Exam 15: The Budgeting Process

Which of the following is usually prepared before the direct materials purchases budget?

The first step in the budgeting process is the preparation of the

Figure 15-1 Rydingsward, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance £15,000+£4 per machine hour Machining £35,000+£1 per machine hour Inspection £60,000+£750 per batch Setups £1,000 per batch Purchasing £50,000+£10 per purchase order -Refer to Figure 15-1. What is the budgeted purchasing cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

If a department plans forward from resources to outputs, this describes which criticism of traditional budgeting?

Figure 15-2 Harald, Inc., has done a cost analysis for its production of bumper stickers. 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 stickers: 5,000 machine hours; 10 batches; 20 purchase orders Maintenance £11,500 Machining 28,300 Setups 550 Purchasing 1,000 -Refer to Figure 15-2. What is the budgeted cost per sticker? (Round to three decimal places.)

Jiggy Company plans to sell 33,000 units during the month of May. Beginning inventory was 1,200 units. The company plans to have 2,500 units on hand at the end of the month. Each unit requires 3 pounds of raw materials. If raw material inventory on May 1 is 4,400 pounds and desired ending inventory is 2,200 pounds, how many pounds of raw materials must be purchased during May?

A budget where managers must justify all costs based on need is a(n)

Budgeted sales for the second quarter of the year for Reuben Company are as follows: Budgeted Sales April £400,000 May 200,000 June 600,000 The company normally collects 60 per cent in the month of sale and 30 per cent in the month following the sale. Ten per cent of all sales are uncollectible and are written off in the following month. The balance in accounts receivable at April 1 was £200,000, which represents 40 per cent of March sales.

Dodge Ltd. is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 60 per cent of sales. Merchandise purchases are to be made during the month preceding the month of the sales. Dodge pays 60 per cent in the month of purchase, and 40 per cent in the month following. Wages are estimated at 20 per cent of sales and are paid during the month of sale. Other operating costs amounting to 10 per cent of sales are to be paid in the month following the sale. The accounts payable balance on June 30 was £20,000. Month Sales June £170,000 July 200,000 August 120,000 September 150,000 October 160,000 November 100,000

Smithson Ltd. has the following budgeted sales for the selected six-month period: Month Unit Sales June 15,000 July 20,000 August 35,000 September 25,000 October 30,000 November 20,000 There were 7,500 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished product equal to 20 per cent of the unit sales for the next month. Three pounds of materials are required for each unit produced. Each pound of material costs £20. Inventory levels for materials equal 30 per cent of the needs for the next month. Materials inventory on June 1 was 5,000 pounds. a.Prepare production budgets in units for July, August, and September. b.Prepare a purchases budget in pounds and dollars for July, August, and September.

Figure 15-4 Budgeted sales for the second quarter of the current year are as follows: Budgeted Sales Apri1 £150,000 May 200,000 June 180,000 The company collects 20 per cent in the month of sale, 70 per cent in the first month following the sale, and 10 per cent in the second month following the sale. -Refer to Figure 15-4 above. Wemberly's budgeted cash receipts for March are

Dusty Company manufactures oak porch swings. Budgeted sales for the first four months of the year are as follows: Budgeted Sales (Units) January 320 February 280 March 340 April 240 Each porch swing requires 15 square feet of oak, at a cost of £20 per square foot. The company wants to maintain an inventory of swings equal to 20 per cent of the following month's sales. At the beginning of the year, 40 swings are on hand. Assume the company maintains an inventory of oak equal to 10 per cent of the next month's needs. At the beginning of the year, 500 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 400 square feet. a.Prepare a production budget, in units, for each of the first three months of the year. b.Prepare a purchases budget, in monetary values, for direct materials for each of the first three months of the year.

Which of the following is an example of a discretionary fixed cost?

Jiggy Company plans to sell 33,000 units during the month of May. The company plans to have 2,500 units on hand at the end of the month. If 1,200 units are on hand on May 1, how many units must be produced during May?

Activity-based budgeting provides better planning because

Figure 15-1 Rydingsward, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance £15,000+£4 per machine hour Machining £35,000+£1 per machine hour Inspection £60,000+£750 per batch Setups £1,000 per batch Purchasing £50,000+£10 per purchase order -Refer to Figure 15-1. What is the machine cost for production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

Figure 15-1 Rydingsward, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: Activity Cost Formula Maintenance £15,000+£4 per machine hour Machining £35,000+£1 per machine hour Inspection £60,000+£750 per batch Setups £1,000 per batch Purchasing £50,000+£10 per purchase order -Refer to Figure 15-1. What is the budgeted setup costs if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

Nichols Company sells a product for £20. Budgeted sales for the first quarter of the current year are as follows: Budgeted Sales January £80,000 February 50,000 March 90,000 The company wants to maintain an inventory of finished units equal to 30 per cent of the following month's sales, and 1,000 units are on hand at the beginning of the year. Each unit requires two pounds of raw material costing £1 per pound. The company maintains a raw materials inventory equal to 10 per cent of the following month's production needs. Budgeted production in units for February would be

Budgeted sales for the first quarter for Cullison Company, a retailer, are as follows: Budgeted Sales (Units) January 75,000 February 100,000 March 110,000 Cullison started the year with an inventory of 7,500 units. The company likes to maintain an inventory equal to 10 per cent of next month's budgeted sales. Budgeted purchases in units for February would be

The following budget estimates have been prepared by Flowers Company: Cash Receipts Cash Payments January £220,000 £220,000 February 380,000 400,000 March 320,000 319,800 The company likes to maintain a minimum cash balance of £50,000. Any excess cash is invested in a money market account earning 8 per cent compounded monthly. Interest is reinvested in the money market account. Any cash deficiencies are covered by a withdrawal from the money market account. If additional cash is needed, the company has a line of credit at 12 per cent interest with the local bank. Assume a cash balance on January 1 of £50,000, a money market account balance of £0, and a credit line loan balance of £0.