Exam 23: Incremental Analysis

The direct materials budget is derived from the direct materials units required for production plus desired ending direct materials units less beginning direct materials units.

Zimmer Company reported the following information for 2010: $\bullet$ Cost of goods sold is 35% of sales. $\bullet$ Zimmer purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month. $\bullet$ Accounts payable is used only for inventory acquisitions. How much is the budgeted balance for Accounts Payable at October 31, 2010?

Dalton Company has budgeted sales revenues as follows: Past experience indicates that 60% of the credit sales will be collected in the month of sale and the remaining 40% will be collected in the following month. Purchases of inventory are all on credit and 50% is paid in the month of purchase and 50% in the month following purchase. Budgeted inventory purchases are: Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000 each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in August for $30,000 cash. The company wishes to maintain a minimum cash balance of $50,000 at the end of each month. The company borrows money from the bank at 8% interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in months when there is an excess cash balance. The beginning cash balance on July 1 was $50,000. Assume that borrowed money in this case is for one month. Instructions Prepare a cash budget for the months of July and August. Prepare separate schedules for expected collections from customers and expected payments for purchases of inventory.

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

Swift, Inc. has budgeted its activity for December according to the following information: 1) Sales at $400,000, all for cash. 2) Budgeted depreciation for December is $10,000. 4) The cash balance at December 1 was $10,000. 5) Selling and administrative expenses are budgeted at $40,000 for December and are paid for in cash. 6) The planned merchandise inventory on December 31 and December 1 is $12,000. 7) The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid in cash. How much are the budgeted cash disbursements for December?

A budget is most likely to be effective if

The budget itself and the administration of the budget are entirely accounting responsibilities.

The following information is taken from the production budget for the first quarter: How many finished goods units should be produced during the quarter if the company desires 1,600 units available to start the next quarter?

A master budget consists of

Neal Merchandising Company expects to purchase $90,000 of materials in July and $105,000 of materials in August. Three-quarters 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. How much will August's cash disbursements for materials purchases be?

The longer the budget period, the more reliable the estimates of future outcomes.

A budget is a primary means of ________________ agreed upon objectives throughout the business organization.

Gunkle Company has budgeted direct materials purchases of $400,000 in March and $600,000 in April. Past experience indicates that the company pays for 65% of its purchases in the month of purchase and the remaining 35% in the next month. Other costs are all paid during the month incurred. During April, the following items were budgeted: Instructions Compute the amount of budgeted cash disbursements for April.

The budget components for Goebel Company for the quarter ended June 30 appear below. McLeod sells trash cans for $12 each. Budgeted sales and production for the next three months are: Goebel 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, Goebel had 4,000 completed units on hand. The number of trash cans to be produced in April and May are 26,000 and 46,000, respectively. Seven pounds of plastic are required for each trash can. At the end of each month, Goebel desires to have 10 percent of the following month's production material needs on hand. At March 31, Goebel had 18,200 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.

Neufeld Company makes and sells widgets. The company is in the process of preparing its Selling and Administrative Expense Budget for the month. The following budget data are available: Expenses are paid in the month incurred. If the company has budgeted to sell 40,000 widgets in October, how much is the total budgeted selling and administrative expenses for October?

It is important that budgets be accepted by

The projection of financial position at the end of the budget period is found on the

Which of the following statements about budget acceptance in an organization is true?

Which one of the following is a problem resulting from a service company being overstaffed?

Effective budgeting requires clearly defined lines of authority and responsibility.