Exam 7: Budgeting

Orion Corporation is preparing a cash budget for the six months beginning January 1. Shown below are the company's expected collection pattern and the budgeted sales for the period. Expected collection pattern: 65% collected in the month of sale 20% collected in the month after sale 10% collected in the second month after sale 4% collected in the third month after sale 1% uncollectible Budgeted sales January \ 160,000 February 185,000 March 190,000 April 170,000 May 200,000 June 180,000 The estimated total cash collections during April from sales and accounts receivables will be:

Pardee Company plans to sell 12,000 units during the month of August. If the company has 2,500 units on hand at the start of the month, and plans to have 2,000 units on hand at the end of the month, how many units must be produced during the month?

Reference: 07-02 Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. Expected Sales January \ 10,000 February 24,000 March 16,000 April 25,000 The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable operating expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable operating expenses are made during the month the expenses are incurred. -In a budget of cash disbursements for March, the total cash disbursements would be:

Which of the following is not a suggested benefit of using the "Beyond Budgeting" model?

Reference: 07-05 The LaGrange Company had the following budgeted sales for the first half of the current year: Cash Sales Credit Sales January \ 70,000 \ 340,000 February 50,000 190,000 March 40,000 135,000 April 35,000 120,000 May 45,000 160,000 June 40,000 140,000 The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: Collections on credit sales: 60% in month of sale 30% in month following sale 10% in second month following sale The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000 represents uncollected December sales and $20,000 represents uncollected November sales. -The total cash collected by LaGrange Company during January 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 desired ending inventory in units for August is:

The budget or schedule that provides necessary input data for the direct labour budget is the:

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 cash disbursements for factory overhead for September are $80,000, then the budgeted production in units for September must be?

The master budget process usually begins with the:

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 variable manufacturing overhead budgeted for the year

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 balance on April 30 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 opening inventory in units for September is?

A multi-tiered business's standing budget committee prepares all the detailed budgets for all components of the organization.

Parlee Company's sales are 30% in cash and 70% on credit. Sixty percent of the credit sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder are uncollectible. The following are budgeted sales data: January February March April Total sales \ 60,000 \ 70,000 \ 50,000 \ 30,000 Total cash receipts in April would be budgeted to be:

Control involves developing objectives and preparing the various budgets to achieve those objectives.

The cash budget must be prepared before you can complete the:

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 predetermined overhead rate per DLH for the year (rounded to nearest cent)

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 20,000 units of Product SW in October, then the total budgeted variable selling and administrative expenses for October will be: