Exam 15: The Budgeting Process

The budget that is a comprehensive financial plan for the organization as a whole is called a

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

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. April sales to be collected in May are

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 budget for maintenance if 20,000 reflectors were made that required 3,500 machine hours, 12 batches, and 5,000 purchase orders?

A budget is

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

Jordan Manufacturing Company expects to incur the following per unit costs for 1,000 units of production: Direct materials 31.@5=£15 Direct labour 1@£6=£6 Variable overhead 75\% of direct labour costs Fixed overhead 50\% of direct labour costs What is the total amount of overhead included in the overhead budget?

Retro, Inc., produces a single product. The projected sales for the first month of the coming year and the beginning and ending inventory data are as follows: Sales 80,000 units Unit price £12 Beginning inventory 6,000 units Desired ending inventory 9,000 units Each unit requires three pounds of material costing £2 per pound. The beginning inventory of raw materials is 2,500 pounds, and the company wants to have 4,500 pounds of material in inventory at the end of the month. Each unit requires one hour of direct labour time, which is billed at £8 per hour. a.Prepare a production budget for the first month. b.Prepare a direct materials purchases budget for the first month.

Brown, Inc., has budgeted £60,000 for annual fixed overhead costs for the coming year. Budgeted variable overhead is £0.10 per unit. For the next quarter, Brown plans to manufacture 500,000 units. Brown's budgeted overhead for the quarter is

The first step in planning and control is

Which of the following appears in the cash budget?

The Good As Old Company manufactures antique-looking, oak rocking chairs. Budgeted sales for the first five months of the year are as follows: Budgeted Sales (Units) January 200 February 240 March 180 April 160 May 240 Each rocking chair requires 10 square feet of oak, at a cost of £20 per square foot. The company wants to maintain an inventory of chairs equal to 25 per cent of the following month's sales. At the beginning of the year, 40 chairs 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, 240 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 180 square feet. a.Prepare a production budget, in units, for each of the first four months of the year. b.Prepare a purchases budget, in dollars, for each of the first three months of the year.

Figure 15-5 Canceco Company produces and sells pillows. It expects to sell 10,000 pillows in the year 2008 and had 1,000 pillows in finished goods inventory at the end of 2011. Canceco would like to complete operations in the year 2008 with at least 1,250 completed pillows in inventory. There is no ending work-in-process inventory. The pillows sell for £5 each. -Refer to Figure 15-5. What would be the total sales for the year 2008?

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 actual cost per sticker? (Round to three decimal places.)

Cal Company uses the following formula for annual overhead: £360,000 + £1.20 for each machine hour used. For the upcoming month, Cal plans to manufacture 6,000 units. Each unit requires 2 machine hours. Cal's budgeted overhead for the month is

Which of the following is true about budgets?

Sales for October, November, and December are expected to be £200,000, £180,000, and £220,000, respectively, for Ripken Company. All sales are on account (terms 2/15, net 30 days) and are collected 50 per cent in the month of sale and 50 per cent in the following month. One-half of all sales discounts are taken on the average. Materials are purchased one month before being needed, and all purchases and expenses are paid for as incurred. Activities for the quarter are expected to be: October November December Materials used £40,000 £36,000 £44,000 Salaries 70,000 68,000 72,000 Maintenance and repairs 18,000 18,000 18,000 Depreciation 36,000 36,000 36,000 Utilities and other 14,000 14,000 14,000 Dividends paid -0- 10,000 -0- Payment on bonds 8,000 8,000 8,000

Steve 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 feet 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 per cent of beginning inventory. Purchases are paid for in the month acquired. 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.

Budgeted sales for the third quarter of the year for Brown Company are as follows: Budgeted Sales July £300,000 August 375,000 September 450,000 The company normally collects 30 per cent in the month of sale and 65 per cent in the month following the sale. Five per cent of all sales are uncollectible and are written off in the following month. The balance in accounts receivable at July 1 was £245,000, which represents 70 per cent of June sales.

Figure 15-3 Projected sales for Sommers, Inc., for next year and beginning and ending inventory data are as follows: Sales 50,000 units Beginning inventory 4,000 units Desired ending inventory 8,000 units The selling price is £40 per unit. Each unit requires four pounds of material which costs £6 per pound. The beginning inventory of raw materials is 12,000 pounds. The company wants to have 3,000 pounds of material in inventory at the end of the year. -Refer to Figure 15-3. How many pounds of material would Sommers need to purchase?