Exam 22: Master Budgets

Why is the forecast of sales revenue considered to be the cornerstone of the master budget?

Calder Water Company has budgeted direct materials inventory purchases as follows: October: $300,000 November: $360,000 December: $460,000 Calder pays for 20% of their purchases during the month of purchase,70% during the month following the purchase,and the remaining 10% two months after the month of purchase.What is the budgeted accounts payable balance on December 31?

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

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

A budget is a financial plan that managers use to coordinate a business's activities.

An intentional understatement of expected revenues or overstatement of expected expenses by managers in order to have a favorable performance evaluation is known as ________.

Burchfield,Inc.has prepared its third quarter budget and provided the following data: Jul Aug Sep Cash collections \ 51,000 \ 39,700 \ 47,900 Cash payments: Purchases of direct materials 30,000 21,900 17,000 Operating expenses 12,200 8100 11,300 Capital expenditures 13,400 24,700 0 The cash balance on June 30 is projected to be $4500.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.

List and describe the three types of budgets that are included in the master budget.

When preparing the operating budgets for a manufacturing company,the manufacturing overhead budget ________.

For a merchandising company,budgeted purchases equals cost of goods sold plus beginning merchandise inventory minus ending merchandise inventory.

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

Developing a budget reduces coordination and communication at different levels in an organization.

From the following details provided by Segura,Inc.,prepare the cost of goods sold budget for the year. Direct materials per unit \ 65 Direct labor hours per unit 2 hours Direct labor rate per hour \ 50 Manufacturing overhead cost per direct labor hour \ 20 Feginning inventory units 1,000 Sales price per unit \ 250 First Second Third Fourth Ourater Ourater Ourater Ourater Units expected to be sold: 15,000 18,000 21,000 24,000 Segura,Inc.expects no inventory units at the end of the second,third and fourth quarters.

When a merchandiser calculates the budgeted cash payments for selling and administrative expenses,noncash expenses like depreciation are also considered.

Camellia,a merchandising company,has provided the following extracts from their budget for the first quarter of the forthcoming year: Jan Feb March Sales (20\% cash) \ 500,000 \ 750,000 \ 1,000,000 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.

For a manufacturer,the budgeted multi-step income statement shows operating income and net income.

To develop the cost of goods sold budget,it is necessary to start by calculating the projected cost to produce each unit.

Which of the following budgets would not be prepared for a merchandising firm?

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

A manufacturing company's budgeted income statement includes the following data: Data extracted from budgeted income statement Mar Apr May Jun Sales revenue \ 130,000 \ 80,000 \ 130,000 \ 120,000 Commission expense (15\% of sales) 19,500 12,000 19,500 18,000 Salaries expense 33,000 33,000 33,000 33,000 Miscellaneous expense -5\% of sales 6500 4000 6500 6000 Rent expense 3600 3600 3600 3600 Utilities expense 2300 2300 2300 2300 Insurance expense 2600 2600 2600 2600 Depreciation expense 4200 4200 4200 4200 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.