Diemans Corp.has provided a part of its budget for the second quarter: \[\begin{array} { | l | r | r | r | } \hline& \text { Apr } & \text { May } & \text { Jun } \\ \hline \text { Cash collections } & \$ 40,000 & \$ 40,000 & \$ 43,000 \\ \hline \text { Cash payments: } & & & \\ \hline \text { Purchases of direct materials } & 7,000 & 7,000 & 4,500 \\ \hline \text { Operating expenses } & 6,000 & 9,000 & 7,000 \\ \hline \text { Capital expenditures } & 20,000 & 4,000 & 4,600 \\ \hline \end{array}\] The cash balance on April 1 is $14,000.Assume that there will be no financing transactions or costs during the quarter.Calculate the projected cash balance at the end of April.

A) $67,900 B) $54,000 C) $21,000 D) $41,000 A) $67,900 B) $54,000 C) $21,000 D) $41,000

Fulkron,Inc.provides the following data taken from its third quarter budget: \[\begin{array} { | l | r | r | r | } \hline & { \text { Jul } } & { \text { Aug } } & { \text { Sep } } \\ \hline \text { Cash collections } & \$ 66,000 & \$ 45,000 & \$ 41,000 \\ \hline \text { Cash payments: } & & & \\ \hline \text { Purchases of direct materials } & 32,000 & 35,000 & 30,000 \\ \hline \text { Operating expenses } & 11,000 & 17,000 & 20,000 \\ \hline \text { Capital expenditures } & 0 & 35,000 & 8,000 \\ \hline \end{array}\] The cash balance on June 30 is projected to be $14,000.Based on the above data,calculate the shortfall the company is projected to have at the end of August.

A) $35,000 B) $22,000 C) $5,000 D) $37,000 A) $35,000 B) $22,000 C) $5,000 D) $37,000

Risa,Inc.has provided the following extracts from their budget for the first quarter of the forthcoming year: \[\begin{array} { | l | c | c | c | } \hline & \text { Jan } & \text { Feb } & \text { March } \\ \hline \text { Purchases on account } & \$ 274,000 & \$ 295,000 & \$ 330,000 \\ \hline \end{array}\] The vendors are allowed the following terms of payment: \[\begin{array} { | l | l | } \hline \text { Month of purchase } & 10 \% \\ \hline \text { First month after the purchase } & 35 \% \\ \hline \text { Second month after the purchase } & 35 \% \\ \hline \end{array}\] Calculate the total payment on account for the month of March.

A) $125,925 B) $179,235 C) $330,000 D) $232,150 A) $125,925 B) $179,235 C) $330,000 D) $232,150

Delleate,Inc.has prepared the following direct materials purchases budget: $\begin{array}{|c|c|} \hline \text { Month } & \begin{array}{l} \text { Budgeted DM } \\ \text { Purchases } \end{array} \\ \hline \text { June } & \$ 68,000 \\ \hline \text { July } & 77,500 \\ \hline \text { August } & 76,300 \\ \hline \text { September } & 75,000 \\ \hline \text { October } & 72,000 \\ \hline \end{array}$ All purchases are paid for as follows: 10% in the month of purchase,50% in the following month,and 40% two months after purchase.Calculate total cash payments made in October for purchases.

A) $44,700 B) $68,020 C) $37,720 D) $75,220 A) $44,700 B) $68,020 C) $37,720 D) $75,220

Exam 22: Master Budgets

Manhattan Enterprises manufactures cookware sets and sells the sets to department stores.Manhattan expects to sell 2,100 cookware sets for $260 each in April and 3,900 cookware sets for $275 each in May.Sales are 10% cash and 90% on account.Compute the total budgeted sales for May.

(Multiple Choice)

4.9/5

(67)

Question 21

Purchases of direct material for May were $114,000,while expected purchases for June and July are $121,000 and $140,000,respectively.All purchases are paid 75% in the month of purchase and 25% the following month.Calculate the budgeted payments for the month of June.

(Multiple Choice)

4.7/5

(83)

Question 22

The budgeted income statement shows operating income and net income.

(True/False)

4.8/5

(80)

Question 23

O'Reilly,Inc.has prepared its third quarter budget and provided the following data: Jul Aug Sep Cash collections \ 49,000 \ 39,900 \ 47,000 Cash payments: Purchases of direct materials 29,000 21,700 17,900 Operating expenses 12,400 8,300 11,600 Capital expenditures 13,100 24,400 0 The cash balance on June 30 is projected to be $4,200.The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls.It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 4%.All financing transactions are assumed to take place at the end of the month.The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.Calculate the amount of principal repayment at the end of September.

(Multiple Choice)

4.9/5

(87)

Question 24

To calculate budgeted direct labor costs,multiply the number of units to be produced by the number of projected direct labor hours.Next,multiply that total by the average direct cost per hour.

(True/False)

4.8/5

(73)

Question 25

The last step in the preparation of the master budget is the budgeted balance sheet.

(True/False)

4.8/5

(84)

Question 26

Diemans Corp.has provided a part of its budget for the second quarter: Apr May Jun Cash collections \ 40,000 \ 40,000 \ 43,000 Cash payments: Purchases of direct materials 7,000 7,000 4,500 Operating expenses 6,000 9,000 7,000 Capital expenditures 20,000 4,000 4,600 The cash balance on April 1 is $14,000.Assume that there will be no financing transactions or costs during the quarter.Calculate the projected cash balance at the end of April.

(Multiple Choice)

4.8/5

(91)

Question 27

An objective of the budgeting process is to communicate a single,unified,comprehensive plan for the business.

(True/False)

4.7/5

(78)

Question 28

Fulkron,Inc.provides the following data taken from its third quarter budget: Jul Aug Sep Cash collections \ 66,000 \ 45,000 \ 41,000 Cash payments: Purchases of direct materials 32,000 35,000 30,000 Operating expenses 11,000 17,000 20,000 Capital expenditures 0 35,000 8,000 The cash balance on June 30 is projected to be $14,000.Based on the above data,calculate the shortfall the company is projected to have at the end of August.

(Multiple Choice)

4.8/5

(82)

Question 29

If the cost of indirect materials needed for production is insignificant,it should not be included in the budgeting process.

(True/False)

4.7/5

(75)

Question 30

Regarding the sales budget,which of the following statements is incorrect?

(Multiple Choice)

4.8/5

(85)

Question 31

What is the cornerstone of the master budget for a merchandising company? Why?

(Essay)

4.7/5

(78)

Question 32

Define sensitivity analysis.Why do managers conduct sensitivity analysis during the budget process?

(Essay)

4.7/5

(87)

Question 33

The production budget determines the number of units to be produced during the period.

(True/False)

4.9/5

(91)

Question 34

The final step in the process of creating the master budget is the preparation of the ________.

(Multiple Choice)

4.8/5

(90)

Question 35

Stockett,Inc.has prepared its third quarter budget and provided the following data: Jul Aug Sep Cash collections \ 50,000 \ 39,500 \ 47,400 Cash payments: Purchases of direct materials 30,000 21,300 17,800 Operating expenses 12,000 8,000 11,400 Capital expenditures 13,500 24,800 0 The cash balance on June 30 is projected to be $4,000.The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls.It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 5%.All financing transactions are assumed to take place at the end of the month.The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.How much will the company have to borrow at the end of August?

(Multiple Choice)

4.7/5

(76)

Question 36

Risa,Inc.has provided the following extracts from their budget for the first quarter of the forthcoming year: Jan Feb March Purchases on account \ 274,000 \ 295,000 \ 330,000 The vendors are allowed the following terms of payment: Month of purchase 10\% First month after the purchase 35\% Second month after the purchase 35\% Calculate the total payment on account for the month of March.

(Multiple Choice)

4.8/5

(69)

Question 37

When preparing the selling and administrative expense budget,there is no need to separate mixed costs into the fixed and variable components.

(True/False)

4.9/5

(90)

Question 38

Delleate,Inc.has prepared the following direct materials purchases budget: Month Budgeted DM Purchases June \ 68,000 July 77,500 August 76,300 September 75,000 October 72,000 All purchases are paid for as follows: 10% in the month of purchase,50% in the following month,and 40% two months after purchase.Calculate total cash payments made in October for purchases.

(Multiple Choice)

4.7/5

(77)

Question 39

The selling and administrative expense budget separates fixed and variable expenses.

(True/False)

4.9/5

(73)

Question 40

Manhattan Enterprises manufactures cookware sets and sells the sets to department stores.Manhattan expects to sell 2,100 cookware sets for $260 each in April and 3,900 cookware sets for $275 each in May.Sales are 10% cash and 90% on account.Compute the total budgeted sales for May.

Purchases of direct material for May were $114,000,while expected purchases for June and July are $121,000 and $140,000,respectively.All purchases are paid 75% in the month of purchase and 25% the following month.Calculate the budgeted payments for the month of June.

The budgeted income statement shows operating income and net income.

To calculate budgeted direct labor costs,multiply the number of units to be produced by the number of projected direct labor hours.Next,multiply that total by the average direct cost per hour.

The last step in the preparation of the master budget is the budgeted balance sheet.

An objective of the budgeting process is to communicate a single,unified,comprehensive plan for the business.

If the cost of indirect materials needed for production is insignificant,it should not be included in the budgeting process.

Regarding the sales budget,which of the following statements is incorrect?

What is the cornerstone of the master budget for a merchandising company? Why?

Define sensitivity analysis.Why do managers conduct sensitivity analysis during the budget process?

The production budget determines the number of units to be produced during the period.

The final step in the process of creating the master budget is the preparation of the ________.

When preparing the selling and administrative expense budget,there is no need to separate mixed costs into the fixed and variable components.

The selling and administrative expense budget separates fixed and variable expenses.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters