How do managers use budgets to control business activities? a) Match the concept (by number) to the correct terminology. 1. Static Budget 2. Budget Performance Report 3. Variance 4. Static Budget Variance 5. Flexible Budget 6. Flexible Budget Variance 7. Sales Volume Variance
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
How do managers use budgets to control business activities?
a) Match the concept (by number) to the correct terminology.
1. Static Budget
2. Budget Performance Report
3. Variance
4. Static Budget Variance
5. Flexible Budget
6. Flexible Budget Variance
7. Sales Volume Variance
______ A budget prepared for various levels of sales volume.
______ The difference between actual results and the expected results in the flexible budget for
the actual units sold.
______ The difference between the expected results in the flexible budget for the actual units sold
and the static budget.
_____ The difference between actual results and the expected results in the static budget.
_____ A report that summarizes the actual results, budgeted amounts, and the differences.
_____ A budget prepared for only one level of sales volume.
_____ The difference between an actual amount and the budgeted amount; labeled as favorable if
it increases operating income and unfavorable if it decreases operating income.
In MyAccountingLab, complete Try It! 23-1 and S23-1 through S23-3.
LO2. Why do managers use a
a) Setting standards required __________________ and ____________________ among
different divisions and functions.
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b) Using a standard cost system helps managers:
i)
ii)
iii)
iv)
v)
c) The formula for cost variance is:
d) The formula for efficiency variance is:
In MyAccountingLab, complete Try It! 23-2 and S23-4 and S23-5.
LO3. How are the standard costs used to determine direct materials and direct labor variances?
a) The formula for direct materials cost variance is:
b) The formula for direct materials efficiency variance is:
c) Given the following information, what is the amount of: i) the direct materials cost variance and
ii) the direct materials efficiency variance?
Actual direct materials cost = $1.00 per pound
Standard direct materials cost = $1.10 per pound
Actual quantity purchased and used = 2,000 pounds
Standard quantity that should have been used = 1,800 pounds
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i)
ii)
d) The formula for direct labor cost variance is:
e) The formula for direct labor efficiency variance is:
f) Given the following information, what is the amount of: i) the direct labor cost variance and ii)
the direct labor efficiency variance?
Actual direct labor cost = $20.00 per hour
Standard direct labor cost = $21,00 per hour
Actual direct labor hours = 200 hours
Standard quantity of labor hours that should have been used = 180 hours
i)
ii)
In MyAccountingLab, complete Try It! 23-3 and S23-6 through S23-8.
LO4. How are standard costs used to determine manufacturing
a) The formula for variable overhead cost variance is:
b) The formula for variable overhead efficiency variance is:
c) The formula for fixed overhead cost variance is:
d) The formula for fixed overhead volume variance is:
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In MyAccountingLab, complete Try It! 23-4 and S23-9 and S23-10.
LO5. What is the relationship among the product cost variances, and who is responsible for them?
a) In your own words, what is management by exception?
b) Which division manager would most likely be responsible for the following variances:
i) Workers were paid more than expected. ___________________________
ii) Materials purchases were at a higher cost than standards. ________________________
iii) Inexperienced workers caused a delay in unit production. ________________________
In MyAccountingLab, complete Try It! 23-5 and S23-11.
LO6. How do
a) Journal entries are needed for the following transactions:
i) Direct materials purchased
ii)
iii)
iv)
v)
vi)
VII)
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