ACCT 2302 Chapter 8 Smart Book PDF

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ACCT 2302 CHAPTER 8 SMARTBOOK A comprehensive set of budgets that covers all phases of planned activities for a specific period is called the (MASTER) budget. A continuous or (PERPETUAL/ROLLING) budget keeps managers focused at least one year ahead. A detailed document that identifies resources and expenditures that will be required over a limited time (typically a year) is a(n) __________. BUDGET A future-oriented version of the statement of cash flows is the (CASH BUDGET) A pro forma budgeted balance sheet is developed from the (FINANCIAL) budgets. Advantages of budgeting include __________. PROVIDING LEAD TIME TO SOLVE POTENTIAL PROBLEMS; FORCING MANAGERS TO THINK ABOUT AND PLAN FOR THE FUTURE; PROVIDING BENCHMARKS FOR EVALUATING PERFORMANCE; PROMOTING COOPERATION AND COORDINATION AMONG DIFFERENT AREAS WITHIN THE ORGANIZATION All costs of production other than direct materials and direct labor are shown on the (MANUFACTURING OVERHEAD) budget. Another budget period is automatically added to the budget as one period passes when using a(n) (CONTINUOUS/PERPETUAL) or rolling budget. Budgetary slack occurs when a manager submits a budget that is __________. TOO EASY TO ATTAIN Budgeted cost of goods sold is based on __________. EXPECTED SALES Budgeted expenses for costs related to selling the product and managing the business are shown on the __________ budget. SELLING AND ADMINISTRATIVE Budgeting is an important part of the (PLANNING AND CONTROL) cycle. Budgets __________. COMMUNICATE MANAGEMENT’S PLAN THROUGHOUT THE ORGANIZATION Budgets are used for two distinct purposes: __________ and __________. The first of these purposes relates to developing goals and preparing various budgets, which the second involves comparing actual results to the budget. PLANNING; CONTROLLING

Budgets that are most likely to motivate employees __________. ARE TIGHT BUT ATTAINABLE Collections on credit sales made to customers in prior period(s) plus collections on sales made in the current budget period equal __________. CASH RECEIPTS Company objectives are translated into financial terms in a(n) (BUDGET) Each component of a(n) (MASTER) budget is based on or provides input for another component. Employees throughout the organization have input into the budget-setting process when (PARTICIPATIVE/BOTTOM-UP) budgeting is used. Financial budgets __________. IMPACT THE BUDGETED BALANCE SHEET; INCLUDE THE CAPITAL EXPENDITURES BUDGET; INCLUDE THE CASH BUDGET Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is __________ units. 13,000 Long-term objectives are goals __________. MANAGERS WANT TO ACHIEVE IN 5 TO 10 YEARS Managers must try to find the “just-right” level of difficulty in setting budgetary goals so they __________. HAVE MOTIVATING EFFECTS ON EMPLOYEE BEHAVIOR Managers prepare a selling and administrative budget based on the (SALES) budget. Planning starts with managers’ __________. STRATEGIC PLAN S&P’s direct material cost is $6.50 per unit. The direct labor rate is $30 per hour and each unit takes ½ hour to produce. Variable manufacturing overhead is $2.75 per unit and total budgeted fixed overhead is $63,000. A sales commission of $5.00 is paid on each unit. If S&P expects to produce 9,000 units and sell 7,000 units, the total budgeted cost of goods sold for the year is __________. $218,750 Setting goals and objectives for the future is done during the (PLANNING) phase. Short-term objectives __________. NEED TO BE ACHIEVED IN ONE YEAR OR LESS; ARE AN IMPORTANT COMPONENT OF LONG-TERM OBJECTIVES

Sperling Company’s master budget shows expected sales of 10,000 units and expected production of 11,000 units for the month of March. Each unit requires ½ hour of direct labor. The direct labor rate is $15.00 per hour. Calculate the expected total direct labor cost for the month of March. $82,500 The __________ budget does not rely on the production budget. SELLING AND ADMINISTRATIVE The __________ budget is prepared first when creating the master budget. SALES The __________ budget shows the number of units needed to satisfy sales and provide the desired inventory. PRODUCTION The amount of goods for resale to be purchased from suppliers during the period shown on the (MERCHANDISE PURCHASES) budget. The budget that shows the budgeted expenses for areas other than manufacturing is the (SELLING AND ADMINISTRATIVE) expense budget. The budgeted (INCOME STATEMENT) shows a company’s planned profit. The budgeted income statement is formed from the combined __________ budgets. OPERATING The calculation of unit product cost requires information from the __________ budget. MANUFACTURING OVERHEAD The cash budget is one of the primary (FINANCIAL) budgets that is prepared. The direct materials budget directly relies on the __________ budget. PRODUCTION The direct materials budget directly relies on the __________ budget. PRODUCTION The direct materials purchases, direct labor, and manufacturing overhead budgets are all based on the (PRODUCTION) budget. The direct materials purchases, direct labor, and manufacturing overhead budgets are all based on the (PRODUCTION) budget. The entire budget must be created from scratch every period when using __________ budgeting. ZERO-BASED

The final step in the master budgeting process is to prepare the __________. BUDGETED BALANCE SHEET The first step in the process of preparing the master budget is the (SALES) budget or forecast. The manufacturing overhead budget includes __________. INDIRECT MANUFACTURING COSTS; DEPRECIATION ON PRODUCTION EQUIPMENT The number of units that must be made to satisfy sales needs and to provide for the desired ending inventory is shown on the (PRODUCTION) budget. The operating budgets feed directly into the (CASH BUDGET), which then feeds directly into the budgeted balance sheet. The production budget is based upon the (SALES) budget. The sales, production, and purchases budgets are all (OPERATING) budgets. The starting point of the planning process is management’s (STRATEGIC PLAN) or vision for the organization. The three sections of the cash budget are (COLLECTIONS, DISBURSEMENTS), and financing. To calculate the cash balance before financing on the cash budget, add the __________. BEGINNING CASH BALANCE TO THE BUDGETED CASH RECEIPTS AND DEDUCT BUDGETED CASH PAYMENTS To calculate the direct labor requirement for each quarter __________. MULTIPLY THE NUMBER OF DIRECT LABOR HOURS REQUIRED PER UNIT TIMES THE NUMBER OF UNITS TO BE PRODUCED Total sales on the sales budget equal budgeted unit sales multiplied by __________. BUDGETED SALES PRICE PER UNIT True or false: Budgeting is more important in manufacturing firms than in other types of businesses. FALSE True or false: Controlling involves developing goals and preparing various budgets to achieve those goals. FALSE True or false: The sales budget is based on the production budget. FALSE True or false: Using a participative approach to budgeting is less likely to motivate employees than using a top-down approach. FALSE Under (ZERO-BASED) budgeting managers must justify their budget each year by starting from scratch.

What number does the raw materials budget take directly from the production budget? BUDGETED PRODUCTION When a manager creates a budget that understates expected revenues or overstates expected expenses, (BUDGETARY SLACK) occurs. When an organization uses a top-down approach to budgeting, __________. TOP MANAGEMENT SETS THE BUDGET; THE BUDGET IS IMPOSED ON LOWER LEVELS OF THE ORGANIZATION When management sets the budget and imposes it on employees through out the organization, a (TOP-DOWN) approach is being followed. Which of the following budgets are needed to calculate unit product costs? DIRECT LABOR BUDGET; DIRECT MATERIALS BUDGET; MANUFACTURING OVERHEAD BUDGET Which of the following budgets is not used to calculate the budgeted manufacturing cost per unit? SELLING AND ADMINISTRATIVE Which of the following budgets shows the company’s planned profit? BUDGETED INCOME STATEMENT Which of the following is needed to prepare a sales budget? THE BUDGETED NUMBER OF UNITS TO BE SOLD Which of the following is not included on a budgeted cash payments budget? PRODUCTION IN UNITS Which of the following provides critical information managers need to manage daily operations? CASH BUDGET...