Exam 14: Planning for Profit and Cost Control

Benton Company's sales budget shows the following expected total sales: The company expects 80% of its sales to be on account (credit sales). Credit sales are collected as follows: 25% in the month of sale, 72% in the month following the sale with the remainder being uncollectible and written off. The total cash receipts during April would be:

Select the correct statement about the master budget.

Strategic planning deals with the establishment of long term company objectives.

The master budget details:

A schedule of cash receipts is often prepared in conjunction with the sales budget.

What budget is generally not included in a master budget?

Which of the following budgets needs to be prepared prior to preparing an inventory purchases budget?

Select the incorrect statement about budgeting committees.

Purchases on account are given below: 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. How much will the cash payments for purchases be in November?

Which of the following is generally included in a sales budget?

The inventory purchases budget is based on which budget?

If a financial statement is labeled "pro forma" this means that the statement was prepared by a professional accountant (usually the firm's auditor) following a prescribed format.

One advantage of participatory budgeting is that it allows subordinates to perform the budgeting function thus freeing up upper management for more important tasks.

What is the role of top management in a participative budgeting system?

The cash budget includes three sections: (1) operating activities, (2) investing activities, and (3) financing activities.

The basic cash budget format is: Total cash available - Total cash disbursed = Surplus or shortage of cash +/- Effects of financing = Ending cash.

Bantam Industries has budgeted the following information for March: If there is a cash shortage, the company borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments and interest is paid monthly at 1% on the first day of the following month. The company had no debt before March 1^st. How much cash will the company need to borrowed in March?

The cash budget is based on which budget?

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be:

Purchases on account are given below: 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. How much will the cash payments for purchases be in December?