SmarT Food Flashcards
WHAT is the order of the different components of the operating budget?
(1) sales (revenue) budget
(2) production budget
(3) direct materials budget
(4) direct labor budget
(5) manufacturing overhead budget
(6) ending finished goods inventory budget
(7) cost of goods sold budget
(8) nonmanufacturing budget
WHAT is considered a key characteristic of a flexible budget?
IT provides budgeted numbers for various activity levels
WHY? - Because a flexible budget consists of the costs that should have been incurred given the actual level of production achieved
WHAT Liability Account would be most affected by the use of the percentage of sales forecasting method for budgeting?
(1) Accounts Payable
(2) Account Receivable
(3) Inventory
WHY? - Because this method is based on the assumptions that most items directly correlate with sales, and the current levels of all assets are optimal for the current sales level
WHAT “costs” are included in a static budget?
Budgeted costs for budgeted output
WHY? - Because it is based on only one level of activity and contains only budgeted costs for budgeted output
WHICH budget in the budgeting process is usually the most difficult to forecast?
THE Sales Budget
WHY? - Because the budgeting process starts with preparation of the sales budget (i.e. all other budgets are prepared based on this)
Thus, there are no internal figures to use as a guide
NOTE: Sales are based on the desires of consumers and the current business climate
WHAT is a disadvantage of an Operating Budget?
IT is not likely to:
- Set out long-range, strategic concepts
WHY? - Because they usually deal with the quantitative allocation of people and resources
Fill in the Blank.
Strategic concepts are (1) for the organization and are almost always stated (2).
(1) overall goals
(2) in words
WHAT is a Fishbone diagram (i.e. also called a cause-and-effect diagram)?
A total quality management process improvement technique
IT is useful in studying causation (i.e. why the actual and desired situations differ)
WHAT is the Pareto diagram ((also known as 80:20 analysis)?
IT displays the values of an independent variable such that managers can quickly identify the areas most in need of attention
WHAT is the equation for Break-Even Point in sales dollars?
Fixed Costs ÷ Contribution Margin
WHAT type of cost is Direct Labor?
DIRECT LABOR is a:
product cost and a prime cost
WHY? - Because it is incurred to produce units of output, deferred to future periods and are considered the direct cost of manufacturing
WHAT is Normal spoilage?
Spoilage that arises under efficient operating conditions and is therefore a product cost
Thus, these would be considered “inventoriable costs”
WHAT is Abnormal Spoilage?
Spoilage NOT expected to occur under efficient operating conditions
Thus, this is accounted for as a period cost
WHAT kind of cost is electricity for a manufacturing plant?
THIS is considered a Product Cost
WHY? - Because Electricity costs are a part of manufacturing overhead and thus is a product cost
HOW do you calculate the Break Even Point in Units?
Fixed costs ÷ the unit contribution margin (UCM)
