ACCT 2521 Chapter 7 Learn Smartt PDF

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ACCT 2521 Chapter 7 LearnSmart 1. Budgets: communicate managements plan throughout the organization 2. A plan for acquiring and using resources over a specified period of time is referred to as: the budget 3. Developing goals and preparing various budgets to achieve those goals is part of the __ process: planning 4. Control involves developing goals and preparing various budgets to achieve those goals: false 5. What is the underlying idea behind responsibility accounting?: someone must be held responsible for each cost or the cost will grow out of control 6. The idea that a manager should be held accountable for only the items the manager can actually control is the basis of: responsibility accounting 7. A budget prepared with the full cooperation of management at all levels is a __ budget: self imposed; participative 8. When a manager creates a budget that is too easy to attain, __ occurs: budgetary slack 9. The purpose of a budget should be to: establish goals, motivate people, coordinate efforts 10. An essential management tool that communicates management’s plans throughout the organization, allocates resources, and coordinates activities is called the __ budget: master 11. The first step in the budgeting process is preparing the __ budget: sales

12. In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the MOH budget?: production 13. In a manufacturing company, the __ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory: production 14. ABC, Inc.’s expected sales for the first six month of the year are Month Expected unit sales January 12,000 February 15,000 March 16,000 April 20,000 May 22,000 June 25,000 If desired ending inventory is 25% of next month’s sales, the number of units to be produced in March is: $17,000 March sales 16,000 + ending inventory (25% of April sales) 5,000 – beginning inventory (25% of March sales) 4,000 = 17,000 15. A budget that is prepared with the full cooperating of managers at all levels of self-imposed or __ budget: participative 16. Given budget sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is: 13,000 units 10,000 + 5,000 – 2,000 = 13,000 17. To prepare a budgeted balance sheet as of December 31, 2012 data is need from the: balance sheet as of December 31, 2011 18. In a manufacturing company, the __ __ budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories: direct materials 19. The cash budget includes four major sections: receipts, disbursements, the cash excess or deficiency and: financing

20. Which of the following budgets are needed to calculate unit product costs?:  Direct labor budget  Direct materials budget  Manufacturing overhead budget 21. Variable selling and administrative expenses are calculated by multiplying the budgeted units __ by the variable selling and administrative expense per unit: sold 22. Which of the following budgets are directly based on info from the sales budget?:  Selling and administrative expense budget  Production budget 23. Which of the following budgets shows the company’s planned profit and serves as a benchmark against which subsequent company performance can be measured?: budgeted income statement 24. To calculate raw materials to be purchased on the direct materials budget, add the desired __ inventory of raw materials to the raw materials needed based on the __ budget and __ the beginning inventory of raw materials to arrive at raw materials to be purchased: Ending, production, less 25. What is usually the major source of receipts in the receipts section of the cash budget?: sales 26. Collections on credit sales made to customers in prior periods plus collections on sales made in the current budget period equals expected __ collections: cash 27. The number of working hours required to satisfy the production budget is shown on the __ __ budget: direct labor 28. The first line of the direct labor budget consists of the budgeted units expected to be __ during the first period: produced 29. Budgeted expenses for areas other than manufacturing are shown on the __ budget: selling and administrative

30. Davidson Corp. master budget shows expected direct labor cost of $90,000 for the month of May. During May, the company’s expected sales equal 12,000 units and expected production is 15,000 units. If each unit requires ½ hour of direct labor, the budgeted direct labor rate is $ __ per hour: $12 Budgeted production = 15,000 units x ½ hour or 7,500 required labor hours. $90,000/7,500 = $12 per hour 31. Highly achievable budget targets:  May generate greater management commitment to the budget  May help build manager confidence  Are used in most companies 32. All costs of production other than direct materials and direct labor are shown on the __ __ budget: manufacturing overhead 33.

Master budget schedules:  Are based on estimates and assumptions  Answer several key questions for a company

34. Required borrowings on a cash budget is calculated by: adding the desired ending cash balance to the amount of the cash deficiency 35. Which of the following is needed to prepare a sales budget?: the budgeted number of units to be sold 36. The cost of unsold units is computed on the __ budget: ending finished goods inventory 37. Risks of not knowing in advance how much labor time will be needed throughout the budget period includes:  Erratic layoffs  Labor shortages  Low employee morale 38. Developing goals for the budget is __, while __ involves steps taken to ensure that steps towards meeting the goal are being followed: planning, control

39. A manager cannot complain that the budget was unrealistic and impossible to meet when a __ - __ budget is in place: self imposed 40. The beginning raw materials inventory for the year is the same as the beginning raw materials for which quarter: first 41. The most common significant noncash MOH cost in most companies is: depreciation 42. What would happen if a company penalized individuals for not meeting budgeted goals?:  Individuals would become too focused on meeting goals  Individuals would add too much budgetary slack 43. Which of the following types of budgets keep managers focused one year ahead, so they do not become too narrowly focused on short-term results?: continuous, perpetual 44. When a company does not use self imposed budgeting, top managers initiate the budgeting process by issuing profit targets and direct __ - level managers to prepare budgets that meet those targets: low 45. Using budget assumptions when preparing the master budget: makes it easier to answer “what if” questions...