Exam 10: Using Budgets for Planning and Coordination

For the next six months, Kurtz Company projects the following information (in units). Demand drives production for that month and cannot be carried over from one month to another. Retail customers are satisfied first. -In November,production appears to be limited by:

________ include an expected cash flow statement,the projected balance sheet,and the projected income statement.

The following information pertains to the October operating budget for Flockhart Corporation. ∙ Budgeted sales for October $100,000 and November $200,000. ∙ Collections for sales are 60% in the month of sale and 40% the next month. ∙ Gross margin is 30% of sales. ∙ Administrative costs are $10,000 each month. ∙ Beginning accounts receivable (October 1)$20,000. ∙ Beginning inventory (October 1)$14,000. ∙ Beginning accounts payable (October 1)$60,000. (All from inventory purchases.) ∙ Purchases are paid in full the following month. ∙ Desired ending inventory is 20% of next month's cost of goods sold (COGS). ∙ No loans are outstanding on October 1 -For October,budgeted cost of goods sold is:

An organization planned to use $44 of material per unit of activity but it actually used $42 of material per unit of activity,and it planned to make 1,200 units but it actually made 1,000 units.The flexible budget variance for materials is:

The best label for the formula (AP - SP)× AQ is the:

All of the following are true statements about the role of budgets and budgeting EXCEPT that:

________ provide(s)the starting point for developing the operating budget.

How is the role of budgeting similar for a manufacturing firm and a not-for-profit organization?

Budgets can play both planning and control roles for management.

The following information pertains to Ortega Corporation: ∙ Cash is collected from customers in the following manner: Month of sale (2% cash discount) 30% Month following sale 50% Two months following sale 15% Amount uncollectible 5% ∙ 40% of purchases are paid for in cash in the month of purchase,and the balance is paid the following month. Required: a. Prepare a summary of cash collections for the 4th quarter. b. Prepare a summary of cash disbursements for the 4th quarter.

L&M Manufacturing produces a single product that sells for $16. Variable (flexible) costs per unit equal $11.20. The company expects the total fixed (capacity-related) costs to be $7,200 for the next month at the projected sales level of 20,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. -What is the current break-even point in terms of number of units for the next month?

Describe the benefits to an organization of preparing an operating budget.

________ occur(s)when managers ask subordinates to discuss their ideas about the budget,but no joint decision-making occurs.

What is the primary role of the flexible budget?

The first step in developing a budget is for the accounting department to prepare the sales forecast.

Abita Manufacturing has prepared the following flexible budget for October and it is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance. -The MOST LIKELY explanation of the above direct labor variances is that:

Tao Industries,Inc.developed standard costs for direct material and direct labor.In 2012 Tao estimated the following standard costs for one of their major products,the 50-gallon plastic container. During August,Tao produced and sold 8,000 containers using 1,900 pounds of direct materials at an average cost per pound of $41 and 250 direct labor hours at an average wage of $18.25 per hour.Determine the following variances for August: Required: a.Total direct material cost variance. b.Direct material price variance. c.Direct material quantity variance. d.Total direct labor cost variance. e.Direct labor rate variance. f.Direct labor efficiency variance.

In the service sector,________ rather than machines usually represent(s)the capacity constraint,which underscores the importance of budgeting even in nonmanufacturing organizations.

Community Manufacturing Inc. developed the following standard costs for direct material and direct labor for one of their major products, the 30-gallon heavy-duty plastic container. During May, Community produced and sold 10,000 containers using 2,200 pounds of direct materials at an average cost per pound of $24 and 1,050 direct labor hours at an average wage of $14.75 per hour. -May's direct labor rate variance was:

The budgeting process is MOST strongly influenced by the: