395
CHAPTER 13
BUDGETING AND STANDARD COSTS
CLASS DISCUSSION QUESTIONS
1. The three major objectives of budgeting are
(1) to establish specific goals for future oper-
ations, (2) to direct and coordinate plans to
5. A budget that is set too loosely may fail to moti-
vate managers and employees to perform effi-
7. Zero-based budgeting is used when an or-
8. A static budget is most appropriate in situations
where costs are not variable to an underlying
activity level. As a result, it is reasonable to
budget preparation when large quantities of
data need to be processed. In addition, by
using computerized simulation models, man-
ries available to fill sales orders.
12. Purchases of direct materials should be closely
planning so that a cash shortage does
curities or used to reduce loans.
15. The schedule of collections from sales is
used to determine the amount of cash col-
396
17. Standard costs assist in controlling costs
and in motivating managers and employees
20. There is no set time period for the revision of
standards. They should be revised when
22. a. The two variances in direct materials
cost are:
23. The offsetting variances might have been
caused by the purchase of low-priced, infe-
b. The direct labor cost variance is usually
under the control of the production
26. Standards can be appropriate in repetitive
397
EXERCISES
E13–1
A B C D
1 FULLER ENTERPRISES
2 Flexible Selling and Administrative Expenses Budget
3 For the Month Ending July 31
4 Total sales $600,000 $800,000 $1,000,000
5 Variable cost:
398
E13–2
a.
A B C D
1 LEI COMPANY
2 Machining Department
3 For the Three Months Ending March 31
4 January February March
5 Units of production 75,000 85,000 90,000
11
12 Supporting calculations:
13 Units of production 75,000 85,000 90,000
b.
January February March
Actual cost ………………………………….. $ 1,200,000 $ 1,356,000 $ 1,425,000
399
E13–3
A B C D
1 STEELCASE INC.
2 Assembly Department
3 Month Ending August 31
4 (Assumed Data)
5 Units of production 10,000 25,000 40,000
6
7 Variable cost:
400
E13–4
a.
A B C D
1 ULTIMATE AUDIO COMPANY
2 Sales Budget
3 For the Month Ending April 30
4 Product and Area
Unit Sales
Volume
Unit Selling
Price Total Sales
5 Model U500:
b.
A B C
1 ULTIMATE AUDIO COMPANY
2 Production Budget
3 For the Month Ending June 30
4 Model Units
5 U500 S1000
401
E13–5
A B C D
1 DAY & SPIETH, CPAs
2 Professional Fees Earned Budget
3 For the Year Ending March 31, 20Y6
4 Billable Hourly Total
Hours Rate Revenue
5 Audit Department:
6 Staff 50,000 $180 $ 9,000,000
E13–6
A B C
1 DAY & SPIETH, CPAs
2 Professional Labor Cost Budget
3 For the Year Ending March 31, 20Y6
4 Staff Partners
5 Audit Department hours 50,000 10,000
402
E13–7
A B C D E
1 ZIPPY’S FROZEN PIZZA INC.
2 Direct Materials Purchases Budget
3 For the Month Ending September 30
4 Dough Tomato Cheese Total
5 Units required for production:
6 12″ pizza 5,400
1
2,700
2
4,500
3
4
5
6
1
2
3
4
5
6
403
E13–8
A B C D
1 COCA-COLA ENTERPRISES—DALLAS PLANT
2 Direct Materials Purchases Budget
3 For the Month Ending October 31
4 (Assumed Data)
5 Concentrate 2-Liter Bottles Carbonated Water
6 Materials required for production:
* Coke® Sprite®
Estimated two-liter bottles of production ……………. 1,500,000 800,000
E13–9
A B C
1 DONNER RACKET COMPANY
2 Direct Labor Cost Budget
3 For the Month Ending March 31
4 Forming Assembly
Department Department
5 Hours required for production:
6 Junior 3,600
1
10,800
2
3
4
1
404
E13–10
a.
A B C
1 LEVI STRAUSS & CO.
2 Production Budget
3 May
4 (Assumed Data)
5 Dockers® 501 Jeans®
b.
A B C D E F
1 LEVI STRAUSS & CO.
2 Direct Labor Cost Budget
3 May
4 (Assumed Data)
5 Inseam Outerseam Pockets Zipper Total
6 Dockers® 375,000
1
450,000
2
150,000
3
75,000
4
5
6
7
8
12
13
1
(125,000 ÷ 5 pairs) × 15 min. = 375,000 min.
2
3
4
5
6
7
8