Laurie Inc.’s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000 units of production would show

• Question 1

  1 out of 1 points

  	Laurie Inc.’s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000 units of production would show
  	Selected Answer: c.  direct materials of $72,000, direct labor of $52,800, fixed utilities of $5,000, and supervisor salaries of $25,000 Answers: a.  the same cost structure in total b.  direct materials of $60,000, direct labor of $52,800, fixed utilities of $6,000, and supervisor salaries of $25,000 c.  direct materials of $72,000, direct labor of $52,800, fixed utilities of $5,000, and supervisor salaries of $25,000 d.  total variable costs of $159,800 Response Feedback: Rationale: Direct materials = ($60,000 ÷ 10,000 units) × 12,000 units = $72,000 Direct labor = ($44,000 ÷ 10,000 units) × 12,000 units = $52,800 Fixed utilities cost = $5,000 Supervisor salaries = $25,000 ​

• Question 2

  1 out of 1 points

  	A company is preparing its cash budget.  Its cash balance on January 1 is $290,000 and it has a minimum cash requirement of $340,000. The following data has been provided:   January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash payments 984,500 1,210,000 1,075,000 ​ ​ ​ What is the amount of the deficiency or excess cash (after considering the minimum cash balance required) for January?
  	Selected Answer: d.  excess of $26,700 Answers: a.  excess of $356,700 b.  excess of $60,000 c.  deficiency of $136,700 d.  excess of $26,700 Response Feedback: Rationale: Cash balance, January 1 $ 290,000 Add: Cash receipts in January 1,061,200 Less: Cash payments in January 984,500 Total ​ $ 366,700 Less: Minimum cash requirement 340,000 Excess of cash ​ $ 26,700 ​

• Question 3

  1 out of 1 points

  	Willow Valley’s April sales forecast projects that 7,000 units will sell at a price of $10.50 per unit.  The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units.  Budgeted production in April would be
  	Selected Answer: c.  7,300 units Answers: a.  6,300 units b.  8,000 units c.  7,300 units d.  7,000 units Response Feedback: Rationale: Expected sales ​ ​ ​ 7,000 Add: Desired ending inventory (130% of 1,000) 1,300 Total ​ ​ ​ 8,300 Less: Estimated beginning inventory ​ 1,000 Total units to be produced ​ ​ 7,300 ​

• Question 4

  1 out of 1 points

  	For March, sales revenue is $1,000,000; sales commissions are 5% of sales; the sales manager's salary is $80,000; advertising expenses are $65,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are $2,100 plus 1% of sales. Total selling expenses for the month of March are
  	Selected Answer: d.  $217,100 Answers: a.  $207,100 b.  $142,100 c.  $205,000 d.  $217,100 Response Feedback: Rationale: Sales commission (5% of $1,000,000) ​ $ 50,000 Sales manager's salary ​ ​ 80,000 Advertising expense ​ ​ 65,000 Shipping expenses (1% of $1,000,000) ​ 10,000 Miscellaneous selling expenses ($2,100 + 1% of $1,000,000) 12,100 Total selling expenses ​ ​ $217,100 ​

• Question 5

  1 out of 1 points

  	The budgeted finished goods inventory and cost of goods sold for a manufacturing company for the year are as follows: January 1 finished goods, $765,000; December 31 finished goods, $640,000; and cost of goods sold, $2,560,000. The budgeted costs of goods manufactured is
  	Selected Answer: b.  $2,435,000 Answers: a.  $3,965,000 b.  $2,435,000 c.  $1,405,000 d.  $2,560,000 Response Feedback: Rationale: Cost of goods sold for the year ​ $2,560,000 Add: Finished goods, December 31 ​      640,000 Total ​ ​ ​ $3,200,000 Less: Finished goods, January 1 ​      765,000 Budgeted costs of goods manufactured for the year $2,435,000 ​

• Question 6

  1 out of 1 points

  	Southern Company is preparing a cash budget for April.  The company has $12,000 cash at the beginning of April and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during April.  Southern Company has an agreement with its bank to maintain a minimum cash balance of $10,000.  To maintain the required balance during April, the company must
  	Selected Answer: a.  borrow $2,500 Answers: a.  borrow $2,500 b.  borrow $5,000 c.  borrow $4,500 d.  borrow $7,500 Response Feedback: Rationale: Beginning cash balance for April $12,000 Add:Cash receipts during the month 30,000 Less: Cash payments during the month 34,500 Total ​ ​ $ 7,500 Less: Minimum cash requirement 10,000 Deficiency of cash ​ $ (2,500) ​ The company needs to borrow $2,500 to maintain the required balance. ​

• Question 7

  1 out of 1 points

  	If the expected sales volume for the current period is 9,000 units, the desired ending inventory is 200 units, and the beginning inventory is 300 units, the number of units set forth in the production budget, representing total production for the current period, is
  	Selected Answer: a.  8,900 Answers: a.  8,900 b.  8,700 c.  9,000 d.  9,100 Response Feedback: Rationale: Expected sales ​ ​ 9,000 Add: Desired ending inventory 200 Total ​ ​ 9,200 Less: Estimated beginning inventory 300 Total units to be produced ​ 8,900 ​

• Question 8

  1 out of 1 points

  	Which of the following budgets allow for adjustments in activity levels?
  	Selected Answer: a.  flexible budget Answers: a.  flexible budget b.  static budget c.  zero-based budget d.  continuous budget

• Question 9

  1 out of 1 points

  	Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following is not considered a human behavior problem?
  	Selected Answer: b.  allowing employees the opportunity to be a part of the budget process Answers: a.  setting goals among managers that conflict with one another b.  allowing employees the opportunity to be a part of the budget process c.  allowing goals to be so low that employees develop a “spend it or lose it” attitude d.  setting goals too tightly making it difficult to meet performance expectation

• Question 10

  1 out of 1 points

  	A disadvantage of static budgets is that they
  	Selected Answer: b.  do not show possible changes in underlying activity levels Answers: a.  show the expected results of a responsibility center for several levels of activity b.  do not show possible changes in underlying activity levels c.  are dependent on previous year's actual results d.  cannot be used by service companies

• Question 11

  1 out of 1 points

  	A series of budgets for varying rates of activity is termed a(n)
  	Selected Answer: d.  flexible budget Answers: a.  variable budget b.  master budget c.  activity budget d.  flexible budget

• Question 12

  1 out of 1 points

  	Production and sales estimates for April are as follows: Estimated inventory (units), April 1 9,000 Desired inventory (units), April 30 8,000 Expected sales volume (units):     Area A 3,500   Area B 4,750   Area C 4,250 Unit sales price $20 ​ The budgeted total sales for April is
  	Selected Answer: b.  $250,000 Answers: a.  $230,000 b.  $250,000 c.  $200,000 d.  $270,000 Response Feedback: Rationale: Expected units to be sold = 3,500 + 4,750 + 4,250 = 12,500 units Budgeted sales = 12,500 × $20 = $250,000 ​

• Question 13

  1 out of 1 points

  	The first budget customarily prepared as part of an entity's master budget is the
  	Selected Answer: c.  sales budget Answers: a.  production budget b.  cash budget c.  sales budget d.  direct materials purchases

• Question 14

  1 out of 1 points

  	For April, sales revenue is $700,000; sales commissions are 5% of sales; the sales manager's salary is $98,000; advertising expenses are $90,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are $2,100 plus 1/2 of 1% of sales. Total selling expenses for the month of April are
  	Selected Answer: c.  $242,600 Answers: a.  $186,000 b.  $159,100 c.  $242,600 d.  $182,100 Response Feedback: Rationale: Sales commission (5% of $700,000) $ 35,000 Sales manager's salary ​ ​    98,000 Advertising expense ​    90,000 Shipping expenses (2% of $700,000) ​    14,000 Miscellaneous selling expenses ($2,100 + 0.5% of $700,000)      5,600 Total selling expenses ​ ​ $242,600 ​

• Question 15

  1 out of 1 points

  	The budget process involves doing all of the following except
  	Selected Answer: b.  dismissing all managers who fail to achieve operational goals specified in the budget Answers: a.  periodically comparing actual results with the goals b.  dismissing all managers who fail to achieve operational goals specified in the budget c.  establishing specific goals d.  executing plans to achieve the goals