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Self-imposed budgets prepared by lower-level managers should be scrutinized by higher levels of management

Accounting

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1. Self-imposed budgets prepared by lower-level managers should be scrutinized by higher levels of management.
2. The basic idea underlying responsibility accounting is that each manager should be held responsible for the overall profit of the company to ensure that all managers are acting together.
3. Which of the following benefits could an organization reasonably expect from an effective budget program?
   
   Increased
   employee motivation Uncover
   potential bottlenecks
   (A) Yes Yes
   (B) Yes No
   (C) No Yes
   (D) No No
4. All the following are considered to be benefits of participative budgeting, except for:
5. Ford Corporation is pulling together its direct labor budget for the next two months. Each unit of output requires 0.05 direct labor-hours. The direct labor rate is $9.90 per direct labor-hour. The production budget calls for producing 3,800 units in June and 4,300 units in July.
   
   Required:
   Prepare the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month. (Round your answers to 2 decimal places.)
6. The management of a company has compiled the following data to use in preparing its budgeted balance sheet for next year:
   
   
   Ending Balances
   Cash ?
   Accounts receivable $ 8,300
   Supplies inventory $ 3,200
   Equipment $ 35,000
   Accumulated depreciation $ 14,200
   Accounts payable $ 2,000
   Common stock $ 5,000
   Retained earnings ?
   
   
   
   The beginning balance of retained earnings was $30,000, net income is budgeted to be $13,900, and dividends are budgeted to be $3,100.
   
   Required:
   Prepare the company's budgeted balance sheet.
7. Direct labor-hours are used as the base to prepare the manufacturing overhead budget at Ford. The variable overhead rate is $1.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $107,380 per month, which includes depreciation of $19,900. All other fixed manufacturing overhead costs represent current cash flows. The October direct labor budget indicates that 9,100 direct labor-hours will be required in that month.
   
   Required:
   a. Determine the cash disbursements for manufacturing overhead for October.
8. Direct labor-hours are used as the base to prepare the manufacturing overhead budget at Ford. The variable overhead rate is $1.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $107,380 per month, which includes depreciation of $19,900. All other fixed manufacturing overhead costs represent current cash flows. The October direct labor budget indicates that 9,100 direct labor-hours will be required in that month
   
   b. Determine the predetermined overhead rate for October.
9. Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company's planning budget for May appears below:
   
   
   Puget Sound Divers
   Planning Budget
   For the Month Ended May 31
   Budgeted diving-hours (q) 250
   Revenue ($410.00q) $ 102,500
   Expenses:
   Wages and salaries ($11,800 + $128.00q) 43,800
   Supplies ($5.00q) 1,250
   Equipment rental ($2,200 + $24.00q) 8,200
   Insurance ($3,900) 3,900
   Miscellaneous ($550 + $1.46q) 915
   Total expense 58,065
   Net operating income $ 44,435
   
   Required:
   During May, the company's activity was actually 240 diving-hours. Complete the following flexible budget for that level of activity. (Round your final answer to nearest dollar amount.)
10. Flight Café is a company that prepares in-flight meals for airlines in its kitchen located next to the local airport. The company's planning budget for July appears below:
    
    
    Flight Café
    Planning Budget
    For the Month Ended July 31
    Budgeted meals (q) 24,000
    Revenue ($4.20q) $ 100,800
    Expenses:
    Raw materials ($1.90q) 45,600
    Wages and salaries ($6,500 + $0.20q) 11,300
    Utilities ($2,000 + $0.05q) 3,200
    Facility rent ($3,300) 3,300
    Insurance ($2,700) 2,700
    Miscellaneous ($500 + $0.10q) 2,900
    Total expense 69,000
    Net operating income $ 31,800
    
    
    In July, 25,000 meals were actually served. The company's flexible budget for this level of activity appears below:
    
    
    Flight Café
    Flexible Budget
    For the Month Ended July 31
    Budgeted meals (q) 25,000
    Revenue ($4.20q) $ 105,000
    Expenses:
    Raw materials ($1.90q) 47,500
    Wages and salaries ($6,500 + $0.20q) 11,500
    Utilities ($2,000 + $0.05q) 3,250
    Facility rent ($3,300) 3,300
    Insurance ($2,700) 2,700
    Miscellaneous ($500 + $0.10q) 3,000
    Total expense 71,250
    Net operating income $ 33,750
    
    
    Required:
    1. Compute the company's activity variances for July.