Exam 22: The Master Budget and Responsibility Accounting

A goal of the budgeting process is to assist managers with coordinating and implementing the business plan.

Zygot Biotech Company is budgeting for the 3rd quarter, 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 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. - What is the projected cash balance at the end of July?

Pequod Company has budgeted inventory purchases as follows: Apr May Jun Budgeted purchses \ 10,000 \ 12,000 \ 9,000 The budget assumes that 40% of a given month's purchases are paid in the month of purchase, and the remaining 60% is paid out one month later. Accounts payable to inventory suppliers at March 31 was $5,000. Please use the format below and prepare the budgeted cash payments for inventory purchases. Budgeted Cash Payments for Inventory Apr May Jun Purchases 60\% of previous month purchases 40\% of current month purchases Total cash payments

California Products Company has the following data as part of its budget for the 2^nd quarter: Apr May Jun Cash collections \ 30,000 \ 32,000 \ 36,000 Cash payments: Purdhess af inventory 4,500 4,600 3,800 Operating Expenses 7,200 7,600 8,000 Capital expenditures 0 24,500 5,200 The cash balance at April 1 is forecast to be $8,200. Please prepare a cash budget using the following format: Cash Budget Apr May Jun Beginning cash balance Cash collections Cash available Cash payments: Purchases of inventory Operating expenses Capital expenditures Total cash payments Finding casin balance

The starting point in the budgeting process is the preparation of the:

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 May?

Hi-value Products Company is creating an operating budget for the 3^rd quarter. Please review the following budgets: Sales Budget Jul Aug Sep Cash sales: 75\% \ 75,000 \ 90,000 \1 20,000 Credit sales: 25\% 25,000 30,000 40,000 Total sales \ 100,000 \ 120,000 \ 160,000 Inventory, Purchases and COGS. Budget Jul Aug Sep Cost of goods sold \ 60,000 \ 72,000 \ 96,000 Desired ending inventory 38,000 50,000 62,000 Total inventory required 98,000 122,000 158,000 ess Beginning inventory (50,000) (38,000) (50,000 Purchases \ 48,000 \ 84,000 \ 108,000 Operating Expenses Budget Jul Aug Sep Variable operating expenses: Misc. expense (10\% of sales) \ 10,000 \ 12,000 \ 16,000 Total variable expenses 10,000 12,000 16,000 Fixed operating expenses: Salary expense 12,000 12,000 12,000 Rent expense 8,000 8,000 8,000 Depreciation expense 5,600 5,600 5,600 Misc. expense(fixed portion) 4,200 4,200 4,200 Total fixed expenses 29,800 29,800 29,800 Total operating expenses \ 39,800 \ 41,800 \ 45,800 Using the format below, please prepare a budgeted income statement. Budgeted Income Statement Jul Aug Sep Sales revenue Cost of goods sold Gross profit Variable operating expenses: Misc. expense Total variable expenses Contribution margin Fixed operating expenses Salary expense Rent expense Depreciation expense Misc. expense(fixed portion) Total fixed expenses Operating income/(loss) Interest expense Net income/(loss)

Henderson Industrial Products Company has three divisions-Construction, Manufacturing, and Military. It has also identified costs associated with several common service departments and has traced those costs to each division. The Construction Division Income Statement is shown here: Construction Division Income Statement Division Total Civil Residential Commercial Sales revenue \ 350,000 \ 36,000 \ 98,000 \ 216,000 Variable expenses \ 125,000 \ 24,000 \ 41,000 \ 60,000 Contribution margin \ 225,000 \ 12,000 \ 57,000 \ 156,000 Traceable fixed expenses \ 144,000 \ 20,250 \ 40,500 \ 83,250 Product margin \ 81,000 (\ 8,250) \ 16,500 \ 72,750 Non-traceable expenses \ 48,000 Division margin \ 33,000 Henderson is now consolidating the division data into a company income statement. The Manufacturing Division reports division margin of $24,000; the Military Division reports division margin of negative $4,000. In addition to the data from the three divisions, there are common non-traceable costs of $21,000. How much is the total company net operating income?

Bartholomew Manufacturing Company is preparing the operating budget for the first quarter of 2012. They forecast sales of $50,000 in January, $60,000 in February, and $70,000 in March. Cost of goods sold is budgeted at 40% of Sales. Variable and fixed expenses are as follows: Variable: $\quad$ Miscellaneous expenses : $20 \%$ of Sales Fixed: $\quad$$\quad$ Salary expense: $\$ 11,000$ per month $\quad$$\quad$$\quad$$\quad$ Rent expense: $\$ 5,000$ per month $\quad$$\quad$$\quad$$\quad$ Depreciation expense: $\$ 1,200$ per month $\quad$$\quad$$\quad$$\quad$ Miscellaneous expenses/fixed portion: $\$ 3,300$ per month - How much is the operating net income/(loss) for February?

Caribbean Tool and Die Company's forecasted sales for April, May, June and July are $150,000, $225,000, $180,000, and $210,000, respectively. Sales are 50% cash and 50% credit with all accounts receivables collected in the month following the sale. What are the cash collections budgeted for June?

Management must get employees to accept the budget's goals in order to effectively use the budget as a benchmark for evaluating performance.

The cash budget may be used to determine whether a company will need additional financing for the coming period.

A budget focuses primarily on financial information, but does not reflect specific business strategies.

Which of the following BEST describes a business unit where the manager is responsible not only for controlling costs and generating sales revenue, but also for investment decisions and for return on investments?

Norton Company prepared the following sales budget: Month Budgeted Sales March \ 200,000 April \2 80,000 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 May?

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 expenditures 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. -What is the 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 exp. - 15\% 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. - How much is the total of the budgeted cash payments for operating expenses for the month of May?

Assume that AAA Company's Legal Department is a centralized service department serving all the various business units of the company. If AAA wished to assign the costs of the department to the company's various business units, which of the following would be the MOST appropriate cost driver or assignment basis?

A manufacturing company's legal department provides legal guidance to all the divisions and units of the company. The salary and benefits of the legal department's personnel would be an example of which of the following?

Which of the following is NOT a characteristic of the budgeting process?