Exam 8: Budgeting for Planning and Control

Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below: The June 30th balance sheet follows: Cash \ 25,000 Accounts payable \ 45,000 Accounts receivable 110,000 Capital stock 300,000 Inventory 54,000 Retained earnings 94,000 Buil ding and equipment (net) 250,000 Actual sales for June and budgeted sales for July, August, and September are given below: June \ 137,500 July 360,000 August 400,000 September 320,000 Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000. What is the balance of the accounts receivable at the end of July?

Collibri, Inc., has done a cost analysis for its production of banners. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance \ 13,000+\ 2 per machine hour Machining \ 45,000+\ 6 per machine hour Inspection \ 70,000+\ 500 per batch Setups \ 2,000 per batch Purchasing \ 80,000+\ 150 per purchase order Following are the actual costs of producing 75,000 banners: 1,000 machine hours; 15 batches; 10 purchase orders Maintenance \ 14,000 Machining 50,000 Inspection 70,000 Setups 32,000 Purchasing 82,000 Required: Prepare an activity-based performance report.

Activity-based budgets compare costs for items based on activities such as

Harlan manufactures picture frames. Sales for July are expected to be 10,000 units of various sizes. Historically, the average frame requires five foot of framing, one square foot of glass, and one square foot of backing. Beginning inventory includes 7,000 feet of framing, 1,500 square feet of glass, and 2,500 square feet of backing. Current prices are $0.90 per foot of framing, $4.50 per square foot of glass, and $1.50 per square foot of backing. Ending inventory should be 150 percent of beginning inventory. Purchases are paid for in the month acquired. Required: a.Determine the quantity of framing, glass, and backing that is to be purchased during July. b.Determine the total amount of cash needed for July purchases.

Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: $\text { Rammazzotti Inc., had the following budgeted data: }$ Unit sales for 2018 26,000 Unit production for 2018 26,000 Budgeted fixed overhead for 2018 : Superrision \ 800 Depreciation 2,000 Rent 100 Budgeted variable costs per unit: Direct materials \ 0.15 Direct labor 0.20 Supplies 0.02 Indirect labor 0.05 Power 0.02 $\text { The following actually occurred: }$ Actual unit sales for 2018 24,000 Actual unit production for 2018 28,000 Actual fixed overhead for 2018 : Supervision \8 50 Depreciation 2,000 Rent 100 Actual variable costs: Direct materials \ 3,500 Direct labor 4,900 Supplies 530 Indirect labor 1,250 Power 470 The static budget variance for total variable costs is

Burgandy Company produces and sells mattresses. It expects to sell 7,000 mattresses in the current year and had 800 mattresses in finished goods inventory at the end of the previous year. Burgandy would like to complete operations in the current year with at least 900 completed mattresses in inventory. There is no ending work-in-process inventory. The mattresses sell for $500 each. How many mattresses will be produced in the current year?

Firefly Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month. Cash sales are 20 percent of total sales each month. Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale. Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March, $90,000. Accounts receivable on December 31 were $45,000. Firefly Manufacturing Company would expect to have an accounts receivable balance on March 31 of

When the reaction to a budget is negative, resulting in managerial behavior that is negative for the organization, the resulting behavior is known as

Rammazzotti, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Rammazzotti Inc., had the following budgeted data: Unit sales for 2018 26,000 Unit production for 2018 26,000 Budgeted fixed overhead for 2018 : Supervision \ 800 Depreciation 2,000 Rent 100 Budgeted variable costs per unit: Direct materials \ 0.15 Direct labor 0.20 Supplies 0.02 Indirect labor 0.05 Power 0.02 $\text { The following actually occurred: }$ Actual unit sales for 2018 24,000 Actual unit production for 2018 28,000 Actual fixed overhead for 2018 : Supervision \ 850 Depreciation 2,000 Rent 100 Actual variable costs: Direct materials \ 3,500 Direct labor 4,900 Supplies 530 Indirect labor 1,250 Power 470 The static budget variance for total fixed overhead is

A __________ budget is developed around one particular level of activity.

Thunderbolt Corporation is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 60 percent of sales. Merchandise purchases are to be made during the month preceding the month of the sales. Thunderbolt pays 60 percent in the month of purchase, and 40 percent in the month following. Wages are estimated at 20 percent of sales and are paid during the month of sale. Other operating costs amounting to 10 percent of sales are to be paid in the month following the sale. The accounts payable balance on June 30 was $48,000. Month Sales June \ 170,000 July 200,000 August 120,000 September 150,000 October 160,000 November 100,000 Required: Prepare a schedule of cash disbursements for July, August, and September.

The type of budget that is a moving twelve-month budget is called the:

Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below: The June 30th balance sheet follows: Cash \ 25,000 Accounts payable \ 45,000 Accounts receivable 110,000 Capital stock 300,000 Inventory 54,000 Retained earnings 94,000 Buil ding and equipment (net) 250,000 Actual sales for June and budgeted sales for July, August, and September are given below: June \ 137,500 July 360,000 August 400,000 September 320,000 Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000. What are the total assets at the end of July?

Bienestar, Inc., has done a cost analysis for its production of vests. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance \ 11,000+\ 2 per machine hour Machining \ 55,000+\ 3 per machine hour Inspection \ 70,000+\ 500 per batch Setups \ 2,000 per batch Purchasing \ 80,000+\ 150 per purchase order Following are the actual costs of producing 75,000 vests: 5,000 machine hours; 10 batches; 20 purchase orders Maintenance \ 20,000 Machining 73,000 Inspection 73,000 Setups 18,000 Purchasing 82,000 What is the budget variance for setups in an activity-based performance report?

The budgeting that recognizes interdependencies among departments is called __________ budgeting.

Walterboro, Inc., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance \ 11,000+\ 0.11 per machine hour Machining \ 25,000+\ 0.50 per machine hour Setups \ 50 per batch Purchasing \ 200+\ 45 per purchase order Following are the actual costs of producing 85,000 decal s: 5,000 machine hours; 10 batches; 20 purchase orders Maintenance \ 11,500 Machining 28,300 Setups 550 Purchasing 1,000 What is the budgeted cost per decal? (Round to three decimal places.)

Macheski Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below: The June 30th balance sheet follows: Cash \ 25,000 Accounts payable \ 45,000 Accounts receivable 110,000 Capital stock 300,000 Inventory 54,000 Retained earnings 94,000 Buil ding and equipment (net) 250,000 Actual sales for June and budgeted sales for July, August, and September are given below: June \ 137,500 July 360,000 August 400,000 September 320,000 Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000. What is the balance of the inventory account at the end of July?

The following forecasted sales pertain to Rapid City: Month Sales June \ 160,000 July 200,000 August 120,000 September 80,000 Finished goods inventory as of May 31 6,000 units Rapid City has a selling price of $5 per unit and expects to maintain ending inventories equal to 25 percent of next month's sales. What is the budgeted beginning balance in units for finished goods inventory on August 1?

The budgeted income statement depends partly on information in the budgets in the master budget.

The master budget is composed of the operations budget and the future budget.