ACCT434 Advanced Cost Management: Week 2 Master Budget Flexible Budgets (Version 4)

Reminder: There are several versions of this week’s questions, please make sure you have reviewed and compared our questions with your questions.

ACCT434 Advanced Cost Management
Week 2 Master Budget Flexible Budgets (Version 4)

1. (TCO 2) If initial budgets prove unacceptable, planners achieve the MOST benefit from (Points : 3)
planning again in light of feedback and current conditions.
deciding not to budget this year.
accepting an unbalanced budget.
using last year's budget.

2. (TCO 2) The time coverage of a budget should be (Points : 3)
shorter rather than longer.
cover design through manufacture and sale of the product.
guided by the purpose of the budget.
one year.

3. (TCO 2) The operating budget process generally concludes with the preparation of the (Points : 3)
research and development budget.
budgeted income statement.
distribution budget.
production budget.

4. (TCO 2) Flexible budgets (Points : 3)
accommodate changes in the inflation rate.
accommodate changes in activity levels.
are used to evaluate capacity utilization.
are static budgets that have been revised for changes in prices.

5. (TCO 2) An unfavorable variance indicates that (Points : 3)
actual costs are less than budgeted costs.
actual revenues exceed budgeted revenues.
the actual amount decreased operating income relative to the budgeted amount.
All of the above

6. (TCO 2) When standards are used to develop a budget (Points : 3)
flexible-budget amounts are difficult to determine.
information is available at a low cost.
past inefficiencies are excluded.
benchmarking must also be used.

7. (TCO 2) Fixed overhead costs include (Points : 3)
the cost of sales commissions.
property taxes paid on plant facilities.
indirect materials.
energy costs.

8. (TCO 2) Katie Enterprises reports the year-end information from 20X8 as follows: Sales (70,000 units) $560,000; Cost of goods sold 210,000; Gross margin 350,000; Operating expenses 200,000; Operating income $150,000. Katie is developing the 20X2 budget. In 20X2, the company would like to increase selling prices by 4%, and as a result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain constant. Assume that COGS is a variable cost and that operating expenses are a fixed cost.

What is budgeted cost of goods sold for 20X2? (Points : 3)

9. (TCO 2) Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 20x2, through June 30, 20x3.
July 1, 20X2 June 30, 20X3
Raw material1 40,000 10,000
Work in process 8,000 8,000
Finished goods 30,000 5,000
1 Three (3) units of raw material are needed to produce each unit of finished product.

If Hester Company plans to sell 600,000 units during the 20x2-20x3 fiscal year, the number of units it would have to manufacture during the year would be
(Points : 3)

10. (TCO 2) Information pertaining to Brenton Corporation's sales revenue is presented in the following table:
February March April
Cash Sales $160,000 $150,000 $120,000
Credit Sales 300,000 400,000 280,000
Total Sales $460,000 $550,000 $400,000
Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month are 70% of the next month's projected total sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.

Brenton's budgeted total cash receipts in April are (Points : 3)
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