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Exam 7: Master Budget and Flexible Budgeting

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Question 1

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Flexible budgeting is a reporting system wherein the:

A) Statements included in the budget report vary from period to period.
B) Budget standards may be adjusted at will.
C) Reporting dates vary according to the levels of activity reported upon.
D) Planned level of activity is adjusted to the actual level of activity before the budget comparison report is prepared.

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Question 2

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Information from the operating budgets of Northwest Industries follows: If Northwest's income tax rate is 40%, what is the budgeted net income?

A) $120,000
B) $30,000
C) $200,000
D) $80,000

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Question 3

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Consider the flexible budget information relating to direct labor costs for Logan Ltd.: Logan's actual production was 51,000 units and the related cost was $205,500. What is the variance related to direct labor?

Lunchco Inc. produces picnic tables in a two-step process. Pretreated wood is cut in the Cutting Department and then the lumber is assembled into tables in the Assembly Department. It takes 30 minutes of direct labor time to cut the lumber and the standard hourly labor rate in the Cutting Department is $12. The tables take one hour to assemble and the standard hourly rate in the Assembly Department is $10. If Lunchco's production budget is 20,000, what is the company's direct labor budget?

Which of the following budgets is used to provide an "apples to apples" comparison of budgeted and actual performance at the actual unit volume attained?

Kerry Kola Company sells Kerry Kola in two sizes: 12 ounce and 32 ounce bottles, at a price of $1.00 and $2.25, respectively. Projected unit sale volumes by region follow: What is Kerry Kola's budgeted sales?

Delaney Company has the following flexible budget formulas and amounts: Actual results for the month of October for the production and sale of 48,000 units were as follows: Prepare a performance report for the month of October.

The November monthly factory overhead cost budget for Brass Ltd. at normal capacity of 10,000 or 5,000 direct labor hours follows: (1) Prepare a flexible budget for 80%, 100% and 120% of normal capacity. (2) Determine the rate for application of factory overhead to work in process at each level of volume in relation to both units and direct labor hours.

The standard capacity of a factory is 9,000 units per month. Cost and production data follow: What is the variance between the overhead per the flexible budget and the actual overhead incurred?

Participative budgeting:

The following information is from Franklin Industries master budget for the current year: Prepare flexible budgets for the production and sale of 14,000, 15,000 and 16,000 units, respectively.

Consider the following about Taylor Corporation: Assuming Taylor Corporation uses flexible budgeting, what is the variance related to direct materials?

A budget prepared for a single level of volume based on management's best estimate of the level of production and sales for the coming period is a:

Denny Door Company has budgeted door sales as follows: Finished goods inventory at February 28 will be 8,000 units, but the company is making an effort to reduce inventory and its new policy is that inventory at the end of the month should be 10% of the budgeted sales for the following month. How many units should Denny Door Company produce in March?

Bradley Company has forecasted sales for the month of March for its single product to be 10,000 in its Columbus Region, 13,000 units in its Cincinnati Region and 15,000 units in its Cleveland Region. The estimated inventory on March 1 is 4,500 units and the company desires to have 3,800 units on hand March 31. The budgeted sales price is $52.00 per unit. (1) Prepare a sales budget for the month of March. (2) Prepare a production budget for the month of March.

A budget that adds a new month at the end of the budget when a month is completed, resulting in a budget that is always one year in advance is a:

The normal capacity of Noel Company is 4,000 units per month. At this volume, budgeted fixed and variable factory overhead are $16,000 and $20,000, respectively. In May, actual production was 4,200 units and actual overhead incurred was $37,900. What is the factory overhead application rate at the actual level of production (rounded to the nearest penny) ?

The standard annual capacity of Jones and Smith Company is 25,000 units per month. Two units can be machined in one hour. The flexible budget for factory overhead at this volume follows: In June, actual production was 22,000 units and actual factory overhead incurred was $258,000. (1) Calculate the standard application rates for fixed and variable overhead at the standard level of volume in relation to units and machine hours. (2) Calculate the amount of factory overhead allowed for the actual volume of production in June and the variance between the actual and budgeted factory overhead.

Which of the following is not an operating budget?

Consider the following budgets: (1) Direct materials (2) Income statement (3) Production (4) Cost of goods sold In what order should these budgets be prepared?