Assume you have just been hired by a large manufacturing company and have been
assigned to a team that has the responsibility of gathering the data for completing the
company ‘s master budget. Your first assignment is to make a presentation to a meeting
of all department managers concerning preparation of the master budget and the
importance of each department manager providing realistic estimates to the team. You
and the other team members have had a brain storming session to determine what you
should cover. The team has come up with some questions you should answer during
your presentation.
Required:
Answer the following questions.
a. What is a master budget?
b. What are the component parts of the master budget?
c. How are the components related?
The Rouge Company sells sports decals that can be personalized with a player’s name, a
team name, and a jersey number for $5 each. Rouge buys the decals from a supplier for
$1.25 each and spends an additional $0.75 in variable operating costs per decal. The
results of last month’s operations are as follows:
Required:
a. What is Rouge’s monthly breakeven point in units? In dollars?
b. What is Rouge’s margin of safety (both units and dollars)?
Which of the following is an example of an employee-oriented nonfinancial measure?
a. Setup efficiency
b. Labor productivity
c. Accidents per month
d. Time to respond to customer problems
Assume a company has a selling price of $20 and a unit cost of $15. What is the
company’s markup percentage?
a. 33.3%
b. 1.33%
c. 25%
d. 1.25%
Which of the following would be considered a source of cash on the statement of cash
flows?
a. Payments from customers
b. Purchase of equipment
c. Payment of accounts payable invoices
d. Payment of dividends to stockholders
Using the direct method of preparing the statement of cash flows, which of the
following is not an activity generating operating cash flows?
a. Collections from customers
b. Payments to suppliers
c. Payments for income taxes
d. Payments of dividends
Miguel Manufacturing has fixed costs of $2,500,000 and variable costs are 40% of
sales. What are the required sales if Montoya desires an operating income of $250,000?
a. $4,583,333
b. $4,166,667
c. $6,875,000
d. $6,250,000
Match the following terms to the appropriate statement by placing the letter to the left
of each statement. a. Annuity f. Present value
b. Discount rate g. Profitability index
c. Hurdle rate h. Return on investment
d. Internal rate of return i. Screening decision
e. Preference decision j. Simple rate of return
If the beginning balance in the Raw Materials Inventory account for the month was
$25,000, the ending balance of $22,000 and material used during the month was
$130,000, what is the amount of materials purchased during the month?
a. $177,000
b. $130,000
c. $127,000
d. $133,000
In an activity-based costing system, which of the following is not a category in which
activities are classified?
a. Unit-level
b. Batch-level
c. Product-level
d. Factory-level
A characteristic of non-value-added activities is that they
a. Can always be eliminated.
b. Can never be eliminated.
c. Are always related to fixed costs.
d. Are sometimes essential to production or business operations.
Basil Industries reported the following information for December:
What was the ending balance in Basil’s Raw Materials Inventory account?
a. $75,000
b. $118,750
c. $162,500
d. $206,250
Pueblo Production Company manufactures 50,000 high-definition televisions each year.
Pueblo is considering purchasing the glass screens from an outside source rather than
producing them internally. The following data relate to the glass screens:
What is the total relevant cost to internally produce 50,000 glass screens?
a. $1,417,500
b. $1,467,900
c. $1,484,500
d. $1,625,000
Which of the following is not a step managers might take after identifying an
unprofitable customer?
a. Identify the reason the customer is unprofitable
b. Work with the customer to return him or her to profitability
c. Require the customer to reimburse the company for any losses attributed to the
customer
d. All of these answer choices are steps managers might take after identifying an
unprofitable customer
Percy ‘s Pickled Snacks produces several types of pickled vegetables. The company
budgets for each quarter in the last month of the previous quarter. In early March, Percy
is preparing the budget for pickled beets. Budgeted sales are 12,000 jars for April,
16,000 jars for May, and 19,000 jars for June. Each jar requires 1.2 pounds of beets.
The pickling process takes 60 minutes for 20 jars. Because pressurized cooking is used,
the processing is monitored by an employee at all times. Each jar of pickled beets sells
for $15.00.
Percy requires ending Finished Goods inventory equal to 25% of the following month ‘s
sales. Other information is as follows:
What is Percy ‘s production budget for April?
a. 12,000
b. 13,000
c. 16,000
d. 11,000
To balance the scorecard, organizations should also select
a. Leading measures.
b. Qualitative measures.
c. Quantitative measures.
d. All of these answer choices are correct.