Exam 7: Budgeting

Reference: 07-12 The Culver Company is preparing its Manufacturing Overhead Budget for the third quarter of the year. Budgeted variable factory overhead is $3.00 per unit produced; budgeted fixed factory overhead is $75,000 per month, with $16,000 of this amount being factory depreciation. Variable factory overhead is paid in the month incurred. -If the budgeted production for August is 5,000 units, then the total budgeted factory overhead per unit is:

The budgeted net income for December is?

The Waverly Company has budgeted sales for next year as follows: Quarter First Second Third Fourth Sales in units 12,000 14,000 18,000 16,000 The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units. The finished goods inventory at the start of the year is 3,000 units. Scheduled production in units for the third quarter should be:

What is the total cash disbursements for manufacturing overhead budgeted for quarter 2

ABC Company has a cash balance of $9,000 on April 1. The company must maintain a minimum cash balance of $6,000. During April expected cash receipts are $45,000. Expected cash disbursements during the month total $52,000. During April the company will need to borrow:

Superior Industries' sales budget shows quarterly sales for the next year as follows: Quarter Sales (units) First 10,000 Second 8,000 Third 12,000 Fourth 14,000 Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production in units for the second quarter should be:

One of the distinct advantages of a budget is that it can help to uncover potential bottlenecks before they occur.

Reference: 07-03 Information on the actual sales and inventory purchases of the Law Company for the first quarter follows: Sales Inventory Purchases January \ 120,000 \ 60,000 February \ 100,000 \ 78,000 March \ 130,000 \ 90,000 Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollectible. Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month. The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be $38,000, of which $15,000 is salaries and $8,000 is depreciation. The remaining operating expenses are variable with respect to the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March 1 was $43,000, and on April 1 was $35,000. -The expected cash disbursements during April for operating expenses would be:

Reference: 07-06 Pardise Company plans the following beginning and ending inventory levels (in units) for July: July 1 July 30 Raw material 40,000 50,000 Work in process 10,000 10,000 Finished goods 80,000 50,000 Two units of raw material are needed to produce each unit of finished product. -If 500,000 finished units were to be manufactured during July, the units of raw material needed to be purchased would be:

Reference: 07-01 KAB Inc., a small retail store, had the following results for May. The budgets for June and July are also given. May (actual) June (budget) July (budget) Sales \ 42,000 \ 40,000 \ 45,000 Cost of sales 21,000 20,000 22,500 Gross margin 21,000 20,000 22,500 Operating expenses 20,000 20,000 20,000 Operating income \ 1,000 \ 2,500 Sales are collected 80% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to sale. Suppliers of the goods are paid in the month following the sale. The "operating expenses" are paid in the month of the sale. -The amount of cash collected during the month of June should be:

Reference: 07-14 A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands. Carney Company Cash Budget Quarters 1 2 3 4 Cash balance, beginning \ 16 \ \ 13 \ 10 Add collections from customers a 70 67 80 Total cash available ? ? 80 90 Less disbursements: Purchase of inventory 31 40 35 Operating expenses 35 22 ? 15 Equipment purchases 10 14 19 0 Dividends 0 6 0 5 Total disbursements 66 ? 55 Excess (deficiency) of cash available over disbursements 7 17 (2) 35 Financing: Borrowings - 12 - Repayments (including interest) - - (21) Total financing ? ? 12 (21) Cash balance, ending ? \ 10 \ 14 -The collections from customers during the first quarter (item a in thousands)are:

Which of the following would you not expect to find when the Beyond Budgeting Model is used?

Reference: 07-09 Noel Enterprises has budgeted sales in units for the next five months as follows: January 6,800 units February 5,400 units March 7,200 units April 4,600 units May 3,800 units Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year. -The desired ending inventory in units for March is:

Which of the following statements is not true about the Direct Labour Budget

Budgets describe in financial terms the plans to achieve an entity's strategic objectives.

Reference: 07-11 The International Company makes and sells only one product, Product SW. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: Variable Cost Per Unit Sold Monthly Fixed Cost Sales commissions \ 0.70 Shipping \ 1.10 Advertising \ 0.20 \ 14,000 Executive salaries - \ 34,000 Depreciation on office equipment - \ 11,000 Other \ 0.25 \ 19,000 All expenses other than depreciation are paid in cash in the month they are incurred. -If the company has budgeted to sell 24,000 units of Product SW in September, then the total budgeted fixed selling and administrative expenses for September would be?

Reference: 07-08 Roberts Enterprises has budgeted sales in units for the next five months as follows: June 4,500 units July 7,100 units August 5,300 units September 6,700 units October 3,700 units Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on May 31 contained 410 units. The company needs to prepare a production budget for the second quarter of the year. -The total number of units to be produced in July is:

Reference: 07-15 Jimbob Co. has budgeted direct labour-hours as follows: Quarter Hours 1 11,000 2 12,000 3 10,000 4 Year Variable manufacturing overhead is applied using direct labour hours at a rate of $3.00 per DLH. Fixed manufacturing overhead is budgeted at $30,000 per quarter which includes $8,000 in depreciation expense. -What is the total manufacturing overhead budgeted for quarter 1?

Reference: 07-11 The International Company makes and sells only one product, Product SW. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: Variable Cost Per Unit Sold Monthly Fixed Cost Sales commissions \ 0.70 Shipping \ 1.10 Advertising \ 0.20 \ 14,000 Executive salaries - \ 34,000 Depreciation on office equipment - \ 11,000 Other \ 0.25 \ 19,000 All expenses other than depreciation are paid in cash in the month they are incurred. -If the budgeted cash disbursements for selling and administrative expenses for November total $123,250, then how many units of Product SW does the company plan to sell in November (rounded to the nearest whole unit):

Reference: 07-14 A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands. Carney Company Cash Budget Quarters 1 2 3 4 Cash balance, beginning \ 16 \ \ 13 \ 10 Add collections from customers a 70 67 80 Total cash available ? ? 80 90 Less disbursements: Purchase of inventory 31 40 35 Operating expenses 35 22 ? 15 Equipment purchases 10 14 19 0 Dividends 0 6 0 5 Total disbursements 66 ? 55 Excess (deficiency) of cash available over disbursements 7 17 (2) 35 Financing: Borrowings - 12 - Repayments (including interest) - - (21) Total financing ? ? 12 (21) Cash balance, ending ? \ 10 \ 14 -The cash balance at the beginning of the second quarter (item e in thousands)is: