Chapter 18—Budgeting and Control Key
1. The overall purpose of a budget is to:
2. In a personal budget, the amount of income left after covering the withdrawals and fixed expenditures is
referred to as:
3. Which of the following is a characteristic of good personal budgeters?
4. Top management’s broad, long-range goals are found in:
5. The budget that details immediate goals for revenues, production, expenses, and cash for the next period is
called:
6. Budgeting assists management in which of the following areas?
7. From a behavioral viewpoint, it is desirable that the operating budget:
8. A budget committee includes:
9. Which of the following is NOT an advantage of bottom-up budgeting as compared to top-down budgeting?
10. To develop a budget that has the proper behavioral considerations, management must ensure all of the
following EXCEPT:
11. What is budgetary slack?
12. Which of the following budget development approaches can be used by management?
13. Which of the following statements is NOT true of the master budget?
14. Given the following budgets, which would be prepared first when completing the master budget?
15. The accuracy of the sales forecast is usually dependent upon all the following EXCEPT:
16. Which budget supplies information for all manufacturing cost budgets?
17. Which of the following is NOT an uncontrollable external factor affecting sales?
18. Which of the following is NOT an internal factor affecting sales?
19. Which of the following factors need NOT be considered in preparing the production budget?
20. Which of the following is NOT included in the manufacturing overhead budget?
21. When determining the amount of cash payments for manufacturing overhead, which costs are removed from
the budgeted manufacturing overhead?
22. Which of the following accumulates all the costs for direct materials, direct labor and manufacturing
overhead?
23. The budgeted product cost sheet accumulates costs for all of the following EXCEPT:
24. The formula underlying the budget for direct materials usage is:
25. The formula underlying the direct labor budget is:
26. Insufficient raw materials inventory may cause:
27. Which of the following is LEAST likely to be affected if actual June production is less than budgeted June
production?
28. Which of the following would NOT be in the selling and administrative budget?
29. Which of the following costs are generally allocated evenly to each quarter?
30. Operating budgets:
31. The master budget includes all the following schedules EXCEPT the:
32. In preparing the sales budget, management should consider:
33. A manufacturing overhead budget:
34. In preparing the master budget, which of the following is created first?
35. The master budgeting process is part of:
36. Which of the following budgets is based on the expected sales volume and the desired ending inventory of
finished goods and is adjusted for the expected beginning inventory of finished goods?
37. The production budget is computed as:
38. Which two factors from the master budget are used to calculate the predetermined overhead rate for
manufacturing overhead?
39. Credit sales are $92,000 in June and $80,500 in July; 80% are collected in the month of sale and 20%
collected in the following month. Total July collections are:
40. If Hardy Company plans to sell 350 monitors during the month of October, has 21 monitors on hand on
October 1, and wants to maintain an inventory at month-end of 30 monitors, how many monitors must Hardy
Company produce during October?
41. Exhibit 18-1
Elsie’s Dairy produces various types of cheese. The following resources are used to make five pounds of
cheddar cheese:
4 gallons of milk at $2.50 per gallon
4 cakes of yeast at $0.50 per cake
1/2 hour of labor at $10.00 per hour
1/2 hour of overhead at $6.00 per hour
Refer to Exhibit 18-1. Based on the information above, what is the cost of making five pounds of cheese?
42. Exhibit 18-1
Elsie’s Dairy produces various types of cheese. The following resources are used to make five pounds of
cheddar cheese:
4 gallons of milk at $2.50 per gallon
4 cakes of yeast at $0.50 per cake
1/2 hour of labor at $10.00 per hour
1/2 hour of overhead at $6.00 per hour
Refer to Exhibit 18-1. Based on the information above, what is the cost of producing one pound of cheese?
43. Exhibit 18-2
Makeby Corporation makes sharbees. The following data are available on December 1, 2011:
·
Raw materials needed to
make 1 sharbee:
6 units of X
4 units of Y
·
Number of units available at
beginning of December:
Raw material X
44
Raw material Y
62
Finished sharbees
18
·
Expected sales during
December:
144 sharbees
·
Desired levels of ending
inventory:
Raw material X
60
Raw material Y
56
Sharbees
20
·
Cost of raw materials:
Raw material X
$6 per unit
Raw material Y
$8 per unit
Refer to Exhibit 18-2. Given the information above, budgeted production for December is:
44. Exhibit 18-2
Makeby Corporation makes sharbees. The following data are available on December 1, 2011:
·
6 units of X
4 units of Y
·
Raw material X
44
Raw material Y
62
Finished sharbees
18
·
144 sharbees
·
Raw material X
60
Raw material Y
56
Sharbees
20
·
Raw material X
$6 per
unit
Raw material Y
$8 per
unit
Refer to Exhibit 18-2. Given the information above, cost of materials to be used in December is:
45. Exhibit 18-2
Makeby Corporation makes sharbees. The following data are available on December 1, 2011:
·
Raw materials needed to make 1
sharbee:
6 units of X
4 units of Y
·
Number of units available at beginning
of December:
Raw material X
44
Raw material Y
62
Finished sharbees
18
·
Expected sales during December:
144 sharbees
·
Desired levels of ending inventory:
Raw material X
60
Raw material Y
56
Sharbees
20
·
Cost of raw materials:
Raw material X
$6 per
unit
Raw material Y
$8 per
unit
Refer to Exhibit 18-2. Given the information above, the direct materials purchases cost during December will be:
46. Bondy Corporation makes widgets. The following are needed to make 1 widget:
Wood
20 board feet
Paint
3 gallons
Direct labor
4 hours
Variable manufacturing overhead
4 hours
The cost of wood is 30 cents per board foot, the cost of paint is $4 per gallon, and employees are paid $12 per hour. Also, variable manufacturing
overhead is applied at the rate of $6 per direct labor hour. Given this information, the total direct materials cost of making 150 widgets is:
47. NewGen Computers is preparing its budget for 2011. Sales for the year are budgeted at $1,000,000; 20% are
cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted
expenses are $800,000. These expenditures include $25,000 for depreciation and $497,000 for variable
manufacturing overhead. Given this information, total cash inflows from sales for 2011 would be:
48. Larry’s Custom Bird Cages has budgeted unit sales for the first quarter of the year as follows:
January
February
March
April
430
390
450
420
Larry wishes to have 20% of the next month’s sales in ending inventory. If the January 1 beginning inventory consisted of 74 units, budgeted
purchases for February would be:
49. Johnson Electric plans to sell 125 boat motors during March. If it currently has 10 motors on hand and must
maintain an inventory of 25, how many motors must the firm make during March?
50. Dean’s Dairy uses 4 gallons of milk to make 1 batch of cheese. Dean currently has 40 gallons of milk and
desires to maintain an inventory of 20 gallons of milk. If 49 batches of cheese will be produced, how much milk
must be purchased?
51. Meadowland Clothing uses 3 yards of material for each garment produced. On May 1, Meadowland had 24
yards of material on hand. If Meadowland desires an ending inventory of 15 yards of material and plans to
produce 65 garments during the month, how many yards of material should the company purchase during May?
52. Exhibit 18-3
Thorne Chemicals makes cleaning solution. The following information is available on December 1, 2011:
·
Raw materials needed to make 1 gallon of
cleaning solution:
4 units of X
3 units of Y
·
Amount on hand, December 1:
Raw material X
22 units
Raw material Y
26 units
Cleaning solution
63 gallons
·
Expected sales of cleaning solution during
December:
160 gallons
·
Desired levels of ending inventory:
Raw material X
30 units
Raw material Y
24 units
Cleaning solution
45 gallons
·
Cost of raw materials:
Raw material X
$2 per unit
Raw material Y
$5 per unit
Refer to Exhibit 18-3. Given the information above, budgeted production for December is:
53. Exhibit 18-3
Thorne Chemicals makes cleaning solution. The following information is available on December 1, 2011:
·
Raw materials needed to make 1
gallon of cleaning solution:
4 units of X
3 units of Y
·
Amount on hand, December 1:
Raw material X
22 units
Raw material Y
26 units
Cleaning solution
63 gallons
·
Expected sales of cleaning solution
during December:
160 gallons
·
Desired levels of ending inventory:
Raw material X
30 units
Raw material Y
24 units
Cleaning solution
45 gallons
·
Cost of raw materials:
Raw material X
$2 per unit
Raw material Y
$5 per unit
Refer to Exhibit 18-3. Given the information above, the cost of materials used in production for the month of December will be:
54. Exhibit 18-3
Thorne Chemicals makes cleaning solution. The following information is available on December 1, 2011:
·
Raw materials needed to make 1
gallon of cleaning solution:
4 units of X
3 units of Y
·
Amount on hand, December 1:
Raw material X
22 units
Raw material Y
26 units
Cleaning solution
63 gallons
·
Expected sales of cleaning
solution during December:
160 gallons
·
Desired levels of ending
inventory:
Raw material X
30 units
Raw material Y
24 units
Cleaning solution
45 gallons
·
Cost of raw materials:
Raw material X
$2 per unit
Raw material Y
$5 per unit
Refer to Exhibit 18-3. Given the information above, how many units of raw material Y should be purchased during December?
55. If it takes 20 hours to make a boat motor and direct labor employees are paid $10 per hour, how much does
it cost for labor to make 100 motors?
56. Exhibit 18-4
Playtime Toys began operations on January 1, 2011. During January it produced 2,000 toys and sold 1,850 toys.
The following are needed to make 1 toy:
Wood
2 board feet at $3 per foot
Paint
1.5 quarts at $2 per quart
Direct labor
3 hours at $6 per hour
Manufacturing overhead is applied at a rate of $4 per direct labor hour.
Refer to Exhibit 18-4. Given the information above, the cost of direct materials used in January would be:
57. Exhibit 18-4
Playtime Toys began operations on January 1, 2011. During January it produced 2,000 toys and sold 1,850 toys.
The following are needed to make 1 toy:
Wood
2 board feet at $3 per foot
Paint
1.5 quarts at $2 per quart
Direct labor
3 hours at $6 per hour
Manufacturing overhead is applied at a rate of $4 per direct labor hour.
Refer to Exhibit 18-4. Given the information above, the direct labor cost per toy would be:
58. Exhibit 18-4
Playtime Toys began operations on January 1, 2011. During January it produced 2,000 toys and sold 1,850 toys.
The following are needed to make 1 toy:
Wood
2 board feet at $3 per foot
Paint
1.5 quarts at $2 per quart
Direct labor
3 hours at $6 per hour
Manufacturing overhead is applied at a rate of $4 per direct labor hour.
Refer to Exhibit 18-4. Given the information above, the manufacturing overhead cost per toy would be:
59. Exhibit 18-4
Playtime Toys began operations on January 1, 2011. During January it produced 2,000 toys and sold 1,850 toys.
The following are needed to make 1 toy:
Wood
2 board feet at $3 per foot
Paint
1.5 quarts at $2 per quart
Direct labor
3 hours at $6 per hour
Manufacturing overhead is applied at a rate of $4 per direct labor hour.
Refer to Exhibit 18-4. Given the information above, the cost of goods available for sale for January would be:
60. Exhibit 18-4
Playtime Toys began operations on January 1, 2011. During January it produced 2,000 toys and sold 1,850 toys.
The following are needed to make 1 toy:
Wood
2 board feet at $3 per foot
Paint
1.5 quarts at $2 per quart
Direct labor
3 hours at $6 per hour
Manufacturing overhead is applied at a rate of $4 per direct labor hour.
Refer to Exhibit 18-4. Given the information above, ending inventory would be:
61. Cachet Inc. had a $93,000 balance in Accounts Receivable on July 1. In July, it expects to collect 55% of
these receivables and 30% of the July credit sales, which are budgeted at $138,000. What is the budgeted
accounts receivable at the end of July?
62. How much cash will be needed to pay the following general and administrative expenses?
Advertising expense
$ 4,500
Executives’ salaries expense
10,000
Depreciation expense
5,250
Amortization of patent
1,225
Interest expense
750
Total
$21,725
63. The following resources are required to make 1 batch of ice cream:
Milk
5 gallons at $2.50 per gallon
Sugar
5 pounds at $0.30 per pound
Direct labor
45 minutes at $12.00 per hour
Manufacturing overhead
30 minutes at $6.00 per hour
Given this information, what is the cost of making 1 batch of ice cream?
64. Theodore’s Musical Toys makes xylophones. Each xylophone takes 3 labor hours to make at a rate of
$10.00 per hour. What is the budgeted production of xylophones if the budgeted direct labor cost for July is
$16,200?
65. Which of the following budgets are the same for both a manufacturing firm and a merchandising firm?
66. The purchases budget for a merchandising firm replaces four budgets for a manufacturing firm. These four
budgets are:
67. The format of the merchant’s purchases budget is very similar to the format of the manufacturer’s:
68. Another name for the sales budget in a service firm is the:
69. Which of the following budgets contains the sales volume (or production) for a service firm?
70. Which of the following budgets contains the supplies needed to operate for a service firm?
71. Which of the following budgets contains the labor costs involved directly in providing the service for a
service firm?
72. Which of the following would NOT be in the overhead budget of a hotel?
73. Which of the following accumulates all the costs for supplies, wages and salaries, and overhead for a service
firm?
74. If Mercedes Corporation plans to sell 1,000 computers during the month of July, has 80 computers on hand
on July 1, and wants to maintain an inventory at month-end of 50 monitors, how many monitors must Heather
Corporation purchase during July?
75. Patricia’s Piano Palace has budgeted piano sales for the fourth quarter of the year as follows:
September
October
November
December
24
28
25
33
Larry wishes to have 20% of the next month’s sales in ending inventory. If the September 1 beginning inventory consisted of 7 pianos, budgeted
purchases for October would be:
76. Percy’s Plants plans to sell 500 tomato plants during April. If it currently has 60 tomato plants on hand and
must maintain an inventory of 90, how many tomato plants must the firm purchase during April?
77. Highland Corporation is a high-speed Internet service provider that will open business January 1. Highland
has enough band-width to potentially have 2,000 subscriptions each month at a cost of $50 per subscription.
Highland expects that during January, the band-width will run at only 30% capacity. Highland plans to collect
payment for each subscription at the beginning of each month. Given this information, how much revenue does
Highland expect to earn during January?
78. Exhibit 18-5
Dr. Gatten began practicing dentistry on January 1, 2011. During January she served 250 patients who had their
teeth examined and cleaned. The following information is known in relation to each patient visit:
Cost of supplies used to clean teeth
$3
Cost of items in “clean teeth” bag, given to each patient
$4
Charges for dental hygienist
$15 an hour, 1.5 hours per patient
Charges for dentist
$40 an hour, 1 hour per patient
Overhead costs per patient
$10
Refer to Exhibit 18-5. Given the information above, total supplies expense for January would be:
79. Exhibit 18-5
Dr. Gatten began practicing dentistry on January 1, 2011. During January she served 250 patients who had their
teeth examined and cleaned. The following information is known in relation to each patient visit:
Cost of supplies used to clean teeth
$3
Cost of items in “clean teeth” bag, given to each patient
$4
Charges for dental hygienist
$15 an hour, 1.5 hours per patient
Charges for dentist
$40 an hour, 1 hour per patient
Overhead costs per patient
$10