Exam 15: The Budgeting Process

The budget committee

General Ltd. manufactures boxes. The estimated number of boxes sold for the first three months of 2012 are: Month Sales January 3,000 February 4,200 March 3,900 Finished goods inventory at the end of December was 900 units. Ending finished goods inventory is equal to 20 per cent of the next month's sales. General Ltd. expects to sell the boxes for £5 each. April 2012 sales is projected at 4,500 boxes. What is the expected sales amount for March?

Gerald Company manufactures books. Manufacturing a book takes 10 units of A1 and 1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months. Based on this information, the number of units of A1 that needs to be purchased by Gerald during the first month is

Continuous budgeting requires managers to

A budget based on additions and subtractions from last year's budget is

Bronco Company sells a product for £10. Budgeted sales for the first quarter of the current year are as follows: Budgeted Sales January £600,000 February 800,000 March 900,000 The company wants to maintain an inventory of finished units equal to 30 per cent of the following month's sales, and 10,000 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 20 per cent of the following month's production needs. Budgeted production in units for February would be

____ are costs incurred for the acquisition of short-run activity capacity, usually as the result of yearly planning.

Activity-based budgeting

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 maintenance cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

Gerald Company manufactures books. Manufacturing a book takes 10 units of A1 and 1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months. How many units of A1 does expect to use in production during the second month?

Which of the following is usually prepared before the production budget?

Michael Ltd. has the following sales forecasts for the first three months of 2011: Month Sales January £36,000 February 24,000 March 40,000 Sixty-five per cent of sales are collected in the month of the sale and the remainder are collected in the following month. Accounts receivable balance (January 1,2011) £16,000 Cash bal ance (January 1,2011) 12,000 Minimum cash balance is £20,000. Cash can be borrowed in £1,000 increments from the local bank (assume no interest charges). How much cash would be collected in March from sales?

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

A bank manager may review a company's cash budget to

Budgeted sales for the second quarter for Maxwell Company, a retailer, are as follows: Budgeted Sales (Units) April 60,000 May 120,000 June 140,000 Maxwell started the quarter with an inventory of 30,000 units. The company likes to maintain an inventory equal to 10 per cent of next month's budgeted sales. Budgeted purchases in units for May would be

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 £5,000+£8 per machine hour Machining £25,000+£4 per machine hour Inspection £90,000+£1,000 per batch Setups £5,000 per batch Purchasing £100,000+£100 per purchase order

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. How many pillows would be produced in the year 2008?

The production budget

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. According to Sommers' production budget, how many units should be produced?

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. Wemberly's budgeted cash receipts for February are