Question: Assume that in preparing the cash budget,

> Farrah Westin plans to build a concrete walkway for her home during her vacation. The following schedule shows how project time will be allocated: Hours Purchase materials …………………………………………………....5 Obtain rental equipment …………………………………………….2 Remove sod an

> The Raleigh plant manager of Allentown Corp. has noticed the plant frequently changes the schedule on its production line. He has gathered the following information on the activities, estimated times, and average costs required for a single schedule chan

> The following activities take place in Usher’s Department Store. Upon receipt, Usher’s discounts all products 25 percent from the manufacturer’s suggested retail price. Only after the goods have been in stock for 90 days will additional discounts be give

> Many manufacturers are deciding to service only customers that buy $10,000 or more of products from the manufacturers annually. Manufacturers defend such policies by stating that they can provide better service to customers that handle more volume and mo

> The cost systems at many companies selling multiple products have become less than adequate in today’s global competition. Managers often make important product decisions based on distorted cost information because the cost systems have been primarily de

> Starshine Company is in the process of analyzing and updating its cost information and pricing practices. Since the company’s product line changed from general paints to specialized marine coatings, there has been tremendous overhead growth, including co

> Tom’s Shoe Repair provides a variety of shoe and repair services. Analysis of monthly costs revealed the following cost formulas when direct labor hours are used as the basis of cost determination: Supplies: y = $0 + $4.00X Production supervision and dir

> Rice Inc. manufactures lawn mowers and garden tractors. Lawn mowers are relatively simple to produce and are made in large quantities. Garden tractors are customized to individual wholesale customer specifications. The company sells 300,000 lawn mowers a

> Briones Books is concerned about the profitability of its regular dictionaries. Company managers are considering producing only the top-quality, hand-sewn dictionaries with gold-edged pages. Briones is currently assigning the $2,000,000 of overhead costs

> Regis Place is a health-care facility that has been allocating its overhead costs to patients based on number of patient days. The facility’s overhead costs total $3,620,400 per year and the facility (which operates monthly at capacity)

> Wyeth Corp. has decided to implement an activity-based costing system for its in-house legal department. The legal department’s primary expense is professional salaries, which are estimated for associated activities as follows: Reviewing supplier or cust

> Leopold & Olney LLP has 5 partners and 12 staff accountants. The partners each work 2,100 hours per year and earn $350,000 annually. The staff accountants each work 2,600 hours per year and earn $80,000 annually. The firm’s total annual budget for profes

> Three clients (A, B, and C) use Kingsley Call Service’s call center. During October, Kingsley initiated four new equipment advancements. The following information indicates the cost and benefits of each service: a. If the total cost of

> DaSilva Co. has a casting machine that is used for three of the company’s products. Each setup of the machine costs was $18,760 and the casting machine was set up in June for six different production runs. The following information show

> For each of the following costs commonly incurred in a manufacturing company, identify a cost driver and explain why it is an appropriate choice. a. Machine setup cost b. Computer operations c. Freight costs for materials d. Material handling e. Material

> For each of the following cost pools in a temporary employment agency, identify a cost driver and explain why it is appropriate. a. Accounts receivable department b. Payroll department c. Advertising cost d. Information technology e. Utilities f. Propert

> Lin Products manufactures special-order office cubicle systems. Production time is two days, but the average cycle time for any order is three weeks. The company president has asked you, as the new controller, to discuss missed delivery dates. Prepare an

> The Sioux City Storage System’s plant prepared the following flexible overhead budget for three levels of activity within the plant’s relevant range. After discussion with the home office, the plant managers planned to

> Why would regression analysis provide a more accurate cost formula than the high– low method for a mixed cost?

> Why are departmental predetermined OH rates more useful for managerial decision making than plantwide OH rates? Why do firms use separate variable and fixed rates rather than total rates?

> Discuss the reasons a company would use a predetermined overhead rate rather than actual overhead to determine cost of products or services.

> The high–low method of analyzing mixed costs uses only two observation points: the high and the low points of activity. Are these always the best points for prediction purposes? Why or why not?

> What is the difference between variable and mixed costs, considering that both change in total with changes in activity levels?

> What are the income relationships between absorption and variable costing when production volume differs from sales volume? What causes these relationships to occur?

> Why does variable costing provide more useful information than absorption costing for making internal decisions?

> La Mia’s Casas builds replicas of residences of famous and infamous people. The company is highly automated, and the new accountant owner has decided to use machine hours as the basis for predicting maintenance costs. The following data are available fro

> Wyoming Wholesale has gathered the following data on the number of shipments received and the cost of receiving reports for the first seven weeks of 2010. Number of Weekly Cost of Shipments Received Receiving Reports 50 ………………………..………………………

> Information about Indiana Industrial’s utility cost for the last six months of 2010 follows. The high–low method will be used to develop a cost formula to predict 2011 utility charges, and the number of machine hours h

> Alberton Electronics makes inexpensive GPS navigation devices and uses a normal cost system that applies overhead based on machine hours. The following 2010 budgeted data are available: Variable factory overhead at 100,000 machine hours $1,250,000 Variab

> For 2010, Milltown Iron Manufacturing has estimated its production capacities as follows: Theoretical capacity ………………………………400,000 units Practical capacity ………………………………….300,000 units Normal capacity ……………………………………260,000 units Expected capacity ……………………

> At year-end 2010, Dub’s Wind Generator Co. had a $40,000 debit balance in its Manufacturing Overhead Control account. Overhead is applied to products based on direct labor cost. Relevant account balance information at year-end follows:

> Davidson’s Dolls had the following information in its Work in Process Inventory account for June 2010: All workers are paid the same rate per hour. Factory overhead is applied to Work in Process Inventory on the basis of direct labor ho

> At the end of 2010, Jackson Tank Company’s accounts showed a $66,000 credit balance in Manufacturing Overhead Control. In addition, the company had the following account balances: Work in Process Inventory $384,000 Finished Goods Inventory 96,000 Cost of

> Roddickton Manufacturing Co. has gathered the following information to develop predetermined OH rates for 2010. The company produces a wide variety of energy-saving products that are processed through two departments, Assembly (automated) and Finishing (

> Is variable or absorption costing generally required for external reporting? Why is this method preferred to the alternative?

> Langston Automotive Accessories applies overhead using a combined rate for fixed and variable overhead. The rate is 250 percent of direct labor cost. During the first three months of the current year, actual costs incurred were as follows: a. What amount

> For 2010, Omaha Mechanical has a monthly overhead cost formula of $42,900+$6 per direct labor hour. The firm’s 2010 expected annual capacity is 78,000 direct labor hours, to be incurred evenly each month. Making one unit of the company’s product requires

> Use the information in Exercise 11 and assume that Lansing Mfg. has decided to use units of production to apply overhead to production. In April 2010, the company produced 875 units and incurred $7,500 and $26,500 of variable and fixed overhead, respecti

> Lansing Mfg. prepared the following 2010 abbreviated flexible budget for different levels of machine hours: Each product requires 4 hours of machine time, and the company expects to produce 10,000 units in 2010. Production is expected to be evenly distri

> How does budgeting provide important information to managers and operating personnel?

> After a master budget has been prepared, what is its role in managerial control?

> Distinguish between a strategic plan and a tactical plan. How are these plans related?

> How does the strategic plan influence preparation of the master budget?

> (Appendix) Why is it helpful for a company to prepare a budget manual? Appendix: Most companies combine many materials and various classes of direct labor to produce goods. In such settings, the material and labor variance computations presented in this

> What is budgetary slack, and what might top managers do to rid their firms’ budgets of slack?

> What is meant by classifying costs (a) functionally and (b) behaviorally? Why would a company be concerned about functional and behavioral classifications?

> If the majority of companies find that their forecasts are inaccurate, why should managers engage in budgeting at all?

> Why is continuous (rolling) budgeting becoming more popular than it was in the past for organizational managers?

> The cash budget and the budgeted statement of cash flows both provide information about cash. What information about cash is common to these two sources, and what information is unique to the two sources?

> Why is a firm’s production budget influenced by the finished goods inventory policy?

> Discuss the sequence in which the major components of the master budget are prepared. Why is it necessary to prepare the components in such a sequence?

> Differentiate between the operating and financial budgets that are contained in a master budget. Why are both types needed?

> Shredder Manufacturing has the following projected unit sales (at $18 per unit) for four months of operations: January ……………………………………………25,000 February ………………………………………….30,000 March ………………………………………………32,000 April ………………………………………………..35,000 Twenty-five pe

> Blackman Corp., a rapidly expanding crossbow distributor, is in the process of formulating plans for 2011. Cara Jordan, director of marketing, has completed her 2011 forecast and is confident that sales estimates will be met or exceeded. The following fo

> Collegiate Management Education (CME) Inc. is a nonprofit organization that sponsors a wide variety of management seminars throughout the Southwest. In addition, it is heavily involved in research into improved methods of teaching and motivating college

> How does absorption costing differ from variable costing in cost accumulation and income statement presentation?

> UpTop Mining has compiled the following data to analyze utility costs: Use the least squares method to develop a formula for budgeting utility cost. Month Machine Hours Utility Cost January 200 $300 February 325 440 March 400 480 Аpril 410 490 Мay 52

> Stabler Co.’s projected March 31, 2011, balance sheet follows. Additional information about the company is as follows: • Expected sales for April and May are $240,000 and $260,000, respectively. All sales are made on a

> Cute and Cuddly Inc. sells teddy bears in walk-by kiosks in shopping malls. The company’s balance sheet on March 31, 2010, showed the following balances related to Accounts Receivable and inventories: Accounts Receivable …………………………………..$346,000 Allowance

> Butler Inc. has projected Cost of Goods Sold (CGS) for June 2011 of $1,500,000. Of this amount, $80,000 represents fixed overhead costs. Total variable costs for the company each month average 70 percent of sales. The company’s cost to retail (CGS to sal

> Corner Brook Furniture Co. makes bookstands and expects sales and collections for the first three months of 2011 to be as follows: The December 31, 2010, balance sheet revealed the following selected account balances: Cash, $18,320; Direct Material Inven

> Atkinson’s Reliable Tools makes two products that use similar raw materials: #587Q and #253X. Estimated production needs for a unit of each product follow. Estimated sales in units by product for 2011 are 80,000 of #587Q and 30,000 of

> Narisho Supply is in the process of preparing the budget for the first quarter of 2011. The following projections for unit sales have been made: Each finished unit requires three direct materials: 4 pounds of Material M, 2.5 pounds of Material N, and 2 p

> Caleb Corp. has prepared the following unit sales forecast for 2011: Estimated ending Finished Goods Inventories are 50,000 units at December 31, 2010; 72,000 units at June 30, 2011; and 120,000 units at December 31, 2011. In manufacturing a unit of this

> Preparing budgets for a multinational organization is significantly more complex than doing so for a solely domestic organization. What costs might managers find in budgets for international companies that might not commonly be included (or included at s

> Attala Co., a division of Jackson Industries ( JI), offers consulting services to clients for a fee. JI’s corporate management is pleased with the performance of Attala Co. for the first nine months of the current year and has recommend

> Norton Weymer & Collins, LLP, a local accounting firm, has a formal budgeting system. The firm has five partners, two managers, four seniors, two secretaries, and two bookkeepers. The budgeting process has a bottom-line focus; that is, the budget and pla

> Red River Farm Machine makes a wide variety of products, all of which must be processed in the Cutting and Assembly departments. For the year 2010, Red River budgeted total overhead of $993,000, of which $385,500 will be incurred in Cutting and the remai

> Kalogridis Corp. manufactures industrial dye. The company is preparing its 2011 master budget and has presented you with the following information: a. The projected December 31, 2010, balance sheet for the company is as follows: b. The Accounts Receivabl

> Clarenville Kitchen Products produces and sells upscale mixers and breadmakers. In October 2010, Clarenville’s budget department gathered the following data to meet budget requirements for 2011. To produce one unit of each product, the

> The projected October 31, 2011, balance sheet for Blanco Co. follows: ASSETS Cash ..…………………………………………………………………………………………………………..$ 28,000,000 Accounts Receivable (net of Allowance for Uncollectibles of $3,000,000) …………………………………………………………………..…57,000,000 Inv

> GJO Corp. manufactures decorative, high-quality nutcrackers. Selling price of a nutcracker is full production cost plus 25 percent (rounded to the nearest dollar). Variable production cost is $55 per unit, and total fixed costs are $2,600,000. Fixed manu

> Davide’s Arrangements purchases, wholesales, and retails fresh flowers. Company estimates reveal the following for the first three months of the company’s 2011 fiscal year: Davide’s pays 60 percent of

> In preparing its budget for July, Wade Inc. has the following information available: Accounts Receivable at June 30 ……………………………………………………………………………….$750,000 Estimated credit sales for July …………………………………………………………………….900,000 Estimated collections in July f

> Grenfell Company is preparing a cash budge for 2010 for purchases of Calvos. Budgeted data are as follows: Cost of goods sold for the year 2010 .…………………………..$600,000 Accounts payable, 1/1/10 …………………………………………………40,000 Inventory, 1/1/10 …………………………………………………

> Nafari Company’s sales budget has the following unit sales projections for each quarter of calendar year 2011: January–March …………………………………1,080,000 April–June …………………………………………1,360,000 July–September ………………………………..…980,000 October–December …………………………….1,

> In 2010, Grand Falls Bank (GFB) had $4,000,000 in business loans at an average interest rate of 3.5 percent as well as $3,200,000 in consumer loans with an average rate of 8 percent. GFB also has $750,000 invested in government securities that pay intere

> Find the Web page for a charitable organization that operates internationally as well as domestically. a. Prepare a list of activities in which this organization is currently involved. b. What would be the greatest challenges in budgeting for such an org

> Idaho Mechanical Systems has two departments: Fabrication and Finishing. Three workers oversee the 25 machines in Fabrication. Finishing uses 35 crafters to hand-polish output, which is then run through buffing machines. Product CG9832-09 uses the follow

> The following budget information is available for Sluyter Corp. for May 2011: • Sales are expected to be $400,000. All sales are on account, and a provision for bad debts is accrued monthly at 3 percent of sales. • Inventory was $35,000 on April 30 and a

> Gap’O has projected sales of 325,000 hospital gowns in October. Each gown requires 2.5 yards of fabric. The beginning inventory of fabric and gowns, respectively, are 5,000 yards and 21,000 gowns. Gap’O wants to have 4,550 yards of fabric and 15,800 gown

> Gerrad Manufacturing has projected sales of its product for the next six months as follows: January ………………………………………..300 units February ……………………………………….700 units March …………………………………………1,000 units April ……………………………………………..900 units May ……………………………………………..

> Seguin Inc. has the following projected unit sales for the first four months of 2011: January ……………………………………..102,400 February …………………………………….96,000 March ……………………………………….128,000 April …………………………………………..153,600 Company policy is to have an ending monthly

> Pataky Co.’s sales manager estimates that 2,000,000 units of product RI#698 will be sold in 2011. The product’s selling price is expected to decline as the result of technology changes during the year and estimates of

> High-level executives have often indicated that competitors’ actions are the top external factor affecting their businesses and their business plans. a. Why are competitors’ actions so important to business planning? b. How would competitors’ actions aff

> People, as well as businesses, need to budget. Assume that you and your spouse are having difficulties living within your combined incomes. Prepare a list of at least 10 recommendations on how to “do things differently” to help manage your finances.

> When engaging in strategic planning, company management often prepares a SWOT analysis. a. What is a SWOT analysis and why is it useful in the planning process? b. Choose an organization with which you are familiar and develop a SWOT analysis for that or

> Before a budget can be prepared, company management considers “what if ” changes that might occur during the forecast period. Prepare a list of five possible questions about changes that you might want to consider if you were a manager in a a. global man

> You own a small boat manufacturing company. At a recent manufacturers’ association meeting, you overheard one of the other company owners say that he liked using a continuous budgeting process. Discuss in a report to your top management group what you be

> Battle Creek Storage Systems budgeted the following factory overhead costs for the upcoming year to help calculate variable and fixed predetermined overhead rates. Indirect material: $2.50 per unit produced Indirect labor: $3.00 per unit produced Factory

> Many managers believe that if all amounts in their spending budgets are not spent during a period, they will lose allocations in future periods and that they will receive little or no recognition for the cost savings. Prepare an essay that discusses the

> Alyssa Co. is planning to purchase a new piece of production equipment. The equipment will increase fixed overhead by $700,000 per year in depreciation but reduce variable expenses per unit by 20 percent. Budgeted 2011 sales of the company’s products are

> The operating results in summarized form for a retail computer store for 2010 are: Revenue: Hardware sales ………………………………………………….$ 4,800,000 Software sales ………………………………………………………2,000,000 Maintenance contracts ………………………………………….1,200,000 Total revenue .…………

> Last year’s income statement for Cooper Company is as follows: This year, unit sales are expected to increase by 25 percent; material and labor costs are expected to increase by 10 percent per unit. Overhead is applied to production bas

> Compute the required answer for each of the following independent situations. a. For next year, Penny Suits projects $8,000,000 of sales and total fixed manufacturing costs of $2,000,000. Variable manufacturing costs are estimated at 65 percent of sales.

> The following cash budget is for the third quarter of 2011. Solve for the missing numbers on the cash budget, assuming that the accountant has requested a minimum cash balance of $7,000 at the start of each month. All borrowings, repayments, and investme

> The following budgeted information about Reeves Co. is available for September 2010: Sales for September ………………………………………………………..$2,700,000 Gross profi t on sales ………………………………………………………………….40% Decrease in Merchandise Inventory during September …………$ 43,75

> The following budgeted May 2010 cash information is available for Salado Corp.: Net after-tax income …………………………………..$336,000 Depreciation expense ……………………………………..56,200 Accrued income tax expense ………………………….82,000 Increase in Accounts Receivable for mont

> Campbell Manufacturing intends to start business on January 1, 2011. Production plans for the first four months of operations are as follows: January …………………………..20,000 units February ………………………….50,000 units March ……………………………….70,000 units April ……………………

> The October 1, 2010, Accounts Receivable balance for Darin Landscaping is $632,500. Of that balance, $480,000 represents remaining accounts receivable from September billings. The normal collection pattern for the firm is 20 percent of billings in the mo