Exam 8: Budgeting for Planning and Control

Which of the following is the basis for all operating budgets and most financial budgets?

Laramie, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels. Laramie had the following budgeted data Budgeted variable costs per unit: Direct materials \ 7.00 Direct labor 10.00 Supplies 1.00 Indirect labor 0.50 Pnwer 0.05 Budgeted fixed overhead for 2018: Supervision \ 4,000 Depreciation 3,000 Rent 2,000 What are the total budgeted costs for 5,000 units?

Zeal Company produces and sells bikes. It expects to sell 15,000 bikes in June for the current year and had 1,000 bikes in finished goods inventory at the end of May. Zeal Company would like to complete operations in June with at least 1,700 completed bikes in inventory. The bikes sell for $250 each. What would be the total sales for June?

The following is responsible for directing and coordinating the overall budgeting process:

Moriah Manufacturing Company expects to incur the following per unit costs for 1,000 units of production: Direct materials 3@\ 5=\ 15 Direct labor 1 hr @6=\ 6 Variable overhead 75\% of direct 1 labor costs Fixed overhead 50\% of direct 1 abor costs What is the total amount of overhead included in the overhead budget?

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. How many units are expected to be produced in June?

High Life Corporation has the following sales budget for the last four months of 2018: Month Sales September \ 400,000 October 320,000 November 440,000 December 360,000 Historically, the following trend has been established regarding cash collection of sales: 65 percent in month of sale 25 percent in month following sale 8 percent in second month following sale 2 percent uncollectible The company allows a 2 percent cash discount for payments made by customers during the month of the sale. July and August sales were $400,000 and $240,000, respectively. Required: Prepare a schedule of budgeted cash collections from sales for September, October, and November.

Activity-based budgets

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. The expected cash collections of Firefly Manufacturing Company for March are

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 direct materials is

Once all the operating budgets have been completed, the net income can be estimated.

If a static budget forecasted 100,000 units to be sold in the fiscal year and actual units sold amounted to 120,000, what assumption could be made under a flexible budget process?

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 payable at the end of July?

The cash excess or deficiency section of the cash budget compares expected available cash to the expected cash needed.

Mikhail Corporation has the following sales forecasts for the first three months of 2018: Month Sales January \ 36,000 February 24,000 March 40,000 Sixty-five percent of sales are collected in the month of the sale and the remainder are collected in the following month. Mikhail will borrow from its bank to maintain its minimum cash balance. Accounts receivable balance (January 1, 2018) \1 6,000 Cash balance (January 1, 2018) 12,000 Minimum cash balance needed 20,000 What is the cash balance at the end of January, assuming that cash is received only from customers and that $48,000 is paid out during January?

Which of the following ensures that the budget is linked to the strategic plan of the organization?

The practice in which top management assumes total control of the budgeting process, seeking only superficial participation from lower-level managers is referred to as:

The records of Morgantown, Inc.show the following forecasted sales: Month Sales September \ 400,000 October 500,000 November 300,000 December 200,000 Collection pattern: 60 percent in month of sale 40 percent in month following the sale Accounts receivable as of August 31 \ 70,000 Finished goods inventory as of August 31 8,000 units The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 20 percent of next month's sales. How much is Accounts Receivable as of October 31?

The city of Charleston had the following sales of water for the selected months of 2018: Month Sales February \ 50,000 March 45,000 April 60,000 May 42,500 June 70,000 July 120,000 All sales are on credit. Historically, 50 percent is collected in the month of sale, 35 percent during the first month following the sale, and 15 percent in the second month following the sale. Cost of water averages 75 percent of sales. Water is purchased in the month of sale. All purchases are paid during the month following the purchase. Operating costs of $10,000 are paid each month. The April 1 cash balance is expected to be the minimum balance of $5,000. Money can be borrowed from a local bank in increments of $1,000. (Do not include interest charges in your budget.) Required: Prepare a cash budget for April, May, and June.

Flexible budgets do NOT provide