Exam 9: Financial Planning and Analysis: the Master Budget

Paradise, Inc., a distributor of suntan lotion, has the following historical collection pattern for its credit sales. The sales on account have been budgeted for the last seven months as follows: Required: A. Compute the estimated total cash collections during August from credit sales. B. Compute the estimated total cash collections during the August - October quarter from sales made on account during this quarter.

Sainte Claire Corporation has a highly automated production facility. Production volume and management judgment are the two factors that would likely have the most direct influence on the company's manufacturing overhead budget.

Nevis' production data for a new deluxe product were taken from the most recent quarterly production budget: In addition, Nevis produces 5,000 units a month of its standard product. It takes two direct labor hours to produce each standard unit and 2.25 direct labor hours to produce each deluxe unit. Nevis' cost per labor hour is $15. - Direct labor cost for the quarter would be budgeted at:

Weed Master Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5 percent per month. The desired monthly ending inventory in units of finished product is 80 percent of the next month's estimated sales. There are 160,000 finished units in inventory on May 31. Each unit of finished product requires four pounds of raw material at a cost of $1.15 per pound. There are 700,000 pounds of raw material in inventory on May 31. Required: A. Compute the company's total required production in units of finished product for the entire three-month period ending August 31. B. Independent of your answer to requirement (A), assume the company plans to produce 600,000 units of finished product in the three-month period ending August 31, and to have raw-material inventory on hand at the end of the three-month period equal to 25 percent of the use in that period. Compute the total estimated cost of raw-material purchases for the entire three-month period ending August 31.

Fortner Manufacturing has a cash balance of $8,000 on August 1 of the current year. The company's controller forecast the following cash receipts and cash disbursements for the upcoming two months of activity: Management desires to maintain a minimum cash balance of $8,000 at all times. If necessary, additional financing can be obtained in $1,000 multiples at a 12% interest rate. All borrowings are made at the beginning of the month; debt retirement, on the other hand, occurs at the end of the month. Interest is paid at the time of repaying loan principal and is computed on the portion of debt repaid. Required: A. Determine the ending cash balance in August both before and after any necessary financing or debt retirement. B. Repeat part "A" for September.

All conversion costs are included in the direct-labor budget.

Blaylock plans to sell 85,000 units of product no. 794 in May, and each of these units requires three units of raw material. Pertinent data follow. On the basis of the information presented, how many units of raw material should Blaylock purchase for use in May production?

Lancaster Company provides services in the retail flooring industry. The following information is available for 20x5: * Twenty percent of the firm's services are for cash and the remaining 80% are on account. Of the credit services, 40% are collected in the month that the service is provided, with the remaining 60% collected in the following month. * Services provided in January are expected to total $250,000 and grow at the rate of 5% per month thereafter. * January's cash collections are expected to be $240,400, and month-end receivables are forecast at $120,000. * Monthly cash operating costs and depreciation during the first quarter of the year are approximated at $250,000 and $15,000, respectively. * Lancaster's December 31, 20x4 balance sheet revealed accounts payable balances of $28,000. This amount is related to the company's operating costs and is expected to grow to $36,000 by the end of 20x5's first quarter. All operating costs are paid within 30 days of incurrence. * Company policy requires that a $20,000 minimum cash balance be maintained, and Lancaster's 20x4 year-end balance sheet showed that the firm was in compliance with policy by having cash of $23,000. Required: A. Determine the sales revenue earned that will appear on the income statement for the quarter ended March 31, 20x5. B. Compute the company's first-quarter cash collections. C. Compute the cash balance that would appear on the March 31, 20x5 balance sheet. D. What are some possible actions the company could pursue if, at any time during the quarter, it finds that the cash balance has fallen below the stated minimum?

A company that uses activity-based budgeting performs the following: 1-Plans activities for the budget period. 2-Forecasts the demand for products and services as well as the customers to be served. 3-Budgets the resources necessary to carry out activities. Which of the following denotes the proper order of the preceding activities?

An examination of Hyong Corporation's inventory accounts revealed the following information: Raw materials, June 1: 46,000 units Raw materials, June 30: 51,000 units Purchases of raw materials during June: 185,000 units Hyong's finished product requires four units of raw materials. On the basis of this information, how many finished products were manufactured during June?

A formal budget program will almost always result in:

Which of the following would depict the logical order for preparing (1) a production budget, (2) a cash budget, (3) a sales budget, and (4) a direct-labor budget?

Budgetary slack often is used to cope with uncertainty.

Nevis Motors manufactures a product requiring 0.5 ounces of platinum per unit. The cost of platinum is approximately $360 per ounce; the company maintains an ending platinum inventory equal to 10% of the following month's production usage. The following data were taken from the most recent quarterly production budget: The cost of platinum to be purchased to support August production is:

Nevis' production data for a new deluxe product were taken from the most recent quarterly production budget: In addition, Nevis produces 5,000 units a month of its standard product. It takes two direct labor hours to produce each standard unit and 2.25 direct labor hours to produce each deluxe unit. Nevis' cost per labor hour is $15. -Direct labor cost for July would be budgeted at:

Gallonte Inc. began operations in April of this year. It makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the firm's budgeted collections for April?

Consider the following statements about budget administration: I. The budgeting process is a very formal process in all organizations regardless of an organization's size. II. The budget manual is prepared to communicate budget procedures and deadlines to employees throughout an organization. III. Effective internal control procedures require that the budget director be an individual other than the controller. Which of the above statements is (are) true?

A three-stage allocation process is used in activity-based costing systems.

Miracle Enterprises sells electronics in retail outlets and on the Internet. It uses activity-based budgeting in the preparation of its selling, general, and administrative expense budget. Which of the following costs would the company likely classify as a unit-level expense on its budget?

Gallonte Inc. began operations in April of this year. It makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. - If sales for April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the firm's budgeted collections for May?