Assessment 8: master budget and flexible budget preparation

 

Prepare a master budget and a flexible budget in this two-part assessment.

Introduction

Note: Accounting requires specific steps that need to be executed in a sequence. The assessments in this course are presented in sequence and must be completed in order.

A master budget is a management tool for planning. A flexible budget provides crucial information for differing levels of business activity.

A master budget is a formal planning tool used to chart the organization’s future. Compiling a master budget serves to provide the financial information needed to make decisions, choose strategies, and create action plans. A master budget also helps to communicate the organization’s expenses to all employees.

Overview

Note: Accounting requires specific steps that need to be executed in a sequence. The assessments in this course are presented in sequence and must be completed in order.

A master budget is a formal planning tool used to chart the organization’s future. Compiling a master budget serves to provide the financial information needed to make decisions, choose strategies, and create action plans. A master budget also helps to communicate the organization’s expenses to all employees.

Instructions

This assessment has two parts.

Part A

For Part A, use the Master Budget Preparation Template [XLSX]. Based on the data in the template, which represents a company’s estimated balance sheet, prepare a complete master budget.

Part B

For Part B, use the Master Budget Preparation Template [XLSX]. Based on the data in the template, complete the problems on flexible budget preparation and computation of materials.

Competencies Measured

By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:

  • Competency 1: Analyze cost accounting systems.
    • Compute the cost for each variable overhead item and its total per-unit costs and the total fixed costs.
  • Competency 2: Apply sound budgeting principles.
    • Construct a monthly selling expense budget.
    • Construct a monthly general and administrative expense budget.
    • Construct a monthly capital expenditures budget.
    • Construct a monthly cash budget.
    • Construct a budgeted income statement for a calendar quarter.
    • Construct a budgeted balance sheet for a calendar quarter.
    • Calculate the direct materials cost variance, including its price and quantity variances.
    • Calculate the direct labor cost variance, including its rate and efficiency variances.
    • Construct flexible overhead budgets for a calendar month.
  • Competency 4: Analyze financial statements.
    • Construct a monthly merchandise purchases budget.
    • Construct a monthly sales budget showing both budgeted unit sales and dollar sales.
    • Construct a detailed overhead variance report that shows variances for individual items of overhead.
  • Competency 5: Communicate in a manner that is professional and consistent with expectations for professionals in the field of accounting.
    • Communicate quantitative information accurately and effectively.

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