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Chapter 22: Q2TI (page 1190)

Match the budget types to the definitions.
Budget Types Definitions
5. Financial a. Includes sales, production, and cost of goods sold budgets
6. Flexible b. Long-term budgets
7. Operating c. Includes only one level of sales volume
8. Operational d. Includes various levels of sales volumes
9. Static e. Short-term budgets
10. Strategic f. Includes the budgeted financial statements

Short Answer

Expert verified

f.
d.
a.
e.
c.
b.

Step by step solution

01

Meaning of Budget

A budget is afinancial planprepared by the managers to achieve the organization’s goals and objectives.

02

Matching budget types to the definitions

Type of Budget	Definitions
5. Financial	f. Includes the budgeted financial statements
6. Flexible	d. Includes various levels of sales volumes
7. Operating	a. Includes sales, production, and cost of goods sold budgets
8. Operational	e. Short-term budgets
9. Static	c. Includes only one level of sales volume
10.Strategic	b. Long-term budgets

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Most popular questions from this chapter

Describing master budget components

Sarah Edwards, division manager for Pillows Plus, is speaking to the controller, Diana Rothman, about the budgeting process. Sarah states, “I’m not an accountant, so can you explain the three main parts of the master budget to me and tell me their purpose?” Answer Sarah’s question.

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.

Question:Brooks Company expects to sell 8,500 units for $175 e a c h f o r a t o t a l o f$ 1,487,500 in January and 2,500 units for $200 e a c h f o r a t o t a l o f$ 500,000 in February. The company expects cost of goods sold to average 70% of sales revenue, and the company expects to sell 4,700 units in March for $280 e a c h . B r o o k s^{'} s t a r g e t e n d i n g i n v e n t o r y i s$ 20,000 plus 50% of the next month’s cost of goods sold. Prepare Brooks’s inventory, purchases, and cost of goods sold budget for January and February

Preparing an operating budget—direct materials, direct labor, and manufacturing overhead budgets

Grady, Inc. manufactures model airplane kits and projects production at 650, 500, 450, and 600 kits for the next four quarters. Direct materials are 4 ounces of plastic per kit and the plastic costs $1 p e r o u n c e . I n d i r e c t m a t e r i a l s a r e c o n s i d e r e d i n s i g n i f i c a n t a n d a r e n o t i n c l u d e d i n t h e b u d g e t i n g p r o c e s s . B e g i n n i n g R a w M a t e r i a l s I n v e n t o r y i s 850 o u n c e s, a n d t h e c o m p a n y d e s i r e s t o e n d e a c h q u a r t e r w i t h 10$ 10 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is $0.20 p e r k i t, a n d f i x e d o v e r h e a d i s$ 165 per quarter. Prepare Grady’s direct materials budget, direct labor budget, and manufacturing overhead budget for the year. Round the direct labor hours needed for production, budgeted overhead costs, and predetermined overhead allocation rate to two decimal places. Round other amounts to the nearest whole number.

Explain the difference between strategic and operational budgets

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