Question 1

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 statement of cash flows
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 2

Favata Company has the following information:
  
In addition, the cost of goods sold rate is 70% and the desired inventory level is 30% of next month's cost of sales.
Required:
Prepare a purchases budget for July through September.

Accepted Answer

The answer of Favata Company has the following information:
 ...

Question 3

Activity-based budgeting would permit the use of multiple drivers and multiple cost pools in the budgeting process.

Accepted Answer

Activity-based budgeting uses multiple drivers and multiple cost pools to allocate costs to activities and products. This allows for a more accurate representation of the costs involved in producing a product or service, and can result in better decision making during the budgeting process.

Question 4

The cost of goods sold budget is calculated by deducting beginning finished-goods from cost of goods available for sale.

Accepted Answer

The cost of goods sold budget is calculated by deducting ending finished-goods from cost of goods available for sale.

Question 5

The production cost budget identifies how each product is manufactured and specifies all the materials, the quantity of materials in each finished product, and the work centers where the operations will be performed.

Accepted Answer

The bill of materials identifies how each product is manufactured, specifying all materials, the sequence in which the materials are used, the quantity of materials in each finished unit, and the work centers where the operations are performed.

Question 6

Activity-based costing analysis takes a long-run perspective and treats all activity costs as variable costs.

Accepted Answer

Activity-based costing analysis takes into account variable costs associated with various activities involved in producing a product or providing a service. It considers a long-run perspective and assigns costs to activities based on their level of consumption. Therefore, it treats all activity costs as variable costs.

Question 7

Preparation of the budgeted balance sheet is the final step in preparing the operating budget.

Accepted Answer

Preparation of the budgeted income statement is the final step in preparing the operating budget.

Question 8

Cost-based budgeting is a budgeting method that focuses on the budgeted cost of the activities necessary to produce and sell products and services.

Accepted Answer

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

Question 9

Prescher Company sells three products with the following seasonal sales pattern:
  
The annual sales budget shows forecasts for the different products and their expected selling price per unit to be as follows:
  
Required:
Prepare a sales budget, in units and dollars, by quarters for the company for the coming year.

Accepted Answer

The answer of Prescher Company sells three products with the...

Question 10

Christy Enterprises reports the year-end information from 2018 as follows:
  
Christy is developing the 2019 budget. In 2019 the company would like to increase selling prices by 10%, and as a result expects a decrease in sales volume of 5%. Cost of goods sold as a percentage of sales is expected to increase to 62%. Other than depreciation, all operating costs are variable.
Required:
Prepare a budgeted income statement for 2019.

Accepted Answer

The answer of Christy Enterprises reports the year-end information from...

Question 11

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

Accepted Answer

The manufacturing labor budget includes the costs associated with the company's workforce, including wages, benefits, and training. The budget will vary depending on various factors such as wage rates, production methods, and hiring plans, among others.

Question 12

Describe operating and financial budgets and give at least two examples of each discussed in the textbook.

Accepted Answer

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

Question 13

Activity-based budgeting, with its focus on cost drivers and the cost of activities, 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 considers the cost drivers and the cost of activities, which provides more accurate information and insights for decision-making. In contrast, output-based budgeting focuses solely on production, sales, or revenue figures, which may not give a complete picture of costs or cost drivers. Therefore, activity-based budgeting is likely to be more effective in providing decision-making information.

Question 14

A company usually prepares a budget for nonmanufacturing costs after preparing all operating budgets.

Accepted Answer

A company usually prepares a budget for nonmanufacturing costs along with operating budgets.

Question 15

Picture Pretty manufactures picture frames. Sales for August are expected to be 10,000 units of various sizes. Historically, the average frame requires four feet of framing, one square foot of glass, and two square feet of backing. Beginning inventory includes 1,500 feet of framing, 500 square feet of glass, and 500 square feet of backing. Current prices are $0.90 per foot of framing, $8.00 per square foot of glass, and $4 per square foot of backing. Ending inventory of materials should be 150% of beginning inventory. Purchases are paid for in the month acquired.
Required:
a.Determine the quantity of framing, glass, and backing that is to be purchased during August.
b.Determine the total costs of direct materials for August purchases.

Accepted Answer

The answer of Picture Pretty manufactures picture frames. Sales for...

Question 16

As budgeting is not a cross-functional activity, it tends to be accurate and reliable with regard to forecasts.

Accepted Answer

Budgeting is a cross-functional activity involving inputs from different business functions of the value chain.

Question 17

Perry Company has provided the following information:
  
In addition, the gross profit rate is 40% and the desired inventory level is 30% of next month's cost of sales.
Required:
Prepare a purchases budget for April through June.

Accepted Answer

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

Question 18

Lubriderm Corporation has the following budgeted unit sales for the next six-month period:
  
There were 30,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month.
Five pounds of materials are required for each unit produced. Each pound of material costs $8. Inventory levels for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 15,000 pounds.
Required:
a.Prepare production budgets in units for July, August, and September.
b.Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month.

Accepted Answer

The answer of Lubriderm Corporation has the following budgeted unit...

Question 19

Data from the revenues budget is utilized in the production budget.

Accepted Answer

The revenue budget provides information about the expected income that a company will receive. This information is needed in the production budget to estimate how much the company can afford to produce and how much it needs to sell to meet its revenue targets. Therefore, data from the revenue budget is utilized in the production budget.

Question 20

The revenues budget is prepared after all other operating budgets are prepared as it is at that point that the amount of projected expenses are known and so a target revenue can be calculated to cover those expenses and provide a target profit.

Accepted Answer

The revenues budget is generally the starting point for preparing operating budgets and is generally the first operating budget to be prepared.

Quiz 6: Master Budget and Responsibility Accounting

Favata Company has the following information: In addition, the cost of goods sold rate is 70% and the desired inventory level is 30% of next month's cost of sales. Required: Prepare a purchases budget for July through September.