Fill in the Blank

Word Bank: Operating, Strategic, Static, Flexible, Operating, Sales, Budget, Financial, Cash, Manufacturing Overhead, Capital Expenditures, Operating Expenses, Production

___________ A financial plan that managers use to coordinate a business' activities

___________ Budget - A long-term financial plan used to coordinate the activities needed to achieve the long-term goals of the company

___________ Budget - Budgets needed to run the daily operations of the company. Produces the budgeted income statement.

___________ Budget - prepared for only one level of sales volume

___________ Budget- prepared for various levels of sales volume.

___________ Budgets - includes the sales, production, Direct Materials, Direct Labor, Manufacturing Overhead, Operating expenses budget and budgeted Income Statement.

___________ Budget - Starting point of the operating budgets. Affects most other components of the master budget.

___________ Budget - similar formula to direct material budget. This is based on the sales budget, determines how many units to produce, including any safety stock.

___________ Budget - Highly dependent on cost behavior such as variable, fixed, or mixed costs. Usually has a separate section for variable and fixed overhead costs, so managers can easily see which cost will change with production volume.

___________ Budget - Includes both variable and fixed costs. Includes all costs, except for production costs that are incurred in the value chain. Examples include research and development, design, marketing, distribution, and customer service costs will be shown on the operating expenses budget.

___________ Budgets - include the capital expenditures budget and the cash budget. Produces the budged balance sheet.

___________ Budget - shows the company plan for purchasing property, plant, and equipment.

___________ Budget - projects the cash that will be available to operate the company and determines if the company will have extra funds to invest or whether the company will need to borrow cash.

FORMULAS

Word Bank: Operating Income, Net Income, Units in Beginning Inventory, Production Budget Formula, Gross Profit, Total Sales Revenue, Sales Revenue

___________ - Units needed for sales + Desired Ending Inventory = Total Units Needed - ___________ = Units to Produce

Sales budget: number of unit sales X Sales price per unit = ___________

Word Bank: Total DL Hours Required, Beginning Inventory, Cost of goods sold, Desired Ending DM Inventory, Total Direct Labor Cost

Direct Material Budget Formula:

Quantity of DM needed for production + ___________ = Total Quantity of DM Needed - D< ___________ = Quantity of DM to purchase

Direct Labor Budget Formula

Units to be Produced X DL Hours per Unit = ___________ X DL Cost per Hour = ___________

Budgeted Income statement

___________

Less: Cost of Goods Sold =

___________

Less: Operating Expenses =

___________

Less: Interest Expense =

___________

Cost of Goods Sold Formula:

Number of Unit Sales X Manufacturing cost per unit = Cost of goods sold

Circle the correct word.

Start with the production or sales budget - develop the production or sales budget using the sales budget

Fill in the Blank.

From the production budget we develop the ___________ (DM), ___________ (DL), and ___________ (MOH).

Using the DM, DL, and MOH budget, we develop the ___________ expenses budget

Using ALL of the above we develop a ___________ ___________ ___________ and this concludes the ___________ budgets.

Production budget gives us Direct Materials budget, Direct labor Budget, and the Manufacturing overhead budget

From those three budgets (materials, labor and MOH) we develop the Operating expenses budget. From all of those budgets we develop the budgeted income statement. This concludes the ___________ budgets.

The next step is to develop the ___________ budgets. We start with the capital expenditures budget, then develop the cash budgets, and then the budgeted balance sheet.

Benefits of budgeting include

1. planning
2. coordination and communication
3. benchmarking
4. all of the above

The comprehensive planning document for the entire organization is called the ______ budget.

Which of the following budgets must be prepared first, because it serves as a basis for most other budgets?

1. Cash budget
2. Production budget
3. Operating expenses budget
4. Sales budget

The operating budgets help produce the

1. balance sheet.
2. income statement
3. statement of cash flows
4. statement of owners' equity

Practical standard costs - includes allowances for normal amounts of waste and inefficiency

Formulas

Write the following formulas

Direct Material (DM) formula:

_______________________________________________________

Direct Labor (DL) Formula:

_______________________________________________________

Manufacturing Overhead (MOH) formulas:

_______________________________________________________ = variable MOH rate

_______________________________________________________ = Standard Variable MOH

_______________________________________________________ = Fixed MOH rate

_______________________________________________________ = Standard Fixed MOH

Legend:

DM_ Direct Material

DL_Direct Labor

MOH_ Manufacturing Overhead

MH_ Machine hours

Flexible budget components are divided into two components:

______________________ and __________________________

______________________ - indicated how much of the total variance is due to paying a higher or lower price than expected for direct materials

DM price Variance = (______ x ______) - (______ x ______)

_____________________________ variance indicates how much of the total variance is due to using larger or smaller quantity of direct materials than expected.

DM quantity variance - ______ X (______ - ______)

Legend:

AQ _Actual Quanity

AP_Actual Price

SP_Standard Price

AQU_Actual quantity in Units

SQU_Standard Unity in Units

__________________________ indicates how much of the total labor variance is due to paying a higher or lower hourly wage rate than expected.

___________________________ indicates how much of the variance is due to using a greater or lesser amount of time than anticipated.

Direct Labor Rate Variance Formula:

DL rate variance = _________ Hours x (_________ Rate - _________ Rate)

Direct Labor Efficiency Variance

DL efficiency variance = _________ Rate x (_________ Hours - _________ Hours Allowed)

___________________________ indicates the difference between the actual variable MOH costs incurred during the period and the mount of variable MOH costs expected.

Variable MOH rate variance formula:

Variable MOH rate variance = _________ Hours x (_________ Rate - _________ Rate)

___________________________ Variance indicates the difference between the actual machine hours run and the standard machine hours allowed for the actual production volume, calculated at the variable MOH rate.

Variable MOH Efficiency Variance formula:

Variable MOH Efficiency Variance = _________ Rate X (_________ - _________ Hours Allowed)

___________________________ variance indicates the difference between the budgeted fixed overhead and the standard fixed overhead costs allocated to production.

Uses a two part formula to calculate:

1.Standard Fixed Overhead Costs Allocated to production = (_________ hours allowed x _________ rate)

2.Fixed overhead volume variance = _________ fixed overhead - _________ fixed overhead cost allocated to production.

Favorable or Unfavorable?

If production volume is greater than expected - Fixed overhead has been over-allocated - therefore the fixed overhead volume variance is ___________.

If production volume is less than expected - fixed overhead has been under allocated - therefore the fixed overhead volume variance is ___________.

Rule of thumb: When production volume is higher than expected, fixed overhead volume variance will be ___________. When production is lower than expected the variance will be ___________.

The direct materials price variance is defined as which of the following?

1. Standard price x (Actual quantity used - Standard quantity allowed)
2. Actual quantity purchased x (Actual price - standard price)
3. Actual price x (Actual quantity used - Standard quantity allowed)
4. Standard quantity allowed x (Actual Price - Standard Price)

The direct labor rate variance can be defined as which of the following?

1. Actual rate x (Actual hours - Standard hours allowed)
2. Standard hours allowed X (Actual rate - Standard rate)
3. Standard rate X (Actual rate - Standard hours allowed)
4. Actual hours x (Actual rate - Standard rate)

The variable overhead rate variance can be defined as which of the following?

1. Actual rate x (Actual hours - Standard hours allowed)
2. Standard hours allowed x (Actual rate - Standard rate)
3. Standard rate X (Actual hours - Standard hours allowed
4. Actual hours X (Actual rate - Standard rate)