In: Accounting
1. Which of the following statements is correct concerning the Cash Budget?
Multiple Choice
The Cash Budget never includes cash disbursements from selling and administrative expenses, it only includes disbursements from product costs.
The Cash Budget must be prepared before any other budgets.
The Cash Budget does not contain any depreciation expenses.
The ending cash balance is calculated by adding cash collected to the beginning cash balance for the period.
2. Hiss Corporation's activity for the last six months is as follows:
Machine Hours | Electrical Cost | |||||
July | 2,000 | $ | 1,560 | |||
August | 3,000 | $ | 2,280 | |||
September | 2,400 | $ | 1,750 | |||
October | 1,900 | $ | 1,520 | |||
November | 1,800 | $ | 1,450 | |||
December | 2,100 | $ | 1,600 | |||
Using the high-low method of analysis, the estimated fixed cost per month for electricity is closest to: (Round your intermediate calculations to 2 decimal places.)
Multiple Choice
$280
$260
$210
$235
3. The starting point for the Direct Labor Budget is:
Multiple Choice
the materials to be purchased from the direct materials budget.
the units to be sold from the sales budget.
the ending inventory from the budgeted balance sheet.
the units to be produced from the production budget.
Answer 1:
Option C: Cash Budget does not contain depreciation costs.
Explanation:
The cash budget is a budget that shows inflows and outflows of cash during the period.
The cash budget does not consider depreciation expense as it is a non-cash item.
The cash budget is usually prepared at the end.
Ending cash balance is calculated as opening balance + cash inflows (-) cash outflows.
Answer 2:
Option C: $ 210
Explanation:
It is given that:
Lowest range | Highest range | |
Cost | $ 1,450 | $ 2,280 |
Hours | 1,800 | 3,000 |
Now,
As per High Low Method, | |
Variable cost per hour = | Change in costs / change in unit |
Variable cost per hour = | ($ 2280 - $ 1450) / (3000 - 1800) |
Variable cost per hour = | $ 830 / 1200 |
Variable cost per hour = | $ 0.69 |
and,
Fixed Cost = | Total Cost - Variable Cost |
Fixed Cost = | Total Cost - (Variable Cost per hour * hours) |
Fixed Cost = | $ 2280 - ($ 0.69 * 3000) |
Fixed Cost = | $ 210.00 |
Answer 3:
Option D: Units to be produced from production budget.
Explanation:
Direct Labor Budget shows the number of hours required for the production and the cost of such direct labor hours.
Direct Labor Budget is prepared from the production budget.\
Direct Labor Budget is not concerned with the sales budget or direct materials or ending inventory of materials.
In case of any doubt, please feel free to comment.