COMPLEX ASSIGNMENT
Assignment # 1
Choose the best answer for the following multiple choice questions.
1. Which of the following statements is
false?
a. The master budget is a flexible
budget for the denominator activity level.
b. The technique of flexible budgeting is
used to fine tune the master budget for
performance evaluation purposes, i.e., to
prepare budgets which are comparable
with the actual results.
c. The master budget includes
appropriation budgets.
d. Appropriation budgets are used to set
the maximum amounts for many types of
discretionary expenditures.
2. Budgeted unit sales is normally
determined by:
a. The accounting department.
b. The engineering department.
c. The personnel department.
d. The marketing department.
e. None of these.
3. Standard quantities per unit of product
for direct labor are normally determined
by:
a. The accounting department.
b. The engineering department.
c. The personnel department.
d. The marketing department.
e. None of these.
4. If a decrease in the time lag between
ordering and receiving direct materials
could be obtained by switching to a new
vendor, then the average inventory of
direct material could be decreased. This
would most likely,
a. Increase net income in the current
month.
b. Decrease cash outflows in the current
month.
c. Increase net income in future months
as well as decrease cash outflows in the
current and future periods.
d. All of these.
e. None of these.
5. Which of the following is a purpose or
advantage of the master budget process?
a. Coordination of the activities of the
different functional areas of the firm.
b. Communication to managers of how
their efforts add value to the
organization's products or services.
c. Forces management to establish profit
objectives.
d. Provides a tool for evaluation and
control.
e. All of these.
6. Which of the following statements is
true?
The master budget process for a
manufacturing firm
a. may be referred to as either
incremental budgeting or zero base
budgeting.
b. may include appropriation budgets.
c. may include continuous budgets.
d. b. and c.
e. All of the above.
7. Appropriation budgets are
a. flexible budgets
b. static (fixed) budgets.
c. incremental budgets.
d. zero base budgets.
e. None of these.
8. The planned production volume
variance is
a. the difference between planned unit
sales and production multiplied by the
budgeted fixed overhead rate per unit.
b. the difference between planned unit
sales and denominator units multiplied by
the budgeted fixed overhead rate per unit.
c. the difference between planned
production units and denominator units
multiplied by the budgeted fixed overhead
rate per unit.
d. the difference between planned direct
labor hours and actual direct labor hours
multiplied by the fixed overhead rate per
hour.
e. None of these.
Assignment # 2
Bibb Company produces and sells a single product with standard costs as follows:
Resource Standard Inputs Cost per Input Cost per Unit
Direct materials 2 lbs $4.00 $8.00
Direct labor 3 hours $6.00 18.00
Variable 3 hours $9.00 27.00
overhead
Fixed overhead 3 hours $10.00 $30.00
Total Unit Cost $83.00
Overhead rates are based on 2,000 units per month or 6,000 standard direct labor
hours, i.e., this is the master budget denominator activity level. Overhead is applied
on the basis of direct labor hours.
Desired ending inventories of materials and finished goods are based on 5% of next
periods needs.
Unit Sales are budgeted as follows:
January February March April May
2,000 2,000 2,100 1,900 1,800
The budgeted sales price is $160 per unit. All sales are budgeted as credit sales.
Past experience indicates that 80% are collected during the month of sale, 18% are
collected in the following month, and 2% are uncollectible. A 1% cash discount is
allowed to customers who pay within the month the sale takes place.
Required: A Partial Master Budget for March as follows.
1. Sales budget for March, including net sales dollars.
2. Calculate collections for March.
3. Production Budget, i.e., units to be produced for March.
4. Direct Material quantity needed for production for March.
5. Direct Material quantity to be purchased for March.
6. Budgeted cost of direct material purchases for March.
7. Budgeted cost of direct material used for March.
8. Direct labor needed for production for March.
9. Budgeted cost of direct labor used for March.
10. Budgeted factory overhead costs for March.
11. Budgeted cost of goods sold for March.
12. Prepare a simple Budgeted Income Statement for March. Assume selling and
administrative expenses are $54,992. Ignore taxes and interest, but don't forget
bad debts.