Question 1

Budget Involves

Accepted Answer

1. Planning   2. Directing  3. Controlling  Budgets should be established to avoid human behavior problems

Question 2

Planning

Accepted Answer

Involves setting goals to guide decisions and help motivate employees. Discussing when/where operations can be improved.

Question 3

Directing

Accepted Answer

Involving decisions and actions to achieve budgeted goals.

Question 4

Controlling

Accepted Answer

Involving comparing actual performance against the budgeted goals. Such comparisons provide feedback to managers and employees about their performance.

Question 5

Responsibility center

Accepted Answer

Budgeting unit of a company

Question 6

Budget System

Accepted Answer

Designed to plan and control a business

Question 7

Budgeting goals

Accepted Answer

Are set too tight, which are very hard or impossible to achieve.     Are set too loose, which are very easy to achieve.    Conflict with the objectives of the company and employees.

Question 8

Continuous Budgeting

Accepted Answer

A variation of fiscal-year budgeting  1. Continually revised

Question 9

Zero-based budgeting

Accepted Answer

Requires managers to estimate sales, products and other operating data as though operations are being started for the first time   1. Fresh view of operations

Question 10

Static Budget

Accepted Answer

Expected results of a responsibility center for only one activity level.    Direct labor $  Electric Power $  Supervisor Salaries $   Total Department Costs $$$

Question 11

Disadvantage of Static Budget

Accepted Answer

They do not adjust for changes in the activity levels

Question 12

Flexible Budget

Accepted Answer

Expected results of a responsibility center for several activity levels.     L1 L2 L3  Units Production $ $ $  Variable Costs: + + +   Direct Labor $ $ $   + + +   Electric Power $ $ $   Total Variable Cost $$$ $$$ $$$  Fixed Costs:   Electric Power $ $ $    + + +   Supervisor Salaries $ $ $   Total Fixed Costs $$ $$ $$  Total Department Costs $$$$$ $$$$$ $$$$$

Question 13

What is more accurate Flexible or Static Budgets

Accepted Answer

Flexible

Question 14

Computerized Budget Systems

Accepted Answer

Spreadsheet software such as Microsoft Excel. Incorporate budget and planning software systems

Question 15

Master Budget

Accepted Answer

An integrated set of operating and financial budgets for a period of time. Yearly basis.     Operating budgets:  Sales budget   COGS budget   Production budget   Direct Materials purchases budget   Factory overhead budget  Selling and admin. expenses     Financial budgets:   Cash budget   Capital expenditures budget

Question 16

Sales budget

Accepted Answer

Begins by estimated the quantity of sales    Unit Sales Volume Unit Selling Price Total  Wallet:   East $ X $ = $    + + +   West $ X $ = $      Total $ $ =$$  Handbag:  East $ X $ = $    + + +  West $ X $ = $   Total $ $ =$$  Total Revenue from Sales $$$$

Question 17

Budgeted Revenue formula

Accepted Answer

Expected Sales Volume X Expected Unit Sales Price

Question 18

Production Budget

Accepted Answer

Estimated the # number of units to be manufactured to meet budgeted sales and desired inventory levels.  Budgeted Units Produced:   Expected units to be sold x   +  Desired units in ending inventory x    -  Estimated units in beginning inventory x   Total Units Produced x units   Wallet Handbag   Production Budget: Expected Units to be sold x x    + +  Desired ending inventory, Dec 31 x x   Total xx xx    - -   Estimated Beginning inventory x x  Total x-total x-total

Question 19

Direct Materials purchase budget

Accepted Answer

Estimates the quantities of direct materials to be purchased to support budgeted production and desired inventory levels and can be developed in 3 steps.    1. Budgeted Direct Materials required for production  Formula: Budgeted Direct materials required for production = Budgeted Production Volume X Direct Materials quantity expected per unit  2. Beginning and Ending Inventories  Formula: Materials required for production + Desired ending inventory - Estimated beginning inventory = Direct Materials quantity to be purchased   3. Budgeted Direct materials to be purchased = Direct Material quantity to be purchased X Unit Price     Wallet / Handbag  x  + (desired)  x (Total before estimated)  - (Estimated inventory)   x(subtotal)   X (Unit Price)   x (Total)

Question 20

Direct Labor Budget

Accepted Answer

Estimates the direct labor hours and related cost needed to support budgeted production. 2 steps.  1. Budgeted labor hours required for production= Budgeted Production Volume X Direct Labor Hours estimated  2. Total Direct Labor Cost= Direct labor required for production X hourly rate    Cutting Sewing Total  Hours Required for production   Wallet x x   + +   Handbag x x   Total xx xx   X X  Hourly Rate $ $   Totals $$ + $$ = $$$$

Question 21

Factory overhead budget

Accepted Answer

Estimates the cost for each item of factory overhead needed to support budgeted production.   Indirect Factory Wages   +  Supervisor salaries  +  Power and light  +  Depreciation of plant and equipment  +   Indirect Materials  +   Maintenance   +  Insurance and property taxes  Total Factory Overhead

Question 22

COGS Budget

Accepted Answer

Estimated and desired inventories for Direct Materials, Work in Process, and finished goods must be included.

Question 23

Selling and Admin Budget

Accepted Answer

The Starting point of all the sales budget. Normally supported by departmental schedules.

Question 24

Budgeted Income Statement

Accepted Answer

Summarizes the budgeted operating activities of the company. Allows management to assess the effects of estimated sales, costs, and expenses on profits for the year. The budgets that are included are Sales budget, COGS budget, and Selling and admin Expenses budget.

Question 25

Cash Budget

Accepted Answer

Estimates the expected receipts (inflows) and payments (outflows) of cash for a period of time.   Formula.: Cash receipts (inflows) = Primary source of estimated cash receipts from cash sales and collections on account.  Schedule of collections for sale Jan. Feb. March  Cash Collected from prior months sales x x x    + + +  Cash collected from current months sales x x x   Total receipts from sales on account $ $ $

Question 26

Capital Expenditures Budget

Accepted Answer

Summarizes plans for acquiring fixed assets.   2016 2017 2018  Machinery- Cutting x x x    + + +   Machinery- Sewing x x x    + +  Office Depart. (varies) x x   Total xxx xx xxx

Question 27

Standards

Accepted Answer

are performance goals.

Question 28

Standard Cost

Accepted Answer

for each of the three following product costs:    Direct materials  Direct labor  Factory overhead

Question 29

Standard cost systems

Accepted Answer

Accounting systems that use standards for product costs  enable management to determine the following:    How much a product should cost (standard cost)  How much it does cost (actual cost)

Question 30

Ideal Standard

Accepted Answer

are standards that can be achieved only under perfect operating conditions, such as no idle time, no machine breakdowns, and no materials spoilage. Such standards may have a negative impact on performance because they may be viewed by employees as unrealistic.

Question 31

Normal Standards

Accepted Answer

are standards that can be attained with reasonable effort. Such standards, which are used by most companies, allow for normal production difficulties and mistakes. When reasonable standards are used, employees focus more on cost and are more likely to put forth their best efforts.

Question 32

Disadvantages of Standard costs

Accepted Answer

Standards limit operating improvements by discouraging improvement beyond the standard.    Standards are too difficult to maintain in a dynamic manufacturing environment, resulting in \"stale standards.\"    Standards can cause employees to lose sight of the larger objectives of the organization by focusing only on efficiency improvement.    Standards can cause employees to unduly focus on their own operations to the possible harm of other operations that rely on them.

Question 33

Standard cost per unit

Accepted Answer

Standard price X Standard Quantity    Actual Costs Volume Variance Direct Materials $ - $ = $   +  Direct Labor $ - $ = $   +  Factory Overhead $ - $ = $  Total Manufacturing Costs = $$$

Question 34

Total Manufacturing Cost Variance

Accepted Answer

The difference between standard costs and total actual costs for the units produced.   Formulas:  Actual Direct Materials cost = Actual Price X Actual Quantity   Standard Direct Materials cost = Standard Price X Standard Quantity   Direct Materials cost variance = Price difference + Quantity Difference    Actual Direct Labor cost = Actual Rate X Actual time  Standard Direct Labor cost = Standard Rate X Standard time  Direct Labor cost variance = Rate Difference + Time difference

Question 35

Cost Variances

Accepted Answer

The differences between actual and standard costs

Question 36

Favorable Cost Variance

Accepted Answer

occurs when the actual cost is less than the standard cost.

Question 37

Unfavorable Cost Variance

Accepted Answer

When the actual cost exceeds the standard cost

Question 38

Total Factory Overhead Variance

Accepted Answer

Separated into controllable variance and a volume variance

Question 39

Total Direct Materials Cost Variance

Accepted Answer

Direct Materials Price Variance   Direct Materials Quantity Variance

Question 40

Total Direct Labor Cost Variance

Accepted Answer

Direct Labor Rate Variance  Direct Labor Time Variance

Question 41

Factory Overhead Rate

Accepted Answer

Budgeted Factory Overhead at Normal Capacity / Direct Labor Hours    Variable Factory Overhead + Fixed Factory Overhead Rate

Question 42

Variable Factory Overhead Rate

Accepted Answer

Budgeted Variable Overhead at Normal Capacity / Variable Direct Labor Hours

Question 43

Fixed Factory Overhead Rate

Accepted Answer

Budgeted Fixed Overhead at Normal Capacity / Fixed Direct Labor Hours

Question 44

Controllable Variance

Accepted Answer

is the difference between the actual variable overhead costs and the budgeted variable overhead for actual production.

Question 45

Variable Factory Overhead Controlled Variance

Accepted Answer

Actual Variable Factory Overhead - Budgeted Variable Factory Overhead

Question 46

Budgeted Variable Factory Overhead

Accepted Answer

Is the standard variable overhead for the actual units produced.    Standard Direct Labor Hours X Variable Factory Overhead Rate

Question 47

fixed factory overhead volume variance

Accepted Answer

Is the difference between the budgeted fixed overhead at 100% of normal capacity and the standard fixed overhead for the actual units produced.   (Standard Hours for 100% of Normal Capacity - Standard Hours for Actual Units Produced) X Fixed Factory Overhead Rate

Question 48

Unfavorable fixed factory overhead volume variance

Accepted Answer

The actual units produced is less than 100% of normal capacity; thus, the company used its fixed overhead resources (plant and equipment) less than would be expected under normal operating conditions.

Question 49

Favorable fixed factory overhead volume variance

Accepted Answer

The actual units produced is more than 100% of normal capacity; thus, the company used its fixed overhead resources (plant and equipment) more than would be expected under normal operating conditions.

Question 50

unfavorable volume variance examples

Accepted Answer

Failure to maintain an even flow of work  Machine breakdowns  Work stoppages caused by lack of materials or skilled labor  Lack of enough sales orders to keep the factory operating at normal capacity

Question 51

Total Factory Overhead Cost Variance

Accepted Answer

Total Variance Factory Overhead Controllable Variance + Total Variance Factory Overhead Volume Variance

Question 52

factory overhead cost variance report

Accepted Answer

is useful to management in controlling factory overhead costs. Budgeted and actual costs for variable and fixed factory overhead along with the related controllable and volume variances are reported by each cost element.

Question 53

factory overhead account

Accepted Answer

At the end of the period, the account is normally balanced.

Question 54

Applied Factory Overhead

Accepted Answer

Direct Labor Hour X Labor Rate Hour

Question 55

Total Factory Overhead Cost Variance

Accepted Answer

Actual Factory Overhead - Applied Factory Overhead

Question 56

Under-applied Factory Overhead

Accepted Answer

Unfavorable Total Factory Overhead Cost Variance

Question 57

Over-applied Factory Overhead

Accepted Answer

Favorable Total Factory Overhead Cost Variance

Question 58

unfavorable direct materials price variance (Using Accounts Payable)

Accepted Answer

Materials x    +  Direct Materials Price Variance x  Accounts Payable xx

Question 59

direct materials quantity variance (Using Work In Process)

Accepted Answer

Work in Process x  Direct Materials Quantity Variance x   +  Materials x

Question 60

nonfinancial performance measure

Accepted Answer

expresses performance in a measure other than dollars. For example, airlines use on-time performance, percent of bags lost, and number of customer complaints as nonfinancial performance measures. Such measures are often used to evaluate the time, quality, or quantity of a business activity.    Inventory Turnover   % on time delivery   Elapsed time between a customer order and product delivery  Customer performance rankings compared to competitors

Question 61

Process

Accepted Answer

is a sequence of activities for performing a task.

Question 62

Relationship Between a Process and Its Inputs and Outputs

Accepted Answer

Inputs ---- Activity levels ----- Outputs

Question 63

Inputs examples

Accepted Answer

# of employees   Employee experience  Employee training

Question 64

Activity level example

Accepted Answer

Counter service

Accounting 2 Exam 3 Harper College

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