Exam 15: The Budgeting Process

Which of the following is an advantage of the budgeting process?

Which budget is prepared without monetary amounts?

Diely Company has the following sales budget: July August September Budgeted Sales £105,000 £211,000 £134,000 Credit sales represent 80 per cent of budgeted sales. Of the credit sales, 20 per cent is collected in the month of the sale, 60 per cent in the month after the sale, and the remaining 15 per cent is collected two months after the sale. Five per cent of all sales are uncollectible and written-off. Cash receipts from sales in September amounted to

Activity-based budgeting is most useful when

Feedee Company has budgeted sales and production (in units) over the next three months as follows: January February March Sales 50,000 ? 80,000 Froduction 52,000 64,000 78,000 There are 10,000 units on hand on January 1. A minimum of 20 per cent of the next month's sales in units must be on hand at the end of each month. April sales are expected to be 70,000. Budgeted sales for February would be

At the beginning of the current month, Melrose had £10,000. Cash disbursements were £260,000 and cash collections were £235,000. Melrose invests all excess cash in a money market fund and has a line of credit to cover cash deficiencies. If Melrose wishes to start the next month with £15,000, Melrose must

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. Sommers' budgeted sales would be

Arlo Company uses an annual cost formula for overhead of £72,000 + £1.60 for each direct labour hour worked. For the upcoming month, Arlo plans to manufacture 96,000 units. Each unit requires five minutes of direct labour. Arlo's budgeted overhead for the month is

Activity-based budgeting

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. Sommers' budgeted total purchase cost of direct materials would be

Which of the following is NOT a criticism of the traditional master budget?

A moving twelve-month budget where a future month is added as the current month expires is called a(n)

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. Total cash collected in June will be

The following budget estimates have been prepared by Clifton Company: Cash Receipts Cash Payments May £120,000 £150,000 June 110,300 150,000 The company likes to maintain a minimum cash balance of £40,000. Any excess cash is invested in a money market account earning 9 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. Interest is paid monthly. Assume a cash balance on May 1 of £40,000, a money market account balance of £0, and a credit line loan balance of £0.

Which is NOT one of the four steps needed to build an activity-based budget?

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