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 believe are the advantages and disadvantages of continuous budgeting for your company.
> 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?
> Assume that in preparing the cash budget, the accountant discovers that a cash shortage will likely occur in a specific month. What actions might the accountant recommend to management to deal with the cash shortage?
> 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
> 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
> Sunny Systems manufactures solar panels. The company has a theoretical capacity of 50,000 units annually. Practical capacity is 80 percent of theoretical capacity, and normal capacity is 80 percent of practical capacity. The firm is expecting to produce
> Total June 2010 sales for Roy’s Catering are expected to be $450,000. Of each month’s sales, 80 percent is expected to be on credit. The Accounts Receivable balance at May 31 is $119,600, of which $90,000 represents the remainder of May credit sales. The
> Miriam Irby is president of MI Corp. Irby has decided to take a month’s vacation with her family to South Africa, Zimbabwe, and Angola. Irby has researched the trip and determined that the total cost of the trip for her family will be approximately $50,0
> The treasurer of Homeyra Corp. needs to estimate cash collections from accounts receivable for September, October, and November 2011. Forty percent of the company’s customers pay in cash and the rest are credit customers. The collection pattern for the c
> Hard Core had budgeted sales of 190,000 feet of its concrete culvert products for June 2010. Each foot of product requires 4 pounds of concrete ($0.10 per pound) and 7.5 pounds of gravel ($0.04 per pound). Actual beginning inventories and projected endin
> What is meant by the term standard hours? Does the term refer to inputs or outputs?
> How are actual and standard costs recorded in a standard cost system?
> The overhead spending and overhead efficiency variances are said to be controllable, but the volume variance is said to be noncontrollable. Explain.
> A total variance can be calculated for each cost component of a product. Into what variances can this total be separated and to what does each relate? (Discuss separately for material and labor.)
> How is the material standard developed? Why are the quantities shown in the bill of materials not always the same quantities shown in the standard cost card?
> What is a standard cost card? What information does it contain? How does it relate to a bill of materials and an operations flow document?
> Last June, Lacy Dalton had just been appointed CFO of Garland & Wreath when she received some interesting reports about the profitability of the company’s three most important product lines. One of the products, GW1, was produced in
> (Appendix) What variances can be computed for direct material and direct labor when some materials or labor inputs are substitutes for others? What information does each of these variances provide? Appendix: Most companies combine many materials and var
> Why do managers care about capacity utilization? Are managers controlling costs when they control utilization?
> What is management by exception? Why is a standard cost system useful when managers control “by exception”?
> What are the three primary uses of a standard cost system? In a business that routinely manufactures the same products or performs the same services, why are standards helpful?
> How are insignificant variances closed at the end of an accounting period? How are significant variances closed at the end of an accounting period? Why is there a difference in treatment?
> Surgical Products produces latex surgical gloves. Machines perform the majority of the processing for 1,000 pairs of gloves per hour. Each pair of gloves requires 0.85 square foot of latex, which has a standard price of $0.80 per square foot. Machine ope
> Aquatica uses a standard cost system for materials and labor in producing small fishing boats. Production requires three materials: fiberglass, paint, and a purchased trim package. The standard costs and quantities for materials and labor are as follows:
> Griffon Corp. makes small plastic dog toys with the following material and labor standards: During October, 60,000 pounds of material were acquired on account at $4.15 per pound. During October, 50,120 pounds of that were used in production during the mo
> Schmidt Co. has the following standard material and labor quantities and costs for one unit of Product SWK#468: Material 1.85 pounds @ ……….…………………….$3.50 per pound Labor 0.04 hours @ ………………………………………..$12 per hour During July, the purchasing agent found a
> Haddas Ltd. makes Healthy Life, a nutritional aid. For a 50-pound batch, standard material and labor costs are as follows: During June, the following materials and labor were used in producing 600 batches of Healthy Life: Wheat 18,000 pounds at â&#
> Tomm’s T’s is a New York–based company that produces and sells t-shirts. The firm uses variable costing for internal purposes and absorption costing for external purposes. At year-end, financial infor
> Polermo Inc. produces three-topping, 18-inch frozen pizzas and uses a standard cost system. The three pizza toppings (in addition to cheese) are onions, olives, and mushrooms. To some extent, discretion may be used to determine the actual mix of these to
> Kieffer Company makes men’s suit alterations for a major clothing store chain. No direct materials are used in the alterations process and overhead costs are primarily variable and relate very closely to direct labor charges. The company owner has decide
> The May budget for the Auberage Company shows $1,080,000 of variable conversion costs, $360,000 of fixed conversion costs, and 72,000 machine hours for the production of 24,000 units of product. During May, 76,000 machine hours were worked and 24,000 uni
> Ripper Corp. uses a standard cost system for its aircraft component manufacturing operations. Recently, the company’s direct material supplier went out of business, but Ripper’s purchasing agent found a new source that produces a similar ma
> Namathe Industries manufactures children’s footballs with the following standard costs per unit: Material: one square foot of leather at …………â€&b
> The following variances existed at year-end 2010 for Muckstadt Production Company: Material price variance …………………………………….$23,400 U Material quantity variance ………………………………….24,900 F Labor rate variance ………………………………………………5,250 F Labor efficiency variance
> Hellier Contractors paints interiors of residences and commercial structures. The firm’s management has established cost standards per 100 square feet of area to be painted. Direct material ($18 per gallon of paint) ………………………………..$1.50 Direct labor ……………
> For 2010, Riguilio Inc. set predetermined variable and fixed overhead rates, respectively, of $6.50 and $9.35 based on an expected monthly capacity of 4,000 machine hours. Each unit of product requires 1.25 machine hours. During August 2010, the company
> Terkelsen Mfg. produces comforter sets with the following standard cost information: • Each comforter set requires 0.5 hours of machine time to produce. • Variable overhead is applied at the rate of $9 per machine hour. • Fixed overhead is applied at the
> During December 2010, Amin Corp. manufactured products requiring 8,000 standard labor hours. The following variance and actual information is available: Labor rate variance ………………………………………..$ 4,500 U Labor efficiency variance ………………………………….12,000 U Actua
> Prior to the start of fiscal 2010, managers of MultiTech hosted a Web conference for their shareholders, financial analysts, and members of the financial press. During the conference, the CEO and CFO released the following financial projections for 2010
> N Joy makes wooden picnic tables, swings, and benches. Standard hours for each product are as follows: Picnic table ………………………………………….10 standard direct labor hours Swing ……………………………………………………3 standard direct labor hours Bench ……………………………………………………7 standa
> ALOHA Corp., started in January 2004, manufactures Hawaiian muumuus. At that time, the following material and labor standards were developed: Material ………………………………….3.0 yards at $4 per yard Labor ……………………………………….1.5 hours at $6 per hour In January 2010,
> Quinan Carpentry Co. makes wooden shelves. A small fire on October 1 partially destroyed the records relating to September’s production. The charred remains of the standard cost card appear here. From other fragments of records and seve
> Edina Co. manufactures a product that requires 3.5 machine hours per unit. The variable and fixed overhead rates were computed using expected capacity of 144,000 units (produced evenly throughout the year) and expected variable and fixed overhead costs,
> Green Tee produces 100 percent cotton t-shirts, with the following standard direct material and labor quantities and costs: Direct material 2.0 yards……………
> Madzinga’s Draperies manufactures curtains. Curtain #4571 requires the following: Direct material standard 10 square yards at …………………………$5 per yard Direct labor standard 5 hours at ………………………………………..$10 per hour During the second quarter, the company purc
