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Exam 8: Activity-Based Costing: a Tool to Aid Decision Making

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Question 21

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The budget method that maintains a constant twelve-month planning horizon by adding a new month on the end as the current month is completed is called:

A) an operating budget.
B) a capital budget.
C) a continuous budget.
D) a master budget.

E) B) and C)
F) A) and B)

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Question 22

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A benefit of self-imposed budgeting is that it may allow lower-level managers to create budgetary slack.

A) True
B) False

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Question 23

Multiple Choice

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Cartier Inc.bases its manufacturing overhead budget on budgeted direct labor-hours.The variable overhead rate is $5.80 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $39,930 per month,which includes depreciation of $12,870.All other fixed manufacturing overhead costs represent current cash flows.The direct labor budget indicates that 3,300 direct labor-hours will be required in April. The company recomputes its predetermined overhead rate every month.The predetermined overhead rate for April should be:

Laurey Inc.is working on its cash budget for May.The budgeted beginning cash balance is $45,000.Budgeted cash receipts total $129,000 and budgeted cash disbursements total $124,000.The desired ending cash balance is $60,000.To attain its desired ending cash balance for May,the company needs to borrow:

Vandel Inc.bases its selling and administrative expense budget on budgeted unit sales.The sales budget shows 6,600 units are planned to be sold in April.The variable selling and administrative expense is $9.70 per unit.The budgeted fixed selling and administrative expense is $127,380 per month,which includes depreciation of $8,580 per month.The remainder of the fixed selling and administrative expense represents current cash flows.The cash disbursements for selling and administrative expenses on the April selling and administrative expense budget should be:

The Covey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year.The budgeted variable manufacturing overhead rate is $4.00 per direct labor-hour;the budgeted fixed manufacturing overhead is $64,000 per month,of which $18,000 is factory depreciation. If the budgeted direct labor time for December is 4,000 hours,then the average budgeted manufacturing overhead per direct labor-hour is:

The selling and administrative expense budget of Gullette Corporation is based on the number of units sold,which are budgeted to be 2,700 units in April.The variable selling and administrative expense is $1.90 per unit.The budgeted fixed selling and administrative expense is $35,640 per month,which includes depreciation of $7,290.The remainder of the fixed selling and administrative expense represents current cash flows. Required: Prepare the selling and administrative expense budget for April.

A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels.

Mate Boomerang Corporation manufactures and sells plastic boomerangs.Expected boomerang sales (in units)for the upcoming months are as follows: Mate likes to maintain a finished goods inventory equal to 10% of the next month's estimated sales.Seven ounces of plastic resin are needed to produce every boomerang.Mate likes to have enough plastic resin on hand at the end of the month to cover 25% of the next month's production requirements. Required: How many ounces of plastic resin should Mate plan on purchasing during the month of October?

Dilbert Farm Supply is located in a small town in the rural west.Data regarding the store's operations follow: o Sales are budgeted at $260,000 for November,$230,000 for December,and $210,000 for January. O Collections are expected to be 80% in the month of sale,19% in the month following the sale,and 1% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold.Payment for merchandise is made in the month following the purchase. O Other monthly expenses to be paid in cash are $20,300. O Monthly depreciation is $20,000. O Ignore taxes. Expected cash collections in December are:

The Adams Corporation,a merchandising firm,has budgeted its activity for November according to the following information: • Sales at $450,000,all for cash. • Merchandise inventory on October 31 was $200,000. • The cash balance November 1 was $18,000. • Selling and administrative expenses are budgeted at $60,000 for November and are paid for in cash. • Budgeted depreciation for November is $25,000. • The planned merchandise inventory on November 30 is $230,000. • The cost of goods sold is 70% of the selling price. • All purchases are paid for in cash. • There is no interest expense or income tax expense. The budgeted cash disbursements for November are:

The Gerald Corporation makes and sells a single product called a Clop.Each Clop requires 1.1 direct labor-hours at $8.20 per direct labor-hour.The direct labor workforce is fully adjusted each month to the required workload.The company is preparing a Direct Labor Budget for the first quarter of the year. If the company has budgeted to produce 20,000 Clops in January,then the budgeted direct labor cost for January is:

The Prattle Corporation makes and sells only one product called a Deb.The company is in the process of preparing its Selling and Administrative Expense Budget for next year.The following budget data are available: All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the company has budgeted to sell 16,000 Debs in February,then the total budgeted fixed selling and administrative expenses for February is:

Cashan Corporation makes and sells a product called a Miniwarp.One Miniwarp requires 1.5 kilograms of the raw material Jurislon.Budgeted production of Miniwarps for the next five months is as follows: The company wants to maintain monthly ending inventories of Jurislon equal to 30% of the following month's production needs.On July 31,this requirement was not met since only 10,400 kilograms of Jurislon were on hand.The cost of Jurislon is $4.00 per kilogram.The company wants to prepare a Direct Materials Purchase Budget for the next five months. The desired ending inventory of Jurislon for September is:

Rehmer Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.61 direct labor-hours.The direct labor rate is $8.90 per direct labor-hour.The production budget calls for producing 2,600 units in June and 2,100 units in July. Required: Construct the direct labor budget for the next two months,assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month.

Planning involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.

Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below: Two pounds of raw materials are required to produce one unit of product.The company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs.The company is expected to have 30,000 pounds of raw materials on hand on January 1.Budgeted production for February should be:

Morie Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.75 direct labor-hours.The direct labor rate is $8.10 per direct labor-hour.The production budget calls for producing 2,000 units in March and 2,300 units in April.The company guarantees its direct labor workers a 40-hour paid work week.With the number of workers currently employed,that means that the company is committed to paying its direct labor work force for at least 1,760 hours in total each month even if there is not enough work to keep them busy.What would be the total combined direct labor cost for the two months?

On November 1,Barnes Corporation has 8,000 units of Product A on hand.During the month,the company plans to sell 30,000 units of Product A,and plans to have 6,500 units on hand at end of the month.How many units of Product A must be produced during the month?

The Prattle Corporation makes and sells only one product called a Deb.The company is in the process of preparing its Selling and Administrative Expense Budget for next year.The following budget data are available: All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the budgeted cash disbursements for selling and administrative expenses for April total $144,390,then how many Debs does the company plan to sell in April?