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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 activity, a.only fixed.
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Ex. 188 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 assets5,000,000 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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128.An investment center generated a contribution margin of $400,000, fixed costs of $200,000 and sales of $2,000,000. The center’s average operating assets were $800,000. How much is the return on investment? a.25% b.175% c.50% d.75% 129. Rhein Manufacturing recorded operating data for its auto accessories division for the year. a.45.0% b.22.5% c.15.0% d.12.0% 130.The current controllable margin for Henry.
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148.Which of the following would not be considered an aspect of budgetary control? a.It assists in the determination of differences between actual and planned results. b.It provides feedback value needed by management to see whether actual operations are on course. c.It assists management in controlling operations. d.It provides a guarantee for favorable results. 149.A static.
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BRIEF EXERCISES BE 160 Devlin Manufacturing makes a single product. Expected manufacturing costs are as follows: Variable costs Direct materials$6.50 per unit Direct labor2.40 per unit Manufacturing overhead1.10 per unit Fixed costs per month Supervisory salaries$13,600 Depreciation5,500 Other fixed costs2,200 Instructions Determine the amount of manufacturing costs for a flexible budget level of 3,200 units per month. BE 161 Wind Productions uses flexible budgets..
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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 depending on the.
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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. 192 Hagen Company's budgeted sales and direct materials purchases are as follows. Budgeted SalesBudgeted D.M. Purchases January$300,000$60,000 February330,00070,000 March350,00080,000 Hagen's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. Hagen's.
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Ex. 185 The Deluxe Division, a profit center of Riley Manufacturing Company, reported the following data for the first quarter of 2016: Sales$9,000,000 Variable costs6,300,000 Controllable direct fixed costs1,200,000 Noncontrollable direct fixed costs530,000 Indirect fixed costs300,000 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. 172 Cody Co. developed its annual manufacturing overhead budget for its master budget for 2016 as follows: Expected annual operating capacity120,000 Direct Labor Hours Variable overhead costs Indirect labor$600,000 Indirect materials120,000 Factory supplies    60,000 Total variable  780,000 Fixed overhead costs Depreciation240,000 Supervision120,000 Property taxes    96,000 Total fixed  456,000 Total costs$1,236,000 The relevant range for monthly activity is expected to be between 8,000 and.
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S-A E  214(Communication) At Boulder Industries, budgets are the responsibility of everyone. Each department collaborates in determining its expected needs, and sales personnel determine the likely sales volume. Bart Gray, one of the production managers, believes in building plenty of slack into everything, including his estimates of ending inventory of work.
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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 center has.
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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 differences should.
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Ex. 186 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$280,000(3)$220,000 Controllable fixed costs  130,000(4)      (5) Controllable margin     (1)$  90,000    96,000 Sales  800,000  480,000      (6) Variable costs     (2)  330,000  250,000 Instructions (a)Compute the missing amounts. Show computations. (b)Prepare.
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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 actual results.
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Ex. 184 Strickland Corp.’s manufacturing overhead budget for the first quarter of 2016 contained the following data: Variable Costs Indirect materials$40,000 Indirect labor24,000 Utilities20,000 Maintenance12,000 Ex. 184(Cont.) Fixed Costs Supervisor’s salary$80,000 Depreciation16,000 Property taxes8,000 Actual variable costs for the first quarter were: Indirect materials$37,200 Indirect labor26,400 Utilities21,000 Maintenance10,600 Actual fixed costs were as expected except for property taxes which were $9,000. All costs are considered controllable by.
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Ex. 176 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$5.00 Indirect materials2.50 Maintenance.50 Utilities.30 Fixed overhead costs per month are: Supervision$1,200 Insurance400 Property taxes600 Depreciation1,800 The company believes it will normally operate in a range of 4,000 to 8,000 machine hours per month. During.
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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 are not responsive.
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Ex. 174 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$5.00 Indirect materials2.50 Maintenance.80 Utilities.30 Fixed overhead costs per month are: Supervision$800 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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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 become more summarized.
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Ex. 183 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. 183(Cont.) The.
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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 negative.
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Ex. 187 Clay Co.’s projected sales are as follows: August$400,000 September$450,000 October$550,000 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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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 centers c.Cost and.
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EXERCISES Ex. 170 Clark Company’s master budget reflects budgeted sales information for the month of June, 2016, as follows: Budgeted QuantityBudgeted Unit Sales Price Product A40,000$7 Product B48,000$9 During June, the company actually sold 39,000 units of Product A at an average unit price of $7.10 and 49,600 units of Product B at an average unit.
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78.In the Dichter Co., indirect labor is budgeted for $72,000 and factory supervision is budgeted for $24,000 at normal capacity of 160,000 direct labor hours. If 180,000 direct labor hours are worked, flexible budget total for these costs is a.$96,000. b.$108,000. c.$105,000. d.$99,000. 79.Stone Industries uses flexible budgets. At normal capacity of 16,000 units, budgeted.
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Ex. 177 Lapp Manufacturing uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $400,000 to $480,000. Variable costs and their percentage relationships to sales are: Sales commissions6% Advertising4% Traveling5% Delivery1% Fixed selling expenses consist of sales salaries $80,000 and depreciation on delivery equipment $20,000. Instructions Prepare a flexible budget for increments of.
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Ex. 183 In September 2016, the budget committee of Jason Company assembles the following data: 1.Expected Sales October$1,800,000 November1,700,000 December1,600,000 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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Ex. 194 In May 2016, the budget committee of Crater, Inc. assembles the following data in preparation of budgeted merchandise purchases for the month of June. 1.Expected sales: June $750,000, July $900,000. 2.Cost of goods sold is expected to be 80% of sales. 3.Desired ending merchandise inventory is 40% of the following (next) month's.
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SHORT-ANSWER ESSAY QUESTIONS S-A E  209 (a)What is a budget? (b)How does a budget contribute to good management? S-A E  210 Budgeting can be an important management tool if implemented properly. Identify several positive results when budgets are used properly. Since budgets affect people, identify several negative aspects if budgets are not implemented properly. S-A E .
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Ex. 173 Copper Manufacturing has prepared the following monthly flexible manufacturing overhead budget for its Mixing Department: COPPER MANUFACTURING Monthly Flexible Manufacturing Overhead Budget Mixing Department Activity level Direct labor hours3,0004,000 Variable costs Indirect materials$  3,000$  4,000 Indirect labor15,00020,000 Factory supplies    4,500    6,000 Total variable  22,500  30,000 Fixed costs Depreciation20,00020,000 Supervision12,00012,000  Property taxes  15,000  15,000 Total fixed  47,000  47,000 Total costs$69,500$77,000 Instructions Prepare a flexible budget at the 5,000.
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Ex. 190 The beginning cash balance is $20,000. Sales are forecasted at $700,000 of which 80% will be on credit. 70% of credit sales are expected to be collected in the year of sale. Cash expenditures for the year are forecasted at $500,000. Accounts receivable from previous accounting periods totaling $12,000.
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Ex. 190 Perez Corp. reported the following: Beginning of year operating assets$3,200,000 End of year operating assets3,000,000 Contribution margin1,000,000 Sales5,000,000 Controllable fixed costs643,000 Its required return is 10%. Instructions Compute the company’s ROI. Ex. 191 Lombard, Inc. has two investment centers and has developed the following information: Department ADepartment B Departmental controllable margin$120,000? Average operating assets?$400,000 Sales800,000250,000 ROI10%12% Ex. 191(Cont.) Instructions Answer the following questions about Department A and.
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Ex. 171 Beal Manufacturing Co.’s static budget at 12,000 units of production includes $72,000 for direct labor and $12,000 for direct materials. Total fixed costs are $48,000. Instructions a.Determine how much would appear on Beal’s flexible budget for 2016 if 18,000 units are produced and sold. b.How would this comparison differ if a static.
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Ex. 178 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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88.At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials: a.$1,400 unfavorable. b.$1,400 favorable. c.$600 favorable. d.$600 unfavorable. 89.The accumulation of accounting data on the basis of the individual manager who.
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Ex. 186 Cruises, Inc. has budgeted sales revenues as follows:    June      July    August  Credit sales$135,000$125,000$  90,000 Cash sales    90,000  255,000  195,000 Total sales$225,000$380,000$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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Ex. 189 The management of Ocean Industries estimates that credit sales for August, September, October, and November will be $540,000, $750,000, $840,000, and $480,000, 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. 179 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 $120,000. 2.At normal capacity of 50,000 direct labor hours, the line drawn from the total budgeted cost line intersects the vertical axis at $360,000. 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. 175 Telemark Production’s manufacturing costs for July when production was 2,000 units appears below: Direct materials$10 per unit Factory depreciation$16,000 Variable overhead10,000 Direct labor4,000 Factory supervisory salaries11,600 Other fixed factory costs3,000 Instructions How much is the flexible budget manufacturing cost amount for a month when 2,200 units are produced? .
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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 budget. 14.The activity index.
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BE 164 Point, Inc. produces men’s shirts. The following budgeted and actual amounts are for 2016: CostBudget at 2,500 unitsActual Amounts at 2,800 units Direct materials$65,000 $75,000 Direct labor  70,000  78,000 Fixed overhead  35,00034,500 Instructions Prepare a performance report for Point, Inc. for the year. BE 165 Moss Corp. reported the following items for 2016: Controllable fixed costs$ .
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Ex. 184 Burr, Inc. provided the following information:     July    August Projected sales$220,000$260,000 Projected merchandise purchases$150,000$180,000 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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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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S-A E  212 What is participative budgeting? What are its potential benefits? What are its potential shortcomings? 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.
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Ex. 185 Casa Development, Inc. has budgeted sales revenues as follows: Budgeted Sales Revenues January$55,000 February75,000 March90,000 April80,000 May60,000 June35,000 Past experience has indicated that 80% of sales each month are on credit and that collection of credit sales occurs as follows:  60% in the month of sale, 30% in the month following the sale, and 5% in the.
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Ex. 182 Campbell Clothing produces men’s ties. The following budgeted and actual amounts are for 2016: CostBudget at 5,000 UnitsActual Amounts at 5,800 Units Direct materials$60,000$71,000 Direct labor75,00086,500 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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