Exam 8: The Master Budget

Hall Company manufactures pool tables.The company has a policy of maintaining a finished goods inventory equal to 35 percent of the next month's planned sales.Each card table requires 4 hours of labor.The budgeted labor rate for the coming year is $12 per hour.Planned sales for the months of July,August,and September are respectively 6,000;8,000;and 5,000 units.What is Hall Company's budgeted direct labor cost for August?

Of the following budgets,which one is least likely to be determined by the dictates of top management?

Whitney Corporation Whitney Corporation,a reseller of women's fashions,has budgeted its activity for March.The budget information is presented below: I. Sales are $\$ 550,000$ . All sales are cash II. Merchandise inventory on F ebruary 28 is $\$ 300,000$ III. Buclgeted depreciation for March is $\$ 35,000$ . IV. Cash in bank on March 1 is $\$ 25,000$ . V. Selling and administrative expenses are buclgeted at $\$ 60,000$ for March and are paid in cash VI. The planned merchandise inventory on March 31 is $\$ 270,000$ . VII. The invoice cost for merchandise purchases represents $75 \%$ of sales price. All purchases are paid for in cash Refer to Whitney Corporation.The budgeted net income for March is:

A budget manual should include pro-forma financial statements for the upcoming period.

The master budget

Santa Fe Music,Inc. Santa Fe Music,Inc.sells electronic keyboards.The following information regarding operating costs has been extracted from budgets of Santa Fe Music for December of this year and the first few months of next year:

	Dec.	Jan.	Feb.	Mar.
Payroll	$12,000	$13,000	$22,000	$16,000
Insurance	4,000	4,000	4,000	4,000
Rent	6,000	6,000	6,000	6,000
Depreciation	2,000	2,000	2,000	2,000
Taxes	1,200	1,000	2,300	2,000

In addition to the above operating costs,enough keyboards are purchased each month to maintain the inventory at 40 percent of the projected next month's sales.The firm is expected to be in compliance with this policy on December 1.Budgeted sales are:

	Dec.	Jan.	Feb.	Mar.	Apr.
Budgeted sales in units:	40	45	60	50	40

Refer to Santa Fe Music,Inc.The average cost of a keyboard is $500.Merchandise is paid for in the month following its purchase.All other expenses are paid in the month in which they are incurred.On average,a keyboard sells for $1,500.Of each sale,40 percent of the sales price is collected in the month of sale.The balance is collected in the month following the sale. Prepare a cash budget for the first three months of next year.The beginning cash balance on January 1 is budgeted to be $50,000.

The final step in the master budget process is preparation of the _________________________.

Budgetary slack is frequently found in imposed budgets.

Sullivan Company Sullivan Company is preparing its Manufacturing Overhead budget for the second quarter of the year.Budgeted variable factory overhead is $3.00 per unit produced;budgeted fixed factory overhead is $75,000 per month,with $16,000 of this amount being factory depreciation. Refer to Sullivan Company.If the budgeted cash disbursements for factory overhead for June are $80,000,then the budgeted production for June must be:

Shown below are the totals from period budgets of Terrell Corporation for the current year:

Revenue budget	$100,000
Materials usage from production budget	15,000
Labor cost budget	20,000
Manufacturing overhead budget	20,000
General and administrative budget	30,000
Capital expenditure budget	20,000
Work in Progress Inventories:
Beginning of Year	10,000
End of Year	5,000
Finished Goods Inventory:
Beginning of Year	15,000
End of Year	10,000
Tax Rate	40%

Required: Prepare a forecasted Income Statement for the current year:

Both the budgeted quantity of material to be purchased and the budgeted quantity of material to be consumed can be found in the

A continuous budget is prepared by adding a new budget month as each month expires.