Exam 9: Budgeting

A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm.

In the merchandise purchases budget,the required purchases (in units)for a period can be determined by subtracting the beginning merchandise inventory (in units)from the budgeted sales (in units).

Alaska Company expressed the total expenses (Y) component of its master budget for February with the cost formula Y = $100,000 + $40*X, where X represents the expected number of units of its only product to be manufactured and sold. The budgeted average selling price per unit was $65 for budgeted sales volume 5,000 units. Reported actual results for February were as follows: -What was the total static budget variance for February?

Montero Corporation,a merchandising company,has provided the following budget data: Collections from customers are normally 70% in the month of sale, 20% in the month following the sale, and 9% in the second month following the sale. The balance is expected to be uncollectible. Montero pays for purchases in the month following the purchase. Cash disbursements for expenses other than merchandise purchases are expected to be $14,400 for May. Montero's cash balance on May 1 was $22,000. Required: a) Compute the expected cash collections during May. b) Compute the expected cash balance on May 31.

Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below: The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable operating expenses should be 10% of sales, and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable operating expenses are made during the month the expenses are incurred. -In a budget of cash receipts for March,what would be the total cash receipts?

The Waverly Company has budgeted sales for next year as follows: The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units.The finished goods inventory at the start of the year is 3,000 units.What should be the scheduled production for the third quarter?

Clay Company has projected sales and production in units for the second quarter of the coming year as follows: Cash-related production costs are budgeted at $5 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $100,000 per month. The accounts payable balance on March 31 totals $190,000, which will be paid in April. All units are sold on account for $14 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totalled $500,000 ($90,000 from February's sales and the remainder from March). Required: a) Prepare a schedule for each month showing budgeted cash disbursements for Clay Company. b) Prepare a schedule for each month showing budgeted cash receipts for Clay Company.

Alaska Company expressed the total expenses (Y) component of its master budget for February with the cost formula Y = $100,000 + $40*X, where X represents the expected number of units of its only product to be manufactured and sold. The budgeted average selling price per unit was $65 for budgeted sales volume 5,000 units. Reported actual results for February were as follows: -What was the master budget operating income for February?

Roberts Enterprises has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on May 31 contained 410 units. The company needs to prepare a production budget for the second quarter of the year. -What is the desired ending inventory for August?

Orion Corporation is preparing a cash budget for the six months beginning January 1.Shown below are the company's expected collection pattern and the budgeted sales for the period: Expected collection pattern: 65% collected in the month of sale 20% collected in the month after sale 10% collected in the second month after sale 4% collected in the third month after sale 1% uncollectible What would be the estimated total cash collections during April from sales and accounts receivables?

The LaPann Company has obtained the following sales forecast data: The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts. -What is the budgeted accounts receivable balance on September 30?

Barley Enterprises has budgeted unit sales for the next four months as follows: The ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on September 30 was below this level and contained only 600 units. -What are the total units to be produced in October?

The two components of the static budget variance are the flexible budget variance and the sales volume variance.

Tilson Company has projected sales and production in units for the second quarter of the coming year as follows: Cash-related production costs are budgeted at $7 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $110,000 per month. The accounts payable balance on March 31 totals $193,000, which will be paid in April. All units are sold on account for $16 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totalled $520,000 ($100,000 from February's sales and the remainder from March). Required: a) Prepare a schedule for each month showing budgeted cash disbursements for Tilson Company. b) Prepare a schedule for each month showing budgeted cash receipts for Tilson Company.

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 receipts for December?

In companies that have "no lay-off" policies,the total direct labour cost for a budget period is computed by taking the total direct labour hours needed to make the budgeted output of completed units and multiplying them by the direct labour wage rate.

The LaPann Company has obtained the following sales forecast data: The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts. -What are the budgeted cash receipts for October?

The LaGrange Company had the following budgeted sales for the first half of the current year: The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: Collections on sales: 60% in month of sale 30% in month following sale 10% in second month following sale The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000 represents uncollected December sales and $20,000 represents uncollected November sales -What is the budgeted accounts receivable balance on June 1 of the current year?

Sales forecasts are drawn up after the cash budget has been completed because it is only at that time that the funds available for marketing are known.

Information on the actual sales and inventory purchases of the Law Company for the first quarter follow: Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollectible. Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month. The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be $38,000, of which $15,000 is salaries and $8,000 is depreciation. The remaining operating expenses are variable with respect to the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March 1 was $43,000, and on April 1 was $35,000 -What would be the expected cash disbursements during April for operating expenses?