The budget is developed within the framework of a sales forecast.
accounting
Description
BUS ADM 202
(Managerial Accounting) – Exam 3 Review Sheet
Ch 09 Concept review
1. The
budget is developed within the framework of a sales forecast.
2. The
direct materials budget must be completed before the production budget because
the quantity of materials available for production must be known.
3. The
financing section of a cash budget shows expected borrowings and the repayment
of borrowed funds plus interest.
4. A
budget can be used for evaluating performance.
5. Financial
budgets must be prepared before the operating budgets can be prepared.
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Chapter
9 Lecture example Grayman Inc is preparing its annual budgets for the
year ending 12/31/19. Relevant data
pertaining to sales and production follow. Sales
budget: Sales for 2018 were
160,000 units. Sales volume for
2019 is expected to be 12.5% higher than that of 2018. Sales volume for 2020
is expected to be 10% higher than that of 2019. Quarterly sales are
20%, 25%, 40%, and 15% of the annual total. The
sales price is expected to be $30 for the first three quarters of 2019 and 10%
higher for the last quarter. Production budget: Beginning
finished goods units (1/1/19): 25% of expected 1st Quarter sales
for 2019. Desired
ending finished goods units (12/31/19): 25% of expected 1st
Quarter sales for 2020. Direct Materials budget: Direct materials
required per unit: 3 pounds Desired ending
direct materials: 20,000 pounds Beginning direct
materials: 10,000 pounds Cost per pound: $3 Direct Labor budget: Direct labor hours
per unit: .75 hours Direct labor rate
per hour: $10 per hour Other budget data: Variable
manufacturing overhead: $2.50 per unit. Fixed manufacturing
overhead: $1.00 per unit. Selling expenses:
$440,000 Administrative
expenses: $380,000 Income tax rate:
30% Instructions: 1.
Prepare a 2019 sales budget by quarter and in total. 2.
Prepare an annual Production budget. 3.
Prepare an annual Direct materials budget. 4.
Prepare an annual Direct labor budget. 5.
Prepare a 2019 budgeted Income Statement. |
Ch 10 Concept Review
1. A flexible budget report will show both actual and budget
cost based on the actual activity level achieved.
2. Cost centers, profit centers, and investment centers can all
be classified as responsibility centers.
3. A cost center incurs costs and generates revenues and cost
center managers are evaluated on the profitability of their centers.
4. Most direct fixed costs are not controllable by the profit
center manager.
5. Management by exception means that management will investigate areas
where actual results differ from planned results if the items are material and
controllable.
Chapter
10 Lecture Example
Cost
Center Exercise
Capital
Manufacturing Company’s overhead budget for the first quarter contained the
following data:
Budgeted Production 1,000 Units
Budgeted Variable Costs
Indirect Materials $12,000
Indirect Labor
4,000
Utilities
3,000
Maintenance
5,000
Budgeted Fixed Costs
Supervisor's Salary $21,000
Depreciation 5,000
Property taxes
3,000
Actual Production
1,120 Units
Actual Variable costs
Indirect Materials $13,100
Indirect Labor
4,480
Utilities
3,400
Maintenance
6,600
Actual Fixed Costs
Supervisor's Salary $21,000
Depreciation
5,000
Property taxes
3,100
Instructions
1. Prepare a Static budget report for the first
quarter.
2. Prepare
a Flexible budget report for the first quarter.
3. Assuming
the company uses management by exception, which items should be investigated?
Profit Center Exercise
Atlantic
Division, a profit center of Hurricane Weather Company, reported the following
actual results
data for the first quarter of the current year:
Sales $2,000,000
Variable costs 1,220,000
Controllable direct fixed
costs 200,000
Noncontrollable direct fixed
costs 150,000
Allocated fixed costs 42,000
The budget data
for the first quarter are
Sales $2,100,000
Variable costs 1,260,000
Controllable direct fixed
costs 205,000
Noncontrollable direct fixed
costs 160,000
Allocated fixed costs 40,000
Instructions
a. Prepare a responsibility report for the
manager of the Atlantic Division.
b. How would the responsibility report differ if
the division was an investment center?
Investment Center Exercise
The
Candle Division of Midwest Wax Company reported the following results for the
current year
Sales $800,000
Variable costs 420,000
Controllable fixed costs 100,000
Average operating assets 4,000,000
Management
is considering the following independent alternative courses of action in the
upcoming year in order to maximize the return on investment for the division.
1. Reduce
controllable fixed costs by 50% with no change in sales or variable costs
2. Reduce
average operating assets by 30% with no change in controllable margin
3. Increase
sales $200,000 with no change in the contribution margin percentage
