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Exam 22: Master Budgets and Planning

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Question 21

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The central guidance of the budget process is the responsibility of the:

A) Chief Accounting Officer.
B) Chief Executive Officer (CEO) .
C) Chief Financial Officer (CFO) .
D) Budget Committee.
E) Board of Directors.

F) A) and D)
G) C) and E)

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Question 22

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Memphis Company's May sales budget calls for sales of $900,000.The store expects to begin May with $50,000 of inventory and to end the month with $55,000 of inventory.Gross margin is typically 45% of sales.Compute the budgeted cost of merchandise purchases for May.

A) $550,000.
B) $500,000.
C) $495,000.
D) $460,000.
E) $490,000.

F) A) and D)
G) A) and E)

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Question 23

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Budgets are normally more effective when all levels of management are involved in the budgeting process.

One of the major benefits of formal budgeting is the positive effect it can have on employee attitudes if applied correctly.

Wichita Industries' sales are 10% cash and 90% on credit.Credit sales are collected as follows: 30% in the month of sale,50% in the next month,and 20% in the following month.On December 31,the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales.Assume that total sales for January are budgeted to be $50,000.What are the expected cash receipts for January from the current and past sales?

Production budgets always show both budgeted units of product and total costs for the budgeted units.

A quantity of inventory that provides protection against lost sales caused by unfulfilled demands from customers is called:

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 disbursements 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 were made during June.On May 31,the accumulated depreciation is $276,000.Depreciation expense for June is estimated to be $24,000. g.There is an outstanding loan balance of $800,000. h.Accrued income taxes payable for June 30 are $71,000;and salaries payable are $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 was issued and no dividends were paid during June.

On its December 31,2014,balance sheet,Calgary Industries reports equipment of $370,000 and accumulated depreciation of $74,000.During 2015,the company plans to purchase additional equipment costing $80,000 and expects depreciation expense of $30,000.Additionally,it plans to dispose of equipment that originally cost $42,000 and had accumulated depreciation of $5,600.The balances for equipment and accumulated depreciation,respectively,on the December 31,2015 budgeted balance sheet are:

Masterson Company's budgeted production calls for 56,000 liters in April and 52,000 liters in May of a key raw material that costs $1.85 per liter.Each month's ending raw materials inventory should equal 30% of the following month's budgeted materials.The January 1 inventory for this material is 16,800 liters.What is the budgeted materials need in liters for April?

Which of the following statements about budgeting is false?

Memphis Company anticipates total sales for April,May,and June of $800,000,$900,000,and $950,000 respectively.Cash sales are normally 25% of total sales.Of the credit sales,30% are collected in the same month as the sale,65% are collected during the first month after the sale,and the remaining 5% are not collected.Compute the amount of cash received from total sales for June.

Long-term liability data for the budgeted balance sheet is derived from:

The Gardner Company expects sales for October of $248,000.Experience suggests that 45% of sales are for cash and 55% are on credit.The company collects 50% of its credit sales in the month of sale and 50% in the month following sale.Budgeted Accounts Receivable on September 30 is $67,000.What is the amount of Accounted Receivables on the October 31 budgeted balance sheet?

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.Webster's preliminary cash balance before loan activity for April is expected to be:

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.

The merchandise purchases budget depends on information provided by the sales budget.

The responsibility for coordinating the preparation of a master budget should be assigned to the Chief Executive Officer.

Webster Corporation is preparing a master budget for the first quarter of the year.The company budgets production of 2,680 units in January,2,600 units in February and 2,740 units in March.Each unit requires 0.6 hours of direct labor.The direct labor rate is $12 per hour.Compute the budgeted direct labor cost for the first quarter budget.

The process of evaluating performance can be improved by using budgets.