Exam 8: Budgeting and Planning

Young is a retailer of assorted baby products. The sales forecast for the coming months is: Young's cost of sales averages 60% of revenues. The inventory policy is to carry 30% of next month's sales needs. April 1 inventory will be as expected under the policy. Young pays for purchases 80% in the month of purchase and 20% the following month. Accounts payable on April 1 is $22,400. a. Prepare a purchases budget for as many months as is possible. b. Prepare a cash payments budget for April through July.

Which of the following is correct about budgetary slack?

Which of the following is not a way to reduce the dysfunctional behaviors associated with budgeting?

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How much will be paid to skilled labor during the three months July through September?

Crystal, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory unit costs will stay constant. What is budgeted cost of goods sold for March?

Lemon, Inc. has prepared the following budgets for March. In March, budgeted production is 1,000 units, budgeted sales is 1,200 units, and raw materials inventory and unit costs will stay constant. What is budgeted cost of goods sold for March?

Dayton has forecast sales to be $205,000 in February, $270,000 in March, $290,000 in April, and $310,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May?

Which of the following would not be an example of a cost to include in a selling and administrative expense budget?

Honeysuckle Inc. produces canvas bags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each bag requires 2.6 hours of unskilled labor (paid $8 per hour) and 4.4 hours of skilled labor (paid $15 per hour). Required: Prepare a labor budget for the three months July through September. Provide the labor requirements according to skill level in hours and in labor cost as well as in total. Provide the budget monthly as well as a total for the quarter.

Jaybird Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August?

A _____________ is the vision of what management wants the organization to achieve over the long term.

Ebony Co. has forecast sales to be $300,000 in May, $375,000 in June, $475,000 in July and $600,000 in August. Forty percent of sales are made in cash, the remainder is on account. Credit sales are partially collected in the month of sale, with all collections completed by the end of the month following the sale. The August 31 accounts receivable is budgeted to be $108,000. What are budgeted cash collections for July?

Which of the following is the backward-looking phase of the planning and control cycle?

Parker Corp., which operates on a calendar year, expects to sell 4,000 units in October, and expects sales to increase 20% each month thereafter. Sales price is expected to stay constant at $8 per unit. What are budgeted revenues for the fourth quarter?

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for September?

Meadow Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Meadow Company's ending finished goods inventory policy is 10% of the following month's sales. March 1 beginning inventory is projected to be 1,400 units. How many units will be produced in April?

The budget translates a company's objectives into financial terms

Larken has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced. What is budgeted manufacturing overhead for July?

Which component of the cash budget is shown as a line item on the budgeted balance sheet?

Which of the following is not a source that can be used in preparing the sales budget?