Exam 9: Profit Planning

The department manager reviews the budget,provides policy guidelines and budgetary goals,and resolves differences that arise as the budget is prepared,approves the final budget,and monitors the actual performance of the organization as the year unfolds.

A firm acquires information that can be used to improve decision making from a budgetary system.

Which of the following is not an advantage of participative budgeting?

Figure 9-11. Pallen Company estimated sales of 11,000 units at $40 each,unit cost of goods sold of $22,marketing expense of $65,000 and a 10% commission on each unit sold.Administrative expense is budgeted at $50,000. Refer to Figure 9-11.What is Pallen's budgeted operating income?

Which of the following budgets can be used for control?

Direct materials needed for production is calculated by

Figure 9-4. Bickford Company plans to sell 135,000 units in November and 180,000 units in December.Bickford's policy is that 10 percent of the following month's sales must be in ending inventory.On November 1,there were 14,000 units in inventory. It takes 30 minutes of direct labor time to make one unit.Direct labor wages average $17 per hour.Variable overhead is applied at the rate of $5 per direct labor hour.Fixed overhead is budgeted at $56,500 per month. Refer to Figure 9-4.What is the budgeted production in units for November?

Which of the following is the most common starting point in the information gathering process for budgeting?

Terrill Company makes and sells two types of shaving cream: foamy,and gel.Last year,Foamy sold for $2.30 per can,and Gel sold for $3.15 per can.Sales volume was as follows: Terrill expects sales for Foamy to increase by 5% over the same quarter last year.The Gel price will increase to $3.50,but aggressive advertising is expected to raise volume by 5% in quarters 1 and 4 and by 10% in quarters 2 and 3. Prepare a sales budget for the coming year.

Figure 9-9. Yummy Jams Company produces a line of jams.Yummy's estimated production of jars of jam for the fourth quarter of the year is as follows: Each jar requires half a pound of berries.Yummy prefers to buy the freshest berries,so its policy is to have just 3 percent of the following month's production needs in ending inventory.On October 1,the company had 1,125 pounds of berries in inventory.Yummy's pays $0.60 per pound of berries.It buys all berries on account and typically pays 40 percent of a month's purchases in that month,and the remaining 60 percent the following month. Refer to Figure 9-9.How many pounds of berries will be purchased during the month of November?

Figure 9-1. Saphire Company budgeted the following production in units for the second quarter of the year: Each unit requires four pounds of raw material.Saphire's policy is to have 30 percentage of the following month's production needs for materials in inventory.This policy was met in March. Refer to Figure 9-1.Raw materials purchases budgeted for May in pounds equal:

A company provided the following information on sales for the coming year: Assuming that the beginning inventory is 3,000 units,and that the company policy is to have 25% of the next quarter's sales in ending inventory,which quarter will have the lowest production?

The sales budget is used directly in the development of the production budget.

Figure 9-7. Lambert Company purchased $140,000 of goods in September and expects to purchase $130,000 of goods in October.Lambert typically pays for 20 percent of purchases in the month of purchase and 80 percent in the following month. Every month,Lambert must make the following payments: In mid-October,Lambert expects to buy a new computer for $4,500 using the company credit card.Typically,the credit card bill is paid in full in the following month.September credit card purchases totaled $6,000. Refer to Figure 9-7.What are the total cash disbursements expected by Lambert during the month of October?

___________________ exists when a manager deliberately underestimates revenues or overestimates cost in an effort to make the future period appear less attractive in the budget than they think it will be in reality.

A firm should develop a strategic plan before preparing a budget.

A company plans on selling 400 units.The selling price per unit is $5.There are 40 units in beginning inventory,and the company would like to have 75 units in ending inventory.How many units should be produced for the coming period?

Pseudoparticipation is one of the potential problems with participative budgeting.

Uma Company production has variable overhead costs of $8 per direct labor hour and fixed overhead costs of $56,000 per month.Budgeted production for the next three months is as follows: Each unit requires three hours of direct labor.

A company requires 200 pounds of plastic to meet the production needs of a product.It currently has 20 pounds of plastic inventory.The desired ending inventory of plastic is 60 pounds.How many pounds of plastic should be budgeted for purchasing during the coming period?