1. Comparing actual results to a budget based on the actual activity for the period is possible with the use of a:

flexible budget.

2. For the month of September the corporation you work for plans to serve 45,000 customers. The company uses the following revenue and cost formulas in its budgeting, where q is the number of customers served:
   
   Revenue: $4.39q
   Wages and salaries: $34,500 + $1.66q
   Supplies: $.86q
   Insurance: $14,000
   Miscellaneous expense: $5,500 + $.56q
   
   Required:
   Prepare your company's planning budget for September.

Budgeted customers served 45,000
Revenue $197,550
Expenses:
Wages and salaries 109,200
Supplies 38,700
Insurance 14,000
Miscellaneous expense 30,700
Total expenses 192,600
Net operating income $4,950

Explanation:
Budgeted customers served: q = 34,000
Revenue: $4.39q = $197,550
Wages and salaries: $34,500 + $1.66q = $109,200
Supplies: $.86q = $38,700
Insurance: $14,000 = $14,000
Miscellaneous expense: $5,500 + $.56q = $30,700

3. For the Daring is a helicopter company that offers daring flights inside the walls of the Grand Canyon. You have been given the following data about the company's operations in July:
   
   
   Operating Data
   For the Month Ended July 31
   ActualResults FlexibleBudget PlanningBudget
   Flights (q) 59 59 57
   Revenue ($340.00q) $16,100 $20,060 $19,380
   Expenses:
   Wages and salaries ($3,200 + $92.00q) 8,584 8,628 8,444
   Fuel ($31.00q) 1,997 1,829 1,767
   Airport fees ($890 + $33.00q) 2,712 2,837 2,771
   Aircraft depreciation ($10.00q) 590 590 570
   Office expenses ($220 + $1.00q) 447 279 277
   Total expense 14,330 14,163 13,829
   Net operating income $1,770 $5,897 $5,551
   
   The helicopter company measures its activity in terms of flights. Two options are available for customers. They can buy individual tickets for helicopter flights or, if they have a large party or like solitude, they can hire an entire chopper for a flight at a discount.
   
   
   Required:
   1. Complete the flexible budget performance report abstract for July. (Indicate the effect of each variance by selecting "F" for favorable, "U" for unfavorable, and "None" for no effect (i.e., zero variance). Input all amounts as positive values.)

Revenue and Spending Variances Activity Variances
Revenue $3,960 U $680 F
Expenses:
Wages and salaries 44 F 184 U
Fuel 168 U 62 U
Airport fees 125 F 66 U
Aircraft depreciation None 20 U
Office expenses 168 U 2 U
Total expense 167 U 334 U
Net operating income $4,127 U $346 F


Explanation:

Flexible Budget Performance Report
For the Month Ended July 31
Actual Results Revenue and Spending Variances Flexible Budget Activity
Variances Planning
Budget
Flights (q) 59 59 57
Revenue ($340.00q) $ 16,100 $ 3,960 U $ 20,060 $ 680 F $ 19,380
Expenses:
Wages and salaries ($3,200 + $92.00q) 8,584 44 F 8,628 184 U 8,444
Fuel ($31.00q) 1,997 168 U 1,829 62 U 1,767
Airport fees ($890 + $33.00q) 2,712 125 F 2,837 66 U 2,771
Aircraft depreciation ($10.00q) 590 0 None 590 20 U 570
Office expenses ($220 + $1.00q) 447 168 U 279 2 U 277
Total expense 14,330 167 U 14,163 334 U 13,829
Net operating income $ 1,770 $ 4,127 U $ 5,897 $ 346 F $ 5,551

4. The table below contains the summary of the budgeted cash flows for the upcoming year.
   1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
   Total cash receipts $280,000 $400,000 $330,000 $350,000
   Total cash disbursements $344,000 $314,000 $304,000 $324,000
   
   Additional information:
   A minimum cash balance of $10,000 is required.
   The company may borrow any amount needed from a local bank at a quarterly interest rate of 3%.
   The company's beginning cash balance for the upcoming fiscal year will be $45,000.
   The company is permitted to borrow any amount at the beginning of any quarter and is also permitted to repay its loans, or any part of its loans, at the end of any quarter.
   Interest payments are due on any principal at the time it is repaid (assume that interest is not compounded).
   
   
   Required:
   Complete the company's cash budget for the upcoming fiscal year. (Cash deficiency, repayments, and interest, should be indicated by a minus sign.)

Cash Budget
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Beginning cash balance $45,000 $10,000 $65,260 $91,260 $45,000
Total cash receipts 280,000 400,000 330,000 350,000 1,360,000
Total cash available 325,000 410,000 395,260 441,260 1,405,000
Less total cash disbursements 344,000 314,000 304,000 324,000 1,286,000
Excess (deficiency) of cash available over disbursements (19,000) 96,000 91,260 117,260 119,000
Financing:
Borrowings 29,000 0000 0000 0000 29,000
Repayments 0000 (29,000) 0000 0000 (29,000)
Interest (1,740) (1,740)
Total financing 29,000 (30,740) 00000 020000 (1,740)
Ending cash balance $10,000 $65,260 $91,260 $117,260 $117,260

Explanation:
Borrowings (at beginnings of quarters): Since the deficiency of cash available over disbursements is $19,000, the company must borrow $29,000 to maintain the desired ending cash balance of $10,000.

Interest: $29,000 × 3% × 2 = $1,740

5. 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.

Cash disbursements for manufacturing overhead $102,040


Explanation:
a.

November
Budgeted direct labor-hours 9,100
Variable manufacturing overhead rate $ 1.60
Variable manufacturing overhead $ 14,560
Fixed manufacturing overhead 107,380
Total manufacturing overhead 121,940
Less depreciation 19,900
Cash disbursements for manufacturing overhead $ 102,040

6. 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. (Round your answer to 2 decimal places.)

Predetermined overhead rate $13.40

Explanation:
b.

Total manufacturing overhead (a) $ 121,940
Budgeted direct labor-hours (b) 9,100
Predetermined overhead rate for the month (a) ÷ (b) $ 13.40

7. 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.

Budgeted Balance Sheet
Assets
Current assets:
Cash $15,500 00000
Accounts receivable 8,300 00000
Supplies inventory 3,200 00000
Total current assets 00000 $27,000
Plant and equipment:
Equipment 35,000 00000
Accumulated depreciation (14,200) 00000
Plant and equipment, net 00000 20,800
Total assets 00000 $47,800
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 00000 $2,000
Stockholders' equity:
Common stock $5,000 00000
Retained earnings 40,800 00000
Total stockholders' equity 00000 45,800
Total liabilities and stockholders' equity 00000 $47,800

Explanation:
Cash = Plug figure.

Retained earnings is computed as follows:


Retained earnings, beginning balance $30,000
Add net income 13,900
43,900
Deduct dividends 3,100
Retained earnings, ending balance $40,800

8. 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.)

Required production in units 3,800 4,300
Direct labor-hours per unit 0.05 0.05
Total direct labor-hours needed 190 215
Direct labor cost per hour $9.90 $9.90
Total direct labor cost $1,881.00 $2,128.50

9. All the following are considered to be benefits of participative budgeting, except for:

when managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.

10. 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

Option A