Exam 10: Strategy and the Master Budget

A business develops a budget for many reasons beyond wanting to know what future profits will be.Comment on the role of a firm's strategic goals in both the master budget and the capital budget.

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 November from collection of accounts receivable is:

What is zero-base budgeting (ZBB) and how does this approach to budgeting compare to what can be considered "traditional budgeting"? How is ZBB implemented in practice?

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 bad debts expense for May is:

Which one of the following is a budgeting process that requires managers to prepare budgets based on in-depth reviews of all budget items?

The successful use of a budgeting system generally involves all of the following except:

Over the years, alternative approaches to traditional budgeting practices have been proposed to facilitate budget preparation and usefulness.First, define what is meant by the term "traditional budgeting." Next, compare and contrast the following alternative budgeting approaches to a traditional budgeting process: Zero Base Budgeting (ZBB); Activity-Based Budgeting (ABB); Time-Driven ABB; and, kaizen budgeting.

West Company budgeted the following credit sales during the current year: September, $75,000; October, $108,000; November, $90,000; December, $96,000.Experience has shown that cash from the credit sales is received as follows: 10% in the month of sale, 50% in the first month after sale, 35% in the second month after sale, and 5% is uncollectible.All collections in the month of sale are subject to 2 percent cash discount. Required: How much total cash can West Company expect to collect in November?

Budgeting provides all of the following except:

The proper treatment of the cost of unused capacity, as identified through the use of an activity-based budgeting (ABB) system, is to charge the amount to:

Capital One produces a single product, which it sells for $8.00 per unit. Variable costs per unit equal $3.20. The company expects short-term fixed costs to be $7,200 for the coming month, at the projected sales level of 20,000 units. Management is considering several alternative actions designed to improve operating results. In conjunction with this, they have created a profit-planning (that is, a CVP) model, which can be used to evaluate different scenarios. Suppose that Capital One's management believes that a $1,600 increase in the monthly promotion costs will provide a boost to sales. By how many units must sales increase during the month to justify the contemplated expenditure? Round answer up to the nearest whole number.

The cash budget does not include:

Which of the following best describes the process of sales forecasting?

Kurt Helfter graduated with a B.S. degree in Mechanical Engineering and joined Andrew Consulting, a firm specializing in HVAC (heating, ventilation, and air conditioning) for small to medium-size business structures. Kurt is knowledgeable in the use of CAD (computer-assisted design) and was pleased during his initial employment to find Andrew Consulting a leader in the use of CAD software. During Kurt's third year at Andrew, he felt a sense of unease with the firm's slow pace in updating computer hardware and software. Although not directly involved in budgeting for the firm, Kurt has been satisfied with the resources that Andrew provided for his use. Kurt felt the need to detail his concerns in a memo to his superior, in which he requested significant investment in computer resources to "allow us to respond to clients' needs, both in quantity and quality." Kurt was surprised and hurt when he received his superior's response, which suggested that resource allocation in the firm is decided at a higher administrative level. "But all I wanted to do was help keep our firm competitive," Kurt responded to his boss when visiting him about the rejection memo. "Sorry, Kurt," his boss said, "That's how things get done in this firm." Kurt now feels lost, wondering if it's time to look for another job. Does this situation suggest what type of budgeting process the company is using? Is there a problem with individual and company goal congruence in Andrew Consulting? If so, how might Kurt's supervisor have prevented the problem?

Which of the following budgets is not a financial budget?

Capital One produces a single product, which it sells for $8.00 per unit. Variable costs per unit equal $3.20. The company expects short-term fixed costs to be $7,200 for the coming month, at the projected sales level of 20,000 units. Management is considering several alternative actions designed to improve operating results. In conjunction with this, they have created a profit-planning (that is, a CVP) model, which can be used to evaluate different scenarios. What is Capital One's current break-even point in terms of number of units for the month?

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 cash collection by Fresplanade Co. during September from credit sales in July, August, and September is:

An accounting statement that presents predicted amounts of the company's assets, liabilities, and stockholders' equity as of the end of the budget period is called a(n):

The budget committee for Amacom Company, with the help of the district sales manager, projects sales of 80,000 units of its primary product next year.The budget committee and key executives have decided that finished goods inventory should be decreased from the 10,000 units expected at the end of the current year, to 7,000 units at the end of next year.Each unit of finished product requires three units of material MPS15 and six units of material NAV23.At the end of the current year, the inventory of material MPS15 is expected to be 10,000 units and material NAV23 is expected to be 20,000 units.The budget committee believes that these material inventories can be reduced by 80% during the coming year because of the newly installed supply chain system. Required 1.Calculate the number of units Amacom expects to produce during the next year. 2.Compute the number of units that should be purchased of each of the raw materials in order to produce the budgeted units and comply with inventory policy.

Graham Corporation's budgeted production schedule, by quarters, for the coming year is as follows: Quarter 1 = 22,500 units Quarter 2 = 19,000 units Quarter 3 = 17,000 units Quarter 4 = 24,000 units Each unit of product requires three pounds of direct material. The company's policy is to begin each quarter with 30% of that quarter's direct materials production requirements. Graham expects to have 50,000 pounds of direct materials on hand at the beginning of Quarter 1. What would be Graham's budgeted direct materials purchases (in pounds) for the first quarter?