Managerial Acc exam 3

participative budget

budgeting that involves the participation of many levels of management

strategic planning

setting long term goals that may extend 5-10 years into the future

rolling (continuous) budget

a budget that is continuously updated so that the next 12 months of operations are always budgeted

slack

intentionally overstating budgeted expenses or understanding budgeted revenues in order to cope with uncertainty, make performance appear better, or make room for potential budget cuts

plan; control

managers use budgets to ______ and _______ business activities

planning, communication and coordination, benchmarking

what are the benefits to budgeting?

sales, production, DM DL MOH, operating expenses, budgeted income statement, financial budgets

what is the order that budgets are prepared

sales

The ____ budget is the starting place for budgeting. It influences most other components and it projects the expected sales revenue

production budget

This budget is based on the sales budget. It determines the number of units to be produced.

Units needed for sales + desired ending inventory - units in beginning inventory

number of units to be produced=

Quantity of DM needed for production + desired DM ending inventory - Dm beginning inventory

quantity of DM to purchase=

units to be produced x DL hours per unit x DL cost per hour

total DL cost=

Direct materials; Direct Labor; MOH

the ______ , _______, and ______ budgets are derived from the production budget and outline the resources needed for production

budgeted operating expenses

compiles costs associated with running daily operations

cash budget

forecasts cash availability, indicating if there are surplus funds or borrowing needs

Sales revenue - COGS = gross profit - operating expenses - depreciation expenses = operating income - interest expenses - income tax expenses = net income

Budgeted income statement format

responsibility centers

part of an organization whose manager is accountable for planning and controlling certain activities

profit center

responsibility center in which managers are responsible for both revenues and costs, so therefore profits

investment center

responsibility center in which managers are responsible for generating revenues, controlling costs, and efficiently managing the divisions

performance reports

reports that compare actual results against budgeted figures

responsibility accounting

_______ is a system for evaluating the performance of each responsibility center and its manager

transfer price

price charged for the internal sale of a product between two different divisions of the same company

market price, negotiated price, and cost

what is the transfer price often based on?

operating income/ total assets

ROI=

ROI

what measures the profitability of a division relative to the size of its assets?

sales margin

shows how much income is generated for every $1 of sales

capital turnover

shows how much sales revenue is generated with every $1 of assets

operating income/ sales

sales margin =

sales/ total assets

capital turnover=

operating income - (target rate of return x total assets)

residual income=

investment center

Johnson & Johnson’s Consumer Healthcare Division that manufactures and sells products including Band-Aid, Neutrogena, and Listerine is most likely treated as a(n)

standard cost

budgeted cost for a single unit of product

ideal standards

standards based on perfect or ideal conditions that do not allow for any waste in the production process, machine breakdown, or other inefficiencies

practical standards

standards based on currently attainable conditions that include allowances for normal amounts of waste and inefficiency

ideal and practical

what are the two types of standards

adjusted

standards need to be _____ when a long-term change in costs or inputs are anticipated

Direct materials price variance

tells managers how much of the total direct materials variance is due to paying a higher/lower price than expected for direct materials it purchased

AQP x (AP - SP)

DM price variance =

direct materials quantity variance

tells managers how much of the total direct materials variance is due to using a larger/ smaller quantity of direct materials than expected

SP x (AQU -SQ Allowed)

DM quantity varaince=

Direct labor efficiency variance

tells managers how much of the total labor variance is due to using a greater/ lesser amount of time than anticipated

SR x (AH - SH allowed for actual output)

DL efficiency variance=

direct labor rate variance

tells managers how much of the total labor variance is due to paying a higher or lower hourly wage rate than anticipated

AH x (AR - SR)

DL rate variance=

variable overhead rate varaince

tells mangers whether more/less was spent on variable overhead than they expected for the hours worked

AH x (AR-SR)

Variable overhead rate variance=

variable overhead efficiency varaiance

tells managers how much of the total variable moh variance is due to using more or fewer hours of the allocation base (usually machine hrs or DL hrs) than anticipated for the actual volume of output

SR x (AH - SH allowed)

variable overhead efficiency variance=

fixed overhead budget (spending) variance

measures the difference between actual fixed overhead costs incurred and the budgeted fixed overhead costs

fixed overhead volume variance

difference between budgeted fixed overhead costs and standard fixed overhead cost allocated to production

SH allowed x SR

standard fixed overhead cost allocated to production =

C

A manager considers all of the following when he or she prepares the cash budget except

A. payments for inventory.

B. cash payments to suppliers.

C. depreciation expense.

D. cash receipts from customers.

operating budgets

Sales budget, production budget, DM budget, DL budget, MOH budget, operating expenses budget, and budgeted income statement are all what kind of budgets?

profit

An amusement​ park's games department which reports revenues and expenses may be classified as​ a(n) ______ center

profit

The local branch office of a national bank is considered to be​ a(n) _____ center

cost

The legal department of a manufacturer is considered to be​ a(n) _____ center

investment

The headquarters for an international consulting firm is considered to be​ a(n)_____ center

profit

Sherwin-Williams Store #1933 is located in Copley, Ohio. The store sells paints, wallpapers, and supplies to do-it-yourself customers and to professional wall covering installers. This is a _____ center

cost

The Accounting Research and Compliance Department at FirstEnergy is responsible for researching how new accounting pronouncements and rules will impact FirstEnergy's financial statements. This is a ______ center

revenue

The Southwestern Sales Region of McDermott Foods is responsible for selling the various product lines of McDermott. This is a _____ center

cost

The Taxation Department at Verizon Communications, Inc., is responsible for preparing the federal, state, and local income and franchise tax returns for the corporation. This is a _____ center

profit

The Roseville Chipotle restaurant in Minnesota, is owned by its parent Chipotle Mexican Grill, Inc. The Roseville Chipotle, like other Chipotle restaurants, serves burritos, fajitas, and tacos and competes in the "fast-casual" dining category. This is a _____ center

investment

Trek Bicycle Corporation manufactures and distributes bicycles and cycling products under the Trek, Gary Fisher, Bontrager, and Klein brand names. This is a _____ center

investment

The Hershey Company is one of the oldest chocolate companies in the United States. Its product lines include the Mauna Loa Macadamia Nuts, Dagoba Organic Chocolates, and Joseph Schmidt Confections. This is a _____ center

cost

The Human Resources Department is responsible for recruiting and training for the Kohl's Corporation. This is a ____ center

revenue

The reservation office for Allegiant Air is responsible for both online sales and counter sales. This is a _ center

profit

The Claire's at Spring Hill Mall in West Dundee, Illinois, is owned by Claire's Stores Inc. This is a _____ center

investment

H & R Block Tax Services, Block Advisors, and Expat Tax Services are all divisions of their parent corporation, H & R Block. This is a _____ center