Exam 8: Budgetary Planning

Carmen is a retailer of scrapbooking products.The sales forecast for the coming months is: Carmen's sales are 70% cash and 30% store credit.The credit sales are collected 60% in the month of sale,the remainder the following month.Accounts receivable on April 1 are $32,000. Carmen's cost of sales averages 65% of revenues.The inventory policy is to carry 40% of next month's sales needs.April 1 inventory will be as expected under the policy.Carmen pays for purchases 30% in the month of purchase and 70% the following month.Accounts payable on April 1 is $125,000. a.Prepare a purchases budget for as many months as is possible. b.Prepare a cash payments budget for April through July. c.Prepare a cash receipts budget for April through July.

Preparing the sales budget includes calculating the revenues to be earned from units sold in addition to the number of units to be sold.

Creating a budget is an important part of which phase of the planning and control process?

Wheat Inc.has forecast its sales for the coming months as follows: Wheat maintains finished goods inventory equal to 20% of the next month's sales requirements.April 1 inventories were 14 standard units and 10 deluxe. Required: Prepare a production schedule for April through June.

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

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

Budgeted cost of goods manufactured reflects:

Ian operates an automobile repair shop and he has the opportunity to buy an additional machine,which he needs to continue servicing his increasing customer base,at a bargain price of $6,200 if he purchases it by the end of February.In order to meet payroll and other expenses,Ian wants to maintain a $5,000 cash balance.He is trying to determine if he needs to go to the bank for a loan.His accountant has projected the following estimates for the month of February: Labor,overhead and administrative expenses are paid in the month incurred.Parts are only purchased as needed to repair vehicles.100% of the parts purchases are paid in the month following the purchase. a.Prepare a cash budget for the month of February. b.What is the minimum amount that Ian will need to borrow? c.Prepare a budgeted income statement for the month of February.

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).How much is total labor cost during the three months July through September?

Clare purchases a single product for $15 and sells it for $30.Forecasted sales for the next three months are July 4,000 units,August 6,000 units,September 7,500 units.Clare'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.What are budgeted purchases in units for August?

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

One advantage of participative budgeting is managers can build in budgetary slack.

Skybird has forecast sales for the next three months as follows: July 4,000 units,August 6,000 units,September 7,500 units.Skybird'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 costs are budgeted as follows: What is budgeted manufacturing overhead cost for July?

How might the budgeting process be used ethically within an organization?

Edna Inc.has forecast its sales for the coming months as follows: The standard model sells for $28,the economy model sells for $21,and the deluxe model sells for $49. Required: Prepare a sales budget for each of the three months July through September as well as the total for the quarter.Present the budget for each product as well as total sales.

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 March?

Which of the following budgets shows how many units will be produced each period?

Which of the following is not a benefit of budgeting?

Marlow Company produces hand tools.A production budget for the next four months is as follows: March 10,300 units,April 13,300,May 16,500,and June 21,800.Marlow Company's ending finished goods inventory policy is 10% of the following month's sales.Marlow plans to sell 16,000 units in May.What is budgeted ending inventory for March?

Spencer Company has budgeted sales for the upcoming months as follows: Seventy percent of the sales are credit sales,the remainder are made in cash.Credit sales are collected 40% in the month of sale,50% in the month following the sale,and 10% in the second month following the sale. a.Compute Spencer's cash receipts for April. b.Compute Spencer's cash receipts for May. c.Compute the accounts receivable balance for May 31.