Exam 23: Incremental Analysis

Davies Nursery plans to sell 160 potted plants during April and 120 units in May. Davies Nursery keeps 15% of the next month's sales as ending inventory. How many units should Davies Nursery produce during April?

A company budgeted unit sales of 102,000 units for January, 2010 and 120,000 units for February, 2010. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 30,600 units of inventory on hand on December 31, 2009, how many units should be produced in January, 2010 in order for the company to meet its goals?

The budget committee has the responsibility for coordinating the preparation of the budget.

The important end-product of the operating budgets is the

The production budget shows that expected unit sales are 40,000. The total required units are 45,000. What are the required production units?

A critical factor in budgeting for a service firm is to

A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were: The cash inflow in the month of March is expected to be

Hudson Company reported the following information for 2010: $\bullet$ All sales are on credit. $\bullet$ Customer amounts on account are collected 60% in the month of sale and 40% in the following month. Instructions Compute the amount of cash Hudson will receive during November.

Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable?

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

A budget can be a means of communicating a company's objectives to external parties.

The budgeted balance sheet is prepared entirely from the budgets for the current year.

A production budget should be prepared before the sales budget.

Eilert Company has budgeted the following unit sales: The finished goods inventory on hand on December 31, 2009 was 14,000 units. It is the company's policy to maintain a finished goods inventory at the end of each quarter equal to 20% of the next quarter's anticipated sales. Instructions Prepare a production budget for 2010.

A manufacturing overhead budget is not needed if the company develops a predeter-mined overhead rate to apply overhead.

Lambert Company has budgeted sales revenue as follows for the next 4 months: Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in the second month following the sale. The other 2% is uncollectible. Instructions Prepare a schedule which shows expected cash receipts from sales for the month of May.

Which one of the following is not needed in preparing a production budget?

Baxter Co.'s projected sales are as follows: Baxter 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 Baxter Co.'s budgeted cash receipts for October?

If the required direct materials purchases are 18,000 pounds, the direct materials required for production is three times the direct materials purchases, and the beginning direct materials are three and a half times the direct materials purchases, what are the desired ending direct materials in pounds?

The budget itself and the administration of the budget are the responsibility of the accounting department.