Exam 7: The Master Budget

Madden Company has supplied the following information for 20X0: Cash balance, January 1 \ 32,000 Tot al revenues 425,000 Total expenses 435,000 All revenues are collected when earned and all expenses are paid as incurred. The total expenses include $21,000 of depreciation. Required: a. How much profit did Madden Company earn during 20X0? b. What was the ending balance of cash? c. Explain how cash increased during the year.

How do strategic planning, long- range planning, and budgeting differ?

The cash budget begins with the ending cash balance from the previous period.

Ankeny Manufacturing Company has the following information: Month Budgeted Sales January \ 76,000 February 85,000 March 92,000 April 79,000 Budgeted ExpensesperMonth Wages \ 15,000 Advertising 12,000 Depreciation 3,000 Other 4\% of sales All cash expenses are paid as incurred. is the expected total expenses for the month of April.

A major drawback of using historical results for judging current performance is that:

Pueblo Manufacturing Company has the following information: Month Budgeted Sales January \ 76,000 February 85,000 M arch 92,000 April 79,000 Budgeted Expens esperMonth W ages \ 15,000 Advertising 12,000 Depreciation 3,000 Other 4\% of sales All cash expenses are paid as incurred. is the expected total expenses budgeted for the month of January.

Pancho Company has the following information: Month Budgeted Purchas es January \ 56,800 February 49,000 March 30,520 April 29,480 May 27,680 Purchases are paid for in the following manner: 10% in the month of purchase 50% in the month after purchase 40% two months after purchase Is the estimated cash disbursement in May from April purchases.

are mathematical models of the master budget that can react to any set of assumption about sales, costs, and product mix.

Silver Corporation has the following information: Month Budgeted Sales May \ 46,000 June 50,000 July 52,000 August 48,000 The cost of goods sold percentage is 65% and the desired inventory level is 25% of next month's sales is the desired beginning inventory for August.

Continuous budgets are a common form of:

The master budgeting process summarizes the key decisions regarding all aspects of the company's value chain.

Desired ending inventory + cost of goods sold - beginning inventory

Budgets are generally more effective if they are:

If cash available plus net cash receipts minus disbursements is negative, then borrowing is necessary.

The operating budget process results in the:

Fun4u Corporation, a wholesaler, has a sales budget for next month of $400,000. Cost of units sold is expected to be 40% of sales. All units are paid for in the month following purchase. The beginning inventory of units is $10,000, and an ending amount of $12,000 is desired. Beginning accounts payable is $76,000. The cost of units sold for next month is expected to be:

The working capital cycle moves from cash to inventory to receivables and back to cash.

Norman Corporation has prepared the following sales budget: Month Expected Sales May \ 84,000 June 100,000 July 92,000 August 116,000 Septemb er 98,000 Credit sales are 80% of total sales. Collections are 80% in the month of sale, 15% in the month following the sale. The remaining 5% is expected to be uncollectible. Required: Prepare a schedule of cash collections for June through August.

The effectiveness of any budgeting system depends directly on whether a budget is understood and accepted by top management.

The following sales budget has been prepared: Month Cash Sales Credit Sales September \ 100,000 \ 200,000 October 125,000 180,000 November 207,000 199,000 December 67,000 144,000 Collections are 50% in the month of sale, 40% in the month following the sale, and 10% two months following the sale. No uncollectible accounts are anticipated. is the expected balance of Accounts Receivable as of October 31.