Question 1

Molonglo Manufacturing produces two products,Deluxe and Supreme.Molonglo expects to sell 20 000 units of Deluxe and 10 000 units of Supreme.Molonglo plans on having an ending inventory of 4000 units of Deluxe and 2000 units of Supreme.Currently,Molonglo has 1000 units of Deluxe in its inventory and 800 units of Supreme.Each product requires two labour operations: moulding and polishing.Product Deluxe requires one hour of moulding time and one hour of polishing time.Product Supreme requires one hour of moulding time and two hours of polishing time.The direct labour rate for moulders is $20 per moulding hour,and the direct labour rate for polishers is $25 per polishing hour.
Required:
Prepare a direct labour budget in hours and dollars for each product.

Accepted Answer

The answer of Molonglo Manufacturing produces two products,Deluxe and Supreme.Molonglo...

Question 2

Since fixed manufacturing overhead is fixed,it is not normally included in the operating budget.

Accepted Answer

Fixed manufacturing overhead is a part of manufacturing cost and is included in the operating budget. It is important to plan for the fixed manufacturing overhead expenses as they can have a significant impact on the total cost of goods sold.

Question 3

Listed below are elements of the master budget.Determine whether each budget is an operating budget or a financial budget.Place an O for operating budget or F for a financial budget.
1.Capital expenditures budget
2.Cost of goods sold budget
3.Revenues budget
4.Budgeted cash flow statement
5.Distribution costs budget
6.Marketing costs budget
7.Cash budget
8.Direct materials cost budget
9.Budgeted balance sheet
10.Budgeted income statement

Accepted Answer

The answer of Listed below are elements of the master...

Question 4

The use of activity-based cost drivers gives rise to activity-based budgeting.

Accepted Answer

Activity-based budgeting involves allocating costs to specific activities and then using those costs as a basis for budgeting. This approach is directly tied to activity-based cost drivers, which are used to allocate costs to activities. Therefore, the use of activity-based cost drivers does indeed give rise to activity-based budgeting.

Question 5

The manufacturing labour budget depends on wage rates,production methods,and hiring plans.

Accepted Answer

The manufacturing labour budget is directly impacted by factors such as wage rates, production methods, and hiring plans. These factors affect the cost of labour, the efficiency of production, and the number of workers needed, all of which are essential components of a labour budget.

Question 6

Activity-based budgeting focuses on the budgeted cost of the activities necessary to produce and sell products and services.

Accepted Answer

Activity-based budgeting is a budgeting approach that focuses on identifying the activities required to produce and sell products and services and determining the cost of each activity. This allows for a more accurate allocation of resources and helps to identify areas for cost reduction and optimization.

Question 7

Vast quantities of information about the materials,machines and equipment,labour,power,maintenance and set-ups needed to manufacture different products can be stored in ________ systems.

Accepted Answer

Enterprise Resource Planning (ERP) systems are designed to store vast quantities of information about different aspects of a business, including materials, machines, equipment, labor, power, maintenance, and set-ups needed for manufacturing products. ERP systems allow companies to integrate data from various departments and functions into a centralized database, providing real-time information for decision-making and improving overall efficiency. Sensitivity, responsibility, and organizational systems do not specifically focus on managing manufacturing processes and their related information.

Question 8

The sales forecast should primarily be based on statistical analysis with secondary input from sales managers and sales representatives.

Accepted Answer

While statistical analysis is important, the sales forecast should also heavily incorporate insights from sales managers and sales representatives, as they can provide valuable context, market intelligence, and customer feedback that statistical models might not capture.

Question 9

Activity-based budgeting (ABB)focuses on budgeting the cost of activities necessary to produce and sell products and services.

Accepted Answer

Activity-based budgeting (ABB) is a method of budgeting that focuses on identifying the cost of activities necessary to produce and sell products and services. This approach differs from traditional budgeting techniques that allocate costs based on broad categories or historical data. ABB is designed to help organizations better understand the cost of different activities and make more informed decisions about resource allocation.

Question 10

If inventoriable costs in the operating budget are going to be in accordance with Generally Accepted Accounting Principles (GAAP),they include only variable manufacturing costs.

Accepted Answer

Inventoriable costs in the operating budget include both variable and fixed manufacturing costs, in accordance with GAAP.

Question 11

The operating budget is that part of the master budget that includes the capital expenditures budget,cash budget,budgeted balance sheet,and the budgeted cash flow statement.

Accepted Answer

The operating budget includes the budgets for revenue, expenses, and resulting net income. The capital expenditures budget, cash budget, budgeted balance sheet, and budgeted cash flow statement are part of the financial budget.

Question 12

Activity-based budgeting provides better decision-making information than budgeting based solely on output-based cost drivers (units produced,units sold,or revenues).

Accepted Answer

Activity-based budgeting takes into consideration the activities or processes required to produce a product or service, providing more accurate cost information and enabling better decision-making. Output-based cost drivers do not consider the underlying activities and may lead to incorrect assumptions about cost behavior.

Question 13

Describe operating and financial budgets and give at least two examples of each.

Accepted Answer

The answer of Describe operating and financial budgets and give...

Question 14

Discuss the importance of the sales forecast and items that influence its accuracy.

Accepted Answer

The answer of Discuss the importance of the sales forecast...

Question 15

The usual starting point in budgeting is to forecast net profit.

Accepted Answer

The usual starting point in budgeting is to forecast sales or revenue, not net profit. Forecasting net profit comes later in the budgeting process after all expenses have been accounted for.

Question 16

________ uses a 'what-if' technique that examines how results will change if the originally predicted data changes.

Accepted Answer

A sensitivity analysis examines how changes in predicted data will affect results. It is commonly used in financial planning and forecasting to test the impact of different scenarios on the financial statements.

Question 17

The self-liquidating cycle is the movement from cash to inventories to receivables and back to cash.

Accepted Answer

The self-liquidating cycle is the process in which cash is used to purchase inventory, which is then sold on credit and converted to accounts receivable. The company collects the accounts receivable and converts them back into cash, completing the cycle.

Question 18

The number of units to be produced is the key to computing the usage of direct materials in quantities and in dollars.

Accepted Answer

The number of units produced is a crucial factor in determining the amount of direct materials needed, and hence the cost of those materials in terms of dollars. As the production volume increases, so does the demand for materials. Therefore, the usage of direct materials will vary based on the number of units produced.

Question 19

A revenues budget is the usual last step in preparing the operating budget.

Accepted Answer

The revenues budget is typically the first step in preparing the operating budget, as it sets the expected income, which determines the resources available for expenses and investments.

Question 20

Financial planning models:

Accepted Answer

Financial planning models are indeed mathematical representations that help in understanding the relationships and dependencies that influence the budgeting process. These models help in performing various types of analyses that are essential for effective budgeting, such as sensitivity analysis, scenario planning, and forecasting. Therefore, Option A is the correct answer. Option B, C, and D are incorrect because financial planning models are not only useful for sensitivity analysis but are primarily used for financial aspects of budgeting. Additionally, they are widely used in the budgeting process by organizations of all sizes and types.

Quiz 11: Budgeting, Management Control and Responsibility Accounting