Exam 9: The Master Budget

Budgets do not provide benchmarks to help managers evaluate performance.

Fosnight Enterprises prepared the following sales budget: The expected gross profit rate is 20% and the inventory at the end of February was $9000. Desired inventory levels at the end of the month are 10% of the next month's cost of goods sold. What is the budgeted cost of goods sold for May?

The final step in the preparation of the financial budget is the preparation of which of the following?

Russell Company expects cash sales for July of $13,000, and a 24% monthly increase during August and September. Credit sales of $6000 in July should be followed by 14% decreases during August and September. What are budgeted cash sales and budgeted credit sales for September?

Meers Corporation had beginning inventory of 17,000 units and expects sales of 79,000 units during the year. Desired ending inventory is 19,900 units. How many units should Meers Corporation produce?

The Alec Corporation sells inflatable pools. On June 30, there were 105 pools in ending inventory, and accounts receivable had a balance of $12,000. Sales of inflatable pools (in units)have been budgeted at the following levels for the upcoming months: The company has a policy that the ending inventory of inflatable pools should be equal to 30% of the number of pools to be sold in the following month. The Outdoor Leisure Store sells the inflatable pools for $100 each. The company's collection history shows that 30% of the sales in a month are paid for by customers in the month of sale, while the remainder is collected in the following month. Required: a. Prepare a merchandise purchases budget showing how many pools should be purchased in each of the months including July, August, and September. b. Prepare a cash collections budget for each of the months including July, August, and September.

Lough Company prepared the following purchases budget: All purchases are paid for as follows: 5% two months after purchase, 40% in the following month, and 55% in the month of purchase. What are the total cash disbursements in August to account for the purchase of merchandise at Lough Company?

Budgets are helpful because managers can plan the cash inflows and outflows in an organization.

Goliath Company prepared the following purchases budget: All purchases are paid for as follows: 30% in the month of purchase, 45% in the following month, and 25% two months after purchase. What are the cash disbursements in October to account for the September purchases at Goliath Company?

Warshaw Company budgets payroll at $3300 per month plus a percentage of monthly sales. The June operating expenses budget includes total payroll of $10,900 with budgeted sales of $190,000. Sales for July are budgeted at $130,000 while purchases of inventory for July are budgeted at $940,000. Depreciation and insurance for July are estimated at $600 and $300, respectively. Office and administrative expenses related to purchasing inventory are budgeted at 5% of purchases for the month. The purchase of $2900 in equipment and $1000 in furniture is expected in July. The July payroll should be budgeted at

In which of the following company types would the manager combine cost of goods sold, inventory, and purchases into one budget?

Which of the following is not part of the operating budget?

Whistle Works manufacturers safety whistle keychains. They have the following information available to prepare their master budget: Whistle Works sells each whistle for $12. It takes 3 ounces of metal to produce each whistle at a cost of $0.50 per ounce. They prefer to have 10% of materials required for the following month's production in ending inventory as well. How many ounces of direct materials does Whistle Works need to purchase in October to meet production needs?

A company sells goods and offers credit terms of "net 30 days." What does this reveal to the company that sold the goods?

In which of the following company types does the manager use a "cost of goods sold, inventory, and purchases" budget?

The master budget of a service company has fewer individual budget components compared to the master budget of a manufacturing company.

A cash collections budget focuses on the timing of cash receipts.

Strategic planning enables the organization to establish long-term goals that extend 5-10 years into the future.

Whistle Works manufacturers safety whistle keychains. They have the following information available to prepare their master budget: Whistle Works sells each whistle for $12. It's been determined that each unit costs $7.25 to manufacture. How much is total budgeted MOH costs for the year ended 2016?