Exam 9: The Budgeting Process

A budget is

Michael Ltd. has the following sales forecasts for the first three months of 2004: Sixty-five percent of sales are collected in the month of the sale and the remainder are collected in the following month. Minimum cash balance is £20,000. Cash can be borrowed in £1,000 increments from the local bank (assume no interest charges). How much cash would be collected in March from sales?

Activity-based budgeting is most useful when

The following forecasted sales pertain to Reject City: Collection pattern: 65 percent in month of sale 35 percent in month following sales Reject City has a selling price of £5 per unit and expects to maintain ending inventories equal to 25 percent of next month's sales. How many units are expected to be produced in June?

Nichols Company sells a product for £20. Budgeted sales for the first quarter of the current year are as follows: The company wants to maintain an inventory of finished units equal to 30 percent of the following month's sales, and 1,000 units are on hand at the beginning of the year. Each unit requires two pounds of raw material costing £1 per pound. The company maintains a raw materials inventory equal to 10 percent of the following month's production needs. Budgeted production in units for February would be

Canceco Company produces and sells pillows. It expects to sell 10,000 pillows in the year 2005 and had 1,000 pillows in finished goods inventory at the end of 2004. Canceco would like to complete operations in the year 2005 with at least 1,250 completed pillows in inventory. There is no ending work-in-process inventory. The pillows sell for £5 each. What would be the total sales for the year 2005?

The Good As Old Company manufactures antique-looking, oak rocking chairs. Budgeted sales for the first five months of the year are as follows: Each rocking chair requires 10 square feet of oak, at a cost of £20 per square foot. The company wants to maintain an inventory of chairs equal to 25 percent of the following month's sales. At the beginning of the year, 40 chairs are on hand. Assume the company maintains an inventory of oak equal to 10 percent of the next month's needs. At the beginning of the year, 240 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 180 square feet. Required: a. Prepare a production budget, in units, for each of the first four months of the year. b. Prepare a purchases budget, in dollars, for each of the first three months of the year.

Budgeted sales for the second quarter of the year for Reuben Company are as follows: The company normally collects 60 percent in the month of sale and 30 percent in the month following the sale. Ten percent of all sales are uncollectible and are written off in the following month. The balance in accounts receivable at April 1 was £200,000, which represents 40 percent of March sales. Required: Prepare a schedule of cash collections on accounts receivable for the second quarter.

In what ways does a department orientation hinder traditional budgeting?

Discuss the features of an ideal budgetary process.

Of the budgets listed below, which is usually prepared last?

Kara Ltd. has the following sales forecasts for the selected three-month period in 2004: Seventy percent of sales are collected in the month of the sale, and the remainder are collected in the following month. Minimum cash balance is £10,000. Cash can be borrowed in £1,000 increments from the local bank (assume no interest charges). How much cash would be collected in September from sales?

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 inspection cost if there was production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

Which of the following is true about budgets?

Canceco Company produces and sells pillows. It expects to sell 10,000 pillows in the year 2005 and had 1,000 pillows in finished goods inventory at the end of 2004. Canceco would like to complete operations in the year 2005 with at least 1,250 completed pillows in inventory. There is no ending work-in-process inventory. The pillows sell for £5 each. How many pillows would be produced in the year 2005?

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 is the difference in total budgeted costs between the volume range of 4,000 and 5,000 units?

Figure 3 Wemberly Company sells a product for £10. Budgeted sales for the first quarter of the current year are as follows: The company collects 65 percent in the month of sale and 30 percent in the following month. Five percent of all sales are uncollectible and written off. -Refer to Figure 3. Wemberly's budgeted cash receipts for February are

Dusty Company manufactures oak porch swings. Budgeted sales for the first four months of the year are as follows: Each porch swing requires 15 square feet of oak, at a cost of £20 per square foot. The company wants to maintain an inventory of swings equal to 20 percent of the following month's sales. At the beginning of the year, 40 swings are on hand. Assume the company maintains an inventory of oak equal to 10 percent of the next month's needs. At the beginning of the year, 500 square feet of oak are on hand. Inventory of oak at March 31 is estimated to be 400 square feet. Required: a. Prepare a production budget, in units, for each of the first three months of the year. b. Prepare a purchases budget, in monetary values, for direct materials for each of the first three months of the year.

Which of the following is usually prepared before the direct materials purchases budget?

The following forecasted sales pertain to Norah Company: Collection pattern: 60 percent in month of sale 40 percent in month following the sale The company has a selling price of £10 per unit and expects to maintain ending inventories equal to 20 percent of the next month's sales. How many units are expected to be produced in April?