Exam 22: Master Budgets

Unlike a manufacturing company,the sales budget is the cornerstone for the master budget of a merchandising company.

The manufacturing overhead budget calculates the budgeted overhead cost for the year and also the predetermined overhead allocation rate for the year.

Which of the following statements regarding the manufacturing overhead budget is incorrect?

What is the formula used to determine the amount of merchandise inventory to be purchased?

Allain,Inc.has the following budgeted figures: Jan Feb Mar April Sales \ 55,900 \ 60,000 \ 88,000 \ 96,000 Cost of goods sold 60\% of sales \ 10,000+30\% of next month's sales Required ending inventory Inventory on hand on Jan 1 \ 27000 Calculate the ending merchandise inventory for the month of March.

Morag Manufacturing Company's budgeted income statement includes the following data: Mar Apr May Jun Sales \ 320,000 \ 340,000 \ 360,000 \ 380,000 Commission expense: 15\% of sales 48,000 51,000 54,000 57,000 Salaries expense 50,000 50,000 50,000 50,000 Miscellaneous expense: 4\% of sales 12,800 13,600 14,400 15,200 Rent expense 4,000 4,000 4,000 4,000 Utilities expense 2,000 2,000 2,000 2,000 Insurance expense 2,100 2,100 2,100 2,100 Depreciation expense 5,000 5,000 5,000 5,000 The budget assumes that 60% of commission expenses are paid in the month in which they are incurred and the remaining 40% are paid one month later.In addition,50% of salaries expenses are paid in the month in which they are incurred,and the remaining 50% are paid one month later.Miscellaneous expenses,rent expense,and utility expenses are assumed to be paid in the same month in which they are incurred.Insurance was prepaid for the year on January 1.Prepare a schedule of cash payments for selling and administrative expenses for the quarter ending June 30.

Zale,Inc.has provided the following extracts from their budget for the first quarter of the forthcoming year: Jan Feb March Sales (20\% cash) \ 400,000 \ 600,000 \ 800,000 The company collects 70% of credit sales in the same month and the balance in the next month.Calculate the collections from the customers for the month of February.

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 actual direct labor cost per hour.

Which of the following best describes the term "sensitivity analysis"?

The budgeted production of Taurus,Inc.is 14,000 units per month.Each unit requires 40 minutes of direct labor to complete.The direct labor rate is $90 per hour.Calculate the budgeted cost of direct labor for the month.(Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

The inventory costing method affects the process of preparing the cost of goods sold budget.

The budgeted income statements of both manufacturing and merchandising companies include the calculation of gross profit.

Budgeted financial statements are financial statements based on budgeted amounts rather than actual amounts.

While calculating the budgeted cash payments for selling and administrative expenses,noncash expenses like depreciation are also considered.

Purchases equals cost of goods sold plus beginning merchandise inventory minus ending merchandise inventory.

When preparing the budgeted balance sheet of a merchandising company,the amount of Merchandise Inventory can be obtained from the ________.

Sensitivity analysis is a what-if technique.

Norton Manufacturing expects to produce 2,800 units in January and 3,900 units in February.Norton budgets $45 per unit for direct materials.Indirect materials are insignificant and not considered for budgeting purposes.The balance in the Raw Materials Inventory account (all direct materials)on January 1 is $37,950.Norton desires the ending balance in Raw Materials Inventory to be 60% of the next month's direct materials needed for production.Desired ending balance for February is $51,000.What is the cost of budgeted purchases of direct materials needed for January?

The starting point in developing the master budget is the preparation of the ________.

Budgeting software is often designed as a component of the company's Enterprise Resource Planning (ERP)system.