Exam 22: The Master Budget and Responsibility Accounting

Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions: Construction, Manufacturing, and Military. The total monthly costs of the procurement department are $480,000. Of these costs, 80% are traceable to the divisions, and 20% are considered untraceable. Henderson has decided to assign the traceable costs to the divisions based on number of purchase orders processed. Below is a list of the purchase orders per division. Divisions Purchase Orders Construction 3,200 Manufacturing 2,400 Military 800 Total 6,400 - How much of the procurement department's cost should be assigned to the Military Division?

AAA Company is preparing its 3rd quarter budget and provides the following data: Jul Aug Sep Cash collections \ 50,000 \ 40,000 \ 48,000 Cash payments: Purchases of inventory 31,000 22,000 18,000 Operating expenses 12,000 9,000 11,600 Capital expenditures 13,000 25,000 0 Cash balance at June 30 is projected to be $4,000. The company is required to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash. - How much will the company have to borrow at the end of July?

Hi-value Products Company is creating an operating budget for the 3^rd quarter and will begin with a sales budget. Budgeted sales are $100,000 in July, $120,000 in August, and $160,000 in September. 75% of sales are cash and 25% of sales are on account. Please use the following format and prepare a sales budget. Sales Budget Jul Aug Sep Cash sales: 75\% Credit sales: 25\% Total sales

Fast Foods has budgeted sales for June and July at $520,000 and $480,000, respectively. Sales are 80% credit, of which 50% is collected in the month of sale and 50% is collected in the following month. What is the accounts receivable balance on July 31?

In preparing an operating budget, the sales budget is prepared first. Which of the following is prepared next?

Circle A Company is preparing its cash collections budget for the 2^nd quarter of 2012. Budgeted sales are as follows: Budgeted stalas Apr May Jun Cash sales \ 10,000 \ 9,000 \ 7,500 Credit sales 24,000 20,000 16,500 Total sales \ 34,000 \ 29,000 \ 24,000 Accounts receivable at March 31 were $14,000. The budget assumes that 20% of credit sales are collected in the month of sale, and the remaining 80% are collected one month later. Using the format below, please prepare the cash collections budget. Budgeted cash collections Apr May Jun Cash sales collected in month of sale Credit sales -20\% collected in current month Credit sales - 80\% collected from previous month Total collections

Norton Company prepared the following sales budget: Month Budgeted Sales March \ 200,000 April \ 180,000 May \ 220,000 June \ 260,000 Cost of goods sold is budgeted at 60% of sales, and the inventory at the end of February was $36,000. Desired inventory levels at the end of each month are 30% of the next month's cost of goods sold. -How much are the budgeted purchases for the month of April?

Responsibility centers are business units where managers are focused exclusively on controlling costs of operation.

Deerborne Company is preparing their budget for the 2^nd quarter and provides the following data: Apr May Jun Budgeted purchases \1 0,000 \1 2,000 \9 ,000 Budgeted Cash Payments for Inventory Purchases Apr May Jun 60\% of previous month purchases 5,000 6,000 7,200 40\% of current month purchases 4,000 4,800 3,600 Total cash payments \ 9,000 \ 10,800 \ 10,800 Assume that accounts payable pertains only to suppliers of inventory. Based on the above data, what should the budgeted balance sheet show as the balance of Accounts payable at June 30?

Which of the following is an example of the benchmarking function of a budget?

The budgeted "Cash payments for purchases" must be completed before the "Inventory, Purchases and Cost of goods sold budget" can be prepared.

In order to prepare a budgeted income statement, several other budgets need to be prepared first. Which of the following is NOT one of the budgets needed to prepare the budgeted income statement?

Zygot Biotech Company is budgeting for the 3rd quarter, and provide the following data: Jul Aug Sep Cash collections \ 50,000 \ 40,000 \ 48,000 Cash payments: Purchases of inventory 31,000 22,000 18,000 Operating expenses 12,000 9,000 11,600 Capital expenclitures 0 19,000 0 The cash balance at June 30 is projected to be $5,600. There are no financing transactions planned in the 3rd quarter. Please use the format below and prepare the cash budget: Cash Budget Jul Aug Sep Beginning cash balance Cash collections Cash available Cash payments: Purchases of inventory Operating expenses Capital expenditures Total cash payments Ending cash balance

Assume that AAA Company's Procurement Department is a centralized service department serving all business units, which of the following would be the MOST appropriate cost driver or assignment basis?

When companies use an enterprise resource planning system to roll up or consolidate the budgets of the individual business units, it is more difficult for managers to conduct sensitivity analysis on their own budget data.

Berkeley Products has a cash balance of $20,000 at April 1, 2011. They are now preparing the cash budget for the second quarter. Budgeted cash collections and payments are as follows: Apr May Jun Cash collections \ 12,000 \ 9,000 \ 10,500 Cash payments: Purchases of inventory 4,600 4,200 4,000 Operating expenses 5,000 5,200 4,800 There are no budgeted capital expenditures or financing transactions during the quarter. - Based on the above data, what is the projected cash balance at the end of June?

Caskill Company forecasts $40,000 of sales in January, $38,000 in February, $30,000 in March, and $32,000 in April. Cost of goods sold is budgeted at 75% of sales. Caskill should have inventory on hand at the end of each month equal to $5,000 plus 20% of the following month's cost of goods sold. How much are budgeted purchases for February?

Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions-Construction, Manufacturing, and Military. The total monthly costs of the procurement department are $480,000. Of these costs, 80% are traceable to the divisions, and 20% are considered untraceable. Henderson has decided to assign the traceable costs to the divisions based on number of purchase orders processed. Below is a list of the purchase orders per division. Divisions Purchase Orders Construction 3,200 Manufacturing 2,400 Military 800 Total 6,400 - How much of the procurement department's cost should be assigned to the Manufacturing Division?

Pentangle Company has prepared a preliminary cash budget for the 3^rd quarter as shown below: Cash Burdget Jul Aug Sep Beginning cash balance \ 32,000 \ 4,400 \ 6,900 Cash collections 49,400 51,000 44,600 Cash available 81,400 55,400 51,500 Cash payments: Purchases of inventory 36,000 9,000 11,000 Operating expenses 41,000 30,500 30,900 Capital expenditures 0 9,000 7,700 Total cash payments \ 77,000 \ 48,500 \ 49,600 Ending cash balance \ 4,400 \ 6,900 \ 1,900 Subsequently, the marketing department revised its figures for cash collections. New data are as follows: $52,000 in July, $50,000 in August, and $42,000 in September. - Based on the new data, what is the new projected cash balance at the end of September?

Craig Manufacturing Company's budgeted income statement includes the following data: Data extracted from budgeted Income statement Mar Apr May Jun Sales \ 120,000 \ 90,000 \ 95,000 \ 100,000 Commission expense - of sales 18,000 13,500 14,250 15,000 Salary exp 30,000 30,000 30,000 30,000 Miscellaneous expense -4\% of sales 4,800 3,600 3,800 4,000 Rent expense 3,600 3,600 3,600 3,600 Utility expense 1,900 1,900 1,900 1,900 Insurance expense 2,100 2,100 2,100 2,100 Depreciation expense 4,400 4,400 4,400 4,400 The budget assumes that 60% of commission expenses are paid in the month they were incurred and the remaining 40% are paid one month later. In addition, 50% of salary expenses are paid in the month incurred and the remaining 50% are paid one month later. Miscellaneous expenses, rent expense and utility expenses are assumed to be paid in the same month in which they are incurred. Insurance was prepaid for the year on January 1. Please provide a budget of cash payments for operating expenses using the following format: Budget of Cash Payments for Operating Expenses Apr May Jun Variable expenses 40\% of last month's commission expense 60\% of this month's commission expense Misc. expenses - 4\% of sales Total variable operating expenses Fixed expenses 50\% of last month's salary expense 50\% of this month's salary expense Rent exp. Utility exp. Total payments for fixed operating expense Total payments for operating expenses