B2: Strategic Planning: Techniques for Forecasting, Budgeting, and Analysis Flashcards Preview

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Flashcards in B2: Strategic Planning: Techniques for Forecasting, Budgeting, and Analysis Deck (31)
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Which of the following costing methods provide(s) the added benefit of usefulness for external reporting purposes?

Absorption costing methods represent GAAP, which are for the benefit of external users in regards to financial statement presentation


A company produces and sells two products. The first product accounts for 75% of sales and the second product accounts for the remaining 25% of sales. The first product has a selling price of $10 per unit, variable costs of $6 per unit, and allocated fixed costs of $100,000. The second product has a selling price of $25 per unit, variable costs of $13 per unit, and allocated fixed costs of $212,000. At the break-even point, what number of units of the first product will have been sold?

Break-even = FC / CM per unit

But... we need to split products

CM's for each product:
First product:
$10 selling - $6 VC = $4 CM
Second product:
$25 selling - $13 VC = $12 CM

Now... we determine units.
Break-even in units x CM = FC

(First product CM x 75% of total units) + (Second product CM x 25% of total units) = FC

($4 x 75%z) + ($12 x 25%z) = $312,000

($3z + $3z) = $312,000

$6z = $312,000

z = $312,000 / $6

z = 52,000 total units

52,000 x 75% = 39,000 units allocated towards first product at break-even


A delivery company is implementing a system to compare costs of purchasing and operating different vehicles in its fleet. Truck 415 is driven 125,000 miles per year at a variable cost of $0.13 per mile. Truck 415 has a capacity of 28,000 pounds and delivers 250 full loads per year. What amount is the truck's delivery cost per pound?

125,000 miles x $0.13 per mile = $16,250 cost

28,000 lbs. x 250 loads = 7,000,000 pounds

$16,250 / 7,000,000 = $0.00232 cost per pound


An increase in production levels within a relevant range most likely would result in:

Increasing the total cost


Absorption Costing: Product vs. Period

Product Costs:
DM, DL, Variable & Fixed Overhead (Use total produced)

Period Costs:
Variable & Fixed SG&A (Use number of units sold)


Variable Costing: Product vs. Period

Product Costs:
DM, DL, Variable Overhead (Use total produced)

Period Costs:
Fixed Overhead, Variable and Fixed SG&A (Use number of units sold)


Snyder Co. manufactures fans with direct material costs of $10 per unit and direct labor of $7 per unit. A local carrier charges Snyder $5 per unit to make deliveries. Sales commissions are paid at 10% of the selling price. Fans are sold for $100 each. Indirect factory costs and administrative costs are $6,800 and $37,200 per month, respectively. How many fans must Snyder produce to break even?

$100 selling price
- $17 DM & DL
- $5 carrier charges
- $10 sales commissions
$68 CM per unit

($6,800 + $37,200) FC / $68 CM per unit = 648 units


In managerial accounting, the term "relevant range" is often used to describe:

The range over which cost relationships are valid


In joint-product costing and analysis, which one of the following costs is relevant when deciding the point at which a product should be sold in order to maximize profits?

Separable costs after the split-off point. Costs subsequent to split-off, and revenues, are relevant to maximizing profits.


Assume that Whitehall Corporation agreed to sell AM-12 to Flank Corporation after further processing for $5.50 per unit. During the first month of production, Whitehall sold 50,000 units with 10,000 units remaining in inventory at the end of the month. Joint costs attributable to AM-12 were $180,000, and costs of processing AM-12 further were $90,000. With respect to AM-12, what is operating profit last month and what is the value of the remaining inventory?

$180,000 + $90,000 = $270,000

$270,000 / 60,000 units = $4.5 per unit

10,000 remaining units x $4.5 per unit = $45,000 inventory value

$5.50 selling price x 50,000 units sold = $275,000 revenue

$4.5 cost per unit x 50,000 units sold = $225,000 total cost

$275,000 - $225,000 = $50,000 operating profit


The Waller Walleye Plant is operating at capacity and currently generates revenue of $1,600,000 per year by processing stewed walleye for cat food. The plant currently has a 15% contribution margin. The company has been offered the opportunity to prepare stewed sturgeon for upscale cat food using one-quarter of the plant's capacity. The sturgeon job would take one year and pay $600,000 with a 25% contribution margin. The opportunity cost of not accepting the sturgeon project is:

$600,000 x 25% contribution margin = $150,000


Trijonis Company estimated its material handling costs at two activity levels, as follows:

Kilos Handled: 80,000 Cost: $160,000
Kilos Handled: 60,000 Cost: $132,000

What is Trijonis' estimated cost for handling 75,000 kilos?

Using high-low method, the variable cost per kilo can be determined by dividing the change in cost.

$160,000 - $132,000 / 80,000 - 60,000 =

$28,000 / 20,000 = $1.40 per kilo

Fixed costs can be determined by using Y = a + bx

$160,000 = a + $1.40 (80,000) = 48,000

Use the same formula to determine costs for 75,000 units.

Y = 48,000 + $1.40 (75,000)

= $153,000


The coefficient of determination, r squared, in a multiple regression equation is the:

Percentage of variation in the dependent variable explained by the variation in the independent variables.

The coefficient of determination (R^2) is the proportion of the total variation in the dependent variable (y) explained by the independent variable (x)


A regression equation:

Estimates the dependent variables.

A regression equation is a statistical model that estimates the dependent variables based on changes in the independent variable.


Which of the following forecasting methods relies mostly on judgement?

The Delphi method of forecasting involves the use of multiple teams in geographically remote locations. Information is shared and gathered in a central point and compiled and then redistributed for comment. The method is highly interpersonal and requires significant judgement.


Learning curve analysis

Learning curve analysis is used to determine increases in efficiency or production as experience is gained. Both products have long production runs, making learning curve analysis the best method for estimating the cost of the competitive bid.


Which of the following types of budgets is the last budget to be produced during the budgeting process?

Cash is LAST


A static budget contains which of the following amounts?

Budgeted costs for budgeted output


Which one of the following statements regarding selling and administrative budgets is most accurate?

Selling and administrative budgets need to be detailed in order that the key assumptions can be better understood


A company's controller is adjusting next year's budget to reflect the impact of an expected 5% inflation rate. Listed below are selected items from next year's budget before the adjustment:

Total salaries expense $250,000
Health costs $100,000
Depreciation expense $65,000
Interest expense on 10-year fixed-rate note $37,750

After adjusting for the 5% inflation rate, what is the company's total budget for the selected items before taxes for the next year?

The depreciation (historical cost) and interest (fixed-rate) expenses are no adjustable for inflation.

$250,000 x 1.05 = $262,500
$100,000 x 1.05 = $105,000
$65,000 x 1 = $65,000
$37,750 x 1 = $37,750

Total budget = $470,250


Which of the following is a disadvantage of participative budgeting?

Participative budgeting requires input from multiple stakeholders and spreads the decision-making process over multiple layers of managers and individuals. Implementing this approach effectively is time consuming.

Authoritative (top down) budgeting is faster.


The information contained in a cost of goods manufactured budget would most directly relate to the:

Materials used, direct labor, overhead applied, and work-in-process inventories budgets


There are various budgets within the master budget cycle. One of these budgets is the production budget. Which one of the following best describes the production budget?

It is calculated from the desired ending inventory and the sales forecast.


Clear Plus, Inc. manufactures and sells boxes of pocket protectors. The static master budget and the actual results for May are as follows:

Units Sales: Actual 12,000 Static 10,000

Sales: Actual $132,000 Static $100,000
VC: Actual $70,800 Static $60,000
CM: Actual $61,200 Static $40,000

FC: Actual $32,000 Static $30,000

Income: Actual $29,200 Static $10,000

What is Operating Income for May using a flexible budget?

Static CM per Unit x Number of Actual Units = Flexible CM per Unit

Static CM per Unit = CM $40,000 / 10,000 units = $4 per unit

$4 Static CM per Unit x 12,000 Actual Units = $48,000 Flexible CM per Unit

$48,000 Flexible CM per Unit - $30,000 Static FC = $18,000 Flexible Operating Income

Operating Income for May is $18,000


Mien Co. is budgeting sales of 53,000 units of product Nous for October. The manufacture of one unit of Nous requires 4 kilos of chemical Loire. During October, Mien plans to reduce the inventory of Loire by 50,000 kilos and increase the finished goods inventory of Nous by 6,000 units. There is no Nous work-in-process inventory. How many kilos of Loire is Mien budgeting to purchase in October?

53,000 budgeted sales of Nous + 6,000 planned increase in Nous = 59,000 units of Nous for October

59,000 units x 4 (Units of Loire required to make Nous) = 236,000

236,000 - 50,000 reduction of Loire inventory during October = 186,000 number of units required to be purchased


On June 30, Year 1, a company is preparing the cash budget for the third quarter. The collection pattern for credit sales has been 60% in the month of sale, 30% in the first month after sale, and the rest (10%) in the second month after sales. Uncollectible accounts are negligible. There are cash sales each month equal to 25% of total sales. The total sales for the quarter are estimated as follows: July $30,000; August $15,000; September $35,000. Accounts receivable on June 30, Year 1, were $10,000. What amount would be the projected cash collections for September?

First: Determine credit sales for each month.

July: $30,000 x 25% = $22,500
August: $15,000 x 25% = $11,250
September: $35,000 x 25% = $26,250

60% in month of sale = September $26,250 x 60% = $15,750

30% in first month after = August $11,250 x 30% = $3,375

10% in second month after = July $22,500 x 10% = $2,250

+ $3,375
+ $2,250
= $21,375

But..... the call of the question is CASH collections. So...

$35,000 total sales for September x 25% cash sales = $8,750

$21,375 + $8,750 = $30,125 September cash collections


A company manufactures a product using one material per unit. The following information for the upcoming budget year is available:

Number of units sold: 14,500
Budgeted beginning finished goods inventory: 1,500
Budgeted ending finished goods inventory: 3,000
Budgeted beginning direct materials: 2,000
Budgeted ending direct materials: 1,500
Direct manufacturing material cost per unit: $5

What is the total amount of direct materials purchasing budget?

Sales 14,500
+ Ending Finished goods 3,000
- Beginning Finished goods (1,500)
= 16,000 Units for production

Units for production 16,000
+ Ending Direct materials 1,500
- Beginning Direct materials (2,000)
= 15,500 total direct materials

15,500 x $5 per unit = $77,500


DM price variance

Actual quantity purchased x (Actual price - Standard price)


DM quantity usage variance

Standard price x (Actual quantity used - Standard quantity allowed)


DL rate variance

Actual hours worked x (Actual rate - Standard rate)