Chapter 9 Starting point for master budget sales budget Budgets are future oriented Tech has made it easier to do everything except remove slack from budget The income st is part of which element of the master budget operating budgets Budgeted Income Statement is not a financial budget Depreciation Exp would not appear in a cash budget Production Budget is not ordinarily prepared by service company starting point for DL budget for a manufacturer is the production budget For a merchandising company the COGS Inv and Purch budget does not replace sales budget Managers will sometimes build slack into their budgets to protect themselves The variance is the dif between actual budgeted figures Budget Committee are often used to review submitted budgets The sales budget production budget are operating budgets Participative Budgeting begins with departmental managers and flows up through top Safety Stock is extra inventory of finished goods that is kept on hand management Rolling Budget is continuously updated by adding months to the budget Master Budget comprehensive planning doc for entire org Financial Budgets project collection payment of cash and forecast the balance sheet Production Budget used to forecast how many units should be made Zero Based Budgeting is when an org builds its budget from ground up Strategic Planning process of setting long term goals Sales manager in charge of Nike NE sales territory revenue c A Shoe Depo at a store which is responsible for buying selling merch profit c Responsibilty C any segment whose manager is accountable for specific activities Manages of cost rev c are at lower levels of the org than of profit investment c Pharm Depo of grocery store is profit c Accounting Depo at Macys is cost c Division of HP produces sells printing scanning equipment investment c Production line at car plant where Ford trucks are manufactured cost c Division of Honda Motor Co is investment c North Canton location of a chain restaurant is profit center Order Type of Budget Sales Op Production Op D M Op Budgeted Income Op Cash Payments Fin Combined Cash Fin Budgeted Bal Fin Cash Payments Budget Cash Pay DM Last Month Purch 1st x 50 Next Month Purch 2nd x 50 Cash Pay DL given Cash Pay MOH DL x 160 Cash Pay Op Exp 1st 2nd 3rd Cash Pay Taxes given Total Cash Pay Which is not one of the potential advantages of decentralization increases goal congruence The Quaker Foods division of PepsiCo is most likely treated as a investment center When management only investigates budget variances that are large this is management by Chapter 10 Which disadvantage of financial performance measures ROI and residual income focus on exception short term performance Which responsibility center would it be appropriate to measure performance using RIO investment center flexible budget contains a plan for a range of activity levels so that the plan can be adjusted to reflect changes in activity levels The volume variance on a flexible budget report is the different between the master budget and the flexible budget Avg repair time on products returned for service would be a typical measure for which of the following balance scorecard perspectives internal business Which of the following balanced scorecard perspectives essentially asks Can we continue to improve and create value learning and growth Responsibility Center Manager is responsible for Examples Cost Center Controlling Costs Production line at Dell computer HR dept Revenue Center Generating Sales Revenue Midwest sales region at Pace Foods call centers Profit Center Producing profit through generating sales and controlling costs Product line at Anheuser Busch individual grocery store in a chain Investment Center Producing profit and managing the division s invested capital Company divisions such as Walt Disney World Resorts Hampton Inns Hilton ROI Op Income Total Assets x 100 Sales Margin Op Income Sales Cap Turnover Sales Total Assets ROI Sales Margin x Cap Turnover RI Op Income Total Assets x Target Rate of Return Chapter 11 Which of the following would be least likely to cause a DM quantity standard to be outdated demand for the product has increased steadily over the past two years in spite of a worsening economy DM price variance is calculated using actual quantity of materials purchased increase in selling price would not cause an unfavorable DM quantity variance The DL efficiency variance is calculated using the standard labor rate per hour Which would be most likely to be the cause of unfavorable DL rate variance using highly paid skilled workers for routine jobs normally performed by minimum wage workers Price sensitivity of customers can be analyzed would not be an advantage of using standard costs Variable overhead spending variance is calculated by AH AR SR The fixed overhead variances are the budget variance and the volume variance The production volume variance is favorable whenever actual output exceeds expected input Fixed OH Budget Variance measures the dif between actual fixed MOH costs incurred and budgeted fixed MOH costs Variable OH Rate Variance variable overhead spending variance DL Rate Variance tells managers how much of the total variance is due to paying a different hourly way rate than anticipated Ideal Standards standards based on conditions that do not allow for any waste in the production process DM quantity variance tells managers how much of the total variance is due to using a Fixed OH Volume Variance measures the difference between the budgeted fixed MOH costs difference quantity of DM than expected and the standard allocated MOH costs Practical Standards attainable standards DM Price Variance tells managers how much of the total variance is due to paying a different price than expected for DM DL Efficiency Variance tells managers how much of the total variance is due to using a greater or lesser amount of time than anticipated Variable OH Efficiency Variance tells managers how much of the total variable MOH variance is due to using more less of the allocation base than anticipated for the actual volume of output Standard Cost budget for a single unit of product Standard Cost of Input Quantity Standard x Price Standard DM Price Variance AQP AP SP DM Quantity Variance SP AQU SQA DL Efficiency Variance SR AH SHA Variable MOH Efficiency Variance SR AH SHA 25hr x of changes DL Rate Variance AH AR SR Variable MOH Rate Variance AH AR SR Fixed MOH Budget Variance Actual Fixed OH Budgeted Fixed OH Fixed MOH