Exam 10: Static and Flexible Budgets

(Appendix 10A) A firm expects credit sales for the week to amount to $3,000, accounts receivable to increase by $200, and accounts payable to decrease by $500. Given this information, what will be the effect on cash?

Ritz Company expects to sell 24,000 units of finished goods over the next 6-month period. The company has 10,000 units on hand and its managers want to have 14,000 units on hand at the end of the period. To produce one unit of finished product, two units of direct materials are needed. Ritz has 100,000 units of direct material on hand and has budgeted for an ending inventory of 110,000 units. What is the number of finished units to be produced?

Horton Company produces and sells two products: round and square tables. In August 20x4, the budget projected the following for 20x5: Budgeted data for 20x5 Direct labour and overhead are: Direct labour: Round 4 hours per unit at $6 per hour Square 6 hours per unit at $8 per hour Overhead: $4 per direct labour hour The cost of ending finished goods inventory of round tables for 20x5 is:

Which of the following budgeting systems relies on cost pools and cost drivers?

Production and inventory budgets form the basis for developing the revenue budget.

Table Top produces tables sold to discount stores. The table tops are manufactured in Canada by Table Top, but the table legs are manufactured in a plant in Nogales, Mexico. The assembly department attaches the four purchased table legs to the table top. It takes 20 minutes of labour to assemble a table. The company follows a policy of producing enough tables to insure that 40% of next month's sales are in the finished goods inventory. Table Top also purchases sufficient raw materials to insure that raw materials inventory is 60% of the following month's scheduled production. Table Top's sales budget in units for the next quarter is as follows: July 2,300 August 2,500 September 2,100 . Table Top's ending inventories in units for June 30, 20×5 are: Finished goods 1,900 Raw materials (legs) 4,000 The number of tables to be produced during August, 20x5 is:

Flexible budgets reflect: I. Operations for actual costs and revenues II. Operations for costs and revenues for the volume of sales from the master budget III. Operations for actual volume of sales with budgeted variable costs per unit and budgeted total fixed costs

When managers use Kaizen budgeting, which of the following is (are) explicitly embedded in the budget? I. Cost reduction goals II. Quality improvement goals III. Changes in activity cost drivers

January February March April Sales \ 26,400 \ 23,100 \ 33,000 \ 25,000 Production in units 990 1,440 1,710 1,200 Sales are 30% cash and 70% on account, and 60% of credit sales are collected in the month of the sale. In the month after the sale, 30% of credit sales are collected. The remainder is collected two months after the sale. It takes 4 kilograms of direct material to produce a finished unit, and direct materials cost $5 per kilogram. All direct materials purchases are on account, and are paid as follows: 40% in the month of the purchase, 50% the following month, and 10% in the second month following the purchase. Ending direct materials inventory for each month is 40% of the next month's production needs. January's beginning materials inventory is 1,080 kilograms. Suppose that both accounts receivable and accounts payable are zero at the beginning of January. (Appendix 10A) The net change in cash for the period January - March is:

(Appendix 10A) Taft Corporation collects cash from customers as follows: 60% in the month of sale, 20% in the month after sale, 19% in the second month after sale, and 1% is never collected. Bad debts are written off annually in December. Budgeted sales are all on credit and amount to: May $600,000 June 700,000 July 500,000 August 600,000 What is the budgeted amount of cash to be collected in July?

Which of the following is not required to develop a budgeted income statement?

TFS Corporation, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below: Beginning inventory \ 10,000 Budgeted purchases 25,000 Expected revenue 150,000 Inflows of cash 120,000 Support departments costs 30,000 Total cash outflows 80,000 TFS' budgeted cost of goods available for sale for the next fiscal year will be:

Table Top produces tables sold to discount stores. The table tops are manufactured in Canada by Table Top, but the table legs are manufactured in a plant in Nogales, Mexico. The assembly department attaches the four purchased table legs to the table top. It takes 20 minutes of labour to assemble a table. The company follows a policy of producing enough tables to insure that 40% of next month's sales are in the finished goods inventory. Table Top also purchases sufficient raw materials to insure that raw materials inventory is 60% of the following month's scheduled production. Table Top's sales budget in units for the next quarter is as follows: July 2,300 August 2,500 September 2,100 Table Top's ending inventories in units for June 30, 20x5 are: Finished goods 1,900 Raw materials (legs) 4,000 Assume that Table Top will produce 1,800 units in the month of September 20x5. How many employees will be required for the assembly department? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour work week and a 4-week month.)

Planning Systems, Inc. has forecast the following unit sales and production for the next year, by quarter: Production 150 160 140 100 Sales 120 140 150 120 The firm has beginning inventories as follows: Finished goods 50 units Direct material A 100 Direct material B 100 A finished unit requires one unit of material A and two units of material B. There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories. How much material B must be purchased in quarter 1?

On a budgeted income statement, the gross margin is determined by:

Ritz Company expects to sell 24,000 units of finished goods over the next 6-month period. The company has 10,000 units on hand and its managers want to have 14,000 units on hand at the end of the period. To produce one unit of finished product, two units of direct materials are needed. Ritz has 100,000 units of direct material on hand and has budgeted for an ending inventory of 110,000 units. What is the amount of direct material to be purchased (in units)?

Budgets provide a mechanism for defining which of the following for individual managers? I. Decision rights II. Behaviours III. Forecasts

Korn Inc., projects sales for its first three months of operation as follows: October November December Credit sales \ 100,000 \ 150,000 \ 200,000 Cash sales 40,000 60,000 50,000 Tota \ 140,000 \ 210,000 \2 50,000 Inventory on October 1 is $40,000. Subsequent beginning inventories should be 40% of that month's cost of goods sold. Goods are priced at 140% of their cost. 50% of purchases are paid for in the month of purchase; the balance is paid in the following month. It is expected that 50% of credit sales will be collected in the month following sale, 30% in the second month following the sale, and the balance the third month. A 5% discount is given if payment is received in the month following sale. (Appendix 10A) What are the anticipated cash disbursements for October?

TFS Corporation, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below: Beginning inventory \ 10,000 Budgeted purchases 25,000 Expected revenue 150,000 Inflows of cash 120,000 Support departments costs 30,000 Total cash outflows 80,000 Which of the following amounts will be subtracted from gross profit on TFS' budgeted income statement?

The cash budget is included in an organization's operating budget.