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Exam 22: Master Budgets and Planning

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Question 61

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Budgets that are periodically revised and have new periods added to replace those that have lapsed are called:

A) Production budgets.
B) Cash budgets.
C) Sales budgets.
D) Capital expenditures budgets.
E) Rolling budgets.

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

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Question 62

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The financial statement effects of the budgeting process are summarized on the cash budget and the capital expenditures budget.

A) True
B) False

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Question 63

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What is a sales budget? How is the sales budget prepared?

The sales budget for Modesto Corp. shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. -The desired ending inventory of B is 3,000 units. Total budgeted sales of both products for the year would be:

The sales budget for Modesto Corp. shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. -The desired ending inventory of B is 3,000 units. Budgeted purchases of Product B for the year would be:

Which of the following would not be used in preparing a cash budget for October?

Grason Corporation is preparing a budgeted balance sheet for 2018. The retained earnings balance at December 31, 2017 was $533,500. The 2015 budgeted income statement shows expected net income of $112,000. The company expects to declare dividends during 2018 amounting to $40,000. The expected balance in retained earnings on the 2018 budgeted balance sheet is:

The sequence of the budgets within the master budget are dictated by GAAP.

Trago Company manufactures a single product and has a JIT policy that ending inventory must equal 5% of the next month's sales. It estimates that May's ending inventory will consist of 14,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively. - Compute the number of units to be produced that would appear on the company's production budget for the month of June.

A department store has budgeted sales of 12,000 men's suits in September. Management wants to have 6,000 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 suits. What is the dollar amount of the purchase of suits if each suit has a cost of $75.

Personnel who will have performance evaluated according to the budget standards should not be consulted and involved in preparing the budget.

Match the definitions 1 through 9 with the correct term or phrase a through i. (a) Master budget (b) General and administrative expense budget (c) Budget (d) Safety stock (e) Budgeted income statement (f) Budgeted balance sheet (g) Sales budget (h) Cash budget (i) Merchandise purchases budget ________ (1) A plan that shows the units and dollars of merchandise to be purchased during the budget period. ________ (2) A managerial accounting report that shows predicted amounts of the company's assets, liabilities, and balances as of the end of the budget period. ________ (3) A plan that shows the expected sales units and the dollars from these sales. (4) A managerial accounting report that shows predicted amounts of sales and expenses for the budget period. ________ (5) A quantity of inventory that provides protection against lost sales caused by unfulfilled demand from customers or delays in shipments from suppliers. (6) A formal, comprehensive plan for a company's future that includes several individual budgets that are linked with each other to form a coordinated plan. ________ (7) A formal statement of a company's future plans, usually expressed in monetary terms. ________ (8) A plan that plans the predicted operating expenses not included in the selling expenses or manufacturing budgets. ________ (9) A plan that shows the expected cash inflows and cash outflows during the budget period.

A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, 25% the following month, and 5% is uncollectible. Projected sales for December, January, and February are $60,000, $85,000 and $95,000, respectively. The February expected cash receipts from all current and prior credit sales is:

Operating budgets include all the following budgets except the:

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?

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

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 April 1 inventory for this material is 16,800 liters. What is the budgeted materials need in liters for April?

Budgets are long-term financial plans that generally cover more than a one-year period.

Greco Company has prepared the following forecasts of monthly sales: $\begin{array} { l | l | l | l | l | l } & \text { July } & \text { August } & \text { September } & \text { October } \\\hline \text { Sales (in Units) } \ldots \ldots \ldots \ldots & 4,500 & 5,300 & 4,000 & 3,700\end{array}$ Greco has decided that the number of units in its inventory at the end of each month should equal 25% of the next month's sales. The budgeted cost per unit is $30. (1) How many units should be in July's beginning inventory? (2) What amount should be budgeted for the cost of merchandise purchases in July?

Flagstaff Company has budgeted production units for July of 7,900 units. Variable factory overhead is $1.20 per unit. Budgeted fixed factory overhead is $19,000, which includes $3,000 of factory equipment depreciation. Compute the total budgeted overhead to be reported on the factory overhead budget for the month.