Exam 7: Budgeting

Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12 per unit, respectively.  The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units.  The beginning inventory of Product B is 2,500 units.  The desired ending inventory of B is 3,000 units. Budgeted production of Product B for the year would be

The treasurer of Calico Dreams Company has accumulated the following budget information for the first two months of the coming fiscal year: The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are collected in full in the month of the sale, and the remainder in the month following the sale. One-fourth of the manufacturing costs are paid in the month in which they are incurred, and the other three-fourths in the following month. Depreciation, insurance, and property taxes represent $6,400 of the monthly selling and administrative expenses. Insurance is paid in February, and property taxes are paid yearly in September. A $40,000 installment on income taxes is to be paid in April. Of the remainder of the selling and administrative expenses, one-half are to be paid in the month in which they are incurred and the balance in the following month. Capital additions of $250,000 are paid in March. Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current liabilities as of March 1 are accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for operating expenses). Management desires to maintain a minimum cash balance of $25,000. Prepare a monthly cash budget for March and April.

Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget.

A budget procedure that provides for the maintenance at all times of a twelve-month projection into the future is called continuous budgeting.

A budget procedure that provides for the maintenance at all times of a twelve-month projection into the future is called master budgeting.

Magnolia, Inc. manufactures bedding sets. The budgeted production is for 55,000 comforters this year. Each comforter requires 7 yards of material. The estimated January 1 beginning inventory is 31,000 yards with the desired ending balance of 30,000 yards of material. If the material costs $4.00 per yard, determine the materials budget for the year.

Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12 per unit, respectively.  The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units.  The beginning inventory of Product B is 2,500 units.  The desired ending inventory of B is 3,000 units. Budgeted production of Product A for the year would be

Good Eats Inc. manufactures flatware sets. The budgeted production is for 80,000 sets this year. Each set requires 2.5 hours to polish the material. If polishing labor costs $15.00 per hour, determine the direct labor cost budget for polishing for the year.

Describe a master budget and the sequence in which the individual budgets within the master budget are prepared.

Southern Company is preparing a cash budget for April.  The company has $12,000 cash at the beginning of April and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during April.  Southern Company has an agreement with its bank to maintain a minimum cash balance of $10,000.  To maintain the required balance during April, the company must

Prepare a flexible budget for Cedar Jeans Company using production levels of 16,000, 18,000, and 20,000 units produced. The following is additional information necessary to complete the budget:

Describe at least five benefits of budgeting.

The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as

What is a capital expenditures budget?

The primary difference between a static budget and a flexible budget is that a static budget

Planning for capital expenditures is necessary for all of the following reasons except

As of January 1 of the current year, the Gunner Company had accounts receivables of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000, and $150,000, respectively. Of each month's sales, 20%  are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with the remaining 40% collected in the following month. What is the accounts receivable balance as of March 31?

Miller and Sons' static budget for 10,000 units of production includes $50,000 for direct materials, $44,000 for direct labor, variable utilities of $5,000, and supervisor salaries of $24,000. A flexible budget for 12,000 units of production would show

Which of the following budgets provides the starting point for the preparation of the direct labor cost budget?

The benefits of comparing actual performance of the operations against planned goals include all of the following except