Question 1

In order to prepare the sales budget, one needs the number of units
A)expected to be produced and the prices expected to be charged.
B)expected to be sold and the cost of producing each unit.
C)expected to be sold and the prices expected to be charged.
D)sold in the previous period and the price charged for the units.

Accepted Answer

The sales budget is prepared based on the expected number of units to be sold and the prices expected to be charged. Therefore, choice C is the correct option as it includes both of these necessary components for preparing the sales budget. The other options either do not include both components, or are focused on past data rather than future expectations.

Question 2

Which of the following is not a consequence of a sales budget developed by an overly optimistic marketing department?
A)Too much inventory may be produced.
B)Too much material will be ordered.
C)The company will fail to achieve its budgeted income.
D)More cash will be on hand than anticipated.

Accepted Answer

An overly optimistic sales budget may lead to overproduction and excess inventory, but it does not necessarily mean that more cash will be on hand than anticipated. In fact, if sales fall short of the budgeted amount, the company may end up with less cash than anticipated.

Question 3

Which of the following is not a step in preparing the production budget?
A)Add beginning inventory units to required units to determine the budgeted production.
B)Enter budgeted sales units from the sales budget.
C)Calculate budgeted ending inventory units for the period.
D)Add budgeted ending to budget sales units.

Accepted Answer

The correct step for preparing the production budget involves subtracting beginning inventory units from the total of required units (budgeted sales units plus budgeted ending inventory units) to determine budgeted production, not adding them.

Question 4

Jody Jewelry manufactures jewelry.It applies overhead based on direct labor hours.In October Jody is planning to make 500 rings, 400 bracelets, and 210 pendants.The company expects the total manufacturing overhead for the year would be $3,450,000 and that total direct labor hours for the year would be 75,000.Actual overhead incurred for October was $295,920.Each ring requires 6.25 hours of labor to manufacture; each bracelet requires 5.5 hours of labor to manufacture, and each pendant requires 4 hours of labor to manufacture.What is the standard overhead cost per bracelet?
A)$46.00
B)$253.00
C)$264.00
D)$48.00

Accepted Answer

The answer of Jody Jewelry manufactures jewelry.It applies overhead based...

Question 5

Which of the following is not a component of the master budget?
A)Budgeted income statement
B)Direct material purchases budget
C)Ending inventory and cost of goods sold budget
D)Budgeted statement of cash flows.

Accepted Answer

The budgeted statement of cash flows is not typically included in the master budget. The other options, including the budgeted income statement, direct material purchases budget, and ending inventory and cost of goods sold budget, are all common components of the master budget.

Question 6

Which of the following use information from the selling and administrative expense budget?
A)Manufacturing overhead budget and cash budget
B)Budgeted income statement and cash budget
C)Cash budget and budgeted balance sheet
D)Production budget and budgeted income statement.

Accepted Answer

The selling and administrative expense budget is used to determine the expenses associated with selling the products and running the administrative operations of the company. This information is important for preparing the budgeted income statement, which includes all revenue and expenses for the period. The cash budget also uses information from the selling and administrative expense budget to determine the cash outflows related to these expenses. The manufacturing overhead budget pertains to the costs associated with producing the products and would not be directly related to selling and administrative expenses. The budgeted balance sheet would use information from the cash budget and other budgets to determine the company's financial position at a given point in time. The production budget would be used to determine how many units of the product are needed to be produced and would not necessarily be related to selling and administrative expenses.

Question 7

Kandy Harts manufactures custom T-shirts.Each T-shirt can be imprinted front and back with photos, company logos or other information.Each T-shirt requires 2 ounces of ink, 15 minutes of direct labor (processing, folding, packaging), and a plastic bag for packaging.The following information is available regarding costs:  Kandy applied overhead at a rate of $9.40 per direct labor hour, and fringe benefits for workers are an additional 20% of wages.What is the standard price of producing one short-sleeve T-shirt?
A)$10.65
B)$11.73
C)$10.73
D)$12.23

Accepted Answer

The answer of Kandy Harts manufactures custom T-shirts.Each T-shirt can...

Question 8

A collection of smaller budgets that leads to pro-forma financial statements is referred to as the
A)master budget.
B)summary budget.
C)overall budget.
D)pro-forma budget.

Accepted Answer

A master budget combines all the smaller budgets (such as sales, production, and operating expenses) into one comprehensive budget, which forms the basis for pro-forma financial statements.

Question 9

Kandy Harts manufactures custom T-shirts.Each T-shirt can be imprinted front and back with photos, company logos or other information.Each T-shirt requires 2 ounces of ink, 15 minutes of direct labor (processing, folding, packaging), and a plastic bag for packaging.The following information is available regarding costs:  Kandy applied overhead at a rate of $9.40 per direct labor hour, and fringe benefits for workers are an additional 20% of wages.What is the standard price and standard quantity for manufacturing overhead?
A)$11.28; 0.25 hour
B)$9.40; 0.25 hour
C)$2.35; 1 hour
D)$2.82; 0.25 hour

Accepted Answer

To find the standard price and quantity of manufacturing overhead, we need to calculate the total overhead cost and divide it by the total direct labor hour.

Total direct labor hour = 15 minutes/60 minutes = 0.25 hour

Direct labor cost = 0.25 hour x $16.20/hour = $4.05

Fringe Benefits for workers = 20% x $4.05 = $0.81

Total direct labor cost = $4.05 + $0.81 = $4.86

Total overhead cost = Total cost - (Direct labor cost + Direct material cost)

= $17.00 - ($4.86 + $0.20)

= $11.94

Standard price of manufacturing overhead = Total overhead cost / Total direct labor hour

= $11.94 / 0.25 hour

= $47.76/hour

Standard quantity of manufacturing overhead = 1 hour

Therefore, the best choice is B) $9.40; 0.25 hour.

Question 10

Which of the following budgets uses information from the selling and administrative expense budget?
A)Pro-forma budget
B)Budgeted income statement
C)Direct materials purchases budget.
D)None of these answer choices are correct.

Accepted Answer

The budgeted income statement uses information from the selling and administrative expense budget to project the expected operating expenses for a certain period of time. The pro-forma budget is a more general budget that incorporates various aspects of the organization's operations, while the direct materials purchases budget focuses on the organization's purchases of raw materials. Therefore, B is the best choice as it specifically uses information from the selling and administrative expense budget.

Question 11

Tanger Products plans to produce 10,000 units in January.Each unit requires 3 pounds of plastic, which costs $2 per pound.What standard material cost would the company use to plan for production?
A)$2
B)$6
C)$3,333
D)$5,000

Accepted Answer

The standard material cost per unit is calculated by multiplying the pounds of plastic required per unit (3 pounds) by the cost per pound ($2), resulting in $6 per unit.

Question 12

Development of the operating budget begins with the
A)cash budget.
B)sales budget.
C)overhead budget.
D)pro-forma budget.

Accepted Answer

The development of the operating budget usually begins with the sales budget since it is the backbone of the entire budgeting process. The sales budget provides the basis for projecting the expected level of sales revenue, which then drives the budget for production, cost of goods sold, and other related expenses. Therefore, the sales budget is usually the first budget prepared in the budgeting process.

Question 13

The first component of the master budget is the
A)cash budget.
B)overhead budget.
C)pro-forma budget.
D)sales budget.

Accepted Answer

The first component of the master budget is usually the sales budget, as it sets the foundation for all other aspects of the budget. The sales budget outlines the expected sales revenue for the budget period, and helps to determine the level of production necessary to meet those sales goals. The other components of the master budget, including the cash budget, overhead budget, and pro-forma budget, all rely on the sales budget as a starting point.

Question 14

Which of the following is not a use of the materials purchases budget?
A)It helps managers minimize the resources invested in inventory.
B)It helps managers plan the quantity and timing of purchases of material.
C)It helps ensure the adequate level of inventory.
D)It helps determine the number of units of product to produce.

Accepted Answer

The materials purchases budget helps managers plan the quantity and timing of purchases of material, ensure the adequate level of inventory, and minimize the resources invested in inventory. However, it does not directly determine the number of units of product to produce. That is the responsibility of the production budget.

Question 15

Which of the following is not a step in preparing the direct materials purchases budget?
A)Enter the budgeted sales from the sales budget.
B)Calculate the direct materials production needs by multiplying the number of units to be produced by the direct material standard quantity for one unit.
C)Calculate the total direct materials required for the period by adding the ending inventory to the direct materials production needs.
D)Calculate the required purchases by subtracting the beginning direct materials balance from the total direct materials required for the period.

Accepted Answer

Entering the budgeted sales from the sales budget is not a step in preparing the direct materials purchases budget. This information is used to prepare the sales budget, which is then used to calculate the direct materials production needs in the direct materials purchases budget. The other options listed (B, C, and D) are all steps in preparing the direct materials purchases budget.

Question 16

Which of the following is not a component of the master budget?
A)Indirect cost budget
B)Direct material purchases budget
C)Ending inventory and cost of goods sold budget
D)Production budget

Accepted Answer

Indirect cost budget is not a component of the master budget. The other options, Direct material purchases budget, Ending inventory and cost of goods sold budget, and Production budget, are all components of the master budget.

Question 17

Kandy Harts manufactures custom T-shirts.Each T-shirt can be imprinted front and back with photos, company logos or other information.Each T-shirt requires 2 ounces of ink, 15 minutes of direct labor (processing, folding, packaging), and a plastic bag for packaging.The following information is available regarding costs:  Kandy applied overhead at a rate of $9.40 per direct labor hour, and fringe benefits for workers are an additional 20% of wages.What is the standard price and standard quantity for direct labor?
A)$16.00; 0.25 hour
B)$19.20; 0.25 hour
C)$4.80; 1 hour
D)$4.80; 0.25 hour

Accepted Answer

To calculate the standard price and standard quantity for direct labor, we need to first find the cost for direct labor per unit. 
Direct labor cost per unit = Direct labor wage + Fringe benefits 
Direct labor wage = $12.00 per hour 
Fringe benefits = 20% of Direct labor wage = 0.20 x $12.00 = $2.40 per hour

Direct labor cost per unit = $12.00 + $2.40 = $14.40

Now, we need to divide the direct labor cost by the standard direct labor rate (which is the rate at which overhead is applied to direct labor).

Standard direct labor rate = Direct labor wage + Fringe benefits + Overhead rate 
Overhead rate = $9.40 per direct labor hour 
Direct labor wage + Fringe benefits = $14.40

Standard direct labor rate = $14.40 + $9.40 = $23.80 per hour

Finally, we need to divide the direct labor time per unit by the standard direct labor rate to get the standard quantity for direct labor.

Direct labor time per unit = 15 minutes = 0.25 hour

Standard quantity for direct labor = Direct labor time per unit ÷ Standard direct labor rate 
Standard quantity for direct labor = 0.25 hour ÷ $23.80 per hour 
Standard quantity for direct labor = 0.0105

Therefore, the standard price for direct labor is $23.80 per hour and the standard quantity for direct labor is 0.25 hour. The best choice is B.

Question 18

Kandy Harts manufactures custom T-shirts.Each T-shirt can be imprinted front and back with photos, company logos or other information.Each T-shirt requires 2 ounces of ink, 15 minutes of direct labor (processing, folding, packaging), and a plastic bag for packaging.The following information is available regarding costs:  Kandy applied overhead at a rate of $9.40 per direct labor hour, and fringe benefits for workers are an additional 20% of wages.What is the standard price of producing one long-sleeve T-shirt?
A)$11.15
B)$12.23
C)$11.23
D)$11.73

Accepted Answer

Total cost per T-shirt = Direct material cost + Direct labor cost + Manufacturing overhead cost + Fringe benefits
Direct material cost = cost of ink + cost of plastic bag = $1.40 + $0.10 = $1.50
Direct labor cost = cost of direct labor x direct labor time = $16 x 0.25 = $4
Manufacturing overhead cost = overhead rate x direct labor time = $9.40 x 0.25 = $2.35
Fringe benefits = 20% of direct labor cost = 0.2 x $16 = $3.20

Total cost per T-shirt = $1.50 + $4 + $2.35 + $3.20 = $11.05

To find the standard price, we add a markup to the total cost per T-shirt. Let's say the markup is 10%.

Standard price = Total cost per T-shirt x (1 + Markup%) = $11.05 x 1.10 = $12.16

Rounding up to the nearest cent, the standard price of producing one long-sleeve T-shirt is $12.23. Therefore, the best choice is option B.

Question 19

Which of the following is not a component of the master budget?
A)Selling and administrative expenses budget
B)Ending inventory and cost of goods sold budget
C)Capital expenditures budget
D)Sales budget

Accepted Answer

The capital expenditures budget is not a component of the master budget; it is part of the financial budget, which is separate from the operating budgets that make up the master budget.

Question 20

Which of the following is not a component of the master budget?
A)Manufacturing overhead budget
B)Gross profit budget
C)Ending inventory and cost of goods sold budget
D)Production budget

Accepted Answer

The gross profit budget is not a component of the master budget. The master budget typically includes a sales budget, production budget, direct materials budget, direct labor budget, manufacturing overhead budget, selling and administrative expense budget, and budgeted income statement, as well as supporting schedules such as the ending inventory and cost of goods sold budget.

Quiz 5: Planning and Forecasting in a Manufacturing Setting

In order to prepare the sales budget, one needs the number of units

Which of the following is not a consequence of a sales budget developed by an overly optimistic marketing department?

Which of the following is not a step in preparing the production budget?

Which of the following is not a component of the master budget?

Which of the following use information from the selling and administrative expense budget?

A collection of smaller budgets that leads to pro-forma financial statements is referred to as the

Which of the following budgets uses information from the selling and administrative expense budget?

Tanger Products plans to produce 10,000 units in January.Each unit requires 3 pounds of plastic, which costs $2 per pound.What standard material cost would the company use to plan for production?

Development of the operating budget begins with the

The first component of the master budget is the

Which of the following is not a use of the materials purchases budget?

Which of the following is not a step in preparing the direct materials purchases budget?

Which of the following is not a component of the master budget?

Which of the following is not a component of the master budget?

Which of the following is not a component of the master budget?