Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: $\begin{array}{llcc} &\text { Dec. Year } 1 &\text { Jan. Year } 2 &\text { Feb. Year } 2 &\text { Mar. Year }\\ &\text { (Actual) }&\text {(Budgeted) }&\text {(Budgeted) }&\text {(Budgeted) }\\ \text { Cost of goods}& \$41,000 &\$71,000 &\$91,000 &\$ 61,000 \\ \text { sold } \end{array}$ Desired ending inventory levels are 26% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

A) $68,800. B) $83,200. C) $90,700. D) $112,480. A) $68,800. B) $83,200. C) $90,700. D) $112,480.

Sentra Sporting Company sells tennis rackets and other sporting equipment. The purchasing department manager prepared the inventory purchases budget. Sentra's policy is to maintain an ending inventory balance equal to 15% of the following month's cost of goods sold. January's budgeted cost of goods sold is $70,000. $\begin{array}{lccc} &\text { October}&\text { November }&\text { December }\\ \text { Budgeted cost of goods sold } & 60,000 & 40,000 &50,000\\ \text { Plus: Desired ending inventory } & 6,000 & ?&? \\ \text { Inventory needed } &66,000& ? &? \\ \text { Less: Beginning inventory } & 9,000 & ?&? \\ \text { Required purchases (on account) } & 57,000 & ? & ? \end{array}$ - What would be the required purchases (on account) for December?

A) $47,000 B) $50,000 C) $53,000 D) $60,500 A) $47,000 B) $50,000 C) $53,000 D) $60,500

Oakton Furniture provided the following information relevant to its sales for December Year 1 and the first quarter of Year 2: $\begin{array}{ccccc} &\text { Dec. Year } 1 &\text { Jan. Year } 2 &\text { Feb. Year } 2 &\text { Mar. Year }\\ &\text { (Actual) }&\text {(Budgeted) }&\text {(Budgeted) }&\text {(Budgeted) }\\ \text { Credit sales } & \$ 120,000 & \$ 280,000 & \$ 310,000 & \$ 220,000 \\ \text { Cash sales } & \$ 20,000 & \$ 50,000 & \$ 60,000 & \$ 24,000 \end{array}$ Based on the company's collection history, 42% of credit sales are collected in month of sale and the remainder is collected in the following month. Total budgeted cash receipts in February are expected to be:

A) $60,000. B) $162,400. C) $352,600. D) $228,000. A) $60,000. B) $162,400. C) $352,600. D) $228,000.

Purchases on account are given below: \[\begin{array} { | c | c | c | } \hline \text { October } & \text { November } & \text { December } \\ \hline 30,000 & 40,000 & 50,000 \\ \hline \end{array}\] 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. - How much will the cash payments for purchases be in December?

A) $44,500 B) $50,000 C) $46,000 D) $45,500 A) $44,500 B) $50,000 C) $46,000 D) $45,500

Exam 14: Planning for Profit and Cost Control

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual. Which advantage of budgeting would have helped him identify this problem sooner?

(Multiple Choice)

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Question 81

Which of the following is not considered a pro forma financial statement?

(Multiple Choice)

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Question 82

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Dec. Year 1 Jan. Year 2 Feb. Year 2 Mar. Year (Actual) (Budgeted) (Budgeted) (Budgeted) Cost of goods \4 1,000 \7 1,000 \9 1,000 \ 61,000 sold Desired ending inventory levels are 26% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

(Multiple Choice)

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Question 83

What budget is generally not included in a master budget?

(Multiple Choice)

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Question 84

Janice was questioned recently about her department's spending in excess of the budget. This is an example of using the budget for performance measurement.

(True/False)

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Question 85

Hernandez Company expects credit sales for January to be $100,000. Cash sales are expected to be $60,000. The company expects credit and cash sales to increase 10% for the month of February. Credit sales are collected in the month following the month in which sales are made. Based on this information, the amount of cash collections in February would be:

(Multiple Choice)

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Question 86

Which of the following would appear on a selling and administrative expense budget, but would not appear on a schedule of cash payments for selling and administrative expenses?

(Multiple Choice)

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Question 87

Sentra Sporting Company sells tennis rackets and other sporting equipment. The purchasing department manager prepared the inventory purchases budget. Sentra's policy is to maintain an ending inventory balance equal to 15% of the following month's cost of goods sold. January's budgeted cost of goods sold is $70,000. October November December Budgeted cost of goods sold 60,000 40,000 50,000 Plus: Desired ending inventory 6,000 ? ? Inventory needed 66,000 ? ? Less: Beginning inventory 9,000 ? ? Required purchases (on account) 57,000 ? ? - What would be the required purchases (on account) for December?

(Multiple Choice)

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Question 88

Indicate whether each of the following statements is true or false.

(Short Answer)

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Question 89

The three major components of the master budget are the financial budgets, the capital budgets, and the pro forma financial statements.

(True/False)

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Question 90

The master budget normally covers:

(Multiple Choice)

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Question 91

Four purposes or advantages for budgeting are planning, coordination, performance measurement, and punitive action.

(True/False)

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Question 92

Select the correct statement about the master budget.

(Multiple Choice)

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Question 93

Select the correct statement regarding the selling and administrative (S&A) expense budget.

(Multiple Choice)

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Question 94

If a budgeting system is designed correctly, top management will not have to get involved in the process.

(True/False)

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Question 95

The basic cash budget format is Total cash available − Total cash disbursed = Surplus or shortage of cash +/ − Effects of financing = Ending cash.

(True/False)

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Question 96

Oakton Furniture provided the following information relevant to its sales for December Year 1 and the first quarter of Year 2: Dec. Year 1 Jan. Year 2 Feb. Year 2 Mar. Year (Actual) (Budgeted) (Budgeted) (Budgeted) Credit sales \ 120,000 \ 280,000 \ 310,000 \ 220,000 Cash sales \ 20,000 \ 50,000 \ 60,000 \ 24,000 Based on the company's collection history, 42% of credit sales are collected in month of sale and the remainder is collected in the following month. Total budgeted cash receipts in February are expected to be:

(Multiple Choice)

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Question 97

Interest expense is not included in the selling and administrative budget because a company cannot estimate interest expense until it prepares the cash budget and makes borrowing projections.

(True/False)

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Question 98

Purchases on account are given below: October November December 30,000 40,000 50,000 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. - How much will the cash payments for purchases be in December?

(Multiple Choice)

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Question 99

Select the term from the list provided that best matches each of the following definitions or descriptions

Composed of numerous separate but interdependent departmental budgets covering sales, production, and administrative expenses

Budgeting

Budgeting technique that allows subordinates and upperlevel managers to work together in settings budgetary targets

Capital budget

Financial planning activities that cover the intermediate range of time (such as whether to buy or lease equipment)

Pro forma financial statements

Correct Answer:

Verified

Composed of numerous separate but interdependent departmental budgets covering sales, production, and administrative expenses

Budgeting technique that allows subordinates and upperlevel managers to work together in settings budgetary targets

Financial planning activities that cover the intermediate range of time (such as whether to buy or lease equipment)

Activities associated with long-range decisions such as defining the scope of the business and deciding which products to develop

Budgeted financial statements

The group of individuals responsible for the coordination of budgeting activities

Example of these budgets include sales budget, inventory purchases budget, and cash budget

Budgeting technique that keeps managers constantly involved in the budget process

Form of planning that formalize goals and objectives of a company in financial terms

(Matching)

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Question 100

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual. Which advantage of budgeting would have helped him identify this problem sooner?

Which of the following is not considered a pro forma financial statement?

What budget is generally not included in a master budget?

Janice was questioned recently about her department's spending in excess of the budget. This is an example of using the budget for performance measurement.

Which of the following would appear on a selling and administrative expense budget, but would not appear on a schedule of cash payments for selling and administrative expenses?

Indicate whether each of the following statements is true or false.

The three major components of the master budget are the financial budgets, the capital budgets, and the pro forma financial statements.

The master budget normally covers:

Four purposes or advantages for budgeting are planning, coordination, performance measurement, and punitive action.

Select the correct statement about the master budget.

Select the correct statement regarding the selling and administrative (S&A) expense budget.

If a budgeting system is designed correctly, top management will not have to get involved in the process.

The basic cash budget format is Total cash available − Total cash disbursed = Surplus or shortage of cash +/ − Effects of financing = Ending cash.

Interest expense is not included in the selling and administrative budget because a company cannot estimate interest expense until it prepares the cash budget and makes borrowing projections.

Purchases on account are given below: October November December 30,000 40,000 50,000 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. - How much will the cash payments for purchases be in December?

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Performance Evaluation

Planning for Capital Investments

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