a.Identify the budget preparation approach used

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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a.Identify the budget preparation approach used

Nicki Fenty Corporation manufactures a variety of beauty products in several departments and
evaluates departments and departmental managers by comparing actual cost and output relative to
the budget. Departmental managers help create the budgets and usually provide information about
input quantities for materials, labor, and overhead costs.
Chante Moore is the manager of the department that produces lip gloss. Chante has estimated
these inputs for Lip gloss:
Budget quantity per unit of output
8 pounds
Input
Direct materials
Direct manufacturing labour
30 minutes
Machine time
24 minutes
The department produces about 100 units of lip gloss each day. Chante's department always gets
excellent evaluations, sometimes exceeding budgeted production quantities. For each 100 units of
lip gloss produced, the company uses, on average, about 48 hours of direct manufacturing labor
(eight people working 6 hours each), 790 pounds of material, and 39.5 machine-hours.
Top management of Nicki Fenty Corporation has decided to implement budget standards that
will challenge the workers in each department, and it has asked Chante to design more challenging
input standards for the production of lip gloss. Chante provides top management with the following
input quantities:
Budget quantity per unit of output
7.9 pounds
29 minutes
Input
Direct materials
Direct manufacturing labour
Machine time
23.6 minutes
Transcribed Image Text:Nicki Fenty Corporation manufactures a variety of beauty products in several departments and evaluates departments and departmental managers by comparing actual cost and output relative to the budget. Departmental managers help create the budgets and usually provide information about input quantities for materials, labor, and overhead costs. Chante Moore is the manager of the department that produces lip gloss. Chante has estimated these inputs for Lip gloss: Budget quantity per unit of output 8 pounds Input Direct materials Direct manufacturing labour 30 minutes Machine time 24 minutes The department produces about 100 units of lip gloss each day. Chante's department always gets excellent evaluations, sometimes exceeding budgeted production quantities. For each 100 units of lip gloss produced, the company uses, on average, about 48 hours of direct manufacturing labor (eight people working 6 hours each), 790 pounds of material, and 39.5 machine-hours. Top management of Nicki Fenty Corporation has decided to implement budget standards that will challenge the workers in each department, and it has asked Chante to design more challenging input standards for the production of lip gloss. Chante provides top management with the following input quantities: Budget quantity per unit of output 7.9 pounds 29 minutes Input Direct materials Direct manufacturing labour Machine time 23.6 minutes
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