ACCT. 2302

Budgets

100

All of the following are important budgeting guidelines EXCEPT for:

Budgetary goals should be attainable, Employees impacted by the budget should be consulted when it is prepared, and goals in a budget should be set low so targets can always be reached.

Goals in a budget should be set low so targets can always be reached- is not an important budgetary guideline.

200

What is the first part of a Master Budget?

The Sales Budget

300

When preparing a production budget, you must add ___________________, add Budgeted Sales Units, and subtract ______________.

When preparing a production budget, you must add Budgeted ending inventory units, add Budgeted Sales Units, and subtract beginning finished goods inventory units.

400

A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Salary for sales manager: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be _________.

$60,000 =

+ Sales x Sales commissions 

+ Sales manager salary 

+ Advertising costs

500

A company budgets the following merchandising purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase and the remaining amount in the following month. Cash disbursements for June for merchandise is $_________

$82,500

($90.000 x .75) + ($60,000 x .25) = $82,500

Variable Costing

100

_______ costs are included as a period expense in the variable costing income statment.

Fixed manufacturing overhead costs

200

What is the contribution margin?

The amount of profit after variable costs, that can then contribute to fixed costs. 

Sales - Variable costs

(or sales price per unit - variable costs per unit)

300

How do you calculate the contribution margin ratio? 

Contribution margin / Sales 

(or CM per unit / Sales Price per unit)

400

The ___________ costing method is required under GAAP for financial statements distributed to external users. 

Absorption Costing

500

A company produces 50,000 units, has fixed costs of $400,000, variable costs of $800,000, and selling price per unit is $45. 

How much sales do they need to achive a target income of $45,000? (round your final answer to the nearest dollar)

They would need $690,517 in sales. 

($800,000 / 50,000 units)= $16 per unit

($400,000 + 45,000) / (45-16) = 15,344.83 units

(618.06 units x $45 per unit) = $690,517 

Random

100

What are the three main things included in production costs? 

DM, DL, Factory Overhead

200

When units produced is higher than units sold, which costing method has a higher net income? (Absorption or Variable)

And why?

Absorption costing- because it stores fixed overhead costs in the inventory produced that period, while under variable, the fixed overhead costs were expensed as a period cost, expensing out the entirety of fixed overhead costs. 

300

The Absorption Costing income statment uses Gross Profit (or margin), while the Variable Costing income statements uses _________  __________. (two words)

Contribution Margin

Sales

less: Variable costs

Contribution Margin

400

Direct materials, direct labor, and variable factory overhead for the units sold is called _______ _____ __ ______ ______. (5 words)

Variable Cost of goods sold

500

True or false: Interest expense and income tax expense are considered general and administrative expenses and, therefore, are included on the general and administrative expense budget. (T/F)

True