Exam 23: Budgetary Planning

Budgeting can be an important management tool if implemented properly. Identify several positive results when budgets are used properly. Since budgets affect people identify several negative aspects if budgets are not implemented properly.

Doe Manufacturing plans to sell 6000 purple lawn chairs during May 5700 in June and 6000 during July. The company keeps 15% of the next month's sales as ending inventory. How many units should Doe produce during June?

Which one of the following items would never appear on a cash budget?

Butler Manufacturing manufactures two products (1) Regular and (2) Deluxe. The budgeted units to be produced are as follows: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Units of Product }$ 2016 Regular Deluxe Total July 10,000 15,000 25,000 August 6,000 10,000 16,000 September 9,000 14,000 23,000 October 8,000 12,000 20,000 It takes 2 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product. It is the company's policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month's production needs for the Regular product and 20% of the next month's production needs for the Deluxe product. Direct materials inventory on hand at June 30 were 6000 pounds for the Regular product and 15000 pounds for the Deluxe product. The cost per pound of materials is $5 Regular and $8 Deluxe. Instructions Prepare separate direct materials budgets for each product for the third quarter of 2016.

The ____________________ is the starting point in preparing the master budget.

In service enterprises the critical factor in budgeting is coordinating materials and equipment with anticipated services.

The following information is taken from the production budget for the first quarter: Beginning inventory in units 1,200 Sales budgeted for the quarter 426,000 Capacity in units of production facility 472,000 How many finished goods units should be produced during the quarter if the company desires 3200 units available to start the next quarter?

If there were 60000 pounds of raw materials on hand on January 1 120000 pounds are desired for inventory at January 31 and 410000 pounds are required for January production how many pounds of raw materials should be purchased in January?

The formula for developing a production budget is ___________________ plus ______________________ minus _______________________.

Pulham Company is preparing its direct labor budget for 2016 from the following production budget based on a calendar year: Quarter Units 1 60,000 2 30,000 3 45,000 4 75,000 Each unit requires 2 hours of direct labor. The union contract provides for a 10% increase in wage rate to $11 per hour on October 1. Instructions Prepare a direct labor budget for 2016.

Budgets are statements of management's plans stated in financial terms.

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 in pounds for direct materials to be purchased for the month?

A budget

Many companies use ____________________________ budgets by dropping the month just ending and adding a future month.

The budget components for Park Company for the quarter ended June 30 appear below. Park sells trash cans for $12 each. Budgeted sales and production for the next three months are: Sales Production April 20,000 units 26,000 units May 50,000 units 46,000 units June 30,000 units 29,000 units Park desires to have trash cans on hand at the end of each month equal to 20 percent of the following month's budgeted sales in units. On March 31 Park had 4000 completed units on hand. Five pounds of plastic are required for each trash can. At the end of each month Park desires to have 10 percent of the following month's production material needs on hand. At March 31 Park had 13000 pounds of plastic on hand. The materials used in production cost $0.60 per pound. Each trash can produced requires 0.10 hours of direct labor. Instructions Determine how much the materials purchases budget will be for the month ending April 30.

Budgeting and long-range planning are both important aids to management in achieving a company's goals and objectives. Briefly distinguish between budgeting and long-range planning and indicate how they help managers perform their functions.

Sable Inc. has budgeted direct materials purchases of $400000 in March and $500000 in April. Past experience indicates that the company pays for 60% of its purchases in the month of purchase and the remaining 40% in the next month. Other costs are all paid during the month incurred. During April the following items were budgeted: Wages expense \ 120,000 Purchase of office equipment 200,000 Selling and administrative expenses 126,000 Depreciation expense 18,000 Instructions Compute the amount of budgeted cash disbursements for April.

Which is true of budgets?

In May 2016 the budget committee of Crater Inc. assembles the following data in preparation of budgeted merchandise purchases for the month of June. 1. Expected sales: June $750000 July $900000. 2. Cost of goods sold is expected to be 80% of sales. 3. Desired ending merchandise inventory is 40% of the following (next) month's cost of goods sold. 4. The beginning inventory at June 1 will be the desired amount. Instructions (a) Compute the budgeted merchandise purchases for June. (b) Prepare the budgeted income statement for June through gross profit.

A major difference between the annual budget and long-range planning is the ____________________ over which the data pertain.