Exam 9: The Budgeting Process

Armati, Inc., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Armati, Inc., had the following budgeted data: The following actually occurred: The budgeted cost for direct labour for 2004 was

Describe activity-based budgeting.

If a department plans forward from resources to outputs, this describes which criticism of traditional budgeting?

Gerald Company manufactures books. Manufacturing a book takes 10 units of A1 and 1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months. How many units of A1 does expect to use in production during the second month?

Schrandt Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below: The June 30th balance sheet follows: Actual sales for June and budgeted sales for July, August, and September are given below: Sales are 20 percent for cash and 80 percent on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 40 percent of sales. The desired ending inventory is equal to 25 percent of the following month's sales. One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are £43,000, and the monthly depreciation expenses are £7,000. What is the balance of the cash account at the end of July?

Activity-based budgeting

Which of the following is an example of a discretionary fixed cost?

Dodge Ltd. is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 60 percent of sales. Merchandise purchases are to be made during the month preceding the month of the sales. Dodge pays 60 percent in the month of purchase, and 40 percent in the month following. Wages are estimated at 20 percent of sales and are paid during the month of sale. Other operating costs amounting to 10 percent of sales are to be paid in the month following the sale. The accounts payable balance on June 30 was £20,000. Required: Prepare a schedule of cash disbursements for July, August, and September.

At the beginning of the current month, Melrose had £10,000. Cash disbursements were £260,000 and cash collections were £235,000. Melrose invests all excess cash in a money market fund and has a line of credit to cover cash deficiencies. If Melrose wishes to start the next month with £15,000, Melrose must

The following data is obtained from the general records in the shipping department at Fast Parcel Delivery Company for August: August will have 24 working days. Fast Parcel expects to load 12 trucks per day during August. There are on average 100 packages per truck. Required: Prepare a budget using the activity based approach for the costs of inspecting, processing, loading miscellaneous activities within the shipping department for August.

Rydingsward, Inc., has done a cost analysis for its production of reflectors. The following activities and cost drivers have been developed: What is the budgeted setup costs if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

Budgeted sales for the second quarter for Maxwell Company, a retailer, are as follows: Maxwell started the quarter with an inventory of 30,000 units. The company likes to maintain an inventory equal to 10 percent of next month's budgeted sales. Budgeted purchases in units for May would be

Feedee Company has budgeted sales and production (in units) over the next three months as follows: There are 10,000 units on hand on January 1. A minimum of 20 percent of the next month's sales in units must be on hand at the end of each month. April sales are expected to be 70,000. Budgeted sales for February would be

A budget where managers must justify all costs based on need is a(n)

Campbell, Inc., has an operating environment with considerable uncertainty. The company prepares the budget for several different volume levels. Campbell had the following budgeted data: What are the budgeted costs for rent if 5,000 units were produced?

Gerald Company manufactures books. Manufacturing a book takes 10 units of A1 and 1 unit of A2. Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively. Beginning inventory is 4,000 units of A1 and 30 units of A2. The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months. Based on this information, the number of units of A1 that needs to be purchased by Gerald during the first month is

Realistic budgets reflect

Which of the following is usually prepared before the production budget?

Retro, Inc., produces a single product. The projected sales for the first month of the coming year and the beginning and ending inventory data are as follows: Each unit requires three pounds of material costing £2 per pound. The beginning inventory of raw materials is 2,500 pounds, and the company wants to have 4,500 pounds of material in inventory at the end of the month. Each unit requires one hour of direct labour time, which is billed at £8 per hour. Required: a. Prepare a production budget for the first month. b. Prepare a direct materials purchases budget for the first month.

Smithson Ltd. has the following budgeted sales for the selected six-month period: There were 7,500 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished product equal to 20 percent of the unit sales for the next month. Three pounds of materials are required for each unit produced. Each pound of material costs £20. Inventory levels for materials equal 30 percent of the needs for the next month. Materials inventory on June 1 was 5,000 pounds. Required: a. Prepare production budgets in units for July, August, and September. b. Prepare a purchases budget in pounds and dollars for July, August, and September.