Chapter09.Profit Planning, Activity-Based Budgeting, and e-Budgeting.doc

Chapter 9: Profit Planning, Activity-Based Budgeting, and e-Budgeting MULTPL! C"#C! $U!%T#&%

1. Generally Generally speaking speaking,, budgets budgets are not not used used to: to: A. identify identify a company' company'ss most most profitab profitable le product products. s. B. eval evalua uate te per perfo form rman ance ce.. C. crea create te a plan plan of of acti action on.. D. assist assist in te contr control ol of profit profit and and operatio operations. ns. !. facilitate facilitate communica communication tion and coordina coordinate te activi activities. ties. Ans"er: A #$: 1 %ype: &C . (ic of te follo"ing follo"ing coices coices correctly correctly denotes denotes managerial functions tat are commonly associated "it budgeting) *erformance Coordination *lanning !valuation of Activities A. +es +es o B. +es +es +es C. +es o o D. +es o +es !. o +es o Ans"er: B #$: 1 %ype: &C -. A formal formal budget budget progra program m "ill "ill almost almost al"ays al"ays result result in: in: A. ig iger er sale sales. s. B. more more cas cas inflo" inflo"ss tan tan cas cas outflo outflo"s. "s. C. decr decrea ease sed d epe epens nses es.. D. impr improv oved ed prof profit its. s. !. a detailed detailed plan plan agains againstt "ic "ic actual actual result resultss can be be compared. compared. Ans"er: ! #$: 1 %ype: &C,  /. A budget budget serves serves as a bencm bencmark ark agains againstt "ic: "ic: A. actual actual result resultss can can be compar compared. ed. B. alloca allocated ted resu results lts can be be compar compared. ed. C. actual actual resul results ts become become incon inconse0 se0uen uentia tial. l. D. allocated allocated results results become become incon inconse0u se0uentia ential. l. !. cas balances balances can can be be compared compared to epense epense totals. totals. Ans"er: A #$: 1 %ype: &C

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. %e compreensive compreensive set of of budgets tat serves as a company's company's overall overall financial plan is commonly kno"n as: A. an int integ egrat rated ed bud budge get. t. B. a pro2 pro2fo forma rma budg budget et.. C. a mas maste terr bud budge get. t. D. a fin finan anci cial al budg budget et.. !. a rol rolli ling ng budg budget et.. Ans"er: C #$: 1 %ype: &C 3. A company's plan for te ac0uisition ac0uisition of long2lived long2lived assets, assets, suc as buildings buildings and e0uipment, e0uipment, is commonly called a: A. pro2 pro2fo form rmaa budg budget et.. B. mast master er budg budget et.. C. fina financ ncia iall budge budget. t. D. pro profit fit pla plan n. !. capi capita tall budg budget et.. Ans"er: ! #$: 1 %ype: &C 4. (ilson Corporation Corporation is budgeting its e0uipment e0uipment needs on an on2going on2going basis, basis, "it a ne" 0uarter 0uarter  being added to te budget budget as te current 0uarter 0uarter is completed. %is type of budget budget is most commonly kno"n as a: A. capi capita tall budg budget et.. B. roll rollin ing g bud budge get. t. C. revi revise sed d bud budge get. t. D. pro2 pro2fo form rmaa budg budget et.. !. fina financ ncia iall budg budget et.. Ans"er: B #$: 1 %ype: &C 5. An organi6a organi6ation tion's 's budgets budgets "ill "ill often often be prepar prepared ed to cover: cover: A. one mo mont. B. one one 0uarte arter. r. C. one ye year. D. period periodss longe longerr tan tan one one year year.. !. all all of of te te abov above. e. Ans"er: ! #$: 1 %ype: &C 7. A manufacturi manufacturing ng firm "ould "ould begin prepara preparation tion of its master master budget budget by constructi constructing ng a: A. sale saless budg budget et.. B. prod produc ucti tion on budg budget et.. C. cas cas budg budget et.. D. capi capita tall budg budget et.. !. set of of pro2fo pro2forma rma fina financi ncial al state statemen ments. ts. Ans"er: A #$: 1, / %ype: &C

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. %e compreensive compreensive set of of budgets tat serves as a company's company's overall overall financial plan is commonly kno"n as: A. an int integ egrat rated ed bud budge get. t. B. a pro2 pro2fo forma rma budg budget et.. C. a mas maste terr bud budge get. t. D. a fin finan anci cial al budg budget et.. !. a rol rolli ling ng budg budget et.. Ans"er: C #$: 1 %ype: &C 3. A company's plan for te ac0uisition ac0uisition of long2lived long2lived assets, assets, suc as buildings buildings and e0uipment, e0uipment, is commonly called a: A. pro2 pro2fo form rmaa budg budget et.. B. mast master er budg budget et.. C. fina financ ncia iall budge budget. t. D. pro profit fit pla plan n. !. capi capita tall budg budget et.. Ans"er: ! #$: 1 %ype: &C 4. (ilson Corporation Corporation is budgeting its e0uipment e0uipment needs on an on2going on2going basis, basis, "it a ne" 0uarter 0uarter  being added to te budget budget as te current 0uarter 0uarter is completed. %is type of budget budget is most commonly kno"n as a: A. capi capita tall budg budget et.. B. roll rollin ing g bud budge get. t. C. revi revise sed d bud budge get. t. D. pro2 pro2fo form rmaa budg budget et.. !. fina financ ncia iall budg budget et.. Ans"er: B #$: 1 %ype: &C 5. An organi6a organi6ation tion's 's budgets budgets "ill "ill often often be prepar prepared ed to cover: cover: A. one mo mont. B. one one 0uarte arter. r. C. one ye year. D. period periodss longe longerr tan tan one one year year.. !. all all of of te te abov above. e. Ans"er: ! #$: 1 %ype: &C 7. A manufacturi manufacturing ng firm "ould "ould begin prepara preparation tion of its master master budget budget by constructi constructing ng a: A. sale saless budg budget et.. B. prod produc ucti tion on budg budget et.. C. cas cas budg budget et.. D. capi capita tall budg budget et.. !. set of of pro2fo pro2forma rma fina financi ncial al state statemen ments. ts. Ans"er: A #$: 1, / %ype: &C

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18. (ic of te te follo"ing follo"ing budgets budgets is based on many oter oter master2bu master2budget dget componen components) ts) A. Dire Direct ct lab labor or budg budget et.. B. $ver $vere ead ad bud budge get. t. C. 9ale 9aless bu budget dget.. D. Cas Cas budge udget. t. !. 9ellin 9elling g and adminis administra trativ tivee epense epense budget budget.. Ans"er: D #$: 1, / %ype:  11. %e budgeted budgeted income statement, budgeted budgeted balance balance seet, seet, and budgeted statement statement of of cas flo"s comprise: A. te fina finall portio portion n of te mast master er budge budget. t. B. te depictio depiction n of an organi6at organi6ation' ion'ss overall overall actual actual financial financial results. results. C. te first first step step of te te mast master er budg budget. et. D. te portion portion of te master master budget budget prepared prepared after te sales sales forecast forecast and before before te remainder remainder of te operational budgets. !. te second second step step of te te maste masterr budge budget. t. Ans"er: A #$: 1, / %ype: &C 1. (ic of te follo"ing follo"ing budgets budgets is prepared at te end of te budget2construction budget2construction cycle) cycle) A. 9ale 9aless budg budget et.. B. *rod *roduc ucti tion on budg budget et.. C. Budget Budgeted ed fin financ ancial ial statem statemen ents. ts. D. Cas Cas budge udget. t. !. $ver $vere ead ad budg budget et.. Ans"er: C #$: 1, / %ype:  1-. (ic of te follo"ing follo"ing "ould depict te logical order order for preparing preparing 1; a production budget, ; a cas budget, -; a sales budget, and /; a direct2labor budget) A. 12-2/2. B. 2-212/. C. 212-2/. D. -212/2. !. -2122/. Ans"er: D #$: 1, / %ype: 

Chapter 9

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1/. %e master budget contains te follo"ing components, among oters: 1; direct2material budget, ; budgeted balance seet, -; production budget, and /; cas budget. (ic of tese components "ould be prepared first and "ic "ould be prepared last) per year 1 credit ours   semesters M - credit ours per class;. %us, 13,888 >enrollments> 1,388 students  18; must be covered. Classes to be taugt: 13,888 M -8 students per class L /,88 classesH A,> assume tat 9cot plans to produce 1,88,888 units of finised product for te 0uarter ended 9eptember -8. f te firm desires to stock direct materials at te end of tis period e0ual to  of current production usage, compute te cost of direct material purcases for te 0uarter. #$: / %ype: A Ans"er: A. *ro@ected sales: uly August /88,888  1.8; 9eptember /8,888  1.8; Nuarterly total %otal 0uarterly sales Add: Desired 7O-8 inventory /3-,88J  58; %otal units needed #ess: 3O-8 inventory %otal 0uarterly production re0uirement

/88,888 /8,888 //1,888 1,31,888 1,31,888 -48,//8 1,3-1,//8 -88,888 1,--1,//8

J$ctober sales: //1,888  1.8 L /3-,88 B.

Chapter 9

=aterial to be used in production 1,88,888  / pounds; Add: Desired 7O-8 inventory /,588,888  ; Direct materials needed #ess: 3O-8 inventory *ounds to be purcased during te 0uarter Direct material cost per pound %otal 0uarterly cost of purcases

/,588,888 1,88,888 3,888,888 1,388,888 /,/88,888  1.8 3,388,888

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Budget Linages: Production, Materials, La)or, Balance %heet

3/. Atlantic Corporation assembles bicycles by purcasing frames, "eels, and oter parts from various suppliers. Consider te follo"ing data: %e company plans to sell ,888 bicycles during eac mont of te year's first 0uarter. A revie" of te accounting records disclosed a finised2goods inventory of 1,/88 bicycles on anuary 1 and an epected finised2goods inventory of 1,58 bicycles on anuary -1. Atlantic as /,-88 "eels in inventory on anuary 1, a level tat is epected to drop by  at mont2end. Assembly time totals -8 minutes per bicycle, and "orkers are paid 1/ per our. Atlantic accounts for employee benefits as a component of direct labor cost. *ension and insurance costs average  per our total;H additionally, te company pays 9ocial 9ecurity taes tat amount to 5 of gross "ages earned. • •

•

• •

&e0uired: A. Po" many bicycles does Atlantic epect to produce i.e., assemble; in anuary) B. Po" many "eels must be purcased to satisfy production needs) C. Compute Atlantic's total direct labor cost. D. Briefly eplain o" te company's purcasing activity "ould affect te end2of2period  balance seet. #$: / %ype: A,  Ans"er: A. employees to increase sales despite te credit "ortiness and profitability of te customer.

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Cash Budgeting

35. &enson Corporation, a "olesaler, provided te follo"ing information:

=ont anuary