9

12/16/21, 1:34 PM Assignment Print View

1.
A summary of a company's plans for which sales, production, distribution targets and financing
activities are laid out is known as a master budget.
 True
 False
A summary of a companyâ€™s plans for which sales, production, distribution targets and financing
activities are laid out is known as a master budget.

2.

XLM Inc. sells a single product for a budgeted selling price of $21 per unit. Budgeted direct
materials costs were $5 per unit, while budgeted direct labour and variable overhead costs were
$3 and $2 respectively. Budgeted fixed overhead costs amount $25,000 per month. The company
has a practical production capacity of 10,000 units per month. Budgeted variable selling costs are
$2 per unit. Budgeted fixed selling costs are $2,000 per month. During the company's first month
of operations, the company produced 10,000 units and sold 6,000 units at an average selling price
of $18 per unit. Fixed costs were as budgeted. Direct material costs were $2 less per unit then
budgeted. All other variable costs were as budgeted. The company's flexible budget variance was:
 $12,000 favourable
 Nil
 $6,000 unfavourable
6,000 × ($21 − $18 − $2) = $6,000 unfavourable.
https://ezto.mheducation.com/hm.tpx 1/76

3.
XYZ Inc. sells a single product for a budgeted selling price of $30 per unit. Budgeted direct
has a practical production capacity of 10,000 units per month. Budgeted Variable selling costs are
$2 per unit. Budgeted Fixed selling costs are $2,000 per month. During the company's first month
of $18 per unit. Fixed and variable costs were as budgeted. The company's sales volume variance
was:
 $10,000 unfavourable
Sales Volume Variance = (10,000 − 7,500) × $30 = $75,000 unfavourable.

4.

was:
 $10,000 favourable.
 $10,000 unfavourable.
 $25,000 unfavourable.

5.
Flexible budgets take into account changes in revenues and costs expected to occur as a
consequence of changes in actual activity.
 True
 False

6.
A static budget is geared toward a single level of activity.
 True
 False

7.
A production budget is to a manufacturing firm as a merchandise purchases budget is to a

merchandising firm.
 True
 False

8.
A sales budget is given below for one of the products manufactured by the Key Co.:

January 21,000 units
February 36,000 units
March 61,000 units
April 41,000 units
May 31,000 units
June 25,000 units
The inventory of finished goods at the end of each month should equal 20% of the next month's
sales. However, on December 31, the finished goods inventory totalled only 4,000 units.
Each unit of product requires three specialized electrical switches. Since the production of these
specialized switches by Key's suppliers is sometimes irregular, the company has a policy of
maintaining an ending inventory at the end of each month equal to 30% of the next month's
production needs. This requirement had been met on January 1 of the current year.
Required:
Prepare a budget showing the quantity of switches to be purchased each month for January,
February, and March, and in total for the quarter.
January February March April

Budgeted sales 21,000 36,000 61,000 41,000
(units)
Add: Desired 7,200 12,200 8,200 6,200
ending inventory
Total needs 28,200 48,200 69,200 47,200
Deduct: Beginning 4,000 7,200 12,200 8,200
inventory
Units to be 24,200 41,000 57,000 39,000
produced
January February March Quarter
Units to be 24,200 41,000 57,000 122,200
produced
Switches per unit X3 X3 X3 X3
Production needs 72,600 123,000 171,000 366,600
Add: Desired 36,900 51,300 35,100 35,100
ending inventory
Total needs 109,500 174,300 206,100 401,700
inventory
Required 87,720 137,400 154,800 379,920
purchases
Beginning inventory, January 1: 72,600 × 0.3 = 21,780.

Ending inventory, March 31: (39,000 × 3) × 0.3 = 35,100.

9.
Tilson Company has projected sales and production in units for the second quarter of the coming
year as follows:

April May June
Sales 55,000 45,000 65,000
Production 65,000 55,000 55,000
Cash-related production costs are budgeted at $7 per unit produced. Of these production costs,
40% are paid in the month in which they are incurred and the balance in the following month.
Selling and administrative expenses will amount to $110,000 per month. The accounts payable
balance on March 31 totals $193,000, which will be paid in April.
All units are sold on account for $16 each. Cash collections from sales are budgeted at 60% in the
month of sale, 30% in the month following the month of sale, and the remaining 10% in the second
month following the month of sale. Accounts receivable on April 1 totalled $520,000 ($100,000
from February's sales and the remainder from March).
Required:
a) Prepare a schedule for each month showing budgeted cash disbursements for Tilson Company.
b) Prepare a schedule for each month showing budgeted cash receipts for Tilson Company.
a)
April May June
Production units 65,000 55,000 55,000
Cash required per unit $7 $7 $7
Production costs $455,000 $385,000 $385,000
Cash disbursements: April May June
Production this month $182,000 $154,000 $154,000
(40%)
Production prior month 193,000 273,000 231,000
(60%)
Selling and 110,000 110,000 110,000
administrative
Total disbursements $485,000 $537,000 $495,000
b) Payments relating to the prior month (March) in April represent the balance of accounts payable
at March 31.

April May June
Sales units 55,000 45,000 65,000
Sales price X $16 X $16 X $16
Total sales $880,000 $720,000 $1,040,000
Cash receipts: April May June
February sales $100,000
March sales 315,000 $105,000
April sales 528,000 264,000 $88,000
May sales 432,000 216,000

June sales 624,000
Total receipts $943,000 $801,000 $928,000

10.
ARO Inc. sold 10,000 units during its second month of operations at an average selling price of $8
per unit. Its Accounts Receivable balance at the start of the second month was $50,000. ARO
collects all sales as follows: 60% during the month of the sale and 40% in the month following the
sale. What were ARO's collections during its second month of operations?
 $50,000
 $82,000
 $98,000
 $135,000
Sales Collections: $50,000 + ($80,000 × 0.60) = $98,000.

11.
A sales budget is given below for one of the products manufactured by the OMI Co.:

January 25,000 units
March 65,000 units
April 45,000 units
May 35,000 units
June 30,000 units
The inventory of finished goods at the end of each month must equal 20% of the next month's
sales. However, on December 31, the finished goods inventory totalled only 4,000 units.
Each unit of product requires three kilograms of specialized material. Since the production of this
specialized material by OMI's suppliers is sometimes irregular, the company has a policy of
maintaining an ending inventory at the end of each month equal to 30% of the next month's
production needs. This requirement had been met on January 1 of the current year.
Required:
Prepare a budget showing the quantity of material to be purchased each month for January,
February, and March, and in total for the quarter.
Production Schedule required for purchase schedule:

Budgeted sales 25,000 40,000 65,000 45,000
(units)
Add: Desired 8,000 13,000 9,000 7,000
ending inventory
Total needs 33,000 53,000 74,000 52,000
inventory
Units to be 29,000 45,000 61,000 43,000
produced
January February March Quarter
Units to be 29,000 45,000 61,000 135,000
produced
Switches per unit X3 X3 X3 X3
Production needs 87,000 135,000 183,000 405,000
Add: Desired 40,500 54,900 38,700 38,700
ending inventory
Total needs 127,500 189,900 221,700 443,700
inventory
Required 101,400 149,400 166,800 417,600
purchases
Beginning inventory, January 1: 87,000 × 0.3 = 26,100.

Ending inventory, March 31: (43,000 × 3) × 0.3 = 38,700.

12.
was:

13.
When using the participative budget approach, it is generally best for top management to accept all
budget estimates without question in order to minimize adverse behavioural responses from
employees.
 True
 False

14.
The beginning cash balance is not included on the cash budget since the cash budget deals
exclusively with cash flows rather than with balance sheet amounts.
 True
 False

15.
The process of getting people at all levels of the organization involved in the budgeting process is
known as:
 Master budgeting.
 Budgeting.
 Participative budgeting.
 Controlling.
The process of getting people at all levels of the organization involved in the budgeting process is
known as participative budgeting.

16.
Revenue budgets that are intentionally set at lower than expected levels and expense budgets that
are set at higher than expected levels is known as:
 Benchmarking
 Budgetary slack
 Cheating
 Participative budgeting

17.
When choosing an activity measure for a flexible budget, it is best to choose an activity that is
measured in dollars.
 True
 False

18.
As part of the planning process, budgets are used for all of the following EXCEPT:
 Encourage managers to think about and plan for the future
 Communicate managementâ€™s financial goals throughout the organization
 Improve the efficiency and effectiveness of operations.
 Coordinate the plans and activities of managers in different departments.
Improve the efficiency and effectiveness of operations is part of a control system where budgets
are compared to actual results.

19.
The following overhead data are for a department in a large company.

Activity Costs Incurred Static Budget
Activity Level (in units) 250 220
Variable costs:
Indirect materials $8,745 $7,634
Power $2,065 $1,738
Fixed costs:
Supervision $1,560 $1,600
Rent $7,210 $7,300
Required:
Prepare a report that would be useful in assessing how well costs were controlled in this
department.
Cost formula per Actual costs Budget based on Variance

unit incurred actual activity
Variable costs:
Indirect materials $34.70 $8,745 $8,675 $70 U
Power 7.90 2,065 1,975 90 U
Total variable cost $42.60 10,810 10,650 160 U
Fixed costs:
Supervision 1,560 1,600 40 F
Rent 7,210 7,300 90 F
Total fixed cost 8,770 8,900 130 F
Total cost 19,580 9,550 $30 U

20.
The Doley Company has planned the following sales for the next three months:

January February March
Budgeted Sales $40,000 $50,000 $70,000
Sales are made 20% for cash and 80% on account. From experience, the company has learned that
a month's sales on account are collected according to the following pattern:

Month of sale 60%
First month following sale 30%
Second month following sale 8%
Uncollectible 2%
The company requires a minimum cash balance of $5,000 to start a month. The beginning cash
balance in March is budgeted to be $6,000.
Required:
a) Compute the budgeted cash receipts for March.

b) The following additional information has been provided for March:

Inventory purchases (all paid in March) $28,000
Operating expenses (all paid in March) 40,000
Depreciation expense for March 5,000
Dividends paid in March 4,000
Prepare a cash budget in good form for the month of March, using this information and the
budgeted cash receipts you computed for part a) above. The company can borrow in any dollar
amount and will not pay interest until April.
a)
Cash sales, March: $70,000 * 20% $14,000
Collections on account:
Jan. sales: $40,000 * 80% * 8% 2,560
Feb. sales: $50,000 * 80% * 30% 12,000
Mar. sales: $70,000 * 80% * 60% 33,600
Total cash receipts $62,160
b)
Cash balance, beginning $6,000
Add cash receipts from sales 62,160
Total cash available $68,160

Less disbursements:
Inventory purchases 28,000
Operating expenses 40,000

Dividends 4,000
Total disbursements 72,000
Cash excess (deficiency) (3,840)
Financing - borrowing 8,840
Cash balance, ending $5,000

21.

Mongelli Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The
Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's
overhead budget for the most recent month appears below:

Activity level 90 guests
Variable overhead costs:
Supplies $234
Laundry $315
Fixed overhead costs:
Utilities $220
Salaries and wages $4,290
Depreciation $2,680
Total overhead cost $7,739
The Inn's variable overhead costs are driven by the number of guests.
Assuming that the activity levels of 90 guests and 99 guests are within the same relevant range
and rounding to the nearest dollar, what would be the total budgeted overhead cost for a month if
the activity level is 99 guests? (Round your final answers to nearest whole dollar).
 $7,794
 $61,541
 $8,513
 $7,739
($234 + $315)/90 = $6.10. Total = 99 * $6.10 + $220 + $4,290 + $2,680 = $7,794.

22.
of $18 per unit. Fixed costs were as budgeted. Direct material costs were $1 more per unit then
 Nil
6,000 × ($22 − $18 + $1) = $30,000 unfavourable.

23.
Friden Company has budgeted sales and production over the next quarter as follows:

April May June
Sales in Units 100,000 120,000 ?
Production in Units 104,000 128,000 156,000
On April 1, the company has 20,000 units of product on hand. A minimum of 20% of the next
month's sales needs (in units) must be on hand at the end of each month. July sales are expected
to be 140,000 units. What would be the budgeted sales for June (in units)?
 128,000 units.
 160,000 units.
 184,000 units.
 188,000 units.
May EI = 128,000 + 120,000 * .20 - 120,000 = $32,000 = June BI. June sales = 156,000 + 32,000 -
140,000 * .20. = 160,000 units.

24.
Perpetual budget is usually prepared for budgeting period covers more than one year.
 True
 False

25.
was:

26.
Polly Company's sales are 30% in cash and 70% on credit. Sixty percent of the credit sales are
collected in the month of sale, 25% in the month following sale, and 12% in the second month
following sale. The remainder is uncollectible. The following are budgeted sales data:

Total Sales $60,000 $75,000 $52,000 $38,000
What would be the budgeted total cash receipts in April?
 $27,230
 $42,760
 $38,900
 $47,900
$38,000 * 0.3 + $38,000 * 0.7 * 0.6 + $75,000 * 0.7 * 0.12 + $52,000 * 0.7 * 0.25 = $42,760.

27.
Modesto Company produces and sells Product AlphaB. To guard against stockouts, the company
requires that 20% of the next month's sales be on hand at the end of each month. Budgeted sales
of Product AlphaB over the next four months are:

June July August September
Budgeted Sales in 30,000 40,000 60,000 50,000
Units
What would be the budgeted production for August?
 50,000 units.
 58,000 units.
 62,000 units.
 70,000 units.
60,000 + 50,000 * .20 - 60,000 * .20 = 58,000 units.

28.
As part of the planning process, budgets are used for all of the following EXCEPT:
 Evaluate and reward employees.
 Encourage managers to think about and plan for the future
 Communicate managementâ€™s financial goals throughout the organization
 Allocate resources to those parts of the organization where they can be used most
effectively.
Evaluating and rewarding employees are part of the control system where budgets are compared
to actual results.

29.
The manufacturing overhead budget provides a schedule of all costs of production other than
direct materials and direct labour.
 True
 False

30.
In a performance report, actual costs should be compared to budgeted costs at the original
budgeted activity level.
 True
 False

31.
A detailed plan for the acquisition and use of financial resources is known as a financial plan.
 True
 False
A detailed plan for the acquisition and use of financial resources is known as a budget.

32.
Control involves developing objectives and preparing the various budgets to achieve those
objectives.
 True
 False

33.
Budgetary slack is the difference between the revenues and expenses a manager expects can be
achieved and the amounts included in the budget.
 True
 False

34.
of $18 per unit. Fixed and variable costs were as budgeted. The company's static budget variance
was:
Budgeted Contribution Margin: 10,000 × ($21 − $5 − $3 − $2 − $2) = $90,000.

Actual Contribution Margin: 7,500 × ($18 − $5 − $3 − $2 − $2) = $45,000.
Variance = $90,000 − $45,000 = $45,000 unfavourable.
Fixed cost can be ignored here since budgeted and actual fixed costs are the same.

35.
Which of the following best describes the direct materials purchase budget?
 It is the beginning point in the budget process.
 It must provide for the desired ending inventory as well as for production.
 It is accompanied by a schedule of cash collections.
 It is completed after the cash budget.

36.
The following overhead data are for a department in a large company.

Activity Costs Incurred Static Budget
Activity Level (in units) 500 500
Variable costs:
Supplies $18,000 $18,200
Electricity $1,020 $1,050
Fixed costs:
Supervision $8,500 $8,600
Depreciation $5,700 $5,800
Required:
Prepare a report that would be useful in assessing how well costs were controlled in this
department.
Cost formula per Actual costs Budget based on Variance

unit incurred actual activity
Variable costs:
Supplies $36.40 $18,000 $18,200 $200 F
Electricity 2.10 1,020 1,050 30 F
Total variable cost $38.50 19,020 19,250 230 F
Fixed costs:
Supervision 8,500 8,600 100 F
Depreciation 5,700 5,800 100 F
Total fixed cost 14,200 14,400 200 F
Total cost $33,220 $33,650 $430 F

37.
The flexible budget variance is the difference between actual results and the flexible budget.
 True
 False

38.
Sales forecasts are drawn up after the cash budget has been completed because it is only at that
time that the funds available for marketing are known.
 True
 False

39.
Fairmont Inc. uses an accounting system that charges costs to the manager who has been
delegated the authority to make decisions concerning the costs. For example, if the sales manager
accepts a rush order that will result in higher than normal manufacturing costs, these additional
costs are charged to the sales manager because the authority to accept or decline the rush order
was given to the sales manager. What best describes this type of an accounting system?
 Responsibility accounting.
 Contribution accounting.
 Absorption accounting.
 Operational budgeting.

40.
A comprehensive flexible budget prepared for performance evaluation should incorporate both
fixed and variable costs, but not revenues.
 True
 False

41.
Budgeted sales in Allen Company over the next four months are given below:

September October November December
Budgeted Sales $100,000 $160,000 $180,000 $120,000
Twenty-five percent of the company's sales are for cash, and 75% are on account. Collections for
sales on account follow a stable pattern as follows: 50% of a month's sales are collected in the
month of sale, 30% are collected in the month following sale, and 15% are collected in the second
month following sale. The remainder is uncollectible. Given these data, what should be cash
collections for December?
 $133,500
 $120,000
 $138,000
 $153,000
Dec. cash sales 120,000 * .25 + Dec. credit sales 120,000 * .75 * .50 + Nov. credit sales 180,000 * .75
* .30 + Oct. 160,000 * .75 * .15. = $133,500.

42.
of $18 per unit. Fixed costs were as budgeted. Direct material costs were $1 more per unit then
 Nil
6,000 × ($20 − $18 + $1) = $18,000 unfavourable.

43.
Marple Company's budgeted production in units and budgeted raw materials purchases over the
next three months are given below:

January February March
Budgeted Production (in 60,000 ? 100,000
Units)
Budgeted Raw Materials: 129,000 165,000 188,000
Purchases (in Kilograms)
Two kilograms of raw materials are required to produce one unit of product. The company wants
raw materials on hand at the end of each month equal to 30% of the following month's production
needs. The company is expected to have 36,000 kilograms of raw materials on hand on January 1.
What should be the budgeted production for February?
 75,000 units.
 82,500 units.
 105,000 units.
 150,000 units.
Desired EI = 129,000 + 36,000 - 60,000 * 2 = 45,000 kg. Production in Feb. = 45,000/.30/2 =

75,000 units.

44.
The Stacy Company makes and sells a single product: Product R. Budgeted sales for April are
$300,000. Gross margin is budgeted at 30% of sales dollars. If the net income for April is budgeted
at $40,000, what are the budgeted selling and administrative expenses?
 $50,000
 $78,000
 $102,000
 $133,333
300,000 * .30 - 40,000 = $50,000.

45.
 Nil
6,000 × ($20 − $18 − $2) = Nil.

46.
The direct materials to be purchased for a period can be obtained by subtracting the desired
ending inventory of direct materials from the total direct materials needed for the period.
 True
 False

47.
If actual costs are greater than flexible budget costs, it would be considered
 Favorable
 Unfavorable

48.
 Nil
6,000 × ($20 − $18 − $1) = $6,000 unfavourable.

49.
of $18 per unit. Fixed costs were as budgeted. Direct material costs were $1.50 more per unit then
 Nil
6,000 × ($20 − $18 + $1.50) = $21,000 unfavourable.

50.
The first step in the master budget is creating a:
 Cash budget
 Sales budget
 Budgeted income statement
 Production budget

51.
of $18 per unit. Fixed costs were as budgeted. Direct material costs were $1.50 more per unit then
budgeted. All other variable costs were as budgeted. The company s flexible budget variance was:
 Nil
6,000 × ($25 − $18 + $1.50) = $51,000 unfavourable.

52.
The following costs appear in Malgorzata Company's flexible budget at an activity level of 15,000
machine-hours:
Indirect materials: $8,600

Factory rent: $20,200
What would be the flexible budget amounts at an activity level of 12,000 machine hours if indirect
material is a variable cost and factory rent a fixed cost?

Indirect materials Factory rent
A) $8,600 $10,000
B) $8,600 $20,200
C) $6,240 $14,400
D) $6,880 $20,200
 Option A
 Option B
 Option C
 Option D
Indirect materials = 12,000 * $8,600 /15,000= $6,880 Factory rent $20,200.

53.
The static budget can be inadequate for control if the actual level of activity during a period differs
significantly from the budgeted level.
 True
 False

54.
XLM Inc. sold 10,000 units during its second month of operations at an average selling price of $9
per unit. Its Accounts Receivable balance at the start of the second month was $60,000. XLM
collects all sales as follows: 60% during the month of the sale and 40% in the month following the
sale. What was XLM's Accounts Receivable at the end of its second month of operations?
 $50,000
 $82,000
 $36,000
 $135,000
Accounts Receivable: $90,000 Ã— 0.40 = $36,000.

55.
The usual starting point in budgeting is to make a forecast of cash receipts and cash
disbursements.
 True
 False

56.
Halifax Souvenir Company currently orders 500 units four times each year. Each order costs $12
and each unit costs $1.20 per year to carry. On average, it takes 5 days to receive an order from the
supplier. Company operates 250 days per year.
a) What is the EOQ?
b) Calculate total annual inventory cost under EOQ.
c) What is the current inventory cost?
d) Should the company change to EOQ system? Please explain.
e) What is the re-order point?
a) E = √2QP/C = √ (2*500*4*12)/1.2 = 200 units

b) T = P (Q/E) + C (E/2) = 12*(2000/200) + 1.2 (200/2) = $240
c) Total Cost = 4*12 + 1.2 (500/2) = $348
d) Total cost for EQO system is lower. Company should change to EQO system. It will save the
company $108.
e) ROP = 5 * 500*4/250 = 40 units

57.
A production budget is required for a service company.
 True
 False
A production budget is only required for a manufacturing company as this type of company is
producing their inventory.

58.
The master budget takes into account different levels of sales and production.
 True
 False
Only the flexible budget takes into account different levels of sales and production.

59.
Which of the following best describes a typical participative budget?
 It is NOT subject to review by higher levels of management since to do so would

contradict the participative aspect of the budgeting processing.
 It is NOT subject to review by higher levels of management except in specific cases where
the input of higher management is required.
 It is subject to review by higher levels of management in order to prevent the budgets

from becoming too loose.
 It is NOT critical to the success of a budgeting program.

60.
Clay Company has projected sales and production in units for the second quarter of the coming
year as follows:

April May June
Sales 50,000 40,000 60,000
Production 60,000 50,000 50,000
Cash-related production costs are budgeted at $5 per unit produced. Of these production costs,
40% are paid in the month in which they are incurred and the balance in the following month.
Selling and administrative expenses will amount to $100,000 per month. The accounts payable
balance on March 31 totals $190,000, which will be paid in April.
All units are sold on account for $14 each. Cash collections from sales are budgeted at 60% in the
month of sale, 30% in the month following the month of sale, and the remaining 10% in the second
month following the month of sale. Accounts receivable on April 1 totalled $500,000 ($90,000 from
February's sales and the remainder from March).
Required:
a) Prepare a schedule for each month showing budgeted cash disbursements for Clay Company.
b) Prepare a schedule for each month showing budgeted cash receipts for Clay Company.
a)
April May June
Production units 60,000 50,000 50,000
Cash required per unit $5 $5 $5
Production costs $300,000 $250,000 $250,000
Cash disbursements: April May June
Production this month $120,000 $100,000 $100,000
(40%)
Production prior month 190,000 180,000 150,000
(60%)
Selling and 100,000 100,000 100,000
administrative
Total disbursements $410,000 $380,000 $350,000
Payments relating to the prior month (March) in April represent the balance of accounts payable at
March 31.
b)
April May June
Sales units 50,000 40,000 60,000
Sales price X $14 X $14 X $14
Total sales $700,000 $560,000 $840,000
Cash receipts: April May June
February sales $90,000
March sales 307,500 $102,500
April sales 420,000 210,000 $70,000

May sales 336,000 168,000
June sales 504,000
Total receipts $817,500 $648,500 $742,000

61.
Fougere Realtors, Inc., specializes in home re-sales. It earns revenue from selling fees. Fougere
Realtors' major costs are commissions for salespersons, listing agents, and listing companies. Its
business has improved steadily over the last ten years. As usual, Chris Fougere, the managing
partner of Fougere Realtors, Inc., received a report summarizing the performance for the most
recent year.
Fougere Realtors, Inc.

Performance Report
For the year ended December 31, 2019

Budget Actual Variance
Number of home re- 180 200 20 F
sales
Variable expenses
Sales commissions $1,000,000 $1,200,000 $200,000 U
Automobile 40,000 40,000 0
Advertising 172,020 190,000 17,980 U
General overhead 700,000 700,000 0U
Total $1,912,020 $2,130,000 $217,980 U
Fixed expenses
General overhead 60,000 62,300 2,300 U
Total expenses $1,972,020 $2,192,300 $220,280 U
Required:
a) Explain the major weakness of the performance report.

b) Explain clearly why all the variances for the variable expenses are unfavourable (U).
c) As a first step in helping Chris Fougere to evaluate cost/expense control in the organization,
complete the following for the year ended December 31, 2019, assuming the only cost driver is the
number of home re-sales. (Note: Indicate any variance as either favourable (F) or unfavourable (U).)

Number of home re- 202 202 0
sales
Variable expenses
Sales commissions $_____ $1,205,183 $_____
Automobile $_____ 39,560 $_____
Advertising $_____ 192,690 $_____
General overhead $_____ 716,970 $_____
Total $_____ $2,154,403 $_____
Fixed expenses
General overhead $_____ 62,300 $_____
a) The major weakness of the performance report is the fact that it compares costs at two different
activity levels (home re-sales), that is, actual home re-sales of 200 versus budgeted home re-sales
of 180. The major flaw is with respect to the variable expenses.
b) All the variable expense variances are unfavourable because the correct comparison of actual
variable expenses should be against budgeted variable expenses for the higher level of home re-
sales, not against budgeted variable expenses for the lower level of home re-sales. In essence, the
original budgeted variable expenses are understated. One would expect the actual variable
expenses to be higher, given the higher level of actual home re-sales. By definition, variable
expenses are expected to change in direct proportion to changes in activity levels (number of
home re-sales).
c) Preliminary calculations per home re-sale:
Sales commissions 1,000,000/ 180 = $5,555.56
Automobile ($40,000 /180): $222.22
Advertising 30,000/ 180 = $955.67
General overhead 700,000/ 180 = $3,888.89

Number of home re- 200 200 0
sales
Variable expenses
Sales commissions $1,111,112 $1,200,000 $88,888 U
Automobile 44,444 40,000 4,444 F
Advertising 191,134 190,000 1,134 F
General overhead 777,778 700,000 77,778 F
Total $2,214,468 $2,130,000 $84,468 F
Fixed expenses
General overhead 60,000 62,300 2,300 U
Total expenses $2,274,468 $2,192,300 $82,168 F

62.
The Tobler Company has budgeted production for next year as follows:

Quarter First Second Third Fourth
Production in Units 10,000 12,000 16,000 14,000
Four kilograms of raw materials are required for each unit produced. At the start of the year, raw
materials on hand total 4,000 kilograms. The raw materials inventory at the end of each quarter
should equal 10% of the next quarter's production needs. What would be the budgeted purchases
of raw materials in the third quarter?
 50,400 kilograms.
 63,200 kilograms.
16,000 * 4 + 14,000 * 4 * .10 - 16,000 * 4 * .10 = 63,200 units.

63.
was:


64.
Toyworld manufactures and sells a line of toys. The toys are primarily distributed through
department stores. As president of Toyworld, you wanted to analyze Toyworld's profitability. Your
capable assistant provided you with the following data:

Static/Master Actual Budget
Selling price, per unit $20.00 $21.00
Variable manufacturing cost, per 11.00 12.00
unit
Variable marketing and 9,000* 11,550
administrative expenses, total
Fixed manufacturing cost, total 34,500 36,000
Fixed marketing and 40,000 44,000
administrative expenses, total
Sales volume, in units 9,000 10,000
* 5% of sales revenue
Required:
a) Your assistant has requested you to complete the "Flexible Budget" and "Static/Master Budget"
columns of the analysis, reproduced below (She had to attend to an out-of-town emergency):

Actual Results Flexible Budget Static/Master Budget
Units sold 10,000 $_____ $_____
Revenues (sales) $210,000 $_____ $_____
Variable expenses:
Manufacturing $120,000 $_____ $_____
Marketing and 11,550 $_____ $_____
administrative
$131,550 $_____ $_____
Contribution margin $78,450 $_____ $_____
Fixed expenses:
Manufacturing $36,000 $_____ $_____
Marketing and 44,000 $_____ $_____
administrative
$80,000 $_____ $_____
Operating income (loss) ($1,550) $_____ $_____
b) Calculate the following variances: flexible budget variance, sales volume variance, and total
static budget variance.
a)
Actual Results Flexible Budget Static/Master Budget
Units sold 10,000 10,000 9,000
Revenues (sales) $210,000 $200,000 $180,000
Variable expenses:
Manufacturing $120,000 $110,000 $99,000
Marketing and 11,550 10,000 9,000
administrative
$131,550 $120,000 $108,000
Contribution margin $78,450 $80,000 $72,000
Fixed expenses:
Manufacturing $36,000 $34,500 $34,500
Marketing and 44,000 40,000 40,000
administrative
$80,000 $74,500 $74,500
Operating income (loss) ($1,550) $5,500 ($2,500)
b) Calculation of Variances
Flexible budget variance = $5,500 - (-$1,550) = $7,050 unfavourable
This is the difference between actual operating loss of $1,550 and flexible budget operating
income of $5,500.
Sales volume variance = $5,500 - (-$2,500) = $8,000 favourable
This is the same as the difference between the flexible budget operating income of $5,500 and the
static budget operating loss of $2,500. It can also be calculated as the increase in unit sales
volume (1,000 units) times the budgeted unit contribution margin of $8 ($72,000/9,000).
Total static budget variance = $2,500 - $1,550 = $950 favourable
This is the difference between the higher static budget operating loss of $2,500 and the lower
actual operating loss of $1,550. This is also the sum of the favourable sales volume variance of
$8,000 and the unfavourable flexible budget variance of $7,050.

65.
was:

KAB Inc., a small retail store, had the following results for May. The budgets for June and July are
also given.

May (actual) June (budget) July (budget)
Sales $45,000 $46,000 $49,000
Cost of sales $20,000 $21,000 $23,500
Gross margin $25,000 $21,000 $21,500
Operating expenses $19,000 $19,000 $19,000
Operating income $5,000 $1,000 $1,500
Sales are collected 75% in the month of the sale and the balance in the month following the sale.
(There are no bad debts.) The goods that are sold are purchased in the month prior to sale.
Suppliers of the goods are paid in the month following the purchase. The operating expenses are
paid in the month of the sale.

66.
What should be the amount of cash collected during the month of June?
 $32,000
 $40,000
 $45,750
 $41,000
$45,000 * 0.25 + $46,000 * 0.75 = $45,750.

67.
What should be the cash disbursements during the month of June for goods purchased for resale
and for operating expenses?
 $40,000
 $41,000
 $42,500
 $43,500
Purchases in May are paid for in June. May purchases = June budgeted CGS. Cash disbursements
= $21,000 + 19,000 = $40,000.
Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were
$16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume
that the company's cost of goods sold is 60% of sales. Expected sales for the first four months
appear below:

Expected Sales
January $10,000
February 24,000
March 16,000
April 25,000
The company desires that the merchandise inventory on hand at the end of each month be equal to
50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory
must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will
be on credit. Seventy-five percent of the credit sales should be collected in the month following the
month of sale, with the balance collected in the following month. Variable operating expenses
should be 10% of sales, and fixed expenses (all depreciation) should be $3,000 per month. Cash
payments for the variable operating expenses are made during the month the expenses are
incurred.

68.
In a budgeted income statement for the month of February, what would be the net income?
 $0
 $1,800
 $4,200
 $9,000
24,000 * (1 -.60) - 24,000 * .10 - 3,000 = $4,200.

69.

In a budgeted balance sheet, what would be the merchandise inventory on February 28?
 $3,200
 $4,800
 $7,500
 $9,600
16,000 * .60 * .50 = $4,800.

70.
What would be the accounts receivable balance that would appear in the March 31 budgeted
balance sheet?
 $8,800
 $12,400
 $15,000
 $16,000
24,000 * .40 * .25 + 16,000 * .40 = $8,800.

71.
In a budget of cash receipts for March, what would be the total cash receipts?
 $8,200
 $16,000
 $17,800
 $20,200
16,000 * .60 + 24,000 * .40 * .75 + 10,000 * .40 * .25 = $17,800.

72.
In a budget of cash disbursements for March, what would be the total cash disbursements?
 $11,200
 $13,900
 $16,900
 $22,300
CGS + EI - BI + Op. Expenses = 16,000 * .60 + 25,000 * .60 * .50 - 4,800 + 16,000 * .10 = $13,900.
Information on the actual sales and inventory purchases of the Law Company for the first quarter
follow:

Inventory Sales Purchases
January $106,000 $60,000
February $92,000 $72,000
March $120,000 $92,000
Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month
following sale, and 8% in the second month following sale. The balance is uncollectible. Law
Company takes full advantage of the 2% discount allowed on purchases paid for by the end of the
following month.
The company expects sales in April of $150,000 and inventory purchases of $109,000. Operating
expenses for the month of April are expected to be $36,000, of which $15,000 is salaries and
$8,000 is depreciation. The remaining $13,000 of operating expenses are variable with respect to
the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during
the month incurred. Law Company's cash balance on March 1 was $42,000, and on April 1 was
$35,200.

73.
What would be the expected cash collections from customers during April?
 $117,600
 $133,360
 $139,000
 $150,000
$150,000 * 0.6 + $120,000 * 0.3 + $92,000 * 0.08 = $133,360.

74.
What would be the expected cash disbursements during April for inventory purchases?
 $87,300
 $90,160
 $97,000
 $100,000
$92,000 * (1-0.02) = $90,160.

75.
What would be the expected cash disbursements during April for operating expenses?
 $15,000
 $23,000
 $28,000
 $38,000
$36,000 - $8,000 = $28,000.

76.
What would be the expected cash balance on April 30?
 $19,700
 $28,700
 $50,400
 $62,700
$35,200 + $133,360 - $90,160 - $28,000 = $50,400.
The LaPann Company has obtained the following sales forecast data:

July August September October
Cash Sales $80,000 $70,000 $50,000 $60,000
Credit Sales 240,000 220,000 180,000 200,000
The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month
following the month of sale, and the remainder in the second month following the month of sale.
There are no bad debts.

77.
What are the budgeted accounts receivable balance on September 30?
 $126,000
 $148,000
 $166,000
 $190,000
180,000 * .80 + 220,000 * .10 = $166,000.

78.
What are the budgeted cash receipts for October?
 $188,000
 $226,000
 $248,000.
 $278,000
60,000 + 200,000 * .20 + 180,000 * .70 + 220,000 * .10 = $248,000.
The LaGrange Company had the following budgeted sales for the first half of the current year:

Cash Sales Credit Sales
January $70,000 $340,000
February 50,000 190,000
March 40,000 135,000
April 35,000 120,000
May 45,000 160,000
June 40,000 140,000
The company is in the process of preparing a cash budget and must determine the expected cash
collections by month. To this end, the following information has been assembled:
Collections on sales:
60% in month of sale
30% in month following sale
10% in second month following sale
The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000
represents uncollected December sales and $20,000 represents uncollected November sales.

79.
What would be the total cash collected by LaGrange Company during January?
 $261,500
 $331,500
 $344,000
 $274,000
70,000 + 20,000 + 50,000/.40 * .30 + 340,000 * .60 = $331,500.

80.
What is the budgeted accounts receivable balance on June 1 of the current year?
 $56,000
 $64,000
 $76,000
 $132,000
120,000 * .10 + 160,000 * .40 = $76,000.
Paradise Company plans the following beginning and ending inventory levels (in units) for June:

June 1 June 31
Raw material 60,000 52,500
Work in process 10,000 10,000
Finished goods 82,000 52,500
Two units of raw material are needed to produce each unit of finished product.

81.
If Paradise Company plans to sell 480,000 units during June, what would be the number of units it
would have to manufacture during June?
 440,000 units.
 450,000 units.
 450,500 units.
 510,000 units.
480,000 + 52,500 - 82,000 = 450,500 units.

82.
If 500,000 finished units were to be manufactured during June, what would be the units of raw
material needed to be purchased?
 900,000 units.
 1,000,000 units.
 992,500 units.
 1,020,500 units.
500,000 * 2 + 52,500 - 60,000 = 992,500 units.
Barley Enterprises has budgeted unit sales for the next four months as follows:

October 4,800 units
November 5,800 units
December 6,400 units
January 5,200 units
The ending inventory for each month should be equal to 15% of the next month's sales in units. The
inventory on September 30 was below this level and contained only 600 units.

83.
What are the total units to be produced in October?
 4,530 units.
 5,070 units.
 5,670 units.
 5,890 units.
4,800 + 5,800 * .15 - 600 = 5,070 units.

84.
What is the desired ending inventory for December?
 690 units.
 780 units.
 870 units.
 960 units.
5,200 * .15 = 780 units.
Roberts Enterprises has budgeted sales in units for the next five months as follows:

June 4,500 units
July 7,100 units
August 5,300 units
September 6,700 units
October 3,700 units
Past experience has shown that the ending inventory for each month must be equal to 10% of the
next month's sales in units. The inventory on May 31 contained 410 units. The company needs to
prepare a production budget for the second quarter of the year.

85.
What is the opening inventory in units for September?
 370 units.
 530 units.
 670 units.
 6,700 units.
6,700 * .10 = 670 units.

86.
What is the total number of units to be produced in July?
 6,920 units.
 7,100 units.
 7,280 units.
 7,630 units.
7,100 + 5,300 * .10 - 7,100 * .10 = 6,920 units.

87.
What is the desired ending inventory for August?
 370 units.
 530 units.
 670 units.
 710 units.
6,700 * .10 = 670 units.
Noel Enterprises has budgeted sales in units for the next five months as follows:

January 5,000 units
March 8,000 units
April 4,200 units
May 2,900 units
Past experience has shown that the ending inventory for each month must be equal to 10% of the
next month's sales in units. The inventory on December 31 contained 400 units. The company needs
to prepare a production budget for the second quarter of the year.

88.
What is the opening inventory in units for April?
 380 units.
 460 units.
 720 units.
 420 units.
4,200 * 0.1 = 420 units.

89.
What is the total number of units to be produced in February?
 5,220 units.
 5,400 units.
 5,930 units.
 6,120 units.
5,700 + 8,000 * 0.1 - 5,700 * 0.1 = 5,930 units.

90.
What is the desired ending inventory for March?
 380 units.
 420 units.
 540 units.
 720 units.
4,200 * 0.10 = 420 units.
The LFM Company makes and sells a single product: Product T. Each unit of Product T requires 1.3
hours of labour at a labour rate of $9.10 per hour. LFM Company needs to prepare a Direct Labour
Budget for the second quarter of next year.

91.
What would be the budgeted direct labour cost per unit of Product T?
 $7.00
 $9.10
 $10.40
 $11.83
1.3 hrs * $9.10/hr.= $11.83 per unit.

92.
The company has budgeted to produce 25,000 units of Product T in June. The finished goods
inventories on June 1 and June 30 were budgeted at 500 and 700 units, respectively. What would
be the budgeted direct labour costs incurred in June?
 $227,500
 $293,384
 $295,750
 $304,031
25,000 * 1.3 * 9.10 = $295,750.
The International Company makes and sells only one product, Product SW. The company is in the
process of preparing its Selling and Administrative Expense Budget for the last half of the year. The
following budget data are available:

Variable cost per unit sold Monthly fixed cost
Sales commissions $0.70
Shipping 1.10
Advertising 0.20 $14,000
Executive salaries 34,000
Depreciation on office equipment 11,000
Other 0.25 19,000
All expenses other than depreciation are paid in cash in the month they are incurred.

93.
If the company has budgeted to sell 25,000 units of Product SW in July, what will be the total
budgeted selling and administrative expenses for July?
 $56,250
 $78,000
 $123,250
 $134,250
Total VC = $2.25. Total FC = $78,000. 25,000 * 2.25 + 78,000 = $134,250.

94.
If the company has budgeted to sell 20,000 units of Product SW in October, what will be the total
budgeted variable selling and administrative expenses for October?
 $40,000
 $45,000
 $56,250
 $78,000
20,000 * 2.25 = $45,000.

95.
If the budgeted cash disbursements for selling and administrative expenses for November total
$123,250, then how much was the total selling and administrative budget for November?
 $123,250
 $134,250
 $168,250
 $187,250
123,250 + 11,000 = $134,250.

96.
If the company has budgeted to sell 24,000 units of Product SW in September, what would be the
total budgeted fixed selling and administrative expenses for September?
 $48,000
 $54,000
 $67,000
 $78,000
Total FC = $78,000.
The Culver Company is preparing its Manufacturing Overhead Budget for the third quarter of the
year. Budgeted variable factory overhead is $3.50 per unit produced; budgeted fixed factory
overhead is $80,000 per month, with $17,000 of this amount being factory depreciation.

97.
If the budgeted production for July is 6,000 units, what is the total budgeted factory overhead for
July?
 $101,000
 $75,000
 $93,000
 $109,000
6,000 * $3.50 + $80,000 = $101,000.

98.
If the budgeted production for August is 5,000 units, what is the total budgeted factory overhead
per unit?
 $15
 $19.50
 $20
 $22.50
$3.50 + $80,000 /5,000 = $19.50 per unit.

99.
If all cash expenses are paid for in the month incurred what is the budgeted cash disbursements for
manufacturing overhead if 5,500 units are produced?
 $16,500
 $82,250
 $91,500
 $99,000
5,500 * $3.50 + $80,000 - $17,000 = $82,250.
The Bandeiras Company, a merchandising firm, has budgeted its activity for December according to
the following information:
I. Sales at $550,000, all for cash.

II. Merchandise inventory on November 30 was $300,000.
III. Budgeted depreciation for December is $35,000.
IV. The cash balance at December 1 was $25,000.
V. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash.
VI. The planned merchandise inventory on December 31 is $270,000.
VII. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are
paid for in cash.

100.
What are the budgeted cash receipts for December?
 $137,500
 $412,500
 $550,000
 $585,000
all sales $550,000.

101.
What are the budgeted cash disbursements for December?
 $382,500
 $442,500
 $472,500
 $477,500
550,000 * .75 + 270,000 - 300,000 + 60,000 = $442,500.

102.
What is the budgeted net income for December?
 $42,500
 $77,500
 $107,500
 $137,500
550,000 * (1 -.75) - 35,000 - 60,000 = $42,500.
A cash budget by quarters for the Carney Company is given below (note that some data are
missing). Missing data amounts have been keyed with either question marks or lowercase letters (a,
b, c, etc.); these lowercase letters will be referred to in the questions that follow. (It may be necessary
to calculate a value for items where a question mark appears.) A zero amount is designated by a
dash (-). The company requires a minimum cash balance of at least $10,000 to start a quarter. All
data are in thousands of dollars.
Carney Corporation
Cash Budget

Quarters
1 2 3 4
Cash balance, $16 $e $13 $10
beginning
Add: collections from $a $70 $67 $80
customers
Total cash available $? $? $80 $90
Less: disbursements
Purchase of inventory $31 $c $40 $35
Operating expenses $10 $14 $19 $-
Dividends $- $6 $- $5
Total disbursements $76 $? $f $55
Excess (deficiency) of $7 $17 $(2) $35
cash available over
disbursements
Financing:
Borrowings $b $- $12 $-
Repayments (including $- $d $- $(16)
interest)
Total financing $? $? $12 $(16)
Cash balance, ending $10 $? $10 $19

103.
What are the collections from customers during the first quarter (item a), in thousands of dollars?
 $43
 $67
 $60
 $73
76 + 7 - 16 = $67.

104.
What is the borrowing required during the first quarter to meet the minimum cash balance (item b),
in thousands of dollars?
 $0
 $3
 $7
 $10
10 - 7 = $3.

105.
What is the cash disbursed for purchases during the second quarter (item c), in thousands of
dollars?
 $9
 $13
 $21
 $55
10(e) + 70 - 17 - 6 - 14 - 22 = $21.

106.
What is the repayment (including interest) of financing during the second quarter (item d), in
thousands of dollars?
 $0
 $4
 $7
 $17
17 - 13 = $4.

107.
What is the cash balance at the beginning of the second quarter (item e), in thousands of dollars?
 $0
 $7
 $10
 $14
the same as ending first quarter.

108.
What are the total disbursements during the third quarter (item f), in thousands of dollars?
 $59
 $78
 $82
 $84
80 + 2 = $82.

109.
What are the total collections from customers for the year, in thousands of dollars?
 $260
 $277
 $290
 $284
67 + 70 + 67 + 80 = $284.
Pollitt Potato Packers has a flexible budget for manufacturing overhead that is based on direct
labour hours. The following overhead costs appear on the flexible budget at the 200,000-hour level
of activity:

Variable overhead costs (total):
Packing supplies $120,200
Indirect labour $160,000
Fixed overhead costs (total):
Utilities $105,000
Insurance $41,300
Rent $23,000

110.
At an activity level of 190,000 direct labour hours, what amount would the flexible budget estimate
for indirect labour cost? (Round your final answer to the nearest whole dollar).
 $100,102
 $152,000
 $170,255
 $188,256
190,000 * ($160,000 / 200,000) = $152,000.

111.
What amount would the flexible budget estimate for total variable overhead cost per direct labour
hour? (Round your final answer to the nearest 2 decimal places).
 $0.60
 $0.90
 $1.40
 $1.80
($120,200 + $160,000) /200,000 = $1.40 per unit.

112.
for total budgeted fixed costs?
 $63,200
 $144,000
 $169,300
 $160,000
$105,000 + $41,300 + $23,000 = $169,300.

113.
for the utilities?
 $80,000
 $105,000
 $120,000
 $160,000
Utilities are fixed.
Capelli Hospital bases its budgets on patient-visits. The hospital's static budget for August appears
below:

Budgeted number of patient-visits 8,300
Budgeted variable overhead costs:
Supplies (@$5.00 per patient-visit) $41,500
Laundry (@$7.30 per patient-visit) 60,590
Total variable overhead cost 102,090
Budgeted fixed overhead costs:
Wages and salaries 60,590
Occupancy costs 73,040
Total fixed overhead cost 133,630
Total budgeted overhead cost $235,720

114.
What should be the total variable overhead cost at an activity level of 9,300 patient-visits per
month?
 $114,390
 $149,730
 $102,090
 $133,630
9,300 * (5 + 7.30) = $114,390.

115.
What should be the total fixed overhead cost at an activity level of 9,600 patient-visits per month?
 $133,630
 $154,560
 $235,720
 $272,640
Total Fixed overhead cost.

116.
What should be the total overhead cost at an activity level of 9,400 patient-visits per month?
 $235,720
 $249,250
 $266,960
 $250,640
9,400 * (5 + 7.30) + 133,630 = $249,250.
Mandalay Hotel bases its budgets on guest-days. The hotel's static budget for August appears
below:

Budgeted number of guest-days 5,000
Supplies (@$9.60 per guest-day) $48,000
Laundry (@$9.40 per guest-day) $47,000
Total variable overhead cost $95,000
Wages and salaries $58,000
Occupancy costs $50,000
Total fixed overhead cost $108,000

117.
What is the expected total variable overhead cost at an activity level of 6,000 guest-days per
month?
 $114,000
 $109,220
 $95,000
 $81,700
6,000 * ($9.60 + $9.40) = $114,000.

118.
What is the expected total fixed overhead cost at an activity level of 5,500 guest-days per month?
 $139,700
 $190,920
 $244,200
 $108,000
Will be same as given for 5,000 guests.

119.
The total overhead cost at an activity level of 5,200 guest-days per month should be:
 $206,800
 $230,880
 $209,940
 $190,920
5,200 * ($9.60 + $9.40) + $108,000 = $206,800.
Isadore Hospital bases its budgets on patient-visits. The hospital's static budget for July appears
below:

Budgeted number of patient-visits 7,700
Supplies (@$4.60 per guest-day) $35,420
Laundry (@$7.20 per guest-day) 55,440
Total variable overhead cost 90,860
Salaries 46,200
Occupancy costs 67,760
Total fixed overhead cost 113,960
Actual results for the month were:

Actual number of patient-visits 7,800
Supplies $38,250
Laundry $61,240
Salaries $46,190
Occupancy costs $65,650

120.
What is the variance for supplies costs in the flexible budget performance report for the month?
 $2,370 U
 $2,370 F
 $2,830 F
 $2,830 U
7,800 * 4.60 - 38,250 = $2,370 U.

121.
What is the variance for laundry costs in the flexible budget performance report for the month?
 $5,080 F
 $5,080 U
 $5,800 U
 $5,800 F
7,800 * 7.20 - 61,240 = $5,080 U.

122.
What is the variance for occupancy costs in the flexible budget performance report for the month?
 $2,110 U
 $2,990 U
 $2,990 F
 $2,110 F
67,760 - 65,650 = $2,110 F.
The following is a summarized master budget that Winnipeg Company prepared for January:

Sales 9,000 units
Sales revenue $450,000
Less variable costs:
Manufacturing $270,000
Selling and administrative $18,000 $288,000
Contribution $162,000
Less fixed costs:
Manufacturing $72,000
Selling and administrative $27,000 $99,000
Operating income $63,000
Actual results for January were as follows:

Units produced and sold 8,500 units
Selling price per unit $55.00
Variable costs per unit:
Manufacturing $32.00
Selling and administrative $1.50
Total fixed costs $99,000

123.
What was the flexible budget operating income (loss) for Winnipeg Company for January?
 $83,750
 $54,000
 $63,000
 $59,500
Bud. Selling price = $450,000/9,000 = $50/unit. Flex Bud Operating Income = 8,500 * $50 - 8,500 *
($270,000/9,000 + $18,000/9,000) - $99,000. = $54,000 (Required for further questions).

124.
What total sales volume variance did Winnipeg Company report for January?
 $3,500 U
 $9,000 U
 $25,000 U
 $27,500 U
$54,000 - $63,000 = $9,000U.

125.
What was the total flexible budget variance for January?
 $20,750 F
 $9,000 U
 $29,750 F
 $12,750 U
Actual Operating Income = 8,500 * ($55 - $32 - $1.50) - $99,000 = $83,750.

Variance = $83,750 - $54,000 = $29,750 F.

126.
What were the total flexible budget expenses for January?
 $383,750
 $371,000
 $387,000
 $365,500
8,500 * ($30 + $2) + $99,000 = $371,000.

127.
What was the total static budget variance for January?
 $20,750 F
 $9,000 U
 $29,750 F
 $12,750 U
$83,750 - $63,000 = $20,750 F.
Alaska Company expressed the total expenses (Y) component of its master budget for February with
the cost formula Y = $100,000 + $40 * X, where X represents the expected number of units of its
only product to be manufactured and sold. The budgeted average selling price per unit was $65 for
budgeted sales volume 5,000 units. Reported actual results for February were as follows:

Sales 5,400 units
Sales revenue $324,000
Less variable costs $194,400
Contribution margin $129,600
Less fixed expenses $102,000
Operating income $27,600

128.
What was the master budget operating income for February?
 $23,000
 $25,000
 $35,000
 $33,000
5,000 * ($65 - $40) - $100,000 = $25,000.

129.
What was the flexible operating income for February?
 $23,000
 $25,000
 $35,000
 $33,000
5,400 * ($65 - $40) - $100,000 = $35,000.

130.
What was the total static budget variance for February?
 $7,400 U
 $2,600 F
 $10,000 F
 $1,000 U
Variance = $27,600 - $25,000 = $2,600 F.

131.
What was the sales volume variance for February?
 $10,000 F
 $26,000 F
 $7,400 U
 $2,600 F
Variance = $35,000 - $25,000 = $10,000 F.

132.
What was the flexible budget variance for February?
 $10,000 F
 $26,000 F
 $7,400 U
 $2,600 F
Variance = $27,600 - $35,000 = $,7400 U.
Windsor Limited makes and sells a single product. The company employs a flexible budgeting
system that covers a relevant range from 20,000 units to 25,000 units and a just in time inventory
system. Budget data for April, based on 22,000 units, are as follows:

Prime costs $40 per unit
Manufacturing overhead $138,000 plus $3 per unit
Selling and administrative expenses $30,000 plus $2 per unit
Selling price $70 per unit

133.
What is the company's master budget operating income (loss) for April?
 $382,000
 $463,000
 $550,000
 $625,000
22,000 * ($70 - $40 - $3- $2) - $138,000 - $30,000 = $382,000.

134.
Suppose the company produces and sells 25,000 units instead of the original 22,000 units at an
average selling price of $55. What is the company's flexible budget operating income (loss) for
April, given the actual sales volume of 25,000 units?
 $457,000
 $463,000
 $550,000
 $625,000
25,000 * ($70- $40 - $3 - $2) - $138,000 - $30,000 = $457,000.

135.
average selling price of $55. What will be the company's sales volume variance for April?
 $3,000 F
 $75,000 F
 $75,000 U
 $180,000 F
$382,000 - $457,000 = $75,000 F.
Children Toys Limited makes and sells a single product. The company employs a flexible budgeting
system that covers a relevant range from 25,000 units to 30,000 units and a just in time inventory
system. Budget data for April, based on 27,000 units, are as follows:

Prime costs $40 per unit
Manufacturing overhead $140,000 plus $4 per unit
Selling and administrative expenses $40,000 plus $3 per unit
Selling price $85 per unit

136.
What is the company's master budget operating income (loss) for April?
 $846,000
 $550,000
 $719,000
 $625,000
27,000 * ($85 - $40 - $4 -$3) - $140,000 - $40,000 = $846,000.

137.
average selling price of $70. What is the company's flexible budget operating income (loss) for
April, given the actual sales volume of 29,000 units?
 $388,000
 $463,000
 $550,000
 $922,000
29,000 * ($85- 40 - 4 -3) - 140,000 - 40,000 = $922,000.

138.
average selling price of $70. What will be the company's sales volume variance for April?
 $3,000 F
 $76,000 F
 $375,000 U
 $379,000 U
846,000 - 922,000 = $76,000 F.
The Shoe Company, a merchandising firm, has budgeted its activity for April according to the
following information:
I. Sales at $700,000, all for cash.

II. Merchandise inventory on March 31st was $350,000.
III. Budgeted depreciation for April is $30,000.
IV. The cash balance at April 1 was $20,000.
V. Selling and administrative expenses are budgeted at $62,200 for April and are paid in cash.
VI. The planned merchandise inventory on April 30 is $300,000.
VII. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are
paid for in cash.

139.
What are the budgeted cash receipts for April?
 $137,500
 $412,500
 $700,000
 $585,000
all sales $700,000.

140.
What are the budgeted cash disbursements for April?
 $382,500
 $537,200
 $472,500
 $477,500
$700,000 * 0.75 + ($300,000 - $350,000) + $62,200 = $537,200.

141.
What is the budgeted net income for April?
 $40,600
 $82,800
 $107,500
 $137,500
$700,000 (1-0.75) - $30,000 - $62,200 = $82,800.
James Enterprises has budgeted unit sales for the next four months as follows:

November 4,800 units
December 5,800 units
January 6,400 units
The ending inventory for each month should be equal to 15% of the next month's sales in units. The
inventory on October 31 was below this level and contained only 600 units.

142.
What are the total units to be produced in October?
 4,530 units.
 5,070 units.
 5,670 units.
 5,890 units.
4,800 + 5,800 * .15 - 600 = 5,070 units.

143.
What is the desired ending inventory for December?
 690 units.
 780 units.
 870 units.
 960 units.
5,200 * .15 = 780 units.
Fallon Inc., a small retail store, had the following results for April. The budgets for May and June are
also given.

April (actual) May (budget) June (budget)
Sales $40,000 $38,000 $50,000
Cost of sales $20,000 $19,000 $24,000
Gross margin $20,000 $19,000 $26,000
Operating expenses $20,000 $20,000 $20,000
Operating income $0 $1,000 $6,000
Sales are collected 70% in the month of the sale and the balance in the month following the sale.
(There are no bad debts.) The goods that are sold are purchased in the month prior to sale.
Suppliers of the goods are paid in the month following the purchase. The operating expenses are
paid in the month of the sale.

144.
What should be the amount of cash collected during the month of May?
 $32,000
 $40,000
 $38,600
 $41,000
$40,000 * 0.3 + $38,000 * 0.7 = $38,600.

145.
What should be the cash disbursements during the month of June for goods purchased for resale
and for operating expenses?
 $44,000
 $41,000
 $42,500
 $43,500
Purchases in May are paid for in June. May purchases = June budgeted CGS. Cash disbursements
= $24,000 + $20,000 = $44,000.

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12/16/21, 1:34 PM Assignment Print View

6,000 × ($21 − $18 − $2) = $6,000 unfavourable.

Sales Volume Variance = (10,000 − 7,500) × $30 = $75,000 unfavourable.

Sales Volume Variance = (10,000 − 9,000) × $25 = $25,000 unfavourable.

A static budget is geared toward a single level of activity.

A production budget is to a manufacturing firm as a merchandise purchases budget is to a

January February March April

Beginning inventory, January 1: 72,600 × 0.3 = 21,780.

May sales 432,000 216,000

Sales Collections: $50,000 + ($80,000 × 0.60) = $98,000.

Production Schedule required for purchase schedule:

Beginning inventory, January 1: 87,000 × 0.3 = 26,100.

Sales Volume Variance = (10,000 − 7,000) × $30 = $90,000 unfavourable.

 Encourage managers to think about and plan for the future

 Communicate managementâ€™s financial goals throughout the organization

 Improve the efficiency and effectiveness of operations.

 Coordinate the plans and activities of managers in different departments.

The following overhead data are for a department in a large company.

Cost formula per Actual costs Budget based on Variance

a) Compute the budgeted cash receipts for March.

Operating expenses 40,000

($234 + $315)/90 = $6.10. Total = 99 * $6.10 + $220 + $4,290 + $2,680 = $7,794.

6,000 × ($22 − $18 + $1) = $30,000 unfavourable.

Sales Volume Variance = (10,000 − 9,500) × $25 = $12,500 unfavourable.

What would be the budgeted total cash receipts in April?

What would be the budgeted production for August?

60,000 + 50,000 * .20 - 60,000 * .20 = 58,000 units.

 Evaluate and reward employees.

 Encourage managers to think about and plan for the future

 Communicate managementâ€™s financial goals throughout the organization

Budgeted Contribution Margin: 10,000 × ($21 − $5 − $3 − $2 − $2) = $90,000.

 It is the beginning point in the budget process.

 It is accompanied by a schedule of cash collections.

 It is completed after the cash budget.

The following overhead data are for a department in a large company.

Cost formula per Actual costs Budget based on Variance

6,000 × ($20 − $18 + $1) = $18,000 unfavourable.

Desired EI = 129,000 + 36,000 - 60,000 * 2 = 45,000 kg. Production in Feb. = 45,000/.30/2 =

300,000 * .30 - 40,000 = $50,000.

6,000 × ($20 − $18 − $2) = Nil.

6,000 × ($20 − $18 − $1) = $6,000 unfavourable.

6,000 × ($20 − $18 + $1.50) = $21,000 unfavourable.

The first step in the master budget is creating a:

 Budgeted income statement

6,000 × ($25 − $18 + $1.50) = $51,000 unfavourable.

Indirect materials: $8,600

Indirect materials = 12,000 * $8,600 /15,000= $6,880 Factory rent $20,200.

Accounts Receivable: $90,000 Ã— 0.40 = $36,000.

a) E = √2QP/C = √ (2*500*4*12)/1.2 = 200 units

A production budget is required for a service company.

Which of the following best describes a typical participative budget?

 It is NOT subject to review by higher levels of management since to do so would

 It is subject to review by higher levels of management in order to prevent the budgets

 It is NOT critical to the success of a budgeting program.

April sales 420,000 210,000 $70,000

Fougere Realtors, Inc.

a) Explain the major weakness of the performance report.

16,000 * 4 + 14,000 * 4 * .10 - 16,000 * 4 * .10 = 63,200 units.

Budgeted Contribution Margin: 10,000 × ($22 − $5 − $3 − $2 − $2) = $100,000.

Flexible budget variance = $5,500 - (-$1,550) = $7,050 unfavourable

Sales volume variance = $5,500 - (-$2,500) = $8,000 favourable

Total static budget variance = $2,500 - $1,550 = $950 favourable

Budgeted Contribution Margin: 10,000 × ($21 − $5 − $3 − $2 − $2) = $90,000.

$45,000 * 0.25 + $46,000 * 0.75 = $45,750.

a) E = √2QP/C = √ (25004*12)/1.2 = 200 units