Exam 15: The Budgeting Process

The following forecasted sales pertain to Norah Company: Collection pattern: 60 per cent in month of sale 40 per cent in month following the sale The company has a selling price of £10 per unit and expects to maintain ending inventories equal to 20 per cent of the next month's sales. How many units are expected to be produced in April?

Which of the following is usually prepared before the production budget?

Schrandt Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below: The June 30th balance sheet follows: Actual sales for June and budgeted sales for July, August, and September are given below: Sales are 20 per cent for cash and 80 per cent on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 40 per cent of sales. The desired ending inventory is equal to 25 per cent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are £43,000, and the monthly depreciation expenses are £7,000. What is the balance of the cash account at the end of July?

Figure 15-3 Projected sales for Sommers, Inc., for next year and beginning and ending inventory data are as follows: The selling price is £40 per unit. Each unit requires four pounds of material which costs £6 per pound. The beginning inventory of raw materials is 12,000 pounds. The company wants to have 3,000 pounds of material in inventory at the end of the year. -Refer to Figure 15-3. Sommers' budgeted sales would be

Figure 15-5 Canceco Company produces and sells pillows. It expects to sell 10,000 pillows in the year 2008 and had 1,000 pillows in finished goods inventory at the end of 2011. Canceco would like to complete operations in the year 2008 with at least 1,250 completed pillows in inventory. There is no ending work-in-process inventory. The pillows sell for £5 each. -Refer to Figure 15-5. How many pillows would be produced in the year 2008?

Which of the following is an example of a discretionary fixed expense?

Which of the following expenses is an example of a discretionary fixed expense?

The following data is obtained from the general records in the shipping department at Fast Parcel Delivery Company for August: $\bullet$ Inspecting packages prior to placement on truck takes 1 minute per package. $\bullet$ Processing paperwork for each shipment (each truck loaded) takes 30 minutes. $\bullet$ Loading packages takes 1 minute of labour per package plus an additional 3 labour hours per truck $\bullet$ Miscellaneous tasks take 2 hours per truck. $\bullet$ Temporary employees to perform all of the above tasks can be hired for any amount of hours at a rate of £10 per hour during the summer (no benefits). $\bullet$ One supervisor is needed for every 1,000 hours of temporary employee labour (rounded up). $\bullet$ Supervisors are paid a flat rate of £3,600 per month. $\bullet$ Supervisors divide their time evenly among inspecting, processing, and loading activities, and miscellaneous tasks. $\bullet$ One thousand dollars per month general department overhead is allocated to miscellaneous tasks and £2,000 per month to loading, inspecting and processing activities. August will have 24 working days. Fast Parcel expects to load 12 trucks per day during August. There are on average 100 packages per truck. Required: Prepare a budget using the activity based approach for the costs of inspecting, processing, loading miscellaneous activities within the shipping department for August.

Which of the following is usually prepared before the direct materials purchases budget?

Figure 15-2 Harald, Inc., has done a cost analysis for its production of bumper stickers. The following activities and cost drivers have been developed: Following are the actual costs of producing 85,000 stickers: 5,000 machine hours; 10 batches; 20 purchase orders -Refer to Figure 15-2. What is the budgeted cost per sticker? (Round to three decimal places.)

Describe zero-based budgeting.

Jiggy Company plans to sell 33,000 units during the month of May. The company plans to have 2,500 units on hand at the end of the month. If 1,200 units are on hand on May 1, how many units must be produced during May?

A moving twelve-month budget where a future month is added as the current month expires is called a(n)

Nichols Company sells a product for £20. Budgeted sales for the first quarter of the current year are as follows: The company wants to maintain an inventory of finished units equal to 30 per cent of the following month's sales, and 1,000 units are on hand at the beginning of the year. Each unit requires two pounds of raw material costing £1 per pound. The company maintains a raw materials inventory equal to 10 per cent of the following month's production needs. Budgeted production in units for February would be

Which is NOT one of the four steps needed to build an activity-based budget?

If a department plans forward from resources to outputs, this describes which criticism of traditional budgeting?

Which of the following appears in the cash budget?

Budgeted sales for the first quarter for Cullison Company, a retailer, are as follows: Cullison started the year with an inventory of 7,500 units. The company likes to maintain an inventory equal to 10 per cent of next month's budgeted sales. Budgeted purchases in units for February would be

Figure 15-4 Budgeted sales for the second quarter of the current year are as follows: The company collects 20 per cent in the month of sale, 70 per cent in the first month following the sale, and 10 per cent in the second month following the sale. -Refer to Figure 15-4 above. Total cash collected in June will be

A budget based on additions and subtractions from last year's budget is