ACCT 001A Lecture Notes - Lecture 19: Budget, Moe Williams, Qantas

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pucemallard867

7 Jan 2021

School

Pasadena City College

Department

Accounting

Course

ACCT 001A

Professor

Hossain

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Document Summary

Service companies may still prepare modified production" budgets such as cpa firm may budget for total revenue and amount of revenue for each engagement (tax, audit). Main focus will often be labour budget and overhead expenditures. Merchandising companies will prepare sales budget and purchases budget instead of production, direct material purchases, direct labour and manufacturing overhead budgets. Static budgets budgets that are set at beginning of period and remain constant throughout budget period. Useful for planning and operating purpose but can be problematic when used for control. When static budgets are used, and actual sales are different from budgeted sales, it"s like comparing apples and oranges. If actual sales are lower than budgeted sales, actual costs of materials, labour and variable overhead should be lower than budgeted costs. Difference does not necessarily mean company spent less or was more efficient than budgeted. Bob"s bewdiful juices produces 250 000 bottles of juice in january instead of budgeted amount of 257 500.

Related Questions

Manufacturing Budgeting Exercise.

Metro Corporation sells two products, P1 and P2. In August 2016Metro accumulated the following information in order to prepare The2017 production budgets.

2017 projected sales:

Product Sales Price

P1 40,000 $62.00

P2 80,000 $56.00

2017 projected Finished Goodsinventory:

Product 1/1/2017 12/31/2017

P1 2,000 2,500

P2 3,000 4,000

2017 Projected Raw Materialsinventory:

Product 1/1/2017 12/31/2017

Z1 - lbs 4,000 5,000

Z2 - units 6,000 8,000

Z3 - feet 10,000 31,000

2017 Projected Production standards:

Units per P1 Units perP2 Unit cost of input

Direct labor hrs 1 0.25 0 $40.00

Direct labor hrs 2 0 0.1 $35.00

Machinehrs 0.1 0.05

Lbs of Z1 1 1.5 $1.50

Units of Z2 5 6 $0.50

Feet of Z3 3 4 $0.70

Fixed manufacturing overhead is estimated at $1,200,000 and isallocated based on the number of machine hours used in production.Variable manufacturing overhead is divided into two cost pools âEngineering Management and Facilities Support. EngineeringManagement is budgeted at $5.00 per unit. Facilities Support isbudgeted at $2.00 for each dollar of materials used.

Complete the assignment Excel work-sheet for each of thefollowing. You may make supplemental calculations, but be sure toput the required information where indicated on the work-sheet.

1. The Revenue budget,

2. The Production schedule,

3. Direct labor budget,

4. Raw materials purchases budget,

5. Mfg. OH budget,

6. Cost of goods manufactured for each product,

7. The unit cost for each product.

8. Expected gross margin for 2017, assume FIFO and the cost ofbeginning inventory is $46.50 per unit of P1 and $41.00 per unit ofP2.

9. What is the answer to 8, above, for a âstretchâ budget inwhich sales of both products are increased by 10%? Assume the onlycapacity constraint is the availability of direct labor hours 1. Anovertime premium of 50% will need to be paid if labor hours exceed10,500.

pinkjackal773

1.A time interest earned ratio of 0.90 to 1 means:

A. The time the firm will default on its interest payment.

B. That net income is less than the interest expense.

C. That the cash flow is less than the net income

D. That the cash floe exceed the net income

E. None of the answer are correct.

2. Statements in which all items are expressed only in relativeterms (percentages on base) are termed;

A. Vertical Statement

B. Horizontal statement

C. Funds Statements

D. Common-sized statements

E. None of the answer are correct

3. A manufacturing firm would begin preparation of its masterbudget by constructing a:

A. Sales budget

B. Product budget

C. Cash Budget

D. Capital Budget

E. Set of pro-forma financial statements.

4. For a company that uses responsibility center accounting,which of the following costs is least likely to appear on aperformance report of an assembly-line supervisor.

A. Direct material used

B. Departmental Supplies

C. Assembly-line labor

D. Repairs and maintenance

E. Assembly-line facilities depreciation

5. which of the folling methods ignores the fact thar someservice department provide service to other service department;

a. Direct Method

B. Indirect method

C. Step down method

D. Reciprocal method

E. Dual cost allocation method

6.A division's return on investment may be improved byincreasing:

A. Cost of goods sold

B. Sales margin and cost of capital

C. Sales revenue and cost of capital

D. Capital turnover or sale margin

E. Capital turnover or cost of capital

7.Which of the following ratios would generally be used toevaluate a firms overall liquidity position

A. Working Capital

B. Current Ratio

C. Acid test ratio

D. Cash ratio

E. Inventory turnover in days.

8.Flexiable budgets reflect a comapny's anticipated costs basedon variations in;

A. Activity levels

B. Inflation rates

C. managers

D. anticipated capital acquistions

E. standards

9.When the quantity of material purchased is not equal to thequantity of material used, most companies base the calculation ofthe material quantity variance on the :

A. quantity of direct material purchased

B. Quantity of direct material spoiled

C. quantity of direct material that should have been used inacheiving actual production

D quantity of direct material actual used.

10. Which of the following costs should be ignored choosingamong alternatives?

A. Opportunity costs

B. Sunk costs

C. Out of pocket costs

D. Differential costs

E. None of these.

11. Which of the foll should have the strongest casue and effectrelationship with overhead cost;

A. Cost followers

B. Non value added cost

C. Cost drivers

D. Value added cost

E. Unit of output

12. Equivalent unit calculation are necessary to allocatemanaufacturing cost between:

A. Units completed and ending work in process

B.Beginning work in process and units completed

C. Unit sold and eding work in process

D. Cost of goods manufactured and beginnining work inprocess

E. Cost of goods manufactured and cost of goods sold.

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Tina's Fine Juices is a bottler of orange juice located in theNortheast. The company produces bottled orange juice from fruitconcentrate purchased from suppliers in Florida, Arizona, andCalifornia. The only ingredients in the juice are water andconcentrate. The juice is blended, pasteurized, and bottled forsale in 12-ounce plastic bottles. The process is heavily automatedand is centered on five machines that control the mixing andbottling of the juice. The amount of labor required is very smallper bottle of juice. The average worker can process 10 bottles ofjuice per minute, or 600 bottles per hour. The juice is sold by anumber of grocery stores under their store brand name and insmaller restaurants, delis, and bagel shops under the name ofTina's Fine Juices. Tina's has been in business for several yearsand uses a sophisticated sales forecasting model based on previoussales, expected changes in demand, and economic factors affectingthe industry. Sales of juice are highly seasonal, peaking in thefirst quarter of the calendar year.

Forecasted sales for the last two months of 2012 and all of 2013are as follows:

2012 Bottles

November 375,000

December 370,000

2013 Bottles

January 350,000

February 425,000

March 400,000

April 395,000

May 375,000

June 350,000

July 375,000

August 385,000

September 395,000

October 405,000

November 400,000

December 365,000

Following is some other information that relates to Tina's FineJuices:

Juice is sold for $1.05 per 12-ounce bottle, in cartons thathold 50 bottles each.

Tina's Fine Juices tries to maintain at least 10 percent of thenext month's estimated sales in inventory at the end of eachmonth.

The company needs to prepare two purchases budgets: one for theconcentrate used in its orange juice and one for the bottles thatare purchased from an outside supplier. Tina's has determined thatit takes 1 gallon of orange concentrate for every 32 bottles offinished product. Each gallon of concentrate costs $4.80. Tina'salso requires 20 percent of next month's direct material needs tobe on hand at the end of the budget period. Bottles can bepurchased from an outside supplier for $0.10 each.

Factory workers are paid an average of $15 per hour, includingfringe benefits and payroll taxes. If the production scheduledoesn't allow for full utilization of the workers and machines, oneor more workers are temporarily moved to another department.

Most of the production process is automated, the juice is mixedby machine, and machines do the bottling and packaging. Overheadcosts are incurred almost entirely in the mixing and bottlingprocess. Consequently, Tina's has chosen to use a plantwide costdriver (machine hours) to apply manufacturing overhead toproducts.

Variable overhead costs will be in direct proportion to thenumber of bottles of juice produced, but fixed overhead costs willremain constant, regardless of production. For budgeting purposes,Tina's separates variable overhead from fixed overhead andcalculates a predetermined overhead rate for variable manufacturingoverhead costs.

Variable overhead is estimated to be $438,000 for the year, andthe production machines will run approximately 8,000 hours at theprojected production volume for the year (4,775,000 bottles).Therefore, Tina's predetermined rate for variable overhead is$54.75 per machine hour ($438,000

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ACCT 001A Lecture Notes - Lecture 19: Budget, Moe Williams, Qantas

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