Question

Managerial Accounting - Chapters 8, 9, & 10 Review Sheet Know definitions of terms. 1. What is the first step in budget preparation? 2. What are the benefits of budgeting? What is the format for determining budgeted production needs? What is the format for determining the budget raw materials that should be purchased? 4. If total costs of an account billing activity center is $250,000. Cost behavior analysis indicates that fixed costs are $50,000. Activity analysis indicates that the cost driver for account hilling activity is the number of lines printed, and the total lines printed are 1,000,000. What is the variable cost per unit? 5 What are factors that you would consider to estimate sales forecasts. 6. What is the difference in a master budget, static budget and a flexible budget? 7. What is the format for calculating a price variance? What is the format for calculating a quantity variance? What is a favorable versus unfavorable variance? Favorable/unfavorable material quantity variance. Favorable/unfavorable material price variance. Which department should be responsible for the different variances? 8. What is a possible reason for a variance between a flexible budget and actual results? 9. When should variances be investigated? 10. What does a variable overhead efficiency variance measure? 11. How does the denominator level used to calculate overhead effect the cost of the product? 12. What is the difference in practical standards and ideal standards? Which is better to use?

Answer 1

Identifying gook for business about knowledge a informations that takes part in Business plan and means through which one can achieve those goals to be identified in first place. 3. FORMAT production budget XXX xxx xx X Forecasted unit sales (+) planned ending inversales a total productim required xxx xx ххх (4x) (xx) (**) inventory (-) Begining F/G 2 units to be manufactured xxx xxx FORMAT] TRawmaterials purchase Bud Direct materiales purchase :- Desided andry sumentory Needed to xxx for production XXX Total Needed XX xxx

less begining inventory Materials to be purchased (***) (***) Xxx d and ② Benofity of Budgetings thives you control over your money - a budget is a way of being intentional about the way you opene Save your money keeps you focused on your money goals. makes you aware what is gooing on with your - profitability review can be happened. Right cash allocations can be done. performance evaluations of a planned activities can be made particulars Kamoment) Total costs - 250,000 least Fixed costs (50,000) variable costs 2,00.000 Ahority driver (No of lines printed) 100.000 variable cost mit $2 [$ 200.000|100,000

Factory post Economic performances Current global conditions cument industry conditims Rate of inflaten Internal organizatoral changes marketing efforts o seasonal demands Staste budget prepared for one level of sales volume does not change after developed Flexible budget - prepared for several diff whene levels withina relevant rage - Seperate fixed costs & variable costs. I lexible * skatic * Inflexible & does not * change with volume * costs are not classified Flexible and secasted quickly to the level activity attaned costs are classified according to the Nature of their variability at difficult to forecasts acurately the results in 9 * clearly shows the impact of various thes,

master budget - comprehensive plan for upcoming accounting period → usually prepared for one-year period. → Is based on series of budget assumptions. 7) price variance ! = (Actual unit cost - Standard wit cost) x (Actual aty purchased) quantity verance or = factual quantity used a std. grantity used) (std. cost permit) ponsible .-) purchasing Department as for the different variancee usually rers materials in possible reasons [for diff. en flexible & Actual budget] info from flexible budget on based on actual results altonary the business to adjust budget for accuracy & compare results 2) tomonic conditions changes 3) sales may changes 4) market conditions changes 3) grior assuptions may not be con

al only unfaronvable variances should be envestigated, I substantial to determine the causes. 10) roiable overhead efficiency variance, It measures the day between Actual hours worked at std. rate and std. hours allowed at std. rate. The std. has allowed means sid. hors allowed for Actual output of production. = (actual hours worked x Std. rete) (sta.hr allowed xestd. rate) - practical Ideal Attaned only under normal altained only when near efficient operating perfect conditions are conditime present. Assumes that every aspect of production process, it at peate efficiency 13 sid. quality is a detail of the requirements, specifications, various guidelines and characteristics to be able to meet 95 quality by the poroduct in order to meet the propre service of product, proceas or perpetual budget is contonually extended whenever cumat reporting period has been completed. where as contonous budgeting is continually adding one more month to multo period budget i

14) A self-imposed budget or participative budget is a budget that is prepared with the full cooperation and participation of managers at all levels. Individuals at all levels of the organization are viewed as members of the team whose judgments are valued by top management. ... Self-imposed budgets eliminate this excuse.

18) At times budgeting can generate negative feelings with employees because their compensation and, indeed, their jobs, may be dependent on meeting certain budgeting goals. This happens when budgeting is used for evaluation or is a top-down process, rather than a participative one.