Deck 6: Master Budget and Responsibility Accounting

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.



-Capital expenditures budget

A) operating budget
B) financial budget.

Answer 1

financial budget.

Question 2

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.



-Cost of goods sold budget

A) operating budget
B) financial budget.

Answer 2

operating budget

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.



-Revenues budget

A) operating budget
B) financial budget.

Answer 3

operating budget

Question 4

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.



-Budgeted statement of cash flows

A) operating budget
B) financial budget.

Question 5

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.



-Distribution costs budget

A) operating budget
B) financial budget.

Question 6

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.



-Marketing costs budget

A) operating budget
B) financial budget.

Question 7

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.



-Direct materials cost budget

A) operating budget
B) financial budget.

Question 8

Use the information below to answer the following question(s).
Berry's Boxes manufactures boxes. It expects to sell 20,000 boxes in 2015. The company had enough beginning inventory of direct materials to produce 24,000 units. Beginning inventory of finished units totalled 2,000 with a target ending inventory of 2,500 units. The boxes sell for $3.00 and the company keeps no work-in-process inventory. Direct materials costs for each box total $1.00 while direct labour is $0.50. Factory overhead is $0.20 per box.

-What will be Berry's Boxes budgeted revenue?

A) $54,000
B) $60,000
C) $78,000
D) $79,500
E) $72,000

Question 9

Use the information below to answer the following question(s).
Berry's Boxes manufactures boxes. It expects to sell 20,000 boxes in 2015. The company had enough beginning inventory of direct materials to produce 24,000 units. Beginning inventory of finished units totalled 2,000 with a target ending inventory of 2,500 units. The boxes sell for $3.00 and the company keeps no work-in-process inventory. Direct materials costs for each box total $1.00 while direct labour is $0.50. Factory overhead is $0.20 per box.

-What will be Berry's Boxes cost of goods sold in 2015?

A) $42,000
B) $24,000
C) $38,000
D) $30,000
E) $34,000

Question 10

Use the information below to answer the following question(s).
Berry's Boxes manufactures boxes. It expects to sell 20,000 boxes in 2015. The company had enough beginning inventory of direct materials to produce 24,000 units. Beginning inventory of finished units totalled 2,000 with a target ending inventory of 2,500 units. The boxes sell for $3.00 and the company keeps no work-in-process inventory. Direct materials costs for each box total $1.00 while direct labour is $0.50. Factory overhead is $0.20 per box.

-What will be Berry's Boxes production costs incurred for direct materials, direct manufacturing labour, and manufacturing overhead, respectively, for 2015?

A) $20,500; $10,250; $4,100
B) $19,500; $9,750; $3,900
C) $10,000; $5,000; $4,000
D) $22,500; 11,250; $4,500
E) $12,000; $6,000; $4,800

Question 11

Use the information below to answer the following question(s).
Country Heather manufactures flowerpots. It expects to sell 40,000 flowerpots in 2016. The company had enough beginning inventory of direct materials to produce 48,000 units. Beginning inventory of finished units totalled 4,000 with a target ending inventory of 5,000 units. The flowerpots sell for $6.00 and the company keeps no work-in-process inventory. Direct materials costs for each flowerpot total $2.00 while direct labour is $1.00. Factory overhead is $0.40 per flowerpot.

-What will be Country Heather's budgeted revenue?

A) $216,000
B) $240,000
C) $312,000
D) $318,000
E) $300,500

Question 12

Use the information below to answer the following question(s).
Country Heather manufactures flowerpots. It expects to sell 40,000 flowerpots in 2016. The company had enough beginning inventory of direct materials to produce 48,000 units. Beginning inventory of finished units totalled 4,000 with a target ending inventory of 5,000 units. The flowerpots sell for $6.00 and the company keeps no work-in-process inventory. Direct materials costs for each flowerpot total $2.00 while direct labour is $1.00. Factory overhead is $0.40 per flowerpot.

-What will be Country Heather's cost of goods sold?

A) $122,400
B) $136,000
C) $139,400
D) $149,600
E) $101,500

Question 13

Use the information below to answer the following question(s).
Fair Score Company manufactures scoreboards for athletic events. It expects to sell 20,000 scoreboards in 2015. The company has enough beginning inventory of direct materials to produce 8,000 units. Beginning work-in-process inventory totals 2,000 units and is 100 percent complete as to material and 50 percent complete as to labour and overhead. Beginning finished units total 4,000 with a target ending finished inventory of 3,000 units. The scoreboards sell for $800. There is no ending work-in-process inventory. Direct materials costs for each scoreboard total $200 while direct labour is $80. Manufacturing overhead is $60 per scoreboard.

-What will be Fair Score Company's budgeted total sales for 2015?

A) $18,400,000
B) $17,600,000
C) $16,000,000
D) $15,200,000
E) $12,300,000

Question 14

Use the information below to answer the following question(s).
Fair Score Company manufactures scoreboards for athletic events. It expects to sell 20,000 scoreboards in 2015. The company has enough beginning inventory of direct materials to produce 8,000 units. Beginning work-in-process inventory totals 2,000 units and is 100 percent complete as to material and 50 percent complete as to labour and overhead. Beginning finished units total 4,000 with a target ending finished inventory of 3,000 units. The scoreboards sell for $800. There is no ending work-in-process inventory. Direct materials costs for each scoreboard total $200 while direct labour is $80. Manufacturing overhead is $60 per scoreboard.

-How many scoreboards should Fair Score Company produce in 2015?

A) 23,000
B) 21,000
C) 20,000
D) 19,000
E) 16,000

Question 15

Use the information below to answer the following question(s).
Fair Score Company manufactures scoreboards for athletic events. It expects to sell 20,000 scoreboards in 2015. The company has enough beginning inventory of direct materials to produce 8,000 units. Beginning work-in-process inventory totals 2,000 units and is 100 percent complete as to material and 50 percent complete as to labour and overhead. Beginning finished units total 4,000 with a target ending finished inventory of 3,000 units. The scoreboards sell for $800. There is no ending work-in-process inventory. Direct materials costs for each scoreboard total $200 while direct labour is $80. Manufacturing overhead is $60 per scoreboard.

-What will be Fair Score Company's budgeted total cost of direct materials used in 2015?

A) $3,400,000
B) $3,800,000
C) $3,600,000
D) $3,200,000
E) $3,155,000

Question 16

Use the information below to answer the following question(s).
Fair Score Company manufactures scoreboards for athletic events. It expects to sell 20,000 scoreboards in 2015. The company has enough beginning inventory of direct materials to produce 8,000 units. Beginning work-in-process inventory totals 2,000 units and is 100 percent complete as to material and 50 percent complete as to labour and overhead. Beginning finished units total 4,000 with a target ending finished inventory of 3,000 units. The scoreboards sell for $800. There is no ending work-in-process inventory. Direct materials costs for each scoreboard total $200 while direct labour is $80. Manufacturing overhead is $60 per scoreboard.

-What will be Contempo Futon's cost of goods manufactured for December?

A) $3,937,500
B) $3,750,000
C) $2,812,500
D) $2,625,000
E) $3,187,500

Question 17

Use the information below to answer the following question(s).
Boone Hobbies, a wholesaler, has a sales budget for next month of $600,000. Cost of units sold is expected to be 40 percent of sales. All units are paid for in the month following purchase. The beginning inventory of units is $20,000, and an ending amount of $24,000 is desired. Beginning accounts payable is $152,000.

-Boone Hobbies gross margin for next month is expected to be

A) $280,000.
B) $336,000.
C) $356,000.
D) $360,000.
E) $240,000.

Question 18

Use the information below to answer the following question(s).
Boone Hobbies, a wholesaler, has a sales budget for next month of $600,000. Cost of units sold is expected to be 40 percent of sales. All units are paid for in the month following purchase. The beginning inventory of units is $20,000, and an ending amount of $24,000 is desired. Beginning accounts payable is $152,000.

-Boone Hobbies budgeted purchases for next month is expected to be

A) $240,000.
B) $264,000.
C) $225,000.
D) $360,000.
E) $244,000.

Question 19

Use the information below to answer the following question(s).
Samson Inc. expects to sell 10,000 barbells for $18.00 each. Direct materials costs are $5.00, direct manufacturing labour is $6.00, and manufacturing overhead is $2.50 per barbell. Each barbell requires 6 kilograms (kg) of material which is all added at the start of production. The units in work-in-process beginning and ending inventory were half complete as to direct labour and manufacturing overhead costs; the units in beginning inventory are completed before new units are started.. Each barbell requires one-quarter hour of direct labour, and manufacturing overhead is allocated based on direct labour hours. Marketing costs are $2.00 per barbell. The following inventory levels are expected to apply to 2016:


-On the 2016 budgeted income statement, what amount will be reported for gross margin?

A) $45,000
B) $70,000
C) $25,000
D) $40,000
E) $35,000

Question 20

Use the information below to answer the following question(s).
Samson Inc. expects to sell 10,000 barbells for $18.00 each. Direct materials costs are $5.00, direct manufacturing labour is $6.00, and manufacturing overhead is $2.50 per barbell. Each barbell requires 6 kilograms (kg) of material which is all added at the start of production. The units in work-in-process beginning and ending inventory were half complete as to direct labour and manufacturing overhead costs; the units in beginning inventory are completed before new units are started.. Each barbell requires one-quarter hour of direct labour, and manufacturing overhead is allocated based on direct labour hours. Marketing costs are $2.00 per barbell. The following inventory levels are expected to apply to 2016:


-How many barbells need to be produced in 2016?

A) 11,050
B) 9,850
C) 10,000
D) 10,050
E) 9,950

Question 21

Use the information below to answer the following question(s).
Samson Inc. expects to sell 10,000 barbells for $18.00 each. Direct materials costs are $5.00, direct manufacturing labour is $6.00, and manufacturing overhead is $2.50 per barbell. Each barbell requires 6 kilograms (kg) of material which is all added at the start of production. The units in work-in-process beginning and ending inventory were half complete as to direct labour and manufacturing overhead costs; the units in beginning inventory are completed before new units are started.. Each barbell requires one-quarter hour of direct labour, and manufacturing overhead is allocated based on direct labour hours. Marketing costs are $2.00 per barbell. The following inventory levels are expected to apply to 2016:


-On the 2016 budgeted income statement, what amount will be reported for cost of goods sold?

A) $132,975
B) $135,675
C) $134,325
D) $135,000
E) $155,000

Question 22

Use the information below to answer the following question(s).
Samson Inc. expects to sell 10,000 barbells for $18.00 each. Direct materials costs are $5.00, direct manufacturing labour is $6.00, and manufacturing overhead is $2.50 per barbell. Each barbell requires 6 kilograms (kg) of material which is all added at the start of production. The units in work-in-process beginning and ending inventory were half complete as to direct labour and manufacturing overhead costs; the units in beginning inventory are completed before new units are started.. Each barbell requires one-quarter hour of direct labour, and manufacturing overhead is allocated based on direct labour hours. Marketing costs are $2.00 per barbell. The following inventory levels are expected to apply to 2016:


-What are the 2016 budgeted costs for direct manufacturing labour?

A) $59,700
B) $60,300
C) $60,700
D) $240,000
E) $60,000

Question 23

Shamokin Manufacturing produces two products, Big and Bigger. Shamokin expects to sell 10,000 units of product Bigger and to have an inventory of 2,000 units of Bigger on hand at the end of the period. Currently, Shamokin has 800 units of Bigger on hand. Bigger requires two labour operations, molding and polishing. Each unit of Bigger requires one hour of molding and two hours of polishing. The direct labour rate for molding is $20 per molding hour and the direct labour rate for polishing is $25 per polishing hour. The expected number of hours of direct labour for Bigger is

A) 8,800 hours of molding; 17,600 hours of polishing.
B) 11,200 hours of molding; 22,400 hours of polishing.
C) 17,600 hours of molding; 8,800 hours of polishing.
D) 22,400 hours of molding; 11,200 hours of polishing.
E) 10,000 hours of molding; 20,000 hours of polishing.

Question 24

Frame Antique manufactures picture frames. Sales for May are expected to be 20,000 units of various sizes. Historically, the average frame requires three metres of framing, one square metre of glass, and two square metres of backing. Beginning inventory includes 3,000 metres of framing, 1,000 square metres of glass, and 1,000 square metres of backing. Current prices are $0.20 per metre of framing, $4.00 per square metre of glass, and $1.50 per square metre of backing. Ending inventory should be 150 percent 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 May.
b. Determine the total costs of direct materials for May purchases.

Question 25

Picture Pretty manufactures picture frames. Sales for August are expected to be 10,000 units of various sizes. Historically, the average frame requires four metres of framing, one square metre of glass, and two square metres of backing. Beginning inventory includes 1,500 metre of framing, 500 square metres of glass, and 500 square metres of backing. Current prices are $0.30 per metre of framing, $6.00 per square metre of glass, and $2.25 per square metre of backing. Ending inventory 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.

Question 26

Budget Corporation has the following budgeted sales for the next six-month period:

There were 30,000 units of finished goods in inventory at the beginning of September. Plans are to have an inventory of finished products that equal 20 percent of the unit sales for the next month.
Five kilograms of materials are required for each unit produced. Each kilogram of material costs $10. Inventory levels for materials are equal to 30 percent of the needs for the next month. Materials inventory on September 1 was 10,000 kilograms.
Required:
a. Prepare production budgets in units for October, November, and December.
b. Prepare a purchases budget in kilograms for October, November, and December, and give total purchases in both kilograms and dollars for each month.

Question 27

Lubriderm Corporation has the following budgeted 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 percent of the unit sales for the next month.
Five kilograms of materials are required for each unit produced. Each pound of material costs $8. Inventory levels for materials are equal to 30 percent of the needs for the next month. Materials inventory on June 1 was 15,000 kilograms.
Required:
a. Prepare production budgets in units for July, August, and September.
b. Prepare a purchases budget in kilograms for July, August, and September, and give total purchases in both kilograms and dollars for each month.

Question 28

Christy Enterprises reports the year-end information from 2015 as follows:


Christy is developing the 2016 budget. In 2016 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 2016.

Question 29

Shamokin Manufacturing produces two products, Big and Bigger. Shamokin expects to sell 20,000 units of Big and 10,000 units of Bigger. Shamokin plans on having an ending inventory of 4,000 units of Big and 2,000 units of Bigger. Currently, Shamokin has 1,000 units of Big in its inventory and 800 units of Bigger. Each product requires two labour operations: molding and polishing. Product Big requires one hour of molding time and one hour of polishing time. Product Bigger requires one hour of molding time and two hours of polishing time. The direct labour rate for molders is $20 per molding 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.

Question 30

Use the information below to answer the following question(s).
Copper Corporation has the following sales budget for the last six months of 2016:

Historically, the cash collection of sales has been as follows:
65 percent of sales collected in month of sale,
25 percent of sales collected in month following sale,
8 percent of sales collected in second month following sale, and
2 percent of sales is uncollectable.

-Cash collections for September are

A) $143,000.
B) $161,400.
C) $199,000.
D) $204,000.
E) $240,000.

Question 31

Use the information below to answer the following question(s).
Copper Corporation has the following sales budget for the last six months of 2016:

Historically, the cash collection of sales has been as follows:
65 percent of sales collected in month of sale,
25 percent of sales collected in month following sale,
8 percent of sales collected in second month following sale, and
2 percent of sales is uncollectable.

-Cash collections for October are

A) $117,000.
B) $184,800.
C) $199,000.
D) $176,400.
E) $174,000.

Question 32

Use the information below to answer the following question(s).
Grinnell Manufacturing Company has the following information for 2015:

Budget Expenses per Month

Note: All cash expenses are paid as incurred; Collections from sales are 50% in the month of sale and 50% in the month following the sale; December 2014 sales were $110,000.

-What is the expected total cash disbursements for expenses in February?

A) $33,400
B) $30,000
C) $30,200
D) $30,400
E) $27,000

Question 33

Use the information below to answer the following question(s).
Grinnell Manufacturing Company has the following information for 2015:

Budget Expenses per Month

Note: All cash expenses are paid as incurred; Collections from sales are 50% in the month of sale and 50% in the month following the sale; December 2014 sales were $110,000.

-What are the expected total cash receipts for February?

A) $118,500
B) $89,000
C) $88,500
D) $85,000
E) $80,500

Question 34

Use the information below to answer the following question(s).
Grinnell Manufacturing Company has the following information for 2015:

Budget Expenses per Month

Note: All cash expenses are paid as incurred; Collections from sales are 50% in the month of sale and 50% in the month following the sale; December 2014 sales were $110,000.

-What is the budgeted net operating income for the first quarter of 2015?

A) $132,640
B) $135,280
C) $172,160
D) $123,640
E) $140,560

Question 35

Answer the following question(s) using the information below.
The following information pertains to Tiffany Company:

Cash is collected from customers in the following manner:
- Month of sale 30%
- Month following the sale 70%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
Labour costs are 20% of sales. Other operating costs are $15,000 per month (including $4,000 of depreciation). Both of these are paid in the month incurred. The cash balance on March 1 is $4,000. A minimum cash balance of $3,000 is required at the end of the month. Money can be borrowed in multiples of $1,000.

-How much cash will be collected from customers in March?

A) $47,000
B) $45,000
C) $50,000
D) $33,000
E) $43,000

Question 36

Answer the following question(s) using the information below.
The following information pertains to Tiffany Company:

Cash is collected from customers in the following manner:
- Month of sale 30%
- Month following the sale 70%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
Labour costs are 20% of sales. Other operating costs are $15,000 per month (including $4,000 of depreciation). Both of these are paid in the month incurred. The cash balance on March 1 is $4,000. A minimum cash balance of $3,000 is required at the end of the month. Money can be borrowed in multiples of $1,000.

-How much cash will be paid to suppliers in March?

A) $23,200
B) $28,000
C) $44,000
D) $24,800
E) $17,600

Question 37

Answer the following question(s) using the information below.
The following information pertains to Tiffany Company:

Cash is collected from customers in the following manner:
- Month of sale 30%
- Month following the sale 70%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
Labour costs are 20% of sales. Other operating costs are $15,000 per month (including $4,000 of depreciation). Both of these are paid in the month incurred. The cash balance on March 1 is $4,000. A minimum cash balance of $3,000 is required at the end of the month. Money can be borrowed in multiples of $1,000.

-What is the ending cash balance for March after borrowing, if required?

A) $4,000
B) $3,800
C) $3,200
D) $2,800
E) $3,000

Question 38

Answer the following question(s) using the information below.
The following information pertains to Hepburn Company:

Cash is collected from customers in the following manner:
- Month of sale 30%
- Month following the sale 70%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
Labour costs are 20% of sales. Other operating costs are $30,000 per month (including $8,000 of depreciation). Both of these are paid in the month incurred. The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required at the end of the month. Money can be borrowed in multiples of $1,000.

-How much cash will be paid to suppliers in March?

A) $56,000
B) $46,400
C) $88,000
D) $49,600
E) $35,200

Question 39

Answer the following question(s) using the information below.
The following information pertains to Hepburn Company:

Cash is collected from customers in the following manner:
- Month of sale 30%
- Month following the sale 70%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
Labour costs are 20% of sales. Other operating costs are $30,000 per month (including $8,000 of depreciation). Both of these are paid in the month incurred. The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required at the end of the month. Money can be borrowed in multiples of $1,000.

-How much cash will be disbursed in total in March?

A) $88,400
B) $42,000
C) $68,400
D) $96,400
E) $91,600

Question 40

Answer the following question(s) using the information below.
The following information pertains to Hepburn Company:

Cash is collected from customers in the following manner:
- Month of sale 30%
- Month following the sale 70%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.
Labour costs are 20% of sales. Other operating costs are $30,000 per month (including $8,000 of depreciation). Both of these are paid in the month incurred. The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required at the end of the month. Money can be borrowed in multiples of $1,000.

-What is the ending cash balance for March after borrowing, if required?

A) $8,000
B) $6,400
C) $5,600
D) $6,000
E) $6,600

Question 41

Perry Company has gathered the following information:

Required:
Prepare a cash budget for May, and indicate whether or not Perry meets minimum cash requirements.

Question 42

Berry Company has gathered the following information:

Required:
Prepare a cash budget for May, and indicate whether or not Berry meets minimum cash requirements.

Question 43

One of the criticisms of traditional budgeting is not using budgets to evaluate performance until the end of the budget period. Which of the following proposals for change would address this criticism?

A) Link budgeting explicitly to strategy.
B) Use Kaizen budgeting to guide areas for cost reduction before the end of the budget period.
C) Inform employees of the need for continuous improvement in performance within the budget period.
D) Balance financial aspects with non-financial aspects (such as quality and time).
E) Rely strictly on extrapolation of past performance.

Question 44

Mannock Company budgeted $400,000 for employee training, but actually spent only $300,000. Which of the following statements is the best course of action for management to take in this instance?

A) Because this $100,000 variance is favourable, management does not need to investigate further.
B) Management will investigate this $100,000 favourable variance to ensure that the cost savings do not reflect a reduction in programming.
C) Management will investigate this $100,000 favourable variance to try to identify and correct the problem with the budgeting system.
D) Management should not investigate every variance, especially the favourable ones.
E) Management should hold a meeting with the budget department and the training department to ensure that next year's budget is more realistic.

Question 45

Disk Company was very profitable for the first ten years of its existence, but the company has fallen on hard times with the growth of compact disks. In 2007 Jean Adams was appointed head of the Product Research Department. She began a number of product development projects. Although the department has developed several good ideas that led to the introduction of several promising products, Ms. Adams was criticized for poor cost control. The financial performance reports of the department under Ms. Adams leadership were consistently unfavourable. Management was quite concerned about cost control because profits for the company were low and the cash budget indicated that additional borrowing would be required during the next year.
Because of her inability to control costs, Ms. Adams was relieved of her responsibilities in 2008 and Fran Jones became head of the department. Ms. Jones promised to improve performance of Product Research and scaled back the developmental activities to obtain favourable financial performance. By the end of 2008 Ms. Jones was showing a favourable financial variance.
Required:
If the Product Research Department is classified as a responsibility centre, what unique problems are associated with evaluating its financial performance?

Question 46

Rick Christensen is the new division manager of Fastfood Sales. His division is considered a responsibility centre, and he has control over all costs and revenue of the division. His predecessor had been dismissed from the company because he could not keep the revenues and costs with acceptable variances on a quarterly basis. However, the former manager had relatively good annual reports. Christensen is very concerned about the situation because Fastfood has a somewhat seasonal business and it is very difficult to keep sales up during the winter months. He is considering changing jobs after only a few months but wants some advice as to the likelihood that he will be able to keep revenue and costs under control throughout the year.
Required:
Distinguish between controllable and uncontrollable aspects of revenue and costs. Can a manager totally control all revenue and costs? Why or why not?

Question 47

Answer the following question(s) using the information below.
Sherry and John Enterprises are using the Kaizen approach to budgeting for 2016. The budgeted income statement for January 2016 is as follows:

Under the Kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per month.

-What is budgeted gross margin for March 2016?

A) $392,040
B) $396,000
C) $408,040
D) $411,940
E) $412,000

Question 48

Stark Company is developing its budgets for 2016 and for the first time will use the Kaizen approach. The initial 2016 income statement, based on static data from 2015 is as follows:

Selling prices for 2016 are expected to increase by 6 percent, and sales volume in units will decrease by 10 percent. The cost of goods sold as estimated by the Kaizen approach will decline by 10 percent per unit. Other than amortization, all other operating costs are expected to decline by 5 percent.
Required:
Prepare a Kaizen-based budgeted income statement for 2016.

Question 49

Jermaine Company is developing its budgets for 2016 and for the first time will use the Kaizen approach. The initial 2016 income statement, based on static data from 2015, is as follows:
Sales (200,000 units) $300,000
Less: cost of goods sold 200,000
Gross margin $100,000
Operating expenses (includes $20,000 of amortization) 80,000
Net income $20,000
Selling prices for 2016 are expected to increase by 8 percent, and sales volume in units will decrease by 10 percent. The cost of goods sold as estimated by the Kaizen approach will decline by 10 percent per unit. Other than amortization, all other operating costs are expected to decline by 5 percent.
Required:
Prepare a Kaizen-based budgeted income statement for 2016.

Question 50

Allscott Company is developing its budgets for 2016 and for the first time will use the Kaizen approach. The initial 2016 income statement, based on static data from 2015, is as follows:


Selling prices for 2016 are expected to increase by 8%, and sales volume in units will decrease by 10%. The cost of goods sold as estimated by the Kaizen approach will decline by 10% per unit. Other than depreciation, all other operating costs are expected to decline by 5%.
Required:
Prepare a Kaizen-based budgeted income statement for 2016.