Exam 10: Strategy and the Master Budget

Ardel Co. budgeted to sell 200,000 units of Zbox in September. Production of one unit of Zbox requires two pounds of aluminum and five pounds of steel powder. The beginning inventory and the desired ending inventory are as follows:How many pounds of aluminum powder does Ardel Co. need to purchase during September if Ardel plans to manufacture 150,000 units of Zbox in September?

LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May $40,000. Experience has shown that payment for the credit sales is received as follows: 60% in the month of sale, 25% in the first month after sale, 12% in the second month after sale, and the remainder is uncollectible. How much cash can LeMinton Company expect to collect in March as a result of credit sales (current and past)?

Joe's Mart policy is to have 20% of the next month's sales on hand at the end of the current month. Projected sales for August, September, and October are 25,000 units, 20,000 units, and 30,000 units, respectively. How many units must be purchased in September?

Uecker Enterprise expects sales of 20,000 units of T1 in September. T1 is its most popular high-performance desktop model. The sales manager is confident that, between October and December, the total sales will experience a 50% growth rate each month from the month before. Each unit requires 40 sets of the Alpha-5 chip. The firm has a policy to maintain inventory at the end of each month equal to 1% of the following month's estimated sales. The same policy applies to the chips and components required to assemble the finished product. Required: 1. What is the budgeted production (in units) for each of the months September, October, and November? 2. How many sets of Alpha-5 does the company plan to purchase in September and in October?

Information pertaining to Yekstop Corp.'s sales revenue is presented below:Management estimates that 4% of credit sales are eventually uncollectible. Of the collectible credit sales, 65% are likely to be collected in the month of sale and the remainder in the month following the month of sale. The company desires to begin each month with an inventory equal to 75% of the sales projected for the month. All purchases of inventory are on open account; 30% will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling prices. Budgeted December cash payments by Yekstop Corp. for December inventory purchases are:

The process of examining how a change in a single item in a budget (for example, sales volume) affects one or more items in the budget (for example, budgeted sales revenue and budgeted operating income) is generally referred to as:

The effect of increasing the targeted (i.e., desired) ending inventory for a given budget period has the following effect on the production budget for the period:

Information pertaining to Yekstop Corp.'s sales revenue is presented below:Management estimates that 4% of credit sales are eventually uncollectible. Of the collectible credit sales, 65% are likely to be collected in the month of sale and the remainder in the month following the month of sale. The company desires to begin each month with an inventory equal to 75% of the sales projected for the month. All purchases of inventory are on open account; 30% will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling prices. Budgeted cash payments in December for November inventory purchases by Yekstop Corp. are:

Information pertaining to Yekstop Corp.'s sales revenue is presented below:Management estimates that 4% of credit sales are eventually uncollectible. Of the collectible credit sales, 65% are likely to be collected in the month of sale and the remainder in the month following the month of sale. The company desires to begin each month with an inventory equal to 75% of the sales projected for the month. All purchases of inventory are on open account; 30% will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling prices. Total budgeted cash collections for Yekstop Corp. in December are:

A plan of dollar amounts to be spent on long-term projects is called a:

Maintaining a constant production level in a firm has the advantage of:

A "participative" budget is a(n):

Information pertaining to Yekstop Corp.'s sales revenue is presented below:Management estimates that 4% of credit sales are eventually uncollectible. Of the collectible credit sales, 65% are likely to be collected in the month of sale and the remainder in the month following the month of sale. The company desires to begin each month with an inventory equal to 75% of the sales projected for the month. All purchases of inventory are on open account; 30% will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. Purchase costs are approximately 60% of the selling prices. Total budgeted inventory purchases in November by Yekstop Corp. are:

All of the following are ways of setting the budget, except:

The authorization function of budgets is especially important for government and not-for-profit (NFP) entities, where budgeted amounts often serve both as approvals of planned activities (or programs) and as:

Dockille, Inc., is preparing its budget for the second quarter of the calendar year.The following sales data (in units) have been forecasted: Additional information: Desired ending inventory each month—Finished goods: 30% of next month's sales Desired ending inventory each month—Raw materials: 25% of next month's production needs Number of raw material units required per unit of finished product: 4 Required: How many units of raw materials should be purchased in the 2^nd quarter?

Assume only the specified parameters (that is, variables) change in a sensitivity analysis. If the contribution margin increases by $2 per unit, then operating profits will:

Brownsville Novelty Store prepared the following budget information for the month of May: Sales are budgeted at $360,000. All sales are on account and a provision for bad debts is made for each month at three percent of sales for the month. Inventory was $84,000 on April 30; an inventory increase of $12,000 is planned for May 31. All inventory is marked to sell at cost plus 50 percent. Estimated expense for selling and administrative expenses for the month are $48,000. Depreciation for May is projected at $6,000. Brownsville's budgeted operating income for May is:

Fresplanade Co. had the following historical collection pattern for its credit sales: 75% collected in the month of sale 12% collected in the first month after month of sale 8% collected in the second month after month of sale 3% collected in the third month after month of sale 2% uncollectible The sales on open account (credit sales) have been budgeted for the last six months of the year as shown below: The estimated total cash collections by Fresplanade Co. during October from accounts receivable is:

Brownsville Novelty Store prepared the following budget information for the month of May: Sales are budgeted at $360,000. All sales are on account and a provision for bad debts is made for each month at three percent of sales for the month. Inventory was $84,000 on April 30; an inventory increase of $12,000 is planned for May 31. All inventory is marked to sell at cost plus 50 percent. Estimated cash disbursements for selling and administrative expenses for the month are $48,000. Depreciation for May is projected at $6,000. Brownsville's budgeted cost of goods sold (CGS) in May is: