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Chapter 22: Q11RQ (page 1228)
What is the formula used to determine the amount of direct materials to be purchased?
The purchasing department uses the amount estimated from the direct materials budget.
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Match the following statements to the appropriate budgeting objective or benefit: developing strategies, planning, directing, controlling, coordinating and communicating, and benchmarking.
1. Managers are required to think about future business activities.
2. Managers use feedback to identify corrective action.
3. Managers use results to evaluate employees’ performance.
4. Managers work with managers in other divisions.
What is a master budget?
Preparing the financial budget—budgeted balance sheet
Barker, Inc. has the following balance sheet at December 31, 2018:
Barker projects the following transactions for 2019:
Sales on account, \(20,000
Cash receipts from customers from sales on account, \)17,600
Purchase of raw materials on account, \(7,000
Payments on account, \)3,500
Total cost of completed products, \(16,600, which includes the following:
Raw materials used, \)7,100
Direct labor costs incurred and paid, \(3,900
Manufacturing overhead costs incurred and paid, \)4,800
Depreciation on manufacturing equipment, \(800
Cost of goods sold, \)14,800
Selling and administrative costs incurred and paid, \(500
Purchase of equipment, paid in 2019, \)2,000
Prepare a budgeted balance sheet for Barker, Inc. for December 31, 2019. (Hint: It may be helpful to trace the effects of each transaction on the accounting equation to determine the ending balance of each account.)
How is the predetermined overhead allocation rate determined?
Preparing an operating budget—manufacturing overhead budget Bennett Company expects to produce 2,030 units in January that will require 8,120 hours of direct labor and 2,210 units in February that will require 8,840 hours of direct labor. Bennett budgets \(10 per unit for variable manufacturing overhead; \)2,100 per month for depre000ciation; and $78,460 per month for other fixed manufacturing overhead costs. Prepare Bennett’s manufacturing overhead budget for January and February, including the predetermined overhead allocation rate using direct labor hours as the allocation base.
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