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Week 7 Homework

Organizations benefit from an effective budgeting process in several ways. the budget assigns responsibility for decision-making to specific managers. it enhances the degree of planned coordination among organizational units. performance evaluation is improved since the budget assigns responsibility and allows comparison between actual and expected outcomes. Second. First.Week 7 Lesson Synopsis The master budget can be a powerful tool for successful planning and control. . Third.

The cost-volume relationship used to prepare June's flexible budget for various production levels includes: . The sales forecast leads to a production schedule and an integrated set of manufacturing cost budgets. Chapter 23 Learning Objectives 1. 3. Prepare a flexible budget and explain its uses. With the operating budget in hand. Discuss the benefits that a company may derive from a formal budgeting process. This analysis emphasizes that the flexible budget improves performance evaluation by isolating the effects of unanticipated volume changes. The company prepared the above budget on May 1: During the first quarter. Week 7 Practice Quiz Question 1 (1 point) Save A budget that adds a new month when the current month ends is called a Rolling budget Capital budget Master budget There is no such budget Question 2 (1 point) Save June Corporation had planned to produce 60." 2. June produced 70. 5. The chapter concludes with an illustration of flexible budgeting. yet cash poor.000 units and incurred total manufacturing costs of $180. A plan for ending inventory then leads to a budget for the cost of goods sold. These are derived sequentially beginning with a sales forecast. we next prepare a budgeted income statement. Prepare the budgets and supporting schedules included in a master budget. Describe the elements of a master budget. Budgeting for operating expenses completes the operating budget. These assumptions combined with the operating budget yield the cash budget. One of the objectives in so doing is to emphasize that a firm may be profitable but cash poor due to the length of its operating cycle.The master budget is developed as a set of interrelated plans. Explain how a company can be "profit rich. 4. Explain two philosophies that may be used in setting budgeted amounts. The cash budget is the key to identifying the points in the operating cycle causing the cash flow problem. Development of the cash budget requires assumptions regarding the timing of cash receipts and payments.000 units of product during the first quarter of the current year.000. 6.

and that net income actually earned at this level was $70. If the concert season is slow due to poor weather.000 under budget.000 Tshirts. Fixed cost of $0. (1 point) Save Question 4 A master budget usually includes all of the following except A sales forecast A cash budget A projected tax return Projected financial statements Question 5 (1 point) Save Monroe Promotions.Total cost of $2. Variable costs of $1. . and the income tax rate is 30% at all levels of operating income.000 T-shirts: Cost of goods sold and variable operating expenses vary directly with sales. The company has developed the above budget for the coming year based on a sales forecast of 80.73 per unit. Manufacturing overhead costs of $1. A performance report would indicate that net income was: $40.000 unit sales level. Cannot be prepared when a standard cost system is in use.500 under budget. $90. Question 3 (1 point) Save A flexible budget: Is designed to be adjusted at frequent intervals for changes in the general price level.35 per unit. Assume Monroe actually achieves the 60. Is better suited for use with a job cost system than a standard cost system.70 per unit. Monroe estimates that sales could fall to as low as 60.98 per unit.000. sells T-shirts decorated for a variety of concert performers. Inc. Consists of advance estimates of costs and expenses for various possible levels of activity.

000.980. Responsibility budget. The operating expense budget. the budgeted direct materials purchases (in dollars) for April are: $19. Question 7 (1 point) Save If the volume of output of a factory for the month of June is 50. $20. If direct material costs $4 per pound. Comparison of budgeted results and actual results will be misleading unless the company uses a flexible budget. $19. Question (1 point) 8 Save Eagle Company has budgeted sales for the upcoming quarter as above: The desired ending finished goods inventory for each month is one-half of next month's budgeted sales. while the budgeted output was 40. The manufacturing cost budget. At the budgeted level. Performance report.800. Both total production costs and unit production costs should be approximately 25% above budgeted levels. and must be paid for in the month of purchase. $18.400 over budget.000 units.000 units: Actual fixed costs per unit may be expected to exceed budgeted levels. . Actual cost per unit will be higher than standard cost per unit.$1. Three pounds of direct material are required for each unit produced. Question 9 (1 point) Save A segment of a master budget relating to that portion of a business under the control of a particular manager is termed a: Cash budget. The prepayments budget. Question 6 (1 point) Save Which of the following is considered a financial budget estimate? The cost of goods sold budget.700.

750. at a production volume of 288. Skyways produced 15.Production report.150.200.000. Question 10 (1 point) Save Skyways. A flexible budget for May should reflect direct materials cost of: $18. $21. Inc. $18.000.200. uses a flexible budget. . $19.000 units in May incurring direct materials cost of $19.000 units. Its master budget for the year projected direct materials cost of $360.