Exam 9: The Master Budget

Desired ending inventory is 20% of next month's sales. If cost of goods sold is $300,000 and next month's sales is $900,000, which of the following statements is true regarding purchases?

Jolly Company produces hula hoops. Jolly Company has the following sales projections for the upcoming year: Jolly Company wants to have 25% of the next quarter's sales in units on hand at the end of each quarter. Inventory at the beginning of the year was 5,525 hula hoops. How many hula hoops should Jolly Company produce during the first quarter?

Sander Enterprises prepared the following sales budget: The expected gross profit rate is 40% and the inventory at the end of February was $10,000. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold. What are the total purchases budgeted for April?

Managers may intentionally build slack into the budget

The master budget of a service company has fewer individual budget components than does the master budget of a manufacturing company.

Brockman Company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $35,000. Budgeted cash disbursements are $123,000, while budgeted cash receipts are $130,000. Brockman Company wants to have an ending cash balance of $48,000. How much would Brockman Company need to borrow to achieve its desired ending cash balance?

Merchandising companies do not prepare a direct materials budget.

The cash budget is prepared before the operating budget.

DogDayz Company has two products: Doggyz and Pupz. A March sales forecast projects 22,000 units of Doggyz and 15,000 units of Pupz are going to be sold at prices of $17.50 and $12.00, respectively. The desired ending inventory of Doggyz is 20% higher than the beginning inventory, which was 2,000 units. How much are total March sales for Doggyz anticipated to be?

Which of the following is a potential disadvantage of participative budgeting?

For Dubinsky Company, experience has shown that payment for the credit sales is received as follows: 10% in the month of sale, 65% in the first month after sale, 20% in the second month after sale, and 5% uncollectible. Dubinsky Company has budgeted the following credit sales during the last four months of the year: September, $20,000; October, $24,000; November $22,000; December, $28,000. How much cash can Dubinsky Company expect to collect in November as a result of credit sales?

Meers Corporation had beginning inventory of 21,000 units and expects sales of 76,500 units during the year. Desired ending inventory is 19,500 units. How many units should Meers Corporation produce?

Which of the following budgets is the cornerstone of the master budget?

A cash collections budget is focused on the timing of cash receipts.

Merchandising companies prepare which of the following budgets?

Which of the following types of companies use a direct materials budget?

Budget committees most often would include all of the following people except

Thomas Corporation recorded sales of $200,000 during March. Management expects sales to increase 5% in April, another 2% in May, and another 10% in June. Cost of goods sold is expected to be 80% of sales. What is the budgeted gross profit for June?

Warshaw Company budgets payroll at $3,600 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $13,200 with budgeted sales of $160,000. Sales for July are budgeted at $180,000 while purchases of inventory for July are budgeted at $95,000. Depreciation and insurance for July are estimated at $1,000 and $600, respectively. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month. The purchase of $2,500 in equipment and $1,500 in furniture is expected in July. The July payroll should be budgeted at

The Alec Corporation sells inflatable pools. On June 30, there were 105 pools in ending inventory, and accounts receivable had a balance of $12,000. Sales of inflatable pools (in units)have been budgeted at the following levels for the upcoming months: The company has a policy that the ending inventory of inflatable pools should be equal to 30% of the number of pools to be sold in the following month. The Outdoor Leisure Store sells the inflatable pools for $100 each. The company's collection history shows that 30% of the sales in a month are paid for by customers in the month of sale, while the remainder is collected in the following month. Required: a. Prepare a merchandise purchases budget showing how many pools should be purchased in each of the months including July, August, and September. b. Prepare a cash collections budget for each of the months including July, August, and September.