Exam 8: Budgetary Planning

In 2014,a design service firm served 12 clients (approximately one per month).The average client project lasted 20 (business)days and the clients were served evenly throughout the year.The firm expects 100% growth in the number of clients served in 2015. a.Prepare a sales forecast based on this information for 2015. b.In December of 2014,an influential journalist wrote an article about the type of approach this design firm used,generating 30 new potential client inquiries for the firm.Historically,50% of the inquiries result in new projects within a six-month period.(Assume the projects begin evenly throughout the period. )Prepare a sales forecast based on this information for 2015. c.To capitalize on the publicity generated by the article,the firm invests in a robust marketing strategy in June.Based on its projections,the marketing efforts will result in an additional 50% growth in clients for the six-month period July through December. Prepare a sales forecast based on this information for 2015.

When calculating direct materials purchases,the starting point should be:

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?

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?

Jackson 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 0.5 square meters of leather.Jackson Inc.'s leather inventory policy is 30% of next month's production needs.On July 1 leather inventory was expected to be 1,000 square meters.Leather is expected to cost $5.00 per square meter in June,but go up to $6.00 per square meter in July.What is the expected cost of leather purchases in July?

Which of the following is not a component of the master budget?

Butler Corp.has forecast sales for the next four months as follows: July 14,000 units,August 16,000 units,September 17,500 units,October 18,000 units.Butler's policy is to have an ending inventory of 20% of the next month's sales needs on hand.July 1 inventory is projected to be 2,500 units.Manufacturing overhead is budgeted to be $18,000 (depreciation $2,000,supervision $7,000,factory lease $1,500,maintenance $4,000,training $3,500)plus $5 per unit produced ($3 indirect materials,$2 utilities). a.Prepare a production budget for Butler for as many months as is possible. b.Prepare a manufacturing overhead budget for the three months July through September.Be sure to include a total for the quarter as well.

Jackson 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 0.5 square meters of leather.Jackson Inc.'s leather inventory policy is 30% of next month's production needs.On July 1 leather inventory was expected to be 1,000 square meters.What will leather purchases be in August?

Johnson Inc.produces leather handbags.Johnson Inc.estimates it will use 3,500 square meters of leather in production in August,and 3,750 square meters of leather in production in September.Johnson Inc.'s leather inventory policy is 30% of next month's production needs.What will leather purchases be in August?

Rapid Corp.sells its product for $200.Forecasted sales are 1,500 units in January,1,800 in February,and 1,600 in March.Variable costs are based on sales,and consist of commissions (6% of sales),cooperative advertising (2%)and shipping (6%).Monthly fixed costs are $7,000 sales salaries,$6,500 office salaries,$2,500 depreciation,$1,800 office rent,$900 insurance and $1,200 utilities. a.Prepare Rapid's selling and administrative expense budget for the period January through March.Present monthly totals as well as a 3-month total.

Dane Inc.has forecast purchases on account to be $465,000 in March,555,000 in April,$630,000 in May,and $735,000 in June.Seventy percent of purchases are paid for in the month of purchase,the remaining 30% are paid in the following month.What are budgeted cash payments for April?

The budgeted income statement is a combination of:

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.

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 many total labor hours will be budgeted for September?

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

Parsley Inc. ,a merchandising firm,has forecasted sales to be $125,000 in February,$135,000 in March,$150,000 in April,and $140,000 in May.The average cost of goods sold is 60% of sales.The merchandise inventory policy is to carry 50% of next month's sales needs.If actual February 1 inventory is $40,000,what will the cost of March purchases be?

The purpose of the cash budget is to:

The basic form of the cash budget is:

Portia is a retailer of scrapbooking products.The sales forecast for the coming months is: Portia's sales are all credit.The collection pattern is 60% in the month of sale,35% the following month and the remainder in the second month following the sale.Accounts receivable on April 1 were $122,500. a.Prepare a cash receipts schedule for the period June through August (by month). b.What will the Accounts Receivable balance be on August 31?

Budgeted cash collections are based on the sales budget.