Deck 6: Planning, The Balanced Scorecard, and Budgeting

Question 1

An advantage of a participatory budget is:

A)Management can disregard their employee's input if necessary.
B)Employees get a percentage of the budgetary slack introduced into the budget.
C)Participatory budgets are typically more accurate than other types of budgets.
D)Employees provide a wealth of information to management and are motivated by the process.

Answer 1

Employees provide a wealth of information to management and are motivated by the process.

Question 2

Which of the following is part of conversion process planning?

A)Production budget
B)Cash receipts schedule
C)Direct materials purchase budget
D)Direct labor and overhead budget

Answer 2

Production budget

Question 3

A plan for the future expressed in quantitative terms is called a:

A)cycle
B)budget
C)commentary
D)mathematical model

Answer 3

budget

Question 4

The balanced scorecard approach is successful in reducing budgetary slack because:

A)It uses several different measures to assess how successful a department performed.
B)It uses actual results rather than estimated budgeted figures to measure performance.
C)It uses only those measures that balance the budgeted figures with the actual figures.
D)It uses those measures that make the assets balance with the liabilities and owners' equity.

Question 5

Budgetary slack is created when:

A)When the difference between actual and budgeted amounts are accidental
B)When the difference between actual and budgeted amounts are based on unforeseen events.
C)When the difference between actual and budgeted amounts are the result of deliberately introduced bias in the budgetary process.
D)When the difference between actual and budgeted amounts are the result of management's inability to be clairvoyant.

Question 6

A budgeting system that allows individuals who are affected by the budget to have input into the budgeting process is called:

A)mandated budgeting
B)zero-based budgeting
C)incremental budgeting
D)participative budgeting

Question 7

Which of the following is not part of revenue process planning?

A)Sales budget
B)Cash receipts budget
C)Production budget
D)Marketing and Distribution Budget

Question 8

The desired ending finished goods inventory would most likely be shown on the:

A)cash budget
B)sales budget
C)production budget
D)direct materials purchases budget

Question 9

Conversion cycle planning consists of all the following except:

A)scheduling labor
B)scheduling production
C)planning manufacturing overhead
D)All of the above are part of the conversion cycle planning process

Question 10

Which of the following does not affect the cost of preparing a budget?

A)Time and resource requirement
B)The budgeting activities of competitors
C)Adaptability of departments
D)Motivation and behavior of individuals

Question 11

The sales budget and the desired level of ending finished goods inventory are primary inputs into the preparation of the:

A)cash budget
B)production budget
C)manufacturing overhead budget
D)selling and administrative costs budget

Question 12

The question of how many units of product to manufacture would be considered when preparing the:

A)master budget
B)project budget
C)strategic budget
D)operating budget

Question 13

Which of the following drives all other operating budgets?

A)Marketing and distribution budget
B)Production budget
C)Sales budget
D)Purchases budget

Question 14

Which of the following is part of the revenue planning process?

A)Cash receipts budget
B)Direct materials purchasing budget
C)Production budget
D)Cash disbursement budget

Question 15

Conversion cycle planning consists of all the following except:

A)scheduling labor
B)scheduling production
C)purchasing merchandise
D)planning manufacturing overhead

Question 16

A budget based on prior year's budget as a starting point is a:

A)Zero-based budget
B)Prior year budget
C)Incremental budget
D)Mandatory budget

Question 17

Which of the following is not part of expenditure process planning?

A)Direct labor and overhead budget
B)Direct materials purchases budget
C)Cash disbursements schedule
D)Production budget

Question 18

The final step in a master budget is the preparation of the:

A)cash budget
B)sales budget
C)pro forma financial statements
D)selling and administrative costs budget

Question 19

Ideal standards used in the budgeting process -

A)Do not factor in operating inefficiencies in the budgeting process
B)Allows for small deviations from perfection
C)Is based on ideal working conditions but will permit some slack in operations
D)Requires that deviations between actual and budgeted results be minimized.

Question 20

The strategy whereby a company uses the current period's budget as a starting point in preparing next period's budget is referred to as:

A)mandated budgeting
B)zero-based budgeting
C)incremental budgeting
D)participative budgeting

Question 21

Use the following to answer questions
Minuteman Company's sales were budgeted for the first six months of its fiscal year as follows:
All sales are on credit and management estimates that 55% will be collected in the month following the sale, with the remaining 45% collected the second month following the sale.
Cash collections during June are estimated at:

A)$376,000
B)$384,000
C)$491,500
D)$550,000

Question 22

Weasel Corporation's sales for January,2010,were $1,350,000.Weasel projects a 10% increase in sales every month through December.The sales for March,2010,are estimated at:

A)$1,633,500
B)$1,796,850
C)$1,620,000
D)$1,755,000

Question 23

Klocke Corporation's sales for January,2010,were $1,350,000.Klocke projects a 10% increase in monthly sales every 6 months.The sales for December,2010,are estimated at:

A)$1,633,500
B)$1,485,000
C)$1,620,000
D)$1,796,850

Question 24

Roo Corporation budgeted sales of its product during the next fiscal year at 255,000 units,with a selling price of $30 each.Sales commissions run 5% of sales and other variable selling and administrative costs are 10% of sales.Fixed selling and administrative costs are estimated at $950,000.The budgeted selling and administrative costs for the next fiscal year are:

A)$2,097,500
B)$1,147,500
C)$3,000,000
D)$1,064,750

Question 25

Use the following to answer questions
Ness Company's sales were budgeted for the first six months of its fiscal year as follows:
Sales are 40% cash and 60% credit. Management estimates that two-thirds of credit sales will be collected in the month of sale with the balance collected the following month.
Cash collections during March are estimated at:

A)$608,000
B)$524,260
C)$550,000
D)$692,000

Question 26

Xenon Corporation budgeted sales of its product during the next fiscal year at 200,000 units,with a selling price of $20 per unit.Sales commissions are 6% of sales and other variable selling and administrative costs are 15% of sales.Fixed selling and administrative costs are estimated at $630,000.The budgeted selling and administrative costs for the next fiscal year are:

A)$ 840,000
B)$1,230,000
C)$860,000
D)$1,470,000

Question 27

Use the following to answer questions
Redcoat Company's unit sales were budgeted for the first six months of its fiscal year as follows:
Management wants to maintain an ending inventory equal to 15% of the next month's sales.
The unit production requirements for May are:

A)280,000
B)289,750
C)331,750
D)373,750

Question 28

Sales commissions would most likely be shown in the:

A)sales budget
B)direct labor budget
C)manufacturing overhead budget
D)Marketing and distribution budget

Question 29

Clyde,Inc.sells two products,X and Y.Clyde sells twice as much X as Y,and projects the sale of 57,000 units of X during the coming year.Product Y sells for three times as much as product X,which sells for $2.75 per unit.The estimated sales revenue for Clyde for the coming year is:

A)$182,970
B)$340,005
C)$391,875
D)$548,625

Question 30

Bergstrom Industries sold 460,000 trash barrels at $12 each during the first quarter of 2010.Unit sales are projected to increase 5% each quarter while the selling price will be reduced by $.50 each quarter.The estimated sales revenue for the fourth quarter of 2010 is:

A)$5,520,000
B)$5,554,500
C)$5,591,334
D)$5,819,000

Question 31

Lichti Industries sold 50,000 ice chests at $20 each during April of 2010.Unit sales are projected to increase 10% in May and June while the selling price will be increased by $1.00 for May and another $1 in June.The estimated sales revenue for June of 2010 is:

A)$1,331,000
B)$1,210,000
C)$1,270,500
D)$1,155,000

Question 32

Use the following to answer questions
Trego Company's unit sales were budgeted for the first six months of its fiscal year as follows:
Management wants to maintain an ending inventory equal to 8% of the next month's sales.
The production requirements for May are:

A)295,000
B)315,000
C)271,800
D)291,400

Question 33

Lyle Industries sold 80,000 ice chests at $30 each during April of 2010.Unit sales are projected to increase 5% in May and June while the selling price will be increased by $2.00 for May and another $1 in June.The estimated sales revenue for June of 2010 is:

A)$2,772,000
B)$2,910,600
C)$2,822,400
D)$2,640,000

Question 34

Indirect labor would most likely be shown on the:

A)sales budget
B)direct labor budget
C)production budget
D)manufacturing overhead budget

Question 35

Use the following to answer questions
Trego Company's unit sales were budgeted for the first six months of its fiscal year as follows:
Management wants to maintain an ending inventory equal to 8% of the next month's sales.
The production requirements for June are:

A)248,000
B)225,000
C)223,000
D)205,000

Question 36

Gove Company has an accounts receivable balance of $357,000 at the beginning of the year.Credit sales for the year are projected at $975,000.Management estimates that 95% of the beginning accounts receivable plus 75% of the credit sales will be collected during the period.What is the projected balance of the ending accounts receivable?

A)$1,332,000
B)$261,600
C)$1,070,400
D)$243,750

Question 37

Farmer Corporation budgeted sales of its product during the next fiscal year at 225,000 units,with a selling price of $17.50 per unit.Sales commissions are 6% of sales and other variable selling and administrative costs are 15% of sales.Fixed selling and administrative costs are estimated at $430,000.The budgeted selling and administrative costs for the next fiscal year are:

A)$ 477,250
B)$1,020,625
C)$1,192,375
D)$1,256,875

Question 38

The Piante Company has an accounts receivable balance of $256,000 at the beginning of the year.Credit sales for the year are projected at $923,000.Management estimates that 98% of the beginning accounts receivable plus 82% of the credit sales will be collected during the period.The projected balance of accounts receivable at year-end equal to:

A)$161,020
B)$166,140
C)$171,260
D)$256,000

Question 39

Use the following to answer questions
Minuteman Company's sales were budgeted for the first six months of its fiscal year as follows:
All sales are on credit and management estimates that 55% will be collected in the month following the sale, with the remaining 45% collected the second month following the sale.
Cash collections during August are estimated at:

A)$360,000
B)$373,500
C)$462,000
D)$517,000

Question 40

Use the following to answer questions
Redcoat Company's unit sales were budgeted for the first six months of its fiscal year as follows:
Management wants to maintain an ending inventory equal to 15% of the next month's sales.
The unit production requirements for February are:

A)245,500
B)295,000
C)300,250
D)344,500

Question 41

Budgets are prepared by the top-level executives of Phififfer Company.This is an example of which type of budgeting?

A)participative
B)zero-based
C)mandated
D)ideal

Question 42

Describe how the sales budget is related to the production budget.

Question 43

Use the following to answer questions
Hepburn Corporation's sales price is $30 per unit. Unit sales information is presented below:
Management estimates that 2% of credit sales are uncollectible. Of the remaining credit sales, 30 percent are collected in the month of sale and the remainder in the following month. The March 31 ending inventory is 5,500 units, and Hepburn wants to have 10% of the next month's sales in ending finished goods inventory.
Hepburn applies overhead at the rate of $10 for each machine hour.Each unit of finished goods requires 0.5 machine hours.What amount should Hepburn budget for overhead for April?

A)$2,615,000
B)$ 523,000
C)$ 366,100
D)$ 261,500

Question 44

What information must a firm have to prepare a sales budget? How does it get this information?

Question 45

Use the following to answer questions
Hepburn Corporation's sales price is $30 per unit. Unit sales information is presented below:
Management estimates that 2% of credit sales are uncollectible. Of the remaining credit sales, 30 percent are collected in the month of sale and the remainder in the following month. The March 31 ending inventory is 5,500 units, and Hepburn wants to have 10% of the next month's sales in ending finished goods inventory.
Each finished unit requires 2 direct labor hours.The average direct labor rate is $14 per hour.What amount should Hepburn budget for direct labor for April?

A)$1,596,000
B)$1,464,400
C)$ 732,200
D)$ 104,600

Question 46

Takai Corporation has a sales price of $20 per unit.Unit sales information is presented below: Management estimates that 4% of credit sales (in dollars)are uncollectible.Of the remaining credit sales,60 percent are collected in the month of sale and the remainder in the following month.What are Takai's estimated cash collections and sales revenue for January?

A)
B)
C)
D)

Question 47

Use the following to answer questions
Hepburn Corporation's sales price is $30 per unit. Unit sales information is presented below:
Management estimates that 2% of credit sales are uncollectible. Of the remaining credit sales, 30 percent are collected in the month of sale and the remainder in the following month. The March 31 ending inventory is 5,500 units, and Hepburn wants to have 10% of the next month's sales in ending finished goods inventory.
What are Hepburn Corporation's expected cash collections for April?

A)$2,725,000
B)$1,350,000
C)$1,560,000
D)$1,330,200

Question 48

Which of the following budgets is completed last?

A)raw materials purchases
B)cash payments
C)production
D)sales

Question 49

Use the following to answer questions
Waterford Enterprises' unit production was budgeted for the first six months of its fiscal year as follows:
Each unit of product requires 15 pounds of raw material and management wants to maintain an ending inventory of raw material equal to 12% of the next month's production requirements.
The direct materials purchases budget for May is:

A)603,300
B)615,000
C)677,100
D)750,900

Question 50

Use the following to answer questions
Waterford Enterprises' unit production was budgeted for the first six months of its fiscal year as follows:
Each unit of product requires 15 pounds of raw material and management wants to maintain an ending inventory of raw material equal to 12% of the next month's production requirements.
The direct materials purchases budget for June is:

A)517,500
B)537,300
C)599,400
D)661,500

Question 51

Use the following to answer questions
Hepburn Corporation's sales price is $30 per unit. Unit sales information is presented below:
Management estimates that 2% of credit sales are uncollectible. Of the remaining credit sales, 30 percent are collected in the month of sale and the remainder in the following month. The March 31 ending inventory is 5,500 units, and Hepburn wants to have 10% of the next month's sales in ending finished goods inventory.
Hepburn's SG&A expenses,paid as incurred,are $100,000 per month plus 5 per cent of sales.What amount should Hepburn budget for SG&A for April?

A)$230,000
B)$178,000
C)$160,000
D)$102,600

Question 52

Describe the relationship between the Production Budget used in Conversion Process Planning and the Direct Materials Purchase Budget and the Direct Labor and Overhead Budget used in the Expenditure Planning Process.

Question 53

In the budgeting process a company can use either an ideal for normal standard.What is the difference between an ideal standard and a normal standard? What impact do you think each would have on employee morale?

Question 54

Use the following to answer questions
Hepburn Corporation's sales price is $30 per unit. Unit sales information is presented below:
Management estimates that 2% of credit sales are uncollectible. Of the remaining credit sales, 30 percent are collected in the month of sale and the remainder in the following month. The March 31 ending inventory is 5,500 units, and Hepburn wants to have 10% of the next month's sales in ending finished goods inventory.
Each finished unit requires 5 units of raw material and raw material can be purchased at $3 per unit.Hepburn wants to have 15% of the next month's needs in ending raw materials inventory.The March 31,raw materials inventory is 40,000 units and Hepburn estimates May production at 58,000 units.What amount should Hepburn budget for raw material purchases for April?

A)$912,750
B)$855,000
C)$790,500
D)$784,500

Question 55

Which of the following budgets is completed first?

A)raw materials purchases
B)cash payments
C)production
D)sales

Question 56

Use the following to answer questions
Hepburn Corporation's sales price is $30 per unit. Unit sales information is presented below:
Management estimates that 2% of credit sales are uncollectible. Of the remaining credit sales, 30 percent are collected in the month of sale and the remainder in the following month. The March 31 ending inventory is 5,500 units, and Hepburn wants to have 10% of the next month's sales in ending finished goods inventory.
Hepburn pays for direct labor and overhead as incurred.It pays for 80 percent of raw material purchases during the month of purchase and the remainder during the next month.Accounts payable on March 31,was $400,000.What amount should Hepburn budget for cash payments for production costs during April?

A)$2,760,100
B)$2,600,100
C)$2,360,100
D)$1,725,900

Question 57

Define the term "budgeting." Describe the benefits and costs of implementing a budgeting process.

Question 58

Which of the following is not one of the benefits of budgeting?

A)understanding of the interaction among different parts of the firm
B)ensures that resources are allocated to value-added activities
C)aids management in identifying areas requiring correction
D)eliminates mistakes

Question 59

Use the following to answer questions
Hepburn Corporation's sales price is $30 per unit. Unit sales information is presented below:
Management estimates that 2% of credit sales are uncollectible. Of the remaining credit sales, 30 percent are collected in the month of sale and the remainder in the following month. The March 31 ending inventory is 5,500 units, and Hepburn wants to have 10% of the next month's sales in ending finished goods inventory.
How many units should Hepburn produce during April.

A)57,800
B)52,300
C)52,000
D)51,700

Question 60

Which of the following must be estimated before a production budget can be completed?

A)unit sales
B)fixed factory overhead
C)cash collection pattern
D)raw materials purchases

Question 61

The Ellis Company is preparing its sales and production budget for 2011.Ellis sells its
product for $37 and thinks it sales in January 2011 will be 230,000 units and this will increase by 10% in February and March and then by 20% for April and May.Ellis has a beginning inventory of 23,000 units and wants to reduce its ending inventory to 1% of the next month's units sales.Create a sales budget (in both units and dollars)and the production budget for the first quarter of the year.

Question 62

The Olpe Corporation budgeted production for the first three months of 2011 is listed below.Each unit produced requires 5 pounds of direct material that cost $8 per pound.Hoxie wants to have 5% on next month's production in ending inventory each month.Hoxie receives a 2% discount on all purchases paid made during the month and pays 80% of its materials bill during the month.
Accounts Payable Balance $110,000 on January 1,2011
Raw materials inventory 30,000 pounds at $8 - $240,000
Required:
(A.)How many pounds and what is the price of the direct material Hoxie plans to purchase in February?
(B.)How much cash does Hoxie plan to pay for materials in February?
(C.)How much will the ending balance of accounts payable be February?

Question 65

Onaga Corporation has the production budget described below.Each unit requires 4 hours of direct labor time at $15 per hour.Unit-related overhead is $20 per machine hour and each unit requires one-quarter of an hour.Batch-related overhead is $2,000 per batch with a batch-size of 500 units.Facility overhead,including depreciation of $150,000 is $820,000 per month.
Required: Prepare Onaga's direct labor and manufacturing overhead budget for February.

Question 67

The Hoxie Corporation budgeted production for the first three months of 2011 is listed below.Each unit produced requires 3 pounds of direct material that cost $9 per pound.Hoxie wants to have 10% on next month's production in ending inventory each month.Hoxie receives a 3% discount on all purchases paid made during the month and pays 90% of its materials bill during the month.
Accounts Payable Balance $210,000 on January 1,2011
Raw materials inventory 28,500 pounds at $9 $256,500
Required:
(A.)How many pounds and what is the price of the direct material Hoxie plans to purchase in February?
(B.)How much cash does Hoxie plan to pay for materials in February?
(C.)How much will the ending balance of accounts payable be February?

Question 68

Greenleaf Company's actual sales for April through June,and budgeted sales for July through September of the current year are as follows:
All sales are on credit.Management estimates that 10% will be collected in the month of sale,55% will be collected in the month following the sale,and the balance will be collected the second month following the sale.Prepare a cash receipts schedule for Greenleaf Company for the period July through September.

Question 69

Logan Enterprises' unit production is budgeted for the first six months of its upcoming fiscal year as follows:
Each unit of product requires 20 pounds of raw material that Logan purchases for $3.50 per pound.The company began the month of March with 13,160 pounds of raw material but wants its ending inventory of raw material to be 2% of the next month's production requirements beginning with the end of March.
Logan pays for 20% of its purchases in the month of purchase,with the remainder paid the following month.Determine the amount of planned cash disbursements for purchases of raw materials for April,May and June.

Question 70

Valentine Company's actual sales for January through March,and budgeted sales for April through June of the current year are as follows:
10% of sales are cash and the rest are credit sales.Management estimates that 20% of credit sales will be collected in the month of sale,78% will be collected in the month following the sale,and the balance will not be collected.Prepare a cash receipts schedule for Valentine Company for the period April through June.