Exam 22: Master Budgets and Planning

A company's history indicates that 20% of its sales are for cash and the remaining 80% are on credit.Collections on credit sales are 30% in the month of the sale and 70% the following month.Projected sales for January,February,and March are $75,000,$92,000 and $60,000,respectively.The March expected cash receipts are $80,500.

The master budget process nearly always begins with the preparation of the ___________________ and usually finishes with the preparation of the ______________________,the ________________,and the ______________________. the first answer (sales budget)must appear in the first blank;the last three solutions can appear in any order

Flack Corporation provides the following information for its December budgeting process: The November 30 inventory was 1,800 units. Budgeted sales for December are 4,000 units. Desired December 31 inventory is 2,840 units. Budgeted purchases are:

In preparing a budgeted balance sheet,the amount for Accounts Receivable data can be derived from:

Continuous budgeting is the practice of revising the entire set of budgets for the periods remaining and adding new budgets to replace those for the periods that have elapsed.

Coomb's Fashions forecasts sales of $125,000 for the quarter ended December 31.Its gross profit rate is 20% of sales,and its September 30 inventory is $32,500.If the December 31 inventory is targeted at $41,500,budgeted purchases for the fourth quarter should be:

The usual starting point for preparing a master budget is forecasting or estimating:

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 collected in the second month.Compute the amount of accounts receivable reported on the company's budgeted balance sheet for June 30.

A master budget refers to a company's sales budget that includes all of its segments or departments.

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?

Snap,Inc. ,provides the following data for the next four months: Desired Ending Inventory: Raw Materials = 30% of next month's production needs Pounds of raw material required for each finished Unit = 5 lbs. Required: Calculate the amount of purchases of raw materials in pounds for April and May.

To determine the production budget for an accounting period,consideration is given to all of the following except:

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:

Traditional budgeting is generally better than activity-based budgeting when attempting to reduce costs by eliminating non-value-added activities.

A ________________________ is a continuously revised budget that adds future months or quarters to replace months or quarters that have lapsed.

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.

Stanley Company is preparing a cash budget for February.The company has $30,000 cash at the beginning of February and anticipates $75,000 in cash receipts and $96,250 in cash disbursements during February.Stanley Company has an agreement with its bank to maintain a cash balance of $10,000.What amount,if any,must the company borrow during February to maintain a $10,000 cash balance?

Hammerly Corporation is preparing its master budget for the quarter ending March 31.It sells a single product for $25 a unit.Budgeted sales are 40% cash and 60% on credit.All credit sales are collected in the month following the sales.Budgeted sales for the next four months follow: At December 31,the balance in accounts receivable is $10,000,which represents the uncollected portion of December sales.The company desires merchandise inventory equal to 30% of the next month's sales in units.The December 31 balance of merchandise inventory is 340 units,and inventory cost is $10 per unit.Forty percent of the purchases are paid in the month of purchase and 60% are paid in the following month.At December 31,the balance of Accounts Payable is $8,000,which represents the unpaid portion of December's purchases.Operating expenses are paid in the month incurred and consist of: • Sales commissions (10% of sales) • Freight (2% of sales) • Office salaries ($2,400 per month) • Rent ($4,800 per month) Depreciation expense is $4,000 per month.The income tax rate is 40%,and income taxes will be paid on April 1.A minimum cash balance of $10,000 is required,and the cash balance at December 31 is $10,200.Loans are obtained at the end of a month in which a cash shortage occurs.Interest is 1% per month,based on the beginning of the month loan balance,and must be paid each month.If the ending cash balance exceeds the minimum,the excess will be applied to repaying any outstanding loan balance.At December 31,the loan balance is $0.Prepare a master budget (round all dollar amounts to the nearest whole dollar)for each of the months of January,February,and March that includes the: • Sales budget • Schedule of cash receipts • Merchandise purchases budget • Schedule of cash disbursements for merchandise purchases • Schedule of cash disbursements for selling and administrative expenses (combined) • Cash budget,including information on the loan balance • Budgeted income statement for the quarter

The Ballentine Company expects sales for June,July,and August of $48,000,$54,000,and $44,000,respectively.Experience suggests that 40% of sales are for cash and 60% are on credit.The company collects 50% of its credit sales in the month following sale,45% in the second month following sale,and 5% are not collected.What are the company's expected cash receipts for August from its current and past sales?

Cameroon Corp.manufactures and sells electric staplers for $16 each.If 10,000 units were sold in December,and management forecasts 4% growth in sales each month,the dollar amount of electric stapler sales budgeted for February should be: