Question 1

Perry Company has gathered the following information:
 
Required:
Prepare a cash budget for May, and indicate whether or not Perry meets minimum cash requirements.

Accepted Answer

The answer of Perry Company has gathered the following information:
...

Question 2

Berry Company has gathered the following information:
 
Required:
Prepare a cash budget for May, and indicate whether or not Berry meets minimum cash requirements.

Accepted Answer

The answer of Berry Company has gathered the following information:
...

Question 3

One of the criticisms of traditional budgeting is not using budgets to evaluate performance until the end of the budget period. Which of the following proposals for change would address this criticism?

Accepted Answer

The answer of One of the criticisms of traditional budgeting...

Question 4

Mannock Company budgeted $400,000 for employee training, but actually spent only $300,000. Which of the following statements is the best course of action for management to take in this instance?

Accepted Answer

B) Investigating a favourable variance is important to ensure that the cost savings do not come at the expense of the quality or quantity of the training programs, which could negatively impact the company in the long run.

Question 5

Disk Company was very profitable for the first ten years of its existence, but the company has fallen on hard times with the growth of compact disks. In 2007 Jean Adams was appointed head of the Product Research Department. She began a number of product development projects. Although the department has developed several good ideas that led to the introduction of several promising products, Ms. Adams was criticized for poor cost control. The financial performance reports of the department under Ms. Adams leadership were consistently unfavourable. Management was quite concerned about cost control because profits for the company were low and the cash budget indicated that additional borrowing would be required during the next year.
Because of her inability to control costs, Ms. Adams was relieved of her responsibilities in 2008 and Fran Jones became head of the department. Ms. Jones promised to improve performance of Product Research and scaled back the developmental activities to obtain favourable financial performance. By the end of 2008 Ms. Jones was showing a favourable financial variance.
Required:
If the Product Research Department is classified as a responsibility centre, what unique problems are associated with evaluating its financial performance?

Accepted Answer

The answer of Disk Company was very profitable for the...

Question 6

Rick Christensen is the new division manager of Fastfood Sales. His division is considered a responsibility centre, and he has control over all costs and revenue of the division. His predecessor had been dismissed from the company because he could not keep the revenues and costs with acceptable variances on a quarterly basis. However, the former manager had relatively good annual reports. Christensen is very concerned about the situation because Fastfood has a somewhat seasonal business and it is very difficult to keep sales up during the winter months. He is considering changing jobs after only a few months but wants some advice as to the likelihood that he will be able to keep revenue and costs under control throughout the year.
Required:
Distinguish between controllable and uncontrollable aspects of revenue and costs. Can a manager totally control all revenue and costs? Why or why not?

Accepted Answer

The answer of Rick Christensen is the new division manager...

Question 7

Answer the following question(s) using the information below.
Sherry and John Enterprises are using the Kaizen approach to budgeting for 2016. The budgeted income statement for January 2016 is as follows:
 
Under the Kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month.
-What is budgeted gross margin for March 2016?

Accepted Answer

$1,000,000 - ($600,000 × .99 × .99) = $411,940

Question 8

Stark Company is developing its budgets for 2016 and for the first time will use the Kaizen approach. The initial 2016 income statement, based on static data from 2015 is as follows:

Selling prices for 2016 are expected to increase by 6 percent, and sales volume in units will decrease by 10 percent. The cost of goods sold as estimated by the Kaizen approach will decline by 10 percent per unit. Other than amortization, all other operating costs are expected to decline by 5 percent.
Required:
Prepare a Kaizen-based budgeted income statement for 2016.

Accepted Answer

The answer of Stark Company is developing its budgets for...

Question 9

Jermaine Company is developing its budgets for 2016 and for the first time will use the Kaizen approach. The initial 2016 income statement, based on static data from 2015, is as follows:
Sales (200,000 units) $300,000
Less: cost of goods sold 200,000
Gross margin $100,000
Operating expenses (includes $20,000 of amortization) 80,000
Net income $20,000
Selling prices for 2016 are expected to increase by 8 percent, and sales volume in units will decrease by 10 percent. The cost of goods sold as estimated by the Kaizen approach will decline by 10 percent per unit. Other than amortization, all other operating costs are expected to decline by 5 percent.
Required:
Prepare a Kaizen-based budgeted income statement for 2016.

Accepted Answer

The answer of Jermaine Company is developing its budgets for...

Question 10

Allscott Company is developing its budgets for 2016 and for the first time will use the Kaizen approach. The initial 2016 income statement, based on static data from 2015, is as follows:

Selling prices for 2016 are expected to increase by 8%, and sales volume in units will decrease by 10%. The cost of goods sold as estimated by the Kaizen approach will decline by 10% per unit. Other than depreciation, all other operating costs are expected to decline by 5%.
Required:
Prepare a Kaizen-based budgeted income statement for 2016.

Accepted Answer

The answer of Allscott Company is developing its budgets for...

Quiz 6: Master Budget and Responsibility Accounting

Perry Company has gathered the following information: Required: Prepare a cash budget for May, and indicate whether or not Perry meets minimum cash requirements.

Berry Company has gathered the following information: Required: Prepare a cash budget for May, and indicate whether or not Berry meets minimum cash requirements.

One of the criticisms of traditional budgeting is not using budgets to evaluate performance until the end of the budget period. Which of the following proposals for change would address this criticism?

Mannock Company budgeted $400,000 for employee training, but actually spent only $300,000. Which of the following statements is the best course of action for management to take in this instance?