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              58.Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets? a.Direct materials cost b.Direct labor cost c.Variable manufacturing overhead d.Fixed manufacturing overhead               59.In developing a flexible budget within a relevant range of.
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Ex. 189 A flexible budget graph for the Assembly Department shows the following: 1.At zero direct labor hours, the total budgeted cost line intersects the vertical axis at $60,000. 2.At normal capacity of 50,000 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $180,000. Instructions Develop the.
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MATCHING 208.Match the items below by entering the appropriate code letter in the space provided. A.Budget              F.              Production budget B.Financial budgets              G.              Cash budget C.Budget committee              H.              Long-range planning D.Master budget              I.              Direct materials budget E.Sales forecast              J.              Sales budget ____              1.A selection of strategies to achieve long-term goals. ____              2.An estimate of expected sales for the budget.
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Ex. 185 Telemark Production's manufacturing costs for July when production was 1,000 units appears below: Direct materials$10 per unit Factory depreciation$8,000 Variable overhead5,000 Direct labor2,000 Factory supervisory salaries5,800 Other fixed factory costs1,500 Instructions How much is the flexible budget manufacturing cost amount for a month when 1,100 units are produced?       .
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Ex. 181 Walt Bach Company has accumulated the following budget data for the year 2012. 1.Sales: 30,000 units, unit selling price $50. 2.Cost of one unit of finished goods: Direct materials 2 pounds at $5 per pound, direct labor 1.5 hours at $12 per hour, and manufacturing overhead $6 per direct labor hour. 3.Inventories.
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Ex. 195 The Deluxe Division, a profit center of Riley Manufacturing Company, reported the following data for the first quarter of 2012: Sales$6,000,000 Variable costs4,200,000 Controllable direct fixed costs800,000 Noncontrollable direct fixed costs530,000 Indirect fixed costs200,000 Instructions (a)Prepare a performance report for the manager of the Deluxe Division. (b)What is the best measure of the manager's performance?  Why? (c)How would.
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Ex. 188 Cadiz Co. uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $300,000 to $360,000. Variable costs and their percentage relationships to sales are: Sales commissions5% Advertising4% Traveling7% Delivery1% Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. The actual selling expenses incurred in February,.
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Ex. 187 Clay Co.’s projected sales are as follows: August$320,000 September$360,000 October$440,000 Clay estimates that it will collect 30% in the month of sale, 50% in the month after the sale, and 18% in the second month following the sale. Two percent of all sales are estimated to be bad debts. Instructions How much are Clay Co.'s.
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Ex. 186 Cruises, Inc. has budgeted sales revenues as follows:    June      July    August  Credit sales$135,000$145,000$  90,000 Cash sales    90,000  255,000  195,000 Total sales$225,000$400,000$285,000 Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are.
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EXERCISES Ex. 180 Clark Company's master budget reflects budgeted sales information for the month of June, 2012, as follows: Budgeted QuantityBudgeted Unit Sales Price Product A20,000$7 Product B24,000$9 During June, the company actually sold 19,000 units of Product A at an average unit price of $7.20 and 24,500 units of Product B at an average unit.
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Ex. 192 Campbell Clothing produces men's ties. The following budgeted and actual amounts are for 2011: CostBudget at 5,000 UnitsActual Amounts at 5,800 Units Direct materials$55,000$65,000 Direct labor70,00081,000 Equipment depreciation5,0005,000 Indirect labor7,5008,600 Indirect materials9,0009,600 Rent and insurance12,00013,000 Instructions Prepare a performance budget report for Campbell Clothing for the year.         .
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Ex. 184 Berne, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor$6.00 Indirect materials2.50 Maintenance.80 Utilities.30 Fixed overhead costs per month are: Supervision$600 Insurance200 Property taxes300 Depreciation900 The company believes it will normally operate in a range of 2,000 to 4,000 machine hours per month. Instructions Prepare a.
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Ex. 184 Burr, Inc. provided the following information:     July    August Projected sales$110,000$130,000 Projected merchandise purchases$65,000$70,000 Burr estimates that it will collect 40% of its sales in the month of sale, 35% in the month after the sale, and 22% in the second month following the sale. Three percent of all sales are estimated to.
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              31.Budget reports provide the feedback needed by management to see whether actual operations are on course.               32.A static budget is an effective means to evaluate a manager's ability to control costs, regardless of the actual activity level.               33.The flexible budget report evaluates a manager's performance in two areas:  (1).
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Ex. 193 Data concerning manufacturing overhead for Wilson Industries are presented below. The Mixing Department is a cost center. An analysis of the overhead costs reveals that all variable costs are controllable by the manager of the Mixing Department and that 50% of supervisory costs are controllable at the department level. Ex. 193(Cont.) The.
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Ex. 187 Lapp Manufacturing uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are: Sales commissions6% Advertising4% Traveling5% Delivery1% Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. Instructions Prepare a flexible budget for increments of.
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              21.Cost centers, profit centers, and investment centers can all be classified as responsibility centers.               22.More costs become controllable as one moves down to each lower level of managerial responsibility.               23.In a responsibility accounting reporting system, as one moves up each level of responsibility in an organization, the responsibility reports.
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a148.The following information is available for Halle Department Stores: Average operating assets$500,000 Controllable margin50,000 Contribution margin125,000 Minimum rate of return8% How much is Halle’s residual income? a.$85,000 b.$450,000 c.$10,000 d.$40,000 a149.What is the goal of residual income? a.To maximize the amount of costs which are controllable b.To maximize profits c.To maximize the total amount of residual income d.To maximize controllable margin a150.Which one of the.
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TRUE-FALSE STATEMENTS               1.Budget reports comparing actual results with planned objectives should be prepared only once a year.               2.If actual results are different from planned results, the difference must always be investigated by management to achieve effective budgetary control.               3.Certain budget reports are prepared monthly, whereas others are prepared more frequently.
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Ex. 193 Minor Landscaping Company is preparing its budget for the first quarter of 2012. The next step in the budgeting process is to prepare a cash receipts schedule and a cash payments schedule. To that end the following information has been collected. Clients usually pay 60% of their fee in the.
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Ex. 183 Copper Manufacturing has prepared the following monthly flexible manufacturing overhead budget for its Mixing Department: COPPER MANUFACTURING Monthly Flexible Manufacturing Overhead Budget Mixing Department Activity level Direct labor hours3,0004,000 Variable costs Indirect materials$  1,500$  2,000 Indirect labor15,00020,000 Factory supplies    4,500    6,000 Total variable  21,000  28,000 Fixed costs Depreciation20,00020,000 Supervision10,00010,000  Property taxes  15,000  15,000 Total fixed  45,000  45,000 Total costs$66,000$73,000 Instructions Prepare a flexible budget at the 5,000.
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S-A E  213(Ethics) Ashley Finn is a new production manager. After a great deal of effort, including considerable market research, she completes her budget and submits it to her boss, Keith Payne. Without even looking at it, he asks her what her "fudge factor" was, and which items contained the most.
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Ex. 198 The Pacific Division of Henson Industries reported the following data for the current year. Sales$4,000,000 Variable costs2,600,000 Controllable fixed costs800,000 Average operating assets6,000,000 Top management is unhappy with the investment center's return on investment (ROI). It asks the manager of the Pacific Division to submit plans to improve ROI in the next year. The.
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Ex. 189 The management of Ocean Industries estimates that credit sales for August, September, October, and November will be $360,000, $500,000, $560,000, and $320,000, respectively. Experience has shown that collections are made as follows: In month of sale25% In first month after sale60% In second month after sale10% Instructions Determine the collections from customers in October.
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Ex. 180 Thread Company is preparing its manufacturing overhead budget for 2012. Relevant data consist of the following. Units to be produced (by quarters): 10,000, 12,000, 14,000, 16,000. Direct labor: Time is 1 hour per unit. Variable overhead costs per direct labor hour: Indirect materials $0.90; indirect labor $1.20; and maintenance $0.50. Fixed overhead costs.
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MULTIPLE CHOICE QUESTIONS               38.What is budgetary control? a.Another name for a flexible budget b.The degree to which the CFO controls the budget c.The use of budgets in controlling operations d.The process of providing information on budget differences to lower level managers               39.A major element in budgetary control is a.the preparation of long-term plans. b.the comparison of.
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138.Return on investment is calculated by dividing a.contribution margin by sales. b.controllable margin by sales. c.contribution margin by average operating assets. d.controllable margin by average operating assets.               139.Which one of the following will not increase return on investment? a.Variable costs are increased b.An increase in sales c.Average operating assets are decreased d.Variable costs are decreased               140.If an investment.
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Ex. 186 Webb, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor$6.00 Indirect materials2.50 Maintenance.80 Utilities.30 Fixed overhead costs per month are: Supervision$600 Insurance200 Property taxes300 Depreciation900 The company believes it will normally operate in a range of 2,000 to 4,000 machine hours per month. During.
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SHORT-ANSWER ESSAY QUESTIONS S-A E  209 (a)What is a budget? (b)How does a budget contribute to good management? S-A E  210 Budgeting can be an important management tool if implemented properly. Identify several positive results when budgets are used properly. Since budgets affect people, identify several negative aspects if budgets are not implemented properly. S-A E .
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              11.Flexible budgeting relies on the assumption that unit variable costs will remain constant within the relevant range of activity.               12.Total budgeted fixed costs appearing on a flexible budget will be the same amount as total fixed costs on the master budget.               13.A flexible budget is prepared before the master.
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BRIEF EXERCISES BE 168 Devlin Manufacturing makes a single product. Expected manufacturing costs are as follows: Variable costs Direct materials$5.50 per unit Direct labor2.40 per unit Manufacturing overhead1.10 per unit Fixed costs per month Supervisory salaries$13,600 Depreciation3,500 Other fixed costs2,200 Instructions Determine the amount of manufacturing costs for a flexible budget level of 3,200 units per month. BE 169 Wind Productions uses flexible budgets..
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118.A responsibility report for a profit center will a.not show controllable fixed costs. b.not show indirect fixed costs. c.show noncontrollable fixed costs. d.not show cumulative year-to-date results.               119.The dollar amount of the controllable margin a.is usually higher than the contribution margin. b.is usually lower than the contribution margin. c.is always equal to the contribution margin. d.cannot be a.
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Ex. 179 Shep Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first quarter of 2012, the following data are developed: 1.Sales:  20,000 units; unit selling price:$35 2.Variable costs per dollar of sales: Sales commissions6% Delivery expense2% Advertising4% 3.Fixed costs per quarter: Sales salaries$24,000 Office salaries17,000 Depreciation6,000 Insurance2,000 Utilities1,000 Instructions Prepare a selling and administrative expense.
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              88.At 9,000 direct labor hours, the flexible budget for indirect materials is $18,000. If $18,700 are incurred at 9,200 direct labor hours, the flexible budget report should show the following difference for indirect materials: a.$700 unfavorable. b.$700 favorable. c.$300 favorable. d.$300 unfavorable.               89.The accumulation of accounting data on the basis of the individual.
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Ex. 196 Danner Co. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows.       Operating Data      Women's ShoesMen's ShoesChildren's Shoes Contribution margin$210,000(3)$200,000 Controllable fixed costs  100,000(4)      (5) Controllable margin     (1)$  90,000    96,000 Sales  600,000  480,000      (6) Variable costs     (2)  330,000  250,000 Instructions (a)Compute the missing amounts. Show computations. (b)Prepare.
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Ex. 194 Strickland Corp.'s manufacturing overhead budget for the first quarter of 2012 contained the following data: Variable Costs Indirect materials$24,000 Indirect labor12,000 Utilities14,000 Maintenance6,000 Ex. 194(Cont.) Fixed Costs Supervisor's salary$40,000 Depreciation8,000 Property taxes4,500 Actual variable costs for the first quarter were: Indirect materials$23,300 Indirect labor13,200 Utilities14,900 Maintenance5,300 Actual fixed costs were as expected except for property taxes which were $4,800. All costs are considered controllable by.
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              78.In the Dichter Co., indirect labor is budgeted for $36,000 and factory supervision is budgeted for $12,000 at normal capacity of 80,000 direct labor hours. If 90,000 direct labor hours are worked, flexible budget total for these costs is a.$48,000. b.$54,000. c.$52,500. d.$49,500.               79.Stone Industries uses flexible budgets. At normal capacity of 8,000.
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              48.When budgeted and actual results are not the same amount, there is a budget a.error. b.difference. c.anomaly. d.by-product.               49.Top management's reaction to a difference between budgeted and actual sales often depends on a.whether the difference is favorable or unfavorable. b.whether management anticipated the difference. c.the materiality of the difference. d.the personality of the top managers.               50.If costs.
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COMPLETION STATEMENTS               196.A _________________ is a formal written statement of management's plans expressed in financial terms.               197.A budget is a primary means of ________________ agreed upon objectives throughout the business organization.               198.Effective budgeting is dependent on an _________________________ in which authority and responsibility are clearly defined.               199.The budget should have.
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Ex. 191 Rudd Company has budgeted sales revenue as follows for the next 4 months: February$200,000 March160,000 April140,000 May220,000 Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in.
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158.A static budget report is appropriate for a.fixed manufacturing costs. b.fixed selling and administrative expenses. c.variable selling and administrative expenses. d.both fixed manufacturing costs and fixed selling and administrative expenses. 159.Sydney, Inc. uses flexible budgets. At normal capacity of 8,000 units, budgeted manufacturing overhead is $64,000 variable and $180,000 fixed. If Sydney had actual overhead.
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Ex. 181 Beal Manufacturing Co.'s static budget at 6,000 units of production includes $36,000 for direct labor and $6,000 for direct materials. Total fixed costs are $24,000. Instructions a.Determine how much would appear on Beal's flexible budget for 2012 if 9,000 units are produced and sold. b.How would this comparison differ if a static.
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              68.Management by exception a.causes managers to be buried under voluminous paperwork. b.means that all differences will be investigated. c.means that only unfavorable differences will be investigated. d.means that material differences will be investigated.               69.Under management by exception, which differences between planned and actual results should be investigated? a.Material and noncontrollable b.Controllable and noncontrollable c.Material and controllable d.All.
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              98.Management by exception a.is most effective at top levels of management. b.can be implemented at each level of responsibility within an organization. c.can only be applied when comparing actual results with the master budget. d.is the opposite of goal congruence.               99.Which responsibility centers generate both revenues and costs? a.Investment and profit centers b.Profit and cost.
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Ex. 200 Perez Corp. reported the following: Beginning of year operating assets$2,200,000 End of year operating assets2,000,000 Contribution margin1,000,000 Sales5,000,000 Controllable fixed costs643,000 Its required return is 10%. Instructions Compute the company’s ROI. Ex. 201 Lombard, Inc. has two investment centers and has developed the following information: Department ADepartment B Departmental controllable margin$200,000? Average operating assets?$500,000 Sales800,000250,000 ROI10%16% Instructions Answer the following questions about Department A and Department.
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BE 173 Moss Corp. reported the following items for 2012: Controllable fixed costs$  77,000 Contribution margin142,000 Interest expense20,000 Variable costs     80,000 Total assets$925,000 BE 173(Cont.) Instructions Compute the controllable margin for 2012. BE 174 The data for an investment center is given below. January 1, 2012December 31, 2012 Current Assets$   400,000$   800,000 Plant Assets3,000,0003,800,000 The controllable margin is $520,000. Instructions Compute the return on investment.
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108.Of the following choices, which contain both a traceable fixed cost and a common fixed cost? a.Profit center manager's salary and timekeeping costs for a responsibility center's employees. b.Company president's salary and company personnel department costs. c.Company personnel department costs and timekeeping costs for a responsibility center's employees. d.Depreciation on a responsibility center's equipment.
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Ex. 183 In September 2012, the budget committee of Jason Company assembles the following data: 1.Expected Sales October$900,000 November850,000 December800,000 2.Cost of goods sold is expected to be 60% of sales. 3.Desired ending merchandise inventory is 20% of the next month's cost of goods sold. 4.The beginning inventory at October 1 will be the desired amount. Instructions Prepare the budgeted.
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128.An investment center generated a contribution margin of $200,000, fixed costs of $100,000 and sales of $1,000,000. The center’s average operating assets were $500,000. How much is the return on investment? a.20% b.140% c.40% d.60% 129. Rhein Manufacturing recorded operating data for its auto accessories division for the year. Sales$375,000 Contribution margin75,000 Total direct fixed costs45,000 Average total operating.
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