Exam 9: Budgeting

The Bandeiras Company, a merchandising firm, has budgeted its activity for December according to the following information: I. Sales at $550,000, all for cash. II. Merchandise inventory on November 30 was $300,000. III. Budgeted depreciation for December is $35,000. IV. The cash balance at December 1 was $25,000. V. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash. VI. The planned merchandise inventory on December 31 is $270,000. VII. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid for in cash. -What are the budgeted cash disbursements for December?

The beginning cash balance is not included on the cash budget since the cash budget deals exclusively with cash flows rather than with balance sheet amounts.

The PDQ Company makes collections on credit sales according to the following schedule: 25% in month of sale 70% in month following sale 4% in second month following sale 1% uncollectible The following sales have been budgeted: What would be the cash collections in June?

The static budget is a good tool for assessing whether variable costs are under control or not.

A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lowercase letters (a, b, c, etc.); these lowercase letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands of dollars. -Which of the following is a major weakness of flexible budgets?

Pollitt Potato Packers has a flexible budget for manufacturing overhead that is based on direct labour hours. The following overhead costs appear on the flexible budget at the 200,000-hour level of activity: -At an activity level of 180,000 direct labour hours,what amount would the flexible budget estimate for indirect labour cost?

The International Company makes and sells only one product, Product SW. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: All expenses other than depreciation are paid in cash in the month they are incurred. -If the company has budgeted to sell 24,000 units of Product SW in September,what would be the total budgeted fixed selling and administrative expenses for September?

The effect of responsibility accounting is to personalize the accounting system.

Pollitt Potato Packers has a flexible budget for manufacturing overhead that is based on direct labour hours. The following overhead costs appear on the flexible budget at the 200,000-hour level of activity: -At an activity level of 180,000 direct labour hours,what amount would the flexible budget estimate for total budgeted fixed costs?

Mandalay Hotel bases its budgets on guest-days. The hotel's static budget for August appears below: -What is the expected total variable overhead cost at an activity level of 5,000 guest-days per month?

A continuous or perpetual budget is one that covers a 12-month period,but is constantly adding a new month onto the end of the 12-month period as the current month is completed.

The Doley Company has planned the following sales for the next three months: Sales are made 20% for cash and 80% on account. From experience, the company has learned that a month's sales on account are collected according to the following pattern: The company requires a minimum cash balance of $5,000 to start a month. The beginning cash balance in March is budgeted to be $6,000. Required: a) Compute the budgeted cash receipts for March. b) The following additional information has been provided for March: Prepare a cash budget in good form for the month of March, using this information and the budgeted cash receipts you computed for part a) above. The company can borrow in any dollar amount and will not pay interest until April.

The cash budget must be prepared before you can complete which of the following?

When choosing an activity measure for a flexible budget,it is best to choose an activity that is measured in dollars.

Capelli Hospital bases its budgets on patient-visits. The hospital's static budget for August appears below: -What should be the total overhead cost at an activity level of 9,400 patient-visits per month?

One of the distinct advantages of a budget is that it can help to uncover potential bottlenecks before they occur.

The participative budget can be a very effective control device in an organization.

A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lowercase letters (a, b, c, etc.); these lowercase letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands of dollars. -What is the cash balance at the beginning of the second quarter (item e),in thousands of dollars?

The master budget process usually begins with which of the following?

The direct materials to be purchased for a period can be obtained by subtracting the desired ending inventory of direct materials from the total direct materials needed for the period.