with the responsible managers.
A continuous (or perpetual) budget:
Is prepared for a range of activity so that the budget can be adjusted for changes in activity.
Is a plan that is updated monthly or quarterly, dropping one period and adding another?
Is a strategic plan that does not change?
Is used in companies that experience no change in sales.
Which of the following statements is not correct?
The sales budget is the starting point in preparing the master budget.
The sales budget is constructed by multiplying the expected sales in units by the sales price.
The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period.
The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.
Budgeted production needs are determined by:
Adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.
Adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total.
Adding budgeted sales in units to the desired ending inventory in units.
Deducting the beginning inventory in units from budgeted sales in units.
Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000 units in June. The company desires that the inventory on hand at the end of each month be equal to 40% of the next month’s expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given
Prestwich Company has budgeted production for next year as follows:
First quarter……… 60,000 units,
Second quarter…… 80,000 units,
Third quarter…….. 90,000 units,
Fourth quarter…… 70,000 units
Two pounds of material 79C are required for each unit produced. The company has a policy of maintaining a stock of material 79C on hand at the end of each quarter equal to 25% of the next quarter’s production needs for material 79C. A total of 30,000 pounds of material A are on hand to start the year. Budgeted purchases of material 79C for the second quarter would be:
Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?
The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in August. The variable overhead rate is $8.60 per direct labor-hour. The company’s budgeted fixed manufacturing overhead is $132,770 per month, which includes depreciation of $24,850. All other fixed manufacturing overhead costs represent current cash flows. The company re computes its predetermined overhead rate every month. The predetermined overhead rate (based on direct labor-hours) for August should be:
Lunderville Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 3,200 units are planned to be sold in December. The variable selling and administrative expense is $3.10 per unit. The budgeted fixed selling and administrative expense is $60,800 per month, which includes depreciation of $6,720 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the December selling and administrative expense budget should be: