Exam 22: Master Budgets and Planning

Flack Corporation, a merchandiser, provides the following information for its December budgeting process: The November 30 inventory was 1,800 units. Budgeted sales for December are 4,000 units. Desired December 31 inventory is 2,840 units. Budgeted purchases are:

Alliance Company's budgets production of 24,000 units in January and 28,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each month's ending raw materials inventory should equal 40% of the following month's budgeted materials. The January 1 inventory for this material is 38,400 pounds. - What is the budgeted materials need in pounds for January?

Aloan Co. provides the following sales forecast for the next three months: Sales units January February March 3.000 4,200 5,000 The company wants to end each month with ending finished goods inventory equal to 10% of the next month's sales. Finished goods inventory on December 31 is 300 units. - The budgeted production units for February are:

Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct materials requirement per unit is 2 ounces (oz.). The company has determined that it wants to have safety stock of direct materials on hand at the end of each month to complete 20% of the units budgeted in the following month. There was 3,160 ounces of direct material in inventory at the start of July - The total amount of direct materials in ounces, to be purchased in July is:

All of the following are necessary for budgets to be effective except:

Garcia Corporation's April sales forecast projects that 5,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units. Budgeted purchases of units in April would be:

Which of the following budgets is not an operating budget?

The ________ , prepared by manufacturing firms, shows the number of units to be produced in a period based on the unit sales projected in the sales budget, along with inventory considerations.

Webster Corporation's budgeted sales for February are $325,000. Webster pays sales representatives a commission of 6% of sales dollars. The company pays a sales manager a monthly salary of $4,400 and expects advertising expense of $2,000 per month. Compute the total selling expenses to be reported on the selling expense budget for the month of February.

Part of the cash budget is based on information taken from the capital expenditures budget.

Cameroon Corp. manufactures and sells electric staplers for $16 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the number of electric stapler sales budgeted for February should be:

Glaston Company manufactures a single product using a JIT inventory system. The production budget indicates that the number of units expected to be produced are 193,000 in October, 201,500 in November, and 198,000 in December. Glaston assigns variable overhead at a rate of $0.75 per unit of production. Fixed overhead equals $150,000 per month. Compute the total budgeted overhead that would appear on the factory overhead budget for month of October.

Schrank Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?

Which of the following is a benefit derived from budgeting?

The master budget of a merchandising company includes a:

Production budgets always show both budgeted units of product and total costs for the budgeted units.

A budget can be an effective means of communicating management's plans to the employees of a business.

Hammerly Corporation is preparing its master budget for the quarter ending March 31. It sells a single product for $25 a unit. Budgeted sales are 40% cash and 60% on credit. All credit sales are collected in the month following the sales. Budgeted sales for the next four months follow: January February March Apri1 Sales in Units \ldots............ 1,200 1,000 1,600 1,400 At December 31, the balance in accounts receivable is $10,000, which represents the uncollected portion of December sales. The company desires merchandise inventory equal to 30% of the next month's sales in units. The December 31 balance of merchandise inventory is 340 units, and inventory cost is $10 per unit. Forty percent of the purchases are paid in the month of purchase and 60% are paid in the following month. At December 31, the balance of Accounts Payable is $8,000, which represents the unpaid portion of December's purchases. Operating expenses are paid in the month incurred and consist of: · Sales commissions (10% of sales) · Freight (2% of sales) · Office salaries ($2,400 per month) · Rent ($4,800 per month) Depreciation expense is $4,000 per month. The income tax rate is 40%, and income taxes will be paid on April 1. A minimum cash balance of $10,000 is required, and the cash balance at December 31 is $10,200. Loans are obtained at the end of a month in which a cash shortage occurs. Interest is 1% per month, based on the beginning of the month loan balance, and must be paid each month (The interest payment is rounded to the nearest whole dollar). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At December 31, the loan balance is $0. Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of January, February, and March that includes the: · Sales budget · Schedule of cash receipts · Merchandise purchases budget · Schedule of cash disbursements for merchandise purchases · Schedule of cash disbursements for selling and administrative expenses (combined) · Cash budget, including information on the loan balance · Budgeted income statement for the quarter

The budgeted balance sheet is prepared primarily from data contained in the previously prepared components of the master budget.