Chapter 21(6): Budgeting
65.
Budgets need to be fair and attainable for employees to consider the budget important in their normal
daily
activities. Which of the following is not considered a human behavior problem?
a.
setting goals among managers that conflict with one another
b.
setting goals too tightly making it difficult to meet performance expectation
c.
allowing employees the opportunity to be a part of the budget process
d.
allowing goals to be so low that employees develop a “spend it or lose it” attitude
66.
Which of the following budgets allow for adjustments in activity levels?
a.
static budget
b.
continuous budget
c.
zero-based budget
d.
flexible budget
67.
The process of developing budget estimates by requiring all levels of management to estimate sales, production,
and
other operating data as though operations were being initiated for the first time is referred to as
a.
flexible budgeting
b.
continuous budgeting
c.
zero-based budgeting
d.
master budgeting
68.
A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times
is
termed
a.
flexible budgeting
b.
continuous budgeting
c.
zero-based budgeting
d.
master budgeting
69.
Jase Manufacturing Co.’s static budget at 10,000 units of production includes $40,000 for direct labor and $4,000
for
electric power. Total fixed costs are $24,000. At 12,000 units of production, a flexible budget would show
a.
variable costs of $52,800 and $29,000 of fixed costs
b.
variable costs of $44,000 and $24,000 of fixed costs
c.
variable costs of $52,800 and $24,000 of fixed costs
d.
variable and fixed costs totaling $68,000
70.
Miller and Sons’ static budget for 10,000 units of production includes $50,000 for direct materials, $44,000 for
direct
labor, variable utilities of $5,000, and supervisor salaries of $24,000. A flexible budget for 12,000 units of
production
would show
a.
the same cost structure in total
b.
direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $29,000
c.
total variable costs of $148,000
d.
direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $24,000
71.
A disadvantage of static budgets is that they
a.
are dependent on previous year’s actual results
b.
cannot be used by service companies
c.
do not show possible changes in underlying activity levels
d.
show the expected results of a responsibility center for several levels of activity
72.
A series of budgets for varying rates of activity is termed a(n)
a.
flexible budget
b.
variable budget
c.
master budget
d.
activity budget
73.
Chelsa Manufacturing Co.’s static budget at 5,000 units of production includes $40,000 for direct labor and
$5,000
for variable electric power. Total fixed costs are $23,000. At 8,000 units of production, a flexible budget
would
show
a.
variable costs of $64,000, and $28,000 of fixed costs
b.
variable costs of $64,000, and $23,000 of fixed costs
c.
variable costs of $72,000, and $23,000 of fixed costs
d.
variable and fixed costs totaling $107,000
74.
Laurie Inc.’s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for
direct
labor, fixed utilities costs of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000
units of
production would show
a.
the same cost structure in total
b.
direct materials of $72,000, direct labor of $52,800, fixed utilities of $5,000, and supervisor salaries of $25,000
c.
total variable costs of $159,800
d.
direct materials of $60,000, direct labor of $52,800, fixed utilities of $6,000, and supervisor salaries of $25,000
75.
The primary difference between a static budget and a flexible budget is that a static budget
a.
is suitable in volatile demand situation while flexible budget is suitable in a stable demand situation
b.
is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned
with
expenses that vary with sales
c.
includes only fixed costs, whereas a flexible budget includes only variable costs
d.
is a plan for a single level of production, whereas a flexible budget can be converted to any level
of
production
76.
If budgeted beginning inventory is $8,000, budgeted ending inventory is $9,400, and budgeted cost of goods sold is
$10,260, budgeted production should be
a. $1,400
b. $9,600
c. $11,660
d. $11,550
77.
At the beginning of the period, the Cutting Department budgeted direct labor of $155,000, direct materials of
$165,000, and fixed factory overhead of $15,000 for 9,000 hours of production. The department actually
completed
10,000 hours of production. What is the appropriate total budget for the department, assuming it uses
flexible
budgeting?
a. $416,000
b. $370,556
c. $368,889
d. $335,000
78.
At the beginning of the period, the Assembly Department budgeted direct labor of $110,000, direct materials of
$170,000, and fixed factory overhead of $28,000 for 8,000 hours of production. The department actually
completed
10,000 hours of production. What is the appropriate total budget for the department, assuming it uses
flexible
budgeting?
a. $288,000
b. $305,000
c. $350,000
d. $378,000
79.
The production budgets are used to prepare which of the following budgets?
a.
operating expenses
b.
direct materials purchases, direct labor cost, and factory overhead cost
c.
sales in dollars
d.
sales in units
80.
Principal components of a master budget include
a.
production budget
b.
sales budget
c.
capital expenditures budget
d.
all of these
81.
The first budget customarily prepared as part of an entity’s master budget is the
a.
production budget
b.
cash budget
c.
sales budget
d.
direct materials purchases
82.
Motorcycle Manufacturers, Inc. projected sales of 78,000 machines for the year. The estimated January 1
inventory is 6,500 units, and the desired December 31 inventory is 6,000 units. What is the budgeted production
(in
units) for the year?
a. 78,500
b. 70,000
c. 77,500
d. 70,500
83.
The operating budgets of a company includes the
a.
cash budget
b.
capital expenditures budget
c.
financing budget
d.
production budget
84.
Which of the following budgets is not directly associated with the production budget?
a.
direct materials purchases budget
b.
sales budget
c.
capital expenditures budget
d.
direct labor cost budget
Chapter 21(6): Budgeting
Below is budgeted production and sales information for Flushing Company for the month of December:
Product XXX
Product ZZZ
Estimated beginning inventory
32,000 units
20,000 units
Desired ending inventory
34,000 units
17,000 units
Region I, anticipated sales
320,000 units
260,000 units
Region II, anticipated sales
180,000 units
140,000 units
The unit selling price for product XXX is $5 and for product ZZZ is $15.
85.
Budgeted sales for the month are
a. $3,180,000
b. $5,820,000
c. $1,800,000
d. $8,500,000
86.
Budgeted production for product XXX during the month is
a.
498,000 units
b.
502,000 units
c.
534,000 units
d.
566,000 units
87.
Budgeted production for product ZZZ during the month is
a.
403,000 units
b.
380,000 units
c.
397,000 units
d.
417,000 units
88.
For February, sales revenue is $700,000; sales commissions are 5% of sales; the sales manager’s salary is $96,000;
advertising expenses are $90,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are
$2,500 plus 1/2 of 1% of sales. Total selling expenses for the month of February are
a. $161,000
b. $237,500
c. $235,000
d. $241,000
89.
For April, sales revenue is $700,000; sales commissions are 5% of sales; the sales manager’s salary is $98,000;
advertising expenses are $90,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are $2,100
plus 1/2 of 1% of sales. Total selling expenses for the month of April are
a. $159,100
b. $242,600
c. $186,000
d. $182,100
90.
Stephanie Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units,
estimated beginning inventory is 108,000 units, and desired ending inventory is 90,000 units. The quantities of
direct
materials expected to be used for each unit of finished product are given below.
Material A 0.50 lb. per unit @ $0.70 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound
The dollar amount of material A used in production during the year is
a. $217,700
b. $528,700
c. $311,000
d. $224,600
91.
For March, sales revenue is $1,000,000; sales commissions are 5% of sales; the sales manager’s salary is $80,000;
advertising expenses are $65,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are
$2,100 plus 1% of sales. Total selling expenses for the month of March are
a. $217,100
b. $205,000
c. $207,100
d. $142,100
Chapter 21(6): Budgeting
Mandy Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units,
estimated
beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of
direct materials
expected to be used for each unit of finished product are given below.
Material A 0.50 lb. per unit @ $0.60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound
92.
The dollar amount of Material B used in production during the year is
a. $1,057,400
b. $1,193,400
c. $1,026,800
d. $1,224,000
93.
The dollar amount of Material C used in production during the year is
a. $746,400
b. $724,800
c. $824,400
d. $758,160
94.
Production and sales estimates for March for the Robin Co. are as follows:
Estimated inventory (units), March 1
18,000
Desired inventory (unit), March 31
21,600
Expected sales volume (units):
Area M
7,000
Area L
8,000
Area O
9,000
Unit sales price
$15
The number of units expected to be manufactured in March is
a. 24,000
b. 27,000
c. 27,600
d. 21,600
95.
Production and sales estimates for May for the Cardinal Co. are as follows:
Estimated inventory (units), May 1
19,500
Desired inventory (units), May 31
19,300
Expected sales volume (units):
Area W
6,000
Area X
7,000
Area Y
8,000
Unit sales price
$20
The number of units expected to be sold in May is
a. 21,000
b. 3,700
c. 22,800
d. 18,300
96.
Production and sales estimates for June are as follows:
20,000
19,000
7,000
4,000
5,500
$20
The number of units expected to be manufactured in June is
a. 11,000
b. 12,500
c. 15,500
d. 13,500
97.
Production and sales estimates for June are as follows:
8,000
9,000
4,000
10,000
6,000
$25
The budgeted total sales for June is
a. $225,000
b. $500,000
c. $525,000
d. $200,000
98.
If the expected sales volume for the current period is 8,000 units, the desired ending inventory is 1,400 units, and
the
beginning inventory is 1,200 units, the number of units set forth in the production budget, representing total
production for the current period, is
a. 10,600
b. 8,200
c. 66,000
d. 6,800
Production estimates for August are as follows:
Estimated inventory (units), August 1 12,000
Desired inventory (units), August 31 9,000
Expected sales volume (units), August 75,000
For each unit produced, the direct materials requirements are as follows:
Material A ($5 per lb.) 3 lbs.
Material B ($18 per lb.) 1/2 lb.
99.
The number of pounds of Materials A and B required for August production is
a. 216,000 lbs. of A; 72,000 lbs. of B
b. 216,000 lbs. of A; 36,000 lbs. of B
c. 225,000 lbs. of A; 37,500 lbs. of B
d. 234,000 lbs. of A; 39,000 lbs. of B
100.
The total direct materials purchases (assuming no beginning or ending inventory of material) of Materials A and
B
required for August production is
a. $1,080,000 for A; $1,296,000 for B
b. $1,080,000 for A; $648,000 for B
c. $1,125,000 for A; $675,000 for B
d. $1,170,000 for A; $702,000 for B
101.
Based on the following production and sales estimates for May, determine the number of units expected to
be
manufactured in May.
30,000
25,000
20,000
40,000
20,000
$10
a. 85,000
b. 80,000
c. 75,000
d. 105,000
102.
Which of the following budgets provides the starting point for the preparation of the direct labor cost budget?
a.
direct materials purchases budget
b.
cash budget
c.
production budget
d.
sales budget
103.
Production and sales estimates for April are as follows:
Estimated inventory (units), April
19,000
Desired inventory (units), April 30
18,000
Expected sales volume (units):
Area A
3,000
Area B
4,750
Area C
4,250
Unit sales price
$20
The number of units expected to be manufactured in April is
a. 11,000
b. 9,500
c. 12,000
d. 13,000
104.
Production and sales estimates for April are as follows:
Estimated inventory (units), April 1
9,000
Desired inventory (units), April 30
8,000
Expected sales volume (units):
Area A
3,500
Area B
4,750
Area C
4,250
Unit sales price
$20
The budgeted total sales for April is
a. $200,000
b. $230,000
c. $270,000
d. $250,000
105.
If the expected sales volume for the current period is 7,000 units, the desired ending inventory is 400 units, and
the
beginning inventory is 400 units, the number of units set forth in the production budget, representing total
production
for the current period, is
a. 6,700
b. 7,400
c. 7,100
d. 7,000
Chapter 21(6): Budgeting
Production estimates for July are as follows:
Estimated inventory (units), July 1 8,500
Desired inventory (units), July 31 10,500
Expected sales volume (units), July 76,000
For each unit produced, the direct materials requirements are as follows:
Direct material A ($5 per lb.) 3 lbs.
Direct material B ($18 per lb.) 1/2 lb.
106.
The number of pounds of materials A and B required for July production is
a. 216,000 lbs. of A; 36,000 lbs. of B
b. 216,000 lbs. of A; 72,000 lbs. of B
c. 234,000 lbs. of A; 39,000 lbs. of B
d. 225,000 lbs. of A; 37,500 lbs. of B
107.
The total direct materials purchases of materials A and B (assuming no beginning or ending material
inventory)
required for July production is
a. $1,080,000 for A; $648,000 for B
b. $1,080,000 for A; $1,296,000 for B
c. $1,170,000 for A; $702,000 for B
d. $1,125,000 for A; $675,000 for B
Chapter 21(6): Budgeting
The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the
next
four months were: January – 200,000 units; February – 180,000 units; March – 210,000 units; and April –
230,000
units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the
following
month’s sales.
108.
What is the budgeted unit of production for January?
a. 236,000
b. 181,000
c. 200,000
d. 219,000
109.
What is the budgeted unit of production for February?
a. 186,000
b. 181,000
c. 222,000
d. 174,000
110.
What is the budgeted unit of production for March?
a. 256,000
b. 206,000
c. 214,000
d. 298,000
111.
What is the budgeted unit of inventory for March 31?
a. 46,000
b. 36,000
c.
cannot be determined from the data given
d.
42,000
112.
Willow Valley’s April sales forecast projects that 7,000 units will sell at a price of $10.50 per unit. The desired
ending inventory is 30% higher than the beginning inventory, which were 1,000 units. Budgeted production in
April
would be
a.
8,000 units
b.
7,000 units
c.
7,300 units
d.
6,300 units