Exam 22: Master Budgets

The capital expenditures budget represents the company's plan for purchasing the long-term assets.

Magnolia,Inc.has budgeted sales for the first quarter of the next year to be 40,000 units.The inventory on hand at the beginning of quarter is 10,000 units.The desired ending inventory is 4,000 units.Calculate the budgeted production for the first quarter.

In a company with different business units,individual managers make decisions by changing various assumptions of its budget in order to determine how the modifications would affect the operational and financial results.This is an example of ________.

A manufacturing company's budgeted income statement includes the following data: Data extracted from budgeted income statement Mar Apr May Jun Sales revenue \ 120,000 \ 100,000 \ 140,000 \ 95,000 Commission expense (20\% of sales) 24,000 20,000 28,000 19,000 Salaries expense 30,000 30,000 30,000 30,000 Miscellaneous expense -5\% of sales 6,000 5,000 7,000 4,750 Rent expense 3,800 3,800 3,800 3,800 Utilities expense 2,200 2,200 2,200 2,200 Insurance expense 2,400 2,400 2,400 2,400 Depreciation expense 4,600 4,600 4,600 4,600 The budget assumes that 60% of commission expenses are paid in the month they are incurred and the remaining 40% are paid one month later.In addition,50% of salaries expenses are paid in the same month,and the remaining 50% are paid one month later.Miscellaneous expenses,rent expense,and utilities expenses are assumed to be paid in the same month in which they are incurred.Insurance has been paid in advance for the year on January 1. Calculate total budgeted cash payments for selling and administrative expenses for the month of April.

Parker,Inc.has a cash balance of $20,000 on April 1.The company is now preparing the cash budget for the second quarter.Budgeted cash collections and payments are as follows: Apr May Jun Cash collections \ 25,000 \ 24,000 \ 24,000 Cash payments: Purchases of direct materials 4,000 5,300 6,200 Operating expenses 5,300 6,000 5,300 There are no budgeted capital expenditures or financing transactions during the quarter.Based on the above data,calculate the projected cash balance at the end of April.

Which of the following statements is true of the operating budget?

Amounts needed for the preparation of the budgeted balance sheet are taken from various operating and financial budgets.

The personnel manager projects direct labor costs.

Which of the following is an example of the benchmarking function of the budgeting process?

A master budget is a financial plan for a specific segment of an organization.

For a merchandising company,the budgeted total sales equals the expected number of units sold multiplied by the budgeted selling price per unit.

The following details have been extracted from the budget of a merchandising company. Rent Expense \ 8,600 per month Depreciation Expense \ 3,500 per month Insurance Expense \ 2,000 per month Miscellaneous Expense 2\% of sales, paid as incurred Commissions Expense 8\% of sales Salaries Expense \ 6,000 per month Dec Jan Feb March Sales \ 70,000 \ 75,000 \ 90,000 \ 105,000 Commissions and salaries expenses are paid 50% in the month to which they are incurred and the balance in the next month. Rent and miscellaneous expenses are paid as and when they occur.Insurance is prepaid at the beginning of the quarter.Calculate cash payments for the selling and administrative expenses for the first quarter of the next year.