Exam 22: The Master Budget and Responsibility Accounting

When a company is preparing a budgeted statement of cash flows and they wish to calculate the payments to suppliers for purchases of inventory, they should refer to which of the following?

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 August?

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 March?

Chaterlain Company is preparing its budget for the 3^rd quarter. Cash balance at June 30 was $11,000. Additional budgeted data is provided here: Jul Aug Sep Cash collections \ 42,000 \ 51,000 \ 39,000 Cash payments: Purdhrses of invertory 14,000 9,000 11,000 Operating Experses 25,000 22,700 30,900 Capital expenditures 5,200 9,000 14,000 - What amount should be shown in the cash budget for the cash balance at the end of September?

Which of the following statements is TRUE about the operating budget?

Hatfield Company has the following budgeted credit sales for the last four months of the year-September, $13,000; October, $19,000; November $20,000; December, $24,000. Experience has shown that payment for the credit sales is received as follows: 10% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 10% uncollectible. How much cash can Hatfield Company expect to collect in November as a result of credit sales?

Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions-Construction, Manufacturing, and Military. The Construction Division has been allocated a total of $192,000 of costs from the procurement department. Of that amount, $144,000 is considered traceable to the three product types within the division-Civil Construction, Residential Construction, and Commercial Construction. The traceable amounts are further allocated to the three product types within the division as shown here: $\text { Construction Division }$ Product lines Revenues Variable Assigned Costs Expenses Civil \ 36,000 \ 24,000 \ 20,250 Residential \ 98,000 \ 41,000 \ 40,500 Commerdal \ 216,000 \ 60,000 \ 83,250 Total \ 350,000 \ 125,000 \ 144,000 - The above information is used to complete a performance report, the divisional income statement, for the Construction Division. On that report, the product margin for the Residential Construction product tis:

Argyle Company forecasts Sales of $50,000 in January, $60,000 in February, $70,000 in March, and $75,000 in April. The inventory balance at January 1 is $12,000. Cost of goods sold is budgeted at 40% of sales revenue. Argyle wishes to have inventory levels at the end of each month equal to 60% of the cost of goods sold for the following month, plus a "safety cushion" of $1,000. How much should be budgeted for inventory purchases in March?

When a company is preparing a budgeted statement of cash flows and they wish to calculate the collections from customers, they should refer to which of the following?

Southshore Company is preparing its financial budget for the first quarter, and is focusing on budgeted cash collections. Accounts receivable at the end of the previous year were $30,000. Sales in the first quarter are forecasted as follows: Budpgtad Salas Jan Feb Mar Cash sales \ 40,000 \ 50,000 \ 48,000 Credit sales 33,000 38,000 35,000 Total sales \ 73,000 \ 88,000 \ 83,000 The budget assumes that cash from the credit sales is collected the month after the credit sales take place. Using the following format, please prepare the budgeted cash collections. Budgeted Cash Collections Jan Feb Mar Cash sales collected in month of sale Credit sales - collected from previaus month's sales Total callections

Budgets provide benchmarks that help managers evaluate performance.

Advance Engineering makes payments on its inventory purchases as follows-30% in the month of purchase, 50% in the following month, and 20% in the second month following purchase. Budgeted inventory purchases for June, July, and August are $50,000, $43,000 and $56,000, respectively. At what amount are cash payments for inventory in August budgeted?

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts receivable, which document should be used?

Which of the following describes the operating expenses budget?

A budgeted income statement is based on estimated amounts and not actual amounts.