Deck 6: Budgeting

Question 1

4. Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.
Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.
How many bears must be produced in February?

A)600
B)540
C)624
D)744
E)None of the choices are correct

Answer 1

C

Question 2

6. Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.
Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.
What is the purchases budget for February?

A)$12,905.60
B)$21,142.40
C)$11,571.20
D)$12,480.00
E)None of the choices are correct

Answer 2

A

Question 3

The organizational process of budgeting performs several important functions.Which is true?

A)Assigns decision rights
B)Shares knowledge
C)Forces planning
D)Measures performance
E)All of the choices are correct

Answer 3

E

Question 4

9. Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.
Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.
Given the production target of 650 bears for February,assume that the actual output for February was 630 bears and that actual production costs totaled $54,280.Which is true?

A)BB did well,saving $620 compared with the master budget
B)BB did well,saving $620 compared with the flexible budget
C)BB missed the master budget target by $300
D)BB missed the flexible budget target by $300
E)Unable to assess performance

Question 5

Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.
Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.
Assume that in March there was a favorable variance from the production master budget.Which factors may not have contributed to this result?

A)BB spent less per labor hour than planned
B)BB wasted less materials than planned
C)BB spent more on fixed overhead than planned
D)BB produced fewer units than planned
E)C and D only

Question 6

8. Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.
Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.
Assume that the production target for February is 650 bears.What is the production budget for the month of February?

A)$26,000
B)$54,900
C)$57,500
D)$59,450
E)None of the choices are correct

Question 7

Nehalem Yacht Club (NYC)is a members-only boating and social club.The board of directors hires professional managers for the many services offered to the club's members,including a harbor master,a chef,and a club manager.The budgeting process is underway at NYC with each operating manager preparing his or her own budget.The board and the membership will approve the budget and monitor operations which demonstrates

A)decision management rights
B)decision control rights
C)decision implementation
D)decision initiation
E)None of the choices are correct

Question 8

Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.
Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.
What is the budgeted amount for direct labor and variable overhead for January?

A)$24,336
B)$18,252
C)$14,040
D)$21,060
E)None of the choices are correct

Question 9

Below are some budgeting techniques which are used rarely (or more often)by government agencies and corporations.Which is true? $\begin{array}{llcc}\quad\quad\quad\quad\quad\quad\quad\quad\quad\text {Private} \quad \text {Public}\\\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text {sector}\quad\text {sector}\end{array}$
a. $\begin{array}{lll}\text {Line-item budgets}& \text {Often}&\text {Rarely}\end{array}$

b. $\begin{array}{lll}\text { Flexible budgeting}& \text {Rarely}&\text {Often }\end{array}$

c. $\begin{array}{lll}\text {Budget lapsing }& \quad\quad\text {Often}&\text {Rarely}\end{array}$

d. $\begin{array}{lll}\text { Zero-based budgeting }& \text {Rarely}&\text {Often }\end{array}$

A)Option A
B)Option B
C)Option C
D)Option D
E)Option E

Question 10

Sassy Snaps is a free-standing photo kiosk that allows customers to enter the kiosk,either alone or with up to 4 friends,and have a series of 5 pictures taken.The pictures are printed for immediate take-away by the customer.Maddie Maple leases several Sassy Snaps kiosks and has one placed in the student union at her college.She pays the union $96 per month to rent the space for her kiosk,she pays Sassy Snaps $144 per month to lease each kiosk.In addition,she pays Sassy Snaps $108 per month for a service to clean the kiosk and ensure it's in top working condition.Each set of pictures costs $4.During October,Maddie had revenue from the college kiosk of $432,and expenses for paper of $64.80 and chemicals of $34.56.If Maddie experienced an unfavorable variance of $2.16 for paper,a favorable variance of $3.24 for chemicals,and no variance for revenue,what was the budgeted amount for chemicals per set of pictures?

A)$0.35
B)$0.38
C)$0.32
D)$0.37
E)$0.33

Question 11

Below are various statements about different budgeting techniques.Which is false?

A)Budget ratcheting tightens targets when performance fails to meet the target by a predetermined percentage
B)Budget lapsing prevents managers from hoarding funds
C)Master(static)budgets are prepared for a single level of activity
D)Budget lapsing encourages managers to spend money regardless of cost or value
E)None of the choices are correct

Question 12

Barrington Bears has developed the following sales forecasts for the next few months.January 500,February 600,March 720,April 800 and May 770.BB has 80 bears on hand on Dec.31.Normal ending inventory policy is to hold 20% of next month's sales. Each bear needs 0.8 yards of fabric and two pounds of stuffing.Fabric is budgeted to cost $15 per yard and stuffing $4 per pound.Direct labor is paid $18 per hour.Each bear takes 40 minutes to hand-finish.Variable overhead totals $21 per direct labor hour.Fixed overhead amounts to $25,000 per month.
Eighty yards of fabric and 100 pounds of stuffing were in stock at year-end.Ten percent and 25% of next month's stuffing and fabric needs respectively are planned for raw materials ending inventory each month.
What quantities of fabric and/or stuffing must be purchased in March?

A)1,248 pounds of stuffing
B)747.6 yards of fabric
C)1,630.8 pounds of stuffing
D)600.4 yards of fabric
E)None of the choices are correct

Question 13

Sassy Snaps is a free-standing photo kiosk that allows customers to enter the kiosk,either alone or with up to 4 friends,and have a series of 5 pictures taken.The pictures are printed for immediate take-away by the customer.Maddie Maple leases several Sassy Snaps kiosks and has one placed in the student union at her college.She pays the union $96 per month to rent the space for her kiosk,she pays Sassy Snaps $144 per month to lease each kiosk.In addition,she pays Sassy Snaps $108 per month for a service to clean the kiosk and ensure it's in top working condition.Each set of pictures costs $4.During October,Maddie had revenue from the college kiosk of $432,and expenses for paper of $64.80 and chemicals of $34.56.If Maddie experienced an unfavorable variance of $2.16 for paper,a favorable variance of $3.24 for chemicals,and no variance for revenue,what was the budgeted amount for paper per set of pictures?

A)$0.60
B)$0.58
C)$0.62
D)$0.63
E)$0.59