Exam 9: Budgeting, Production, Cash, and Master Budget

Identify each item as either part of the operating budget or the financial budget. -Budgeted income statement

For which organization is having a production budget most important?

When preparing the direct labour budget, the number of hours worked by each employee is the only information needed.

A large difference between actual and planned results is feedback that the system is providing adequate control.

Which of the following is responsible for directing and coordinating an organization's overall process of budgeting?

Treetop Company, an importer and retailer of pottery and kitchenware, prepares a monthly master budget. Data for the July master budget are given below: The June 30 balance sheet follows: Cash \ 25,000 Accounts payable \ 45,000 Accounts receivable 110,000 Capital stock 300,000 Merchandise inventory 54,000 Retained earnings 94,000 Building and equipment (net) 250,000 Actual sales for June and budgeted sales for July, August, and September are given below: June \ 137,500 July 360,000 August 400,000 September 320,000 Sales are 20% in cash and 80% on credit. All credit sales are collected in the month following the sale. There are no bad debts. The gross margin percentage is 40% of sales. The desired ending merchandise inventory is equal to 25% of the following month's sales. One-fourth of the purchases are paid for in the month of purchase, and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000. What is the balance of the accounts receivable at the end of July?

The sales budget is prepared in units only, NOT dollars.

Hillbrant Company purchased $40,000 of goods in July and expects to purchase $60,000 of goods in August. Hillbrant typically pays for 25% of purchases in the month of purchase and 75% in the following month. What total expected cash disbursements for purchases should Hillbrant Company expect to pay in August?

Pseudoparticipation is one of the potential problems with participative budgeting.

When generating a master budget, what schedule is created first?

Budgets are a key component of planning.

Which statement best describes a characteristic of the master budget?

The selling and administrative expense budgets are part of the financial budgets.

The master budget is typically a comprehensive financial plan for the organization for the past fiscal year.

Bingimton Company Bingimton Company provided the following information for last month. Production in units 1,000 Direct materials cost \ 3,000 Direct labour cost \ 4,000 Manufacturing overhead cost \ 7,600 Sales commission per unit sold \ 2 Price per unit sold \ 24 Fixed selling and administrative expense \ 5,000 There were no beginning and ending inventories. -Refer to Southern Inc. What is the budgeted amount of peppers to be purchased during the month of August?

The master budget is composed of operating budgets and financial budgets.

Identify each item as an advantage or disadvantage of budgeting. -Leads to budgetary slack

Comparing actual results with budgeted results on a periodic basis provides planning in a budgetary system.

Garden Company Garden Company purchased $140,000 of goods in June and expects to purchase $130,000 of goods in July. The company typically pays for 20% of purchases in the month of purchase and 80% in the following month.Every month, the company must make the following payments: Rent \ 5,000 Wages \ 14,000 Utilities \ 3,000 Telephone \ 400 Loan on equipment \ 1,200 In mid-July, the company expects to buy a new computer for $4,500 using the company credit card. Typically, the credit card bill is paid in full in the following month. June credit card purchases totalled $6,000. -Refer to Garden Company. What is the expected cash disbursement in July to pay for purchases of goods?

A continuous budget is a static 15-month budget.