Budgeting Paper 5

1

Jura Corporation is developing standards for the next year. Currently XZ-26, one of the material components, is being purchased for $36.45 per unit. It is expected that the componentís cost will increase by approximately 10% next year and the price could range from $38.75 to $44.18 per unit, depending on the quantity purchased. The appropriate standard for XZ-26 for next year should be set at the






2

After performing a thorough study of Michigan Companyís operations, an independent consultant determined that the firmís labor standards were probably too tight. Which one of the following facts would be inconsistent with the consultantís conclusion?






3

When compared with ideal standards, practical standards






4

Diana Stinson, Cherry Valley, Inc.ís factory manager, had lost her patience. Six months ago, she appointed a team from the production and service departments to finalize the allocation of costs and setting of standard costs. They were still feuding, so she hired Brennan and Rose, a large consulting firm, to resolve the matter. All of the following are potential consequences of having the standards set by Brennan and Roseexcept that






5

All of the following statements concerning standard costs are correct except that






6

One approach for developing standard costs incorporates communication, bargaining, and interaction among product line managers; the immediate supervisors for whom the standards are being developed; and the accountants and engineers before the standards are accepted by top management. This approach would best be characterized as a(n)






7

Granger Company is reviewing its standard machine hours per unit to use in its budget for the upcoming year. The machine manufacturerís specifications indicated a unit could be made in 0.75 hours, and a bench marking study showed a competitor produced at a speed of 0.78 machine hours per unit. Grangerís actual results from last year averaged 0.83 machine hours per unit even though a standard of 0.80 machine hours per unit had been established using engineering studies. The standard Granger should use in its upcoming budget is






8

The budget that describes the long-term position and objectives of an entity within its environment is the






9

A manufacturer makes picture frames that require one sheet of glass each. Each sheet of glass comes from one larger sheet that is cut into four pieces. Normally, the company is able to produce 400 frames using 110 large sheets of glass, as there is typically some breakage during the process. To improve its operation, the company has set its standard for glass material usage at 100 sheets of large glass to manufacture 400 frames. Which one of the following statements best describes the type of standard the company has set?






10

All of the following are advantages of the budgeting process except that the budget






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