McCourt Inc.manufacturers a unique product.The company's controller has prepared the following static budget for the month of February: $\begin{array}{lr} \text { Estimated production } & \text {300 units }\\ \text { Direct labour per unit } & \text {1 hour }\\ \text {Direct labour required for estimated production } & \text { 300 hours}\\ \text { Average direct labour rate per hour } &\$10\\ \text {Estimated direct labour cost } &\$3000\\ \end{array}$ Actual production during February was 275 units and actual direct labour cost was $2900. If McCourt prepares a flexible budget for February,direct labour cost is estimated to be:

A) $2750 B) $2900 C) $3000 D) $3165 A) $2750 B) $2900 C) $3000 D) $3165

Boylan Inc.has projected the following sales information for the first quarter of 2009: $\begin{array}{lrr} &\underline{\text { January }} &\underline{ \text { February }} &\underline{ \text { March }}\\ \text {Cash sales}&\$20000&\$ 35000 & \$ 40000 \\ \text {Credit sales}&\underline{43000}&\underline{57000} &\underline{ 55000} \\ \text {Total sales}&\underline{\$63000}&\underline{ \$ 92000} &\underline{ \$ 95000} \end{array}$ Credit sales are collected over a two-month period,with 55 per cent collected in the month of sale and 45 per cent collected in the month following sale. Total cash collections for March are:

A) $55 900 B) $93 650 C) $70 250 D) $95 900 A) $55 900 B) $93 650 C) $70 250 D) $95 900

Becham Inc.had the following purchases budgeted for the last quarter of 2009: $\begin{array}{lr} \text { October } &\$75000\\ \text { November } &90000\\ \text { December } &84000\\ \end{array}$ Becham pays one-half of a month's purchases in the month of purchase and the remainder in the following month.What are expected cash disbursements for the month of December?

A) $124 500 B) $ 84 000 C) $ 87 000 D) $ 42 000 A) $124 500 B) $ 84 000 C) $ 87 000 D) $ 42 000

Crafty Cathy Products Inc.manufactures a product sold in most craft stores which requires non-soluble glue as one of the key ingredients.The company has already estimated that it needs to produce the following number of units of product for the second quarter of 2009: $\begin{array}{ll} \text { April } & 75000 \text { units } \\ \text { May } & 90000 \text { units } \\ \text { June } & 84000 \text { units } \end{array}$ Each unit requires .5 grams of glue at a cost of $.30 a gram.The company has determined that it needs 15 per cent of next month's raw material needs on hand at the end of each month. The cost of the glue that should be purchased in May is:

A) $13 365 B) $13 500 C) $15 390 D) $13 635 A) $13 365 B) $13 500 C) $15 390 D) $13 635

Baker Inc. ,a local manufacturer of cooking tools,had the following information available for 2009: $\begin{array}{lr} \text {Budgeted sales for 2009 } & \text { 250000 units } \\ \text { Units in beginning inventory (1/1/08)} &\text { 5000 units }\\ \text { Units produced during 2009 } &\text { 265000 units }\\ \text { Units in ending inventory (31/12/08) } &\text {2000 units}\\ \end{array}$ How many units should Baker's 2009 flexible sales budget be based upon?

A) 268 000 B) 265 000 C) 250 000 D) 262 000 A) 268 000 B) 265 000 C) 250 000 D) 262 000

Exam 12: Fixed and Rolling Budgets for Planning and Decision Making

Broughton Corp.has prepared a production budget for February.Management has determined that the total required production for February is 360 000 units when an ending inventory of 40 000 units is desired and the beginning inventory is 10 000 units. Based on the above information,what were February's budgeted sales?

Free

(Multiple Choice)

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Question 1

Correct Answer:

Verified

C

A budget that is established at the beginning of the period and not adjusted for different levels of actual sales activity is called a:

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(Multiple Choice)

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Question 2

Correct Answer:

Verified

C

Managers use budgets for three types of activities.Describe and give a brief example of each of these three activities.

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(Essay)

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Question 3

Correct Answer:

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$\begin{array}{ll}\text { Planning activities: } &\text { Planning involves the development of objectives and goals for the } \\&\text { organisation. Example: Planning for the required production to meet } \\&\text { expected sales. } \\\text {Operating activities:}&\text { Operating activities involve the day-to-day decision making by } \\&\text { managers. Example: Budgeting for how many hours employees will } \\&\text { need to work this week. } \\\text {Control activities:}&\text { Control activities involve the comparison of flexible budgets to actual } \\&\text { performance. Example: Ascertaining whether or not the actual cost of } \\&\text { direct materials was more or less than expected. }\end{array}$

Which of the following budgets is often more of a focus for a service company than a manufacturing company?

(Multiple Choice)

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Question 4

McCourt Inc.manufacturers a unique product.The company's controller has prepared the following static budget for the month of February: Estimated production 300 units Direct labour per unit 1 hour Direct labour required for estimated production 300 hours Average direct labour rate per hour \1 0 Estimated direct labour cost \3 000 Actual production during February was 275 units and actual direct labour cost was $2900. If McCourt prepares a flexible budget for February,direct labour cost is estimated to be:

(Multiple Choice)

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Question 5

Which type(s)of activities are static budgets less useful for?

(Multiple Choice)

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Question 6

For a manufacturing company,which two budgets should be prepared before the direct materials purchases budget is prepared?

(Essay)

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Question 7

Boylan Inc.has projected the following sales information for the first quarter of 2009: Cash sales \2 0000 \ 35000 \ 40000 Credit sales Total sales Credit sales are collected over a two-month period,with 55 per cent collected in the month of sale and 45 per cent collected in the month following sale. Total cash collections for March are:

(Multiple Choice)

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Question 8

The alignment of the personal goals of an organisation's managers with the goals of the overall organisation is called:

(Multiple Choice)

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Question 9

ABC Manufacturing sells widgets for $6.00 each.The marketing department has prepared the following second quarter sales forecast (in units)for 2009: April 15000 May 23000 June Total Required: Prepare a sales budget for each month and the total for the quarter.Include all column and row headings.

(Essay)

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Question 10

Becham Inc.had the following purchases budgeted for the last quarter of 2009: October \7 5000 November 90000 December 84000 Becham pays one-half of a month's purchases in the month of purchase and the remainder in the following month.What are expected cash disbursements for the month of December?

(Multiple Choice)

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Question 11

Which of the following is not increased by the budgeting process?

(Multiple Choice)

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Question 12

Prior to the start of 2009,Bellamy Inc.estimated budgeted sales at 60 000 units.During 2009,68 000 units were produced out of which 65 000 units were sold.How many units should Bellamy's 2009 flexible sales budget be based upon?

(Multiple Choice)

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Question 13

There are many advantages of budgeting.List four of these advantages.

(Essay)

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Question 14

Crafty Cathy Products Inc.manufactures a product sold in most craft stores which requires non-soluble glue as one of the key ingredients.The company has already estimated that it needs to produce the following number of units of product for the second quarter of 2009: April 75000 units May 90000 units June 84000 units Each unit requires .5 grams of glue at a cost of $.30 a gram.The company has determined that it needs 15 per cent of next month's raw material needs on hand at the end of each month. The cost of the glue that should be purchased in May is:

(Multiple Choice)

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Question 15

Which of the following is not an advantage of the budgeting process?

(Multiple Choice)

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Question 16

Carteret Inc. Carteret Inc. manufactures hammocks under various brand names. The company sells most of its hammocks in the second quarter of each year. Their production budget for the second quarter shows the following number of hammocks needs to be produced: April 6000 units May 10000 units June 15000 units Each unit requires 30 feet of cotton rope cord which costs $.50 per foot. The company has determined that it needs 20 per cent of next month’s raw material needs on hand at the end of each month. In addition, each hammock requires 45 minutes of direct labour for assembly and inspection at a cost of $.25 per minute. The company currently applies manufacturing overhead to production at the rate of $8 per direct labour hour. -The cost of the rope cord that should be purchased in May is:

(Multiple Choice)

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Question 17

Rolling budgets are better for managing uncertainty in organisations because they:

(Multiple Choice)

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Question 18

Baker Inc. ,a local manufacturer of cooking tools,had the following information available for 2009: Budgeted sales for 2009 250000 units Units in beginning inventory (1/1/08) 5000 units Units produced during 2009 265000 units Units in ending inventory (31/12/08) 2000 units How many units should Baker's 2009 flexible sales budget be based upon?

(Multiple Choice)

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Question 19

Sunshine Inc.manufactures kiddie pools.On 31 March,the company had 750 pools in inventory.Each pool sells for $25.00.The company's policy is to maintain a pool inventory equal to 15 per cent of next month's sales.The company expects the following sales activity for the second quarter of the year: April 5000 units May 9000 units June 16000 units In addition,July's sales are expected to be 20 000 units. Required: A. Prepare a sales budget for the second quarter of the year. B. Prepare a production budget for the second quarter of the year.

(Essay)

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Question 20

A budget that is established at the beginning of the period and not adjusted for different levels of actual sales activity is called a:

Managers use budgets for three types of activities.Describe and give a brief example of each of these three activities.

Which of the following budgets is often more of a focus for a service company than a manufacturing company?

Which type(s)of activities are static budgets less useful for?

For a manufacturing company,which two budgets should be prepared before the direct materials purchases budget is prepared?

The alignment of the personal goals of an organisation's managers with the goals of the overall organisation is called:

ABC Manufacturing sells widgets for $6.00 each.The marketing department has prepared the following second quarter sales forecast (in units)for 2009: April 15000 May 23000 June Total Required: Prepare a sales budget for each month and the total for the quarter.Include all column and row headings.

Becham Inc.had the following purchases budgeted for the last quarter of 2009: October \7 5000 November 90000 December 84000 Becham pays one-half of a month's purchases in the month of purchase and the remainder in the following month.What are expected cash disbursements for the month of December?

Which of the following is not increased by the budgeting process?

Prior to the start of 2009,Bellamy Inc.estimated budgeted sales at 60 000 units.During 2009,68 000 units were produced out of which 65 000 units were sold.How many units should Bellamy's 2009 flexible sales budget be based upon?

There are many advantages of budgeting.List four of these advantages.

Which of the following is not an advantage of the budgeting process?

Rolling budgets are better for managing uncertainty in organisations because they:

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, cost Terminology and Cost Flows

Cost Behaviour

Job Costing and Overhead Costing Systems

Process Costing Systems

Service and Operations Costing

Departmental Overhead Costing

Activity-Based Costing

Cost-Volume-Profit Analysis

Relevant Costs and Product Planning Decisions

Long-Term Capital Investmentdecisions

Management Accounting for Cost Control and Performance Evaluation Flexible Budgets and Variance Analysis

Decentralisation and Modern Performance Management Systems the Balanced Scorecard

Accounting for Sustainability Social Reporting,environmental Reporting and Management Accounting

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