Exam 23: Budgetary Planning

Smoke Inc. makes and sells buckets. Each bucket uses 1/2 pound of plastic. Budgeted production of buckets in units for the next three months is as follows: $\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { April } \quad \text { May }\quad \quad\text { June }$ $\text { Budgeted production } \quad 21,000 \quad22,000 \quad\quad 24,000$ The company wants to maintain monthly ending inventories of plastic equal to 25% of the following month's budgeted production needs. The cost of plastic is $2.20 per pound. Instructions Prepare a direct materials purchases budget for the month of May.

The budget committee would not normally include the

A budget period should be

The number of direct labor hours needed for production is obtained from the production budget.

In many companies responsibility for coordinating the preparation of the budget is assigned to

Which of the following is done to improve the reliability of the sales forecast?

At Boulder Industries budgets are the responsibility of everyone. Each department collaborates in determining its expected needs and sales personnel determine the likely sales volume. Bart Gray one of the production managers believes in building plenty of slack into everything including his estimates of ending inventory of work in process. Required: You are the accounting manager. Write a memo to Mr. Gray. Explain why the ending inventory figure should be extremely accurate with as little slack as possible.

Dex Industries expects to purchase $120000 of materials in March and $140000 of materials in April. Three-fourths of all purchases are paid for in the month of purchase and the other one-fourth are paid for in the month following the month of purchase. In addition a 2% discount is received for payments made in the month of purchase. How much will April's cash disbursements for materials purchases be?

The production budget shows expected unit sales are 100000. The required production units are 104000. What are the beginning and desired ending finished goods units respectively? Beginning Units Ending Units A) 10,000 6,000 B) 6,000 10,000 C) 4,000 10,000 D) 10,000 4,000

For each item given identify the budget in which it will appear. If an item will appear on more than one budget then indicate as many budgets as are relevant.

The budget committee in a company is often headed by the

Three major sections of a cash budget are (1) ___________________ (2) ____________________ and (3) ______________________.

Delta Manufacturing has budgeted the following unit sales: 2016 Units April 25,000 May 40,000 June 60,000 July 45,000 Of the units budgeted 40% are sold by the Coastal Division at an average price of $15 per unit and the remainder are sold by the Central Division at an average price of $12 per unit. Instructions Prepare separate sales budgets for each division and for the company in total for the second quarter of 2017.

A company determined that the budgeted cost of producing a product is $30 per unit. On June 1 there were 80000 units on hand the sales department budgeted sales of 300000 units in June and the company desires to have 120000 units on hand on June 30. The budgeted cost of goods sold for June would be

Teller Co. is planning to sell 900 boxes of ceramic tile with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3900 pounds of clay mix in beginning inventory and wants to have 4500 pounds in ending inventory. What is the total amount to be budgeted for direct labor for the month?

Effective budgeting is dependent on an _________________________ in which authority and responsibility are clearly defined.

The production budget shows expected unit sales of 32000. Beginning finished goods units are 3600. Required production units are 33600. What are the desired ending finished goods units?

Ashley Finn is a new production manager. After a great deal of effort including considerable market research she completes her budget and submits it to her boss Keith Payne. Without even looking at it he asks her what her "fudge factor" was and which items contained the most slack. Ashley very surprised responds that she doesn't use any "fudge factor" and that all her figures are honest. Mr. Payne counters by asking her how she would respond if she had to cut about 20% from her budget as it is. He tells her that most budgets are trimmed in committee and she had better be ready. He returns the budget to her and tells her to come back with something reasonable. Required: 1. Is it ethical to build slack into a budget? Explain. 2. Was it ethical for Mr. Payne to refuse to accept a budget without slack? Briefly explain.

Which of the following is not an operating budget?

Clay Co.'s projected sales are as follows: August \ 400,000 September \ 450,000 October \ 550,000 Clay estimates that it will collect 30% in the month of sale 50% in the month after the sale and 18% in the second month following the sale. Two percent of all sales are estimated to be bad debts. Instructions How much are Clay Co.'s budgeted cash receipts for October?