Module 3

Question 1

Participative budgeting

Answer 1

means that the budget preparation begins with the lowest level of management and is adjusted at each level to align with the strategic plan

Question 2

Pros of Participative budgeting

Answer 2

1. lower level management has more detail = more accuracy

2. Lover level management is motivated to meet budgets they helped to create

Question 3

Cons of Participative budgeting

Answer 3

1. too complex and time consuming

2. padding the budget (employees over budget to make themselves look good)

Question 4

Incremental budgeting means that budget preparation begins with

Answer 4

the budget from last year

Question 5

Zero-Based budgeting means that budget preparation begins with

Answer 5

$0 every expense is justified or not included

Question 6

Rolling budgets always includes

Answer 6

12 months of data

Question 7

Sales Revenue Budget
Calculates:
Formula + Notes:
Relies on info from:

Answer 7

Calculates: expected sales revenue
Formula + Notes: # of units to sell x sales price per unit
Relies on info from: projected unit sales

Question 8

Production budget
Calculates:
Formula + Notes:
Relies on info from:

Answer 8

Calculates: # of units to produce
Formula + Notes: (# of units to sell) + (# of units in EI) - (# of units in BI) [Snapshot of FG inventory t-accnt in units]
Relies on info from: projected unit sales; ending F/G inventory policy

Question 9

Direct materials budget
Calculates:
Formula + Notes:
Relies on info from:

Answer 9

Calculates: quantity and cost of direct materials to purchase
Formula + Notes: (# of units to produce) + (# units in EI) - (# units in BI) = Quantity to purchase x Standard price per unit of input [snapshot of the raw materials inventory t-acct in units]
Relies on info from: Production budget; standard DM quantity; standard DM price; Ending R/M inventory policy

Question 10

Direct labor budget
Calculates:
Formula + Notes:
Relies on info from:

Answer 10

Calculates: direct labor costs
Formula + Notes: (# units to produce) x (DLH per unit) x (wage rate per DLH)
Relies on info from: production budget; standard DL quantity; standard DL price

Question 11

Manufacturing Overhead Budget
Calculates:
Formula + Notes:
Relies on info from:

Answer 11

Calculates: expected overhead costs
Formula + Notes: (Cost driver) x (Variable MOH Rate) + (Fixed MOH) = Total MOH used for PDMOH Rate - Noncash items = Total MOH cash costs
Relies on info from: Projected use of cost driver

Question 12

Cash receipts budget
Calculates:
Formula + Notes:
Relies on info from:

Answer 12

Calculates: amount of cash to be collected from customers
Formula + Notes: Calculation depends on cash collection policies (snapshot of A/R t-acct)
Relies on info from: Sales Rev Budget

Question 13

Cash Payments Budget
Calculates:
Formula + Notes:
Relies on info from:

Answer 13

Calculates: Amount of cash to be paid to suppliers for purchases
Formula + Notes: Calculation depends on cash collection policies (snapshot of A/P t-acct)
Relies on info from: Direct materials budget

Question 14

Static / Master Budget prepared for

Answer 14

one level of sales volume at the beginning of a period

Question 15

Flexible budgets prepared for

Answer 15

any level of sales volume within relevant range

Question 16

Actual formula

Answer 16

AP x AQ x AV

Question 17

Hybrid formula

Answer 17

SP x AQ x AV

Question 18

Flexible Budget Formula

Answer 18

SP x SQ x AV

Question 19

Master budget formula

Answer 19

SP x SQ x BV

Question 20

Volume refers to

Answer 20

units sold/produced

Question 21

Quantity refers to

Answer 21

input used

Question 22

Flexible budget variance

Answer 22

Did we properly control costs or manage revenue?
(Actual Cost per unit - Standard Cost per unit) x Actual volume
–On pitchfork = Flexible - Actual
* Gives most info about cost control

Question 23

Sales Volume Variance

Answer 23

Did we sell more or less than originally projected?
(Act Vol - Budgeted Vol) x Standard Cost per unit
No info about cost controls
–On Pitchfork = Master - Flexible

Question 24

Standard costs help to even further refine the variance analysis by

Answer 24

identifying whether we under/over paid or were efficient/inefficient with our resources

Question 25

Price/Spending Variance

Answer 25

Did we pay too much or too little compared to the standard price?
(AP - SP) x AQ
–On pitchfork = Actual - Hybrid

Question 26

Quantity / Efficiency variance

Answer 26

did we use too much or too little compared to the standard quantity?
(AQ - SQ) x SP
–On pitchfork = Hybrid - Flexible

Question 27

Master Budget Variance

Answer 27

On pitchfork = Actual - Master

Question 28

Who is responsible for a direct material price variance?

Answer 28

purchasing manager

Question 29

Who is responsible for direct materials quantity variance?

Answer 29

production supervisor

Question 30

Who is responsible for direct labor rate variance?

Answer 30

HR manager

Question 31

Who is responsible for direct labor efficiency variance?

Answer 31

Production Supervisor