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Exam 13: Budgeting and Standard Cost Systems

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Question 91

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Department managers plan lower goals than possible in order to build in a cushion for unexpected events. This result in:

A) budgetary slack.
B) zero-based budgeting.
C) goal conflict.
D) flexible budgeting.

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Question 92

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The treasurer of Unisyms Company has accumulated the following budget information for the first two months of the coming year: $\begin{array}{lrl} \underline{\text { April }}& \underline{\text {March }}\\\$ 520,000 & \$ 450,000 & \text { Sales } \\350,000 & 290,000 & \text { Manufacturing costs } \\46,400 & 41,400 & \text { Selling and administrative expenses } \\\text { - } &250,000 & \text { Capital adchitions }\\ \end{array}$ The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are expected to be collected in full in the month of the sale and the remainder in the month following the sale. One-fourth of the manufacturing costs are expected to be paid in the month in which they are incurred and the other three-fourths in the following month. Depreciation, insurance, and property taxes represent $6,400 of the probable monthly selling and administrative expenses. Insurance is paid in February, and a $40,000 installment on income taxes is expected to be paid in April. Of the remainder of the selling and administrative expenses, one-half are expected to be paid in the month in which they are incurred, with the balance paid in the following month. Capital additions of $250,000 are expected to be paid in March. Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current liabilities as of March 1 are composed of accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for operating expenses). Management desires to maintain a minimum cash balance of $20,000. Prepare a monthly cash budget for March and April.

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*$450,000 x .35 = $157,500; $520,000 x ...

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Question 93

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If the standard to produce a given amount of product is 500 direct labor hours at $15 and the actual was 600 hours at $17, the time variance was $1,500 favorable.

Efficient Corporation uses a standard cost system. The following information was provided for the period that just ended: $\begin{array}{ll}\$ 11.75 & \text { Actual price per gallon } \\5,000 & \text { Actual gallons of material used } \\\$ 17.00 & \text { Actual hourly labor rate } \\24,300 & \text { Actual hours of prochuction } \\\$ 12.00 & \text { Standard price per gallon } \\1 / 2 & \text { Standard gallons per completed urit } \\\$ 12.00 & \text { Standard hourly labor rate } \\3 \mathrm{hrs} . & \text { Standard time per completed urit } \\9,000 & \text { Units completed churingthe period }\end{array}$ Refer to the information provided for Efficient Corporation. The direct labor rate variance is:

The budgeted volume of production is based on the sum of (1) the expected sales volume and (2) the desired ending inventory, less (3) the estimated beginning inventory.

As a device for measuring efficiency, standard cost systems enables management to determine the causes of differences between what a product should cost and how much it actually costs to produce.

For February, sales revenue is $250,000; sales commissions are 6% of sales; the sales manager's salary is $50,000; advertising expenses are $15,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are $1,000 plus 1/2 of 1% of sales. Total selling expenses for the month of February are:

Which of the following would not lend itself to applying direct labor variances?