Weebly Yufoe Uploads Chapter 6 Master Budget and Responsibility Accounting 14e Horngrens
Problem 1
What are the four elements of the budgeting cycle?
Shazia N.
Numerade Educator
Trouble ii
Define master upkeep
Ameer S.
Numerade Educator
Problem 3
'Strategy, plans, and budgets are unrelated to i another." Do you lot agree? Explain.
Alexander B.
Numerade Educator
Problem 4
'Approaching performance is a better criterion than past performance for judging managers." Do you agree? Explain.
Paul A.
California State Polytechnic University, Pomona
Trouble 5
"Production managers and marketing managers are like oil and water. They just don't mix." How tin a budget assist in reducing conflicts between these two areas?
Ameer Southward.
Numerade Educator
Problem 6
"Budgets meet the price-do good exam. They force managers to act differently." Exercise you agree? Explain.
Shazia Due north.
Numerade Educator
Problem 7
Define rolling budget. Give an example.
Ameer Due south.
Numerade Educator
Problem 8
Outline the steps in preparing an operating budget.
Ameer South.
Numerade Educator
Problem 9
"The sales forecast is the cornerstone for budgeting." Why?
Ameer S.
Numerade Educator
Problem ten
How tin can sensitivity analysis be used to increment the benefits of budgeting?
Ameer South.
Numerade Educator
Problem 11
Define Kaizen budgeting.
Ameer Due south.
Numerade Educator
Problem 12
Describe how nonoutput-based toll drivers can exist incorporated into budgeting.
Ameer South.
Numerade Educator
Problem 13
Explain how the choice of the blazon of responsibility center (cost, revenue, profit, or investment) affects behavior.
Ameer Southward.
Numerade Educator
Problem 14
What are some additional considerations that arise when budgeting in multinational companies?
Ameer S.
Numerade Educator
Problem 14
What are some additional considerations that arise when budgeting in multinational companies?
Problem 15
"Cash budgets must be prepared before the operating income budget." Practice y'all agree? Explain.
Ameer S.
Numerade Educator
Trouble 16
Master budget. Which of the post-obit statements is correct regarding the components of the master budget?
a. The cash budget is used to create the capital budget.
b. Operating budgets are used to create cash budgets.
c. The manufacturing overhead budget is used to create the production budget.
d. The cost of goods sold budget is used to create the selling and administrative expense upkeep.
Muhammad A.
Numerade Educator
Problem 17
Operating and fiscal budgets. Which of the following statements is right regarding the drivers of operating and fiscal budgets?
a. The sales upkeep will drive the cost of goods sold upkeep.
b. The cost of goods sold budget volition drive the units of production budget.
c. The production budget will drive the selling and administrative expense budget.
d. The greenbacks upkeep volition drive the product and selling and administrative expense budgets.
Problem 18
Production upkeep. Superior Industries sales budget shows quarterly sales for the adjacent yr as follows: Quarter $ane-x,000 ;$ Quarter $ii-8,000 ;$ Quarter $iii-12,000 ;$ Quarter $4-fourteen,000$. Company policy is to accept a target finished-goods inventory at the end of each quarter equal to $20 \%$ of the next quarter'due south sales. Budgeted production for the second quarter of next year would be:
1. 7,200 units; 2.8,800 units; 3.12,000 units; 4.x,400 units
Problem 19
Responsibility centers. Elmhurst Corporation is considering changes to its responsibility accounting system. Which of the following statements is/are correct for a responsibleness accounting system.
i. In a cost center, managers are responsible for controlling costs simply not revenue.
ii. The idea behind responsibility accounting is that a manager should be held responsible for those items that the manager tin can control to a significant extent.
iii. To be effective, a good responsibleness accounting system must aid managers to plan and to control.
4. costs that are allocated to a responsibility centre are commonly controllable by the responsibility center manager.
one. I and Il merely are correct.
ii. II and III only are correct.
iii. $I, \|,$ and \|\| are correct.
iv. $I, \|$ and $I V$ are correct
Muhammad A.
Numerade Educator
Problem 20
Cash budget. Mary Jacobs, the controller of the Jenks Company is working on Jenks' greenbacks budget for year $2 .$ She has information on each of the following items:
i. Wages due to workers accrued as of December 31 , year 1
ii. Limits on a line of credit that may exist used to fund Jenks' operations in year ii
iii. The balance in accounts payable as of December 31 , year 1 , from credit purchases made in yr 1 Which of the items above should Jacobs take into business relationship when edifice the greenbacks budget for twelvemonth $ii ?$
a. $1, \|$
b. $1, \| 1$
c. $\|,\|$
d. $\quad|,| I,|| |$
Problem 21
Sales budget, service setting. In 2017 , Hart $\&$ Sons, a small environmental-testing firm, performed xi,400 radon tests for $260$ each and fifteen,000 lead tests for $210$ each. Considering newer homes are being built with pb-free pipes, pb-testing volume is expected to subtract by $12 \%$ next year. However, awareness of radon-related health hazards is expected to result in a $5 \%$ increment in radon-test volume each yr in the near future. Jim Hart feels that if he lowers his price for lead testing to $200$ per exam, he will have to face only a $iv \%$ decline in atomic number 82-exam sales in 2018 .
1. Gear up a 2018 sales budget for Hart $\&$ Sons assuming that Hart holds prices at 2017 levels.
ii. Prepare a 2018 sales budget for Hart $\&$ Sons assuming that Hart lowers the price of a lead test to $ 200$. Should Hart lower the toll of a lead exam in 2018 if the company'south goal is to maximize sales revenue?
Problem 22
Sales and production budget. The Coby Company expects sales in 2018 of 201,000 units of serving trays. Coby's beginning inventory for 2018 is 13,000 trays, and its target ending inventory is 29,000 trays. Compute the number of trays approaching for production in 2018 .
Muhammad A.
Numerade Educator
Problem 23
Direct textile upkeep. Dawson Co. produces vino. The company expects to produce two,535,000 2-liter bottles of Chablis in 2018 . Dawson purchases empty glass bottles from an outside vendor. Its target ending inventory of such bottles is 77,000 ; its get-go inventory is 54,000 . For simplicity, ignore breakage. Compute the number of bottles to be purchased in 2018
Problem 24
Material purchases budget. The McGrath Visitor has prepared a sales budget of 42,000 finished units for a 3 -month menses. The company has an inventory of xiii,000 units of finished goods on mitt at December 31 and has a target finished-goods inventory of fifteen,000 units at the finish of the succeeding quarter.
It takes iii gallons of direct materials to make one unit of finished production. The company has an inventory of 61,000 gallons of direct materials at December 31 and has a target ending inventory of 53,000 gallons at the terminate of the succeeding quarter. How many gallons of directly materials should McGrath Company purchase during the 3 months ending March 31?
Problem 25
Revenues, product, and purchases budgets. The Yucatan Co. in Mexico has a sectionalization that manufactures bicycles. Its budgeted sales for Model $\mathrm{XG}$ in 2018 are 95,000 units. Yucatan's target catastrophe inventory is vii,000 units, and its beginning inventory is 11,000 units. The company'southward budgeted selling price to its distributors and dealers is 3,500 pesos per wheel.
Yucatan buys all its wheels from an outside supplier. No defective wheels are accepted. Yucatan'south needs for extra wheels for replacement parts are ordered by a separate partition of the visitor. The company's target ending inventory is fourteen,000 wheels, and its offset inventory is 16,000 wheels. The budgeted purchase price is 400 pesos per wheel.
1. Compute the approaching revenues in pesos.
two. Compute the number of bicycles that Yucatan should produce.
iii. Compute the approaching purchases of wheels in units and in pesos.
iv. What actions can Yucatan's managers take to reduce budgeted purchasing costs of wheels assuming the same budgeted sales for Model XG?
Problem 26
Revenues and product budget. Saphire, Inc., bottles and distributes mineral water from the company'southward natural springs in northern Oregon. Saphire markets two products: 12-ounce disposable plastic bottles and 1 -gallon reusable plastic containers.
one. For $2018,$ Saphire marketing managers project monthly sales of 500,000 12-ounce bottles and 130,0001 -gallon containers. Average selling prices are estimated at $0.30$ per 12 -ounce bottle and $1.60$ per 1 -gallon container. Prepare a revenues upkeep for Saphire, Inc., for the year ending December 31,2018
2. Saphire begins 2018 with 980,000 12-ounce bottles in inventory. The vice president of operations requests that 12 -ounce bottles ending inventory on December $31,2018,$ be no less than 660,000 bottles. Based on sales projections as budgeted previously, what is the minimum number of 12 -ounce bottles Saphire must produce during $2018 ?$
3. The VP of operations requests that catastrophe inventory of 1 -gallon containers on Dec $31,2018,$ be 300,000 units. If the production budget calls for Saphire to produce one,200,0001 -gallon containers during $2018,$ what is the beginning inventory of 1 -gallon containers on January $1,2018 ?$
Problem 27
Budgeting; direct textile usage, manufacturing cost, and gross margin. Xander Manufacturing Company manufactures blue rugs, using wool and dye every bit direct materials. One rug is budgeted to use 36 skeins of wool at a cost of $ two$ per skein and 0.eight gallons of dye at a price of $six$ per gallon. All other materials are indirect. At the commencement of the yr Xander has an inventory of 458,000 skeins of wool at a price of $961,800$ and iv,000 gallons of dye at a cost of $23,680 .$ Target ending inventory of wool and dye is nada. Xander uses the FIF0 inventory toll-period method.
Xander blue rugs are very pop and need is high, but considering of chapters constraints the firm will produce only 200,000 blue rugs per twelvemonth. The approaching selling cost is $two,000$ each. In that location are no rugs in beginning inventory. Target ending inventory of rugs is also zero.
Xander makes rugs by hand, but uses a machine to dye the wool. Thus, overhead costs are accumulated in 2 cost pools- 1 for weaving and the other for dyeing. Weaving overhead is allocated to products based on direct manufacturing labor-hours (DMLH). Dyeing overhead is allocated to products based on automobile-hours (MH).
There is no direct manufacturing labor cost for dyeing. Xander budgets 62 direct manufacturing laborhours to weave a carpeting at a budgeted charge per unit of $13$ per hour. It budgets 0.ii machine-hours to dye each skein in the dyeing procedure.
1. Prepare a direct materials usage budget in both units and dollars.
ii. Summate the budgeted overhead allocation rates for weaving and dyeing.
3. Summate the budgeted unit cost of a blue rug for the year.
iv. Fix a revenues budget for blue rugs for the yr, assuming Xander sells (a) 200,000 or (b) 185,000 blue rugs (that is, at two different sales levels).
5. Calculate the approaching cost of goods sold for blue rugs nether each sales supposition.
six. Find the approaching gross margin for blue rugs under each sales supposition.
7. What deportment might you have every bit a managing director to improve profitability if sales driblet to 185,000 blue rugs?
8. How might top direction at Xander use the budget developed in requirements $1-six$ to better manage the company?
Problem 28
Budgeting, service company. Ever Claan Visitor provides gutter cleaning services to residential clients. The company has enioyed considerable growth in recent years due to a successful marketing camm paign and favorable reviews on service-rating Spider web sites. Ever Make clean owner Joanne Clark makes sales calls herself and quotes on jobs based on length of gutter surface. Ever Clean hires college students to drive the visitor vans to jobs and make clean the gutters. A parttime bookkeeper takes intendance of billing customers and other function tasks. Overhead is allocated based on directlabor-hours (DLH)
Joanne Clark estimates that her gutter cleaners will work a total of i,000 iobs during the yr. Each chore averages 600 anxiety of gutter surface and requires 12 direct labor-hours. Clark pays her gutter cleaners 15 per 60 minutes, inclusive of taxes and benefits. The following table presents the approaching overhead costs for 2018
ane. Ready a directly labor budget in both hours and dollars.
ii. Calculate the approaching overhead allocation rate based on the budgeted quantity of the price drivers.
3. Calculate the budgeted total cost of all jobs for the year and the budgeted toll of an average 600 -foot gutter-cleaning job.
iv. Gear up a revenues budget for the year, assuming that Always Clean charges customers $0.60$ per square foot.
v. Calculate the budgeted operating income.
6. What actions can Clark take if sales should refuse to 900 jobs annually?
Problem 29
Budgets for production and direct manufacturing labor. (CMA, adapted) DeWitt Company makes and sells artistic frames for pictures of weddings, graduations, and other special events. Ron Bahar, the controller, is responsible for preparing DeWitt'south principal budget and has accumulated the following data for 2018 :
In addition to wages, direct manufacturing labor-related costs include alimony contributions of $0.forty$ per 60 minutes, worker'southward bounty insurance of $\0.x$ per hr, employee medical insurance of $0.50$ per hour, and Social Security taxes. Assume that equally of Jan 1,2018 , the Social Security tax rates are $7.5 \%$ for employers and $7.five \%$ for employees. The toll of employee benefits paid past DeWitt on its direct manufacturing employees is treated as a directly manufacturing labor cost.
DeWitt has a labor contract that calls for a wage increase to $ 12$ per 60 minutes on April 1,2018 . New laborsaving machinery has been installed and will exist fully operational by March 1,2018 . DeWitt expects to have 16,000 frames on mitt at December $31,2017,$ and it has a policy of carrying an end-of-calendar month inventory of $100 \%$ of the following month'south sales plus $l \%$ of the 2d following month's sales.
one. Prepare a product upkeep and a straight manufacturing labor cost budget for DeWitt Company by month and for the first quarter of $2018 .$ You lot may combine both budgets in one schedule. The direct manufacturing labor cost budget should include labor-hours and show the details for each labor cost category.
ii. What actions has the budget process prompted DeWitt's direction to take?
3. How might DeWitt'due south managers employ the upkeep developed in requirement i to better manage the company?
Problem 30
Action-based budgeting. The Jerico shop of Jiffy Mart, a chain of small neighborhood convenience stores, is preparing its action-based budget for January 2018 . Jiffy Mart has three production categories: soft drinks $135 \%$ of price of goods sold $[\mathrm{COGS}]$, fresh produce $(25 \% \text { of } \mathrm{COGS} \text { ), and packaged food }(twoscore \%$ of $\mathrm{COGS}$ ). The post-obit table shows the iv activities that consume indirect resources at the Jerico store, the toll drivers and their rates, and the cost-driver amount budgeted to be consumed by each activeness in January 2018
i. What is the total budgeted indirect costat the Jerico store in Jan 2018? What is the total budgeted cost of each activeness at the Jerico shop for Jan 2018? What is the budgeted indirect cost of each product category for January 2018?
two. Which product category has the largest fraction of total budgeted indirect costs?
3. Given your answer in requirement 2, what advantage does Jiffy Mart proceeds by using an activity-based approach to budgeting over, say, allocating indirect costs to products based on cost of goods sold?
Problem 31
Kaizen approach to activeness-based budgeting (continuation of $half dozen-30$ ). Jiffy Mart has a Kaizen (continuous improvement) approach to budgeting monthly activeness costs for each calendar month of 2018 . Each successive month, the budgeted toll-driver rate decreases by $0.4 \%$ relative to the preceding month. So, for instance, Feb's budgeted toll-commuter charge per unit is 0.996 times January's budgeted cost-driver rate, and March's budgeted toll-driver rate is 0.996 times the budgeted February rate. Jiffy Mart assumes that the budgeted amount of cost-commuter usage remains the aforementioned each month.
1. What are the total budgeted price for each action and the total budgeted indirect toll for March $2018 ?$
two. What are the benefits of using a Kaizen approach to budgeting? What are the limitations of this approach, and how might Jiffy Mart management overcome them?
Problem 32
Responsibility and controllability. Consider each of the following independent situations for Prestige Fountains. Prestige manufactures and sells decorative fountains for commercial properties. The company also contracts to service both its own and other brands of fountains. Prestige has a manufacturing plant, a supply warehouse that supplies both the manufactory and the service technicians (who often demand parts to repair fountains), and 12 service vans. The service technicians drive to customer sites to service the fountains. Prestige owns the vans, pays for the gas, and supplies fountain parts, but the technicians own their ain tools.
1. In the factory, the production managing director is not happy with the motors that the purchasing manager has been purchasing. In May, the production director stops requesting motors from the supply warehouse and starts purchasing them straight from a different motor manufacturer. Actual materials costs in May are higher than budgeted.
two. Overhead costs in the manufacturing institute for June are much college than budgeted. Investigation reveals a utility rate hike in result that was not figured into the budget.
3. Gasoline costs for each van are budgeted based on the service area of the van and the amount of driving expected for the month. The driver of van iii routinely has monthly gasoline costs exceeding the budget for van 3. After investigating, the service managing director finds that the diriver has been driving the van for personal use.
4. Regency Mall, one of Prestige's fountain service customers, calls the service people merely for emergencies and not for routine maintenance. Thus, the materials and labor costs for these service calls exceeds the monthly budgeted costs for a contract customer
5. Prestige's service technicians are paid an hourly wage of S22, regardless of experience or time with the company. As a effect of an analysis performed last calendar month, the service manager determined that service technicians in their first year of employment worked on average 20\% more slowly than other employees. Prestige bills customers per service telephone call, not per 60 minutes.
6. The cost of health insurance for service technicians has increased by 40\% this year, which caused the actual health insurance costs to profoundly exceed the budgeted health insurance costs for the service technicians
For each state of affairs described, determine where (that is, with whom) (a) responsibleness and (b) controllability prevarication. Propose ways to solve the problem or to improve the situation.
Problem 33
Responsibility, controllability, and stretch targets. Consider each of the post-obit independent situations for Sunrise Tours, a company owned past David Bartlett that sells motor coach tours to schools and other groups. Sunshine Tours owns a fleet of 10 motor coaches and employs 12 drivers, i maintenance technician, iii sales representatives, and an office manager. Sunshine Tours pays for all fuel and maintenance on the coaches. Drivers are paid $0.50$ per mile while in transit, plus $fifteen$ per hour while idle (time spent waiting while tour groups are visiting their destinations). The maintenance technician and office manager are both full-time salaried employees. The sales representatives work on directly commission.
i. When the office managing director receives calls from potential customers, she is instructed to handle the contracts herself. Recently, notwithstanding, the number of contracts written up past the office director has declined. At the aforementioned time, i of the sales representatives has experienced a significant increment in contracts. The other two representatives believe that the function manager has been colluding with the third representative to ship him the prospective customers.
2. Ane of the motor bus drivers seems to be reaching his destinations more quickly than whatsoever of the other drivers and is reporting longer idle fourth dimension.
3. Regular preventive maintenance of the motor coaches has been proven to improve fuel efficiency and reduce overall operating costs past averting costly repairs. During busy months, however, it is difficult for the maintenance technician to consummate all of the maintenance tasks within his 40-60 minutes workweek.
iv. David Bartlett has read nigh stretch targets, and he believes that a change in the bounty structure of the sales representatives may amend sales. Rather than a straight committee of $10 \%$ of sales. he is because a arrangement where each representative is given a monthly goal of 50 contracts. If the goal is met, the representative is paid a $12 \%$ committee. If the goal is non met, the commission falls to $eight \% .$ Currently, each sales representative averages 45 contracts per month.
5. Fuel consumption has increased significantly in recent months. David Bartlett is considering ways to promote improved fuel efficiency and reduce harmful emissions using stretch ecology targets, where drivers and the maintenance mechanic would receive a bonus if fuel consumption falls below $90 \%$ of budgeted fuel usage per mile driven.
For situations $ane-three,$ discuss which employee has responsibleness for the related costs and the extent to which costs are controllable and past whom. What are the risks or costs to the visitor? What can exist done to solve the problem or improve the situation? For situations four and $5,$ describe the potential benefits and costs of establishing stretch targets.
Problem 34
Cash menstruation analysis, sensitivity assay. HealthMart is a retail store selling home oxygen equipment. HealthMart likewise services home oxygen equipment, for which the company bills customers monthly. HealthMart has budgeted for increases in service acquirement of $200$ each month due to a recent advertisement campaign. The forecast of sales and service revenue for the March-June 2018 is as follows:
Nigh all of the sales revenues of the oxygen equipment are credit bill of fare sales; greenbacks sales are negligible. The credit card visitor deposits $97 \%$ of the revenues recorded each twenty-four hours into HealthMart's account overnight. For the servicing of dwelling house oxygen equipment, $60 \%$ of oxygen services billed each month is collected in the calendar month of the service, and $40 \%$ is nerveless in the calendar month following the service.
1. Calculate the cash that HealthMart expects to collect in April, May, and June 2018 from sales and service revenues. Bear witness calculations for each month.
2. HealthMart has budgeted expenditures for May of $11,000$ and requires a minimum cash balance of $250$ at the cease of each month. It has a cash residuum on May 1 of $400$
a. Given your answer to requirement 1, volition HealthMart need to borrow cash to embrace its payments for May and maintain a minimum greenbacks balance of $250$ at the stop of May?
b. Assume (independently for each situation) that (1) May total revenues might be $x \%$ lower or that
(two) total costs might be $five \%$ higher. Under each of those two scenarios, bear witness the total internet cash for May and the amount HealthMart would have to borrow to encompass its cash payments for May and maintain a minimum cash remainder of $250$ at the end of May. (Over again, assume a balance of $ 400$ on May $i .$
3. Why do HealthMart'south managers fix a cash budget in add-on to the acquirement, expenses, and operating income budget? Has preparing the cash budget been helpful? Explain briefly.
Trouble 35
Budget schedules for a manufacturer. Hale Specialties manufactures, among other things, woolen blankets for the athletic teams of the ii local high schools. The company sews the blankets from material and sews on a logo patch purchased from the licensed logo store site. The teams are as follows:
$\cdot$ Broncos, with red blankets and the Broncos logo
$\cdot$ Rams, with blackness blankets and the Rams logo
Manufacturing overhead (both variable and fixed) is allocated to each blanket on the basis of approaching direct manufacturing labor-hours per coating. The budgeted variable manufacturing overhead rate for March 2017 is $ 17$ per direct manufacturing labor-hr. The budgeted fixed manufacturing overhead for March 2017 is $ xiv,625 .$ Both variable and fixed manufacturing overhead costs are allocated to each unit of finished appurtenances.
Budgeted sales for March 2017 are 140 units of the Broncos blankets and 195 units of the Rams blankets. The budgeted selling prices per unit in March 2017 are $ 305$ for the Broncos blankets and $ 378$ for the Rams blankets. Assume the following in your answer:
$\cdot$ Piece of work-in-process inventories are negligible and ignored.
$\cdot$ Directly materials inventory and finished-goods inventory are costed using the FIF0 method.
$\cdot$ Unit of measurement costs of direct materials purchased and finished appurtenances are abiding in March 2017 .
ane. Gear up the following budgets for March 2017:
a. Revenues upkeep
b. Production budget in units
c. Direct material usage budget and directly materials purchases upkeep
d. Direct manufacturing labor costs budget
e. Manufacturing overhead costs budget
f. Catastrophe inventories budget (direct materials and finished goods)
k. cost of goods sold upkeep
ii. Suppose Hale Specialties decides to incorporate continuous comeback into its budgeting process. Describe two areas where information technology could incorporate continuous improvement into the budget schedules in requirement 1.
Oluwadamilola A.
Numerade Educator
Problem 36
Budgeted costs, Kaizen improvements environmental costs. The states Apparel (USA) articles obviously white and solid-colored T-shirts. Budgeted inputs include the following:
USA has the opportunity to switch from using the dye it currently uses to using an environmentally friendly dye that costs $ 1.25$ per ounce. The company would still need 4 ounces of dye per shirt. USA is reluctant to modify considering of the increment in costs (and decrease in profit), only the Environmental Protection Agency has threatened to fine the company $130,000$ if it continues to apply the harmful only less expensive dye.
1. Given the preceding information, would USA be ameliorate off financially by switching to the environmentally friendly dye? (Assume all other costs would remain the same.)
2. Assume USA chooses to exist environmentally responsible regardless of toll, and it switches to the new dye. The production manager suggests trying Kaizen costing. If U.s. tin reduce fabric and labor costs each past $1 \%$ per calendar month on all the shirts it manufactures, by how much volition overall costs decrease at the end of 12 months? (Circular to the nearest dollar for calculating cost reductions.)
iii. Refer to requirement ii. How could the reduction in material and labor costs be accomplished? Are there any problems with this program?
Problem 37
Revenue and production budgets. (CPA, adapted) The Chen Corporation manufactures and sells two products: Thingone and Thingtwo. In July 2016 , Chen's upkeep department gathered the following data to set budgets for 2017 :
Manufacturing overhead is allocated at the rate of $\$ 24$ per direct manufacturing labor-hour.
Based on the preceding projections and budget requirements for Thingone and Thingtwo, prepare the following budgets for 2017 :
ane. Revenues budget (in dollars)
2. What questions might the CEO ask the marketing manager when reviewing the revenues budget? Explain briefly.
iii. Production upkeep (in units)
4. Direct fabric purchases upkeep (in quantities)
5. Straight material purchases budget (in dollars)
6. Direct manufacturing labor budget (in dollars)
seven. Budgeted finished-goods inventory at December 31,2017 (in dollars)
8. What questions might the CEO ask the production director when reviewing the production, direct materials, and direct manufacturing labor budgets?
ix. How does preparing a upkeep help Chen Corporation's top direction better manage the company?
Problem 38
Budgeted income argument. $(\mathrm{CMA}, \text { adapted) } \mathrm{Smart}$ Video Company is a manufacturer of videoconferencing products. Maintaining the videoconferencing equipment is an of import expanse of client satisfaction. A recent downturn in the computer manufacture has acquired the videoconferencing equipment segment to suffer, leading to a reject in Smart Video's fiscal performance. The following income statement shows results for 2017 :
Smart Video'southward management team is preparing the 2018 budget and is studying the following information:
1. Selling prices of equipment are expected to increment by $10 \%$ as the economic recovery begins. The selling toll of each maintenance contract is expected to remain unchanged from 2017
2. Equipment sales in units are expected to increase by 6\%, with a respective 6 \% growth in units of maintenance contracts
iii. toll of each unit sold is expected to increase past $5 \%$ to pay for the necessary technology and quality improvements.
four. Marketing costs are expected to increase by S290,000, but admininstration costs are expected to remain at 2017 levels
5. Distribution costs vary in proportion to the number of units of equipment sold
6. Two maintenance technicians are to be hired at a full cost of $\$ 160,000$, which covers wages and related travel costs. The objective is to improve customer service and shorten response time
seven. There is no beginning or ending inventory of equipment.
1. Set a approaching income argument for the year ending December 31,2018
2. How well does the budget marshal with Smart Video'due south strategy?
three. How does preparing the budget help Smart Video's management team amend manage the company?
Problem 39
Responsibleness in a restaurant. Paula Beane owns a restaurant franchise that is part of a concatenation of "southern homestyle" restaurants. 1 of the chain'southward popular breakfast items is biscuits and gravy. Cardinal Warehouse makes and freezes the biscuit dough, which information technology then sells to the franchise stores where it is thawed and baked in the private stores past the cook. Each franchise besides has a purchasing agent who orders the biscuits (and other items) based on expected need. In March 2018 , one of the freezers in Central Warehouse breaks down and biscuit production is reduced by $25 \%$ for 3 days. During those 3 days, Paula's franchise runs out of biscuits but need does not slow downward. Paula's franchise cook, Betty Baker, sends ane of the kitchen helpers to the local grocery store to buy refrigerated set up-to-bake biscuits. Although the customers are kept happy, the refrigerated biscuits toll Paula's franchise three times the cost of the Central Warehouse frozen biscuits, and the franchise loses money on this item for those three days. Paula is angry with the purchasing agent for not ordering enough biscuits to avoid running out of stock and with Betty for spending too much money on the replacement biscuits.
Who is responsible for the cost of the biscuits? At what level is the price controllable? Exercise you agree that Paula should be angry with the purchasing amanuensis? With Betty? Why or why not?
Problem 40
Comprehensive trouble with $A B C$ costing. Animal Gear Company makes two pet carriers, the Cat-allac and the Dog-eriffic. They are both made of plastic with metallic doors, but the Cat-allac is smaller. Information for the two products for the month of Apr is given in the following tables:
Animal Gear uses a FIF0 toll-flow supposition for finished-goods inventory. Animal Gear uses an activity-based costing organization and classifies overhead into three activeness pools:
Setup, Processing, and Inspection. Activity rates for these activities are $ 105$ per setup-hr, $ ten$ per machine-hour, and $ 15$ per inspection-hr, respectively. Other information follows:
If necessary, round up to calculate number of batches. Nonmanufacturing stock-still costs for March equal $ 32,000$, half of which are salaries. Salaries are expected to increase $5 \%$ in April. 0 ther nonmanufacturing fixed costs will remain the aforementioned. The only variable nonmanufacturing toll is sales commission, equal to $1 \%$ of sales revenue. Prepare the following for April:
1. Revenues budget
two. Production upkeep in units
3. Direct material usage budget and directly cloth purchases budget
4. Direct manufacturing labor price budget
5. Manufacturing overhead cost budgets for each of the three activities
vi. Budgeted unit price of catastrophe finished-appurtenances inventory and catastrophe inventaries budget
7. cost of goods sold budget
eight. Nonmanufacturing costs budget
nine. Budgeted income statement (ignore income taxes)
ten. How does preparing the budget help Animal Gear's management team meliorate manage the visitor?
Problem 41
Cash upkeep (continuation of $6-40$ ). Refer to the information in Problem $6-forty$ Presume the following: Animal Gear (AG) does non make whatever sales on credit. AG sells simply to the public and accepts cash and credit cards; $90 \%$ of its sales are to customers using credit cards, for which AG gets the cash right away, less a $ii \%$ transaction fee.
Purchases of materials are on business relationship. AG pays for one-half the purchases in the period of the purchase and the other half in the post-obit menstruum. At the end of March, AG owes suppliers $ eight,000$.
AG plans to replace a machine in Apr at a net greenbacks toll of $ 13,000$. Labor, other manufacturing costs, and nonmanufacturing costs are paid in greenbacks in the calendar month incurred except of course depreciation, which is not a greenbacks flow. Depreciation is $ 25,000$ of the manufacturing cost and $ ten,000$ of the nonmanufacturing price for April.
AG currently has a $ 2,000$ loan at an annual involvement rate of $12 \%$. The interest is paid at the terminate of each month. If AG has more than than $ 7,000$ cash at the end of Apr it volition pay back the loan. AG owes $ 5,000$ in income taxes that need to exist remitted in April. AG has cash of $ five,900$ on hand at the end of March.
1. Gear up a greenbacks upkeep for April for Beast Gear.
two. Why practice Animal Gear'southward managers gear up a cash budget in add-on to the revenue, expenses, and operating income budget?
Problem 42
Comprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manufactures a single model, the Pipex. In late 2017 , Skulas's management accountant gathered the post-obit information to set up budgets for January 2018 :
Skulas's CEO expects to sell 2,900 snowboards during January 2018 at an estimated retail cost of $650$ per board. Further, the CEO expects 2018 kickoff inventory of 500 snowboards and would like to finish January 2018 with 200 snowboards in stock.
Variable manufacturing overhead is $ seven$ per direct manufacturing labor-hour. In that location are also $ 81,000$ in stock-still manufacturing overhead costs budgeted for January $2018 .$ Skulas combines both variable and fixed manufacturing overhead into a single charge per unit based on straight manufacturing labor-hours. Variable marketing costs are allocated at the rate of $ 250$ per sales visit. The marketing plan calls for 38 sales visits during January
2018. Finally, there are $ 35,000$ in fixed nonmanufacturing costs budgeted for January 2018 Other data include:
The inventoriable unit price for ending finished-goods inventory on December $31,2017,$ is $ 374.eighty .$ Presume Skulas uses a FIF0 inventory method for both direct materials and finished goods. Ignore work in process in your calculations.
1. Gear up the January 2018 revenues upkeep (in dollars).
2. Gear up the January 2018 production budget (in units).
3. Prepare the direct material usage and purchases budgets for January 2018
4. Prepare a direct manufacturing labor costs budget for Jan 2018
5. Prepare a manufacturing overhead costs upkeep for January 2018
6. What is the budgeted manufacturing overhead charge per unit for Jan $2018 ?$
7. What is the budgeted manufacturing overhead toll per output unit in Jan $2018 ?$
8. Summate the cost of a snowboard manufactured in Jan 2018 .
9. Ready an ending inventory budget for both direct materials and finished goods for January 2018.
10. Set a cost of goods sold upkeep for January 2018
11. Prepare the budgeted income statement for Skulas, Inc., for Jan 2018
12. What questions might the CEO ask the direction team when reviewing the upkeep? Should the CEO set stretch targets? Explain briefly.
xiii. How does preparing the budget aid Skulas's direction team meliorate manage the company?
Oluwadamilola A.
Numerade Educator
Problem 43
Greenbacks budgeting, budgeted rest sheet (Continuation of 6 -42) (Appendix) Refer to the information in Problem $6-42$ Budgeted balances at January 31,2018 are equally follows:
Client invoices are payable inside 30 days. From past experience, Skulas'southward accountant projects $twoscore \%$ of invoices will be collected in the month invoiced, and $60 \%$ volition exist collected in the following month.
Accounts payable relates only to the purchase of direct materials. Straight materials are purchased on credit with $50 \%$ of direct materials purchases paid during the calendar month of the purchase, and $50 \%$ paid in the calendar month following buy.
Fixed manufacturing overhead costs include $ 64,000$ of depreciation costs and fixed nonmanufacturing overhead costs include $ x,000$ of depreciation costs. Straight manufacturing labor and the remaining manufacturing and nonmanufacturing overhead costs are paid monthly.
All belongings, constitute, and equipment acquired during January 2018 were purchased on credit and did not entail any outflow of greenbacks. There were no borrowings or repayments with respect to long-term liabilities in January 2018 On Dec $15,2017,$ Skulas's board of directors voted to pay a $ 160,000$ dividend to stockholders on January 31,2018
1. Prepare a cash upkeep for January $2018 .$ Prove supporting schedules for the calculation of drove of receivables and payments of accounts payable, and for disbursements for fixed manufacturing and nonmanufacturing overhead.
2. Skulas is interested in maintaining a minimum cash residuum of $ 120,000$ at the end of each month. Volition Skulas be in a position to pay the $ 160,000$ dividend on January $31 ?$
iii. Why do Skulas's managers fix a cash budget in addition to the revenue, expenses, and operating income budget?
4. Prepare a budgeted balance sheet for January 31,2018 by calculating the Jan 31,2018 balances in (a) cash (b) accounts receivable (c) inventory (d) accounts payable and (e) plugging in the residuum for stockholders' disinterestedness.
Oluwadamilola A.
Numerade Educator
Trouble 44
Comprehensive problem; ABC manufacturing, two products. Hazlett, Inc., operates at capacity and makes plastic combs and hairbrushes. Although the combs and brushes are a matching set, they are sold individually and so the sales mix is not i: 1 . Hazlett's management is planning its annual budget for fiscal twelvemonth $2018 .$ Here is data for 2018 :
Hazlett uses a FIF0 cost-flow assumption for finished-goods inventory. Combs are manufactured in batches of $200,$ and brushes are manufactured in batches of $100 .$ It takes twenty minutes to set up for a batch of combs and 1 hr to fix for a batch of brushes.
Hazlett uses activity-based costing and has classified all overhead costs equally shown in the post-obit table. Budgeted fixed overhead costs vary with capacity. Hazlett operates at capacity so budgeted fixed overhead cost per unit equals the budgeted fixed overhead costs divided by the approaching quantities of the cost allocation base of operations.
Commitment trucks transport units sold in commitment sizes of 1,000 combs or 1,000 brushes. Exercise the post-obit for the year 2018 :
1. Prepare the revenues budget.
2. Use the revenues budget to:
a. Notice the approaching allocation rate for marketing costs.
b. Find the budgeted number of deliveries and allocation charge per unit for distribution costs.
iii. Prepare the production budget in units.
4. Use the product budget to:
a. Find the approaching number of setups and setup-hours and the resource allotment rate for setup costs.
b. Find the budgeted total machine-hours and the allotment rate for processing costs.
c. Detect the budgeted total units produced and the allocation charge per unit for inspection costs.
5. Prepare the direct fabric usage budget and the direct fabric purchases upkeep in both units and dollars; round to whole dollars.
6. Apply the directly textile usage upkeep to discover the budgeted allocation rate for materials-handling costs.
seven. Prepare the directly manufacturing labor cost budget
viii. Prepare the manufacturing overhead cost upkeep for materials handling, setup, processing, and inspection costs
9. Prepare the budgeted unit cost of ending finished-goods inventory and ending inventories budget
10. Prepare the cost of goods sold budget.
11. Fix the nonmanufacturing overhead costs upkeep for marketing and distribution.
12. Prepare a approaching income argument (ignore income taxes).
thirteen. How does preparing the budget assist Hazlett's management squad better manage the visitor?
Oluwadamilola A.
Numerade Educator
Problem 45
Refer to the information in Problem $6-44$ All purchases fabricated in a given month are paid for in the post-obit month, and straight cloth purchases make up all of the accounts payable remainder and are reflected in the accounts payable balances at the get-go and the end of the twelvemonth.
Sales are made to customers with terms cyberspace 45 days. Fifty percentage of a calendar month's sales are collected in the month of the auction, $25 \%$ are nerveless in the month post-obit the sale, and $25 \%$ are collected two months after the sale and are reflected in the accounts receivables balances at the beginning and the stop of the year. Direct manufacturing labor, variable manufacturing overhead and variable marketing costs are paid as they are incurred. Fifty per centum of stock-still manufacturing overhead costs, $lx \%$ of fixed marketing costs, and $100 \%$ of stock-still distribution costs are depreciation expenses. The remaining fixed manufacturing overhead and marketing costs are paid as they are incurred. Selected balances for December $31,2017,$ follow:Hazlett has approaching to purchase equipment costing $ 145,000$ for greenbacks during 2018 . Hazlett desires a minimum cash residuum of $ 25,000$. The company has a line of credit from which information technology may borrow in increments of $ i,000$ at an interest rate of $12 \%$ per year. By special system, with the bank, Hazlett pays interest when repaying the principal, which only needs to be repaid in 2019
1. Prepare a cash budget for 2018 . If Hazlett must borrow cash to meet its desired ending cash balance, prove the amount that must be borrowed.
ii. Does the greenbacks upkeep for 2018 give Hazlett's managers all of the data necessary to manage cash in $2018 ?$ How might that exist improved?
3. What insight does the cash budget requite to Hazlett'south managers that the budgeted income statement does not?
Problem 46
Budgeting and ethics. Jayzee Visitor manufactures a variety of products in a variety of departments and evaluates departments and departmental managers by comparing actual price and output relative to the budget. Departmental managers help create the budgets and usually provide information nearly input quantities for materials, labor, and overhead costs.
Kurt Jackson is the manager of the department that produces product Z. Kurt has estimated these inputs for production Z:
The department produces about 100 units of product $Z$ each day. Kurt's department ever gets excellent evaluations, sometimes exceeding budgeted product quantities. For each 100 units of product $Z$ produced, the company uses, on boilerplate, about 48 hours of direct manufacturing labor (viii people working 6 hours each), 790 pounds of cloth, and 39.5 automobile-hours.
Height direction of Jayzee Visitor has decided to implement upkeep standards that will claiming the workers in each department, and it has asked Kurt to design more challenging input standards for production Z. Kurt provides top management with the following input quantities:
Discuss the following:
one. Are these upkeep standards challenging for the section that produces product Z?
2. Why do you lot suppose Kurt picked these detail standards?
3. What steps can Jayzee Company'due south superlative management take to make sure Kurt's standards really meet the goals of the firm?
Problem 47
Kaizen budgeting for carbon emissions. Apex Chemic Visitor currently operates three manufacturing plants in Colorado, Utah, and Arizona. Annual carbon emissions for these plants in the first quarter of 2018 are 125,000 metric tons per quarter for 500,000 metric tons in 2018 ). Apex management is investigating improved manufacturing techniques that volition reduce annual carbon emissions to below 475,000 metric tons so that the company can meet Environmental Protection Agency guidelines by $2019 .$ costs and benefits are as follows:
Apex Direction has chosen to use Kaizen budgeting to reach its goal for carbon emissions.
ane. If Noon reduces emissions past $1 \%$ each quarter, showtime with the 2d quarter of $2018,$ volition the company reach its goal of 475,000 metric tons past the finish of $2019 ?$
2. What would exist the net financial price or do good of their plan? Ignore the fourth dimension value of coin.
3. What factors other than toll might weigh into Apex's decision to bear out this program?
Problem 48
Comprehensive budgeting trouble; activeness-based costing, operating and financial budgets. Tyva makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have textile soles and the Palatial sandals have cloth-covered wooden soles. Tyva is preparing its upkeep for June 2018 and has estimated sales based on past experience. Other information for the month of June follows:
Tyva uses a FIF0 toll-flow supposition for finished-goods inventory. All the sandals are made in batches of 50 pairs of sandals. Tyva incurs manufacturing overhead costs, marketing and general administration, and shipping costs. Also materials and labor, manufacturing costs include setup, processing, and inspection costs. Tyva ships 40 pairs of sandals per shipment. Tyva uses action-based costing and has classified all overhead costs for the calendar month of June every bit shown in the post-obit chart:
one. Prepare each of the following for June:
a. Revenues budget
b. Production upkeep in units
c. Direct material usage budget and direct material purchases budget in both units and dollars; round to dollars
Direct manufacturing labor cost budget
e. Manufacturing overhead price budgets for setup, processing, and inspection activities
f. Budgeted unit of measurement cost of ending finished-appurtenances inventory and catastrophe inventories budget
m. cost of goods sold budget
h. Marketing and general administration and shipping costs budget
2. Tyva's balance sheet for May 31 follows.
Use the rest sheet and the post-obit information to prepare a greenbacks budget for Tyva for June. Round to dollars.
$\cdot$ All sales are on account, $60 \%$ are nerveless in the month of the auction, $38 \%$ are nerveless the following month, and $2 \%$ are never collected and written off equally bad debts.
$\cdot$ All purchases of materials are on account. Tyva pays for $fourscore \%$ of purchases in the month of purchase and $twenty \%$ in the following month.
$\cdot$ All other costs are paid in the month incurred, including the annunciation and payment of a $15,000$ cash dividend in June.
$\cdot$ Tyva is making monthly involvement payments of $0.v \%$ ( $6 \%$ per year) on a $150,000$ long-term loan.
$\cdot$ Tyva plans to pay the $10,800$ of taxes owed as of May 31 in the month of June. Income tax expense for June is zero.
$\cdot$ $30 \%$ of processing, setup, and inspection costs and $ten \%$ of marketing and general administration and shipping costs are depreciation.
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Source: https://www.numerade.com/books/chapter/master-budget-and-responsibility-accounting/
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