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Exam 20: Master Budgets and Performance Planning

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Question 101

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A department store has budgeted cost of goods sold for March of $60,000 for its women's shorts.Management wants to have $12,000 of shorts in inventory at the end of the month to prepare for the summer season.Beginning inventory in March was $8,000.What dollar amount of shorts should be purchased to meet the above plans?

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Question 102

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The following information is available for Jergenson Company: a.The Cash Budget for March shows a bank loan of $10,000 and an ending cash balance of $48,000. b.The Sales Budget for March indicates sales of $120,000.Accounts receivable is expected to be 70% of March sales. c.The Merchandise Purchases Budget indicates that $90,000 in merchandise will be purchased in March on account.Ending inventory for March is predicted to be 600 units at a cost of $35 per unit.Purchases on account are paid 100% in the month following the purchase. d.The Budgeted Income Statement shows depreciation expense of $4,000,net income of $44,000 and $21,000 in income tax expense for the quarter ended March 31.Accrued taxes will be paid in April. e.The Balance Sheet for February 28 shows equipment of $77,000 with accumulated depreciation of $28,000,common stock of $25,000 and retained earnings of $8,000.There are no changes budgeted in the equipment or common stock accounts for March Prepare a budgeted balance sheet as of March 31.

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Question 103

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Operating budgets include all the following budgets except the:

Webster Corporation is preparing its cash budget for April.The March 31 cash balance is $36,400.Cash receipts are expected to be $641,000 and cash payments for purchases are expected to be $608,500.Other cash expenses expected are $27,000 selling and $33,500 general and administrative.The company desires a minimum cash balance at the end of each month of $30,000.If necessary,the company borrows enough cash to meet the minimum using a short-term note.The amount Webster must borrow during April is:

Larger,more complex organizations usually require a longer time to prepare their budgets than smaller organizations because of the considerable effort to coordinate the different units within the business.

A manufacturing budget shows dollar amounts estimated to be spent to purchase additional plant assets and amounts expected to be received from plant asset disposals.

A July sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit.Management forecasts 2% growth in sales each month.Total July sales are anticipated to be:

The production budget cannot be prepared until the direct materials and direct labor budgets are prepared.

Use the following information to prepare a budgeted balance sheet for Grover Company for the month of June. a.The budgeted net income for the month of June is $236,000. b.The beginning cash balance is $62,000; total budgeted cash receipts are $1,660,000; total budgeted cash payments are $1,580,000. c.Budgeted sales for June are $1,700,000.Collections are 40% in the month of sale and 60% in the month following. d.The projected inventory balance is 10% of the following month's sales.Sales for July are projected to be $1,750,000. e.Budgeted purchases for June are $900,000 to be paid 80% in the month of purchase and 20% in the month following. f.The equipment account balance is $1,400,000 on May 31.No equipment purchases or disposals will be made during June.On May 31,the accumulated depreciation is $276,000.Depreciation expense for June is estimated to be $24,000. g.An outstanding loan balance of $800,000 is expected at the end of June. h.Accrued income taxes payable for June 30 are expected to be $71,000.Salaries payable for June 30 are expected to be $50,000. i.The only other balance sheet accounts are: Common Stock,with a balance of $800,000 on May 31,and Retained Earnings with a balance of $300,000 on May 31.No additional common stock will be issued and no dividends will be paid during June.

Match the definitions 1 through 9 with the correct term or phrase (a) through (i) . -A plan that plans the predicted operating expenses not included in the selling expenses or manufacturing budgets.

Cahuilla Corporation predicts the following sales in units for the coming four months: Each month's ending Finished Goods Inventory in units should be 40% of the next month's sales.March 31 Finished Goods inventory is 96 units.A finished unit requires five pounds of direct material B at a cost of $2.00 per pound.The March 31 Raw Materials Inventory has 200 pounds of direct material B.Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. -The budgeted cost of direct material B during May should be:

Garcia Corporation's April sales forecast projects that 5,000 units will sell at a price of $10.50 per unit.The desired ending inventory is 30% higher than the beginning inventory of 1,000 units.Budgeted purchases in April would be:

Ratchet Manufacturing's August sales budget calls for sales of 8,000 units.Each month's unit sales are expected to grow by 5%.The product selling price is $25 per unit.The expected total sales dollars for September's sales budget are:

Zhang Industries budgets production of 300 units in June and 310 units in July.Each finished unit requires 4 pounds (lbs.) of raw material K,which costs $5 per pound.Each month's ending inventory of raw materials should be 30% of the following month's budgeted production.The June 1 raw materials inventory has 360 pounds of raw material K.Compute the budgeted purchases for raw material K in pounds for June.

What is activity-based budgeting?

Briefly describe the process by which budgets are developed and administered.

A company's history indicates that 20% of its sales are for cash and the rest are on credit.Collections on credit sales are 30% in the month of the sale,50% in the next month,and 15% the following month.Projected sales for January,February,and March are $60,000,$85,000 and $95,000,respectively.The March expected cash receipts from current and prior credit sales is:

Match the definitions 1 through 9 with the correct term or phrase (a) through (i) . -A formal statement of a company's future plans,usually expressed in monetary terms.

The practice of preparing budgets for each of several future periods and revising those budgets as each period is completed,adding a new budget each period so that the budgets always cover the same number of future periods,is called:

In preparing financial budgets: