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

Identify each item as an advantage or disadvantage of budgeting. -Improves communication and coordination

Sessional Company finds that typically 30% of a month's sales are paid in cash. Payments on accounts receivable are 60% in the month of sale and 38% in the month following sale. Budgeted sales for June are $100,000, for July are $140,000, and for August are $120,000. What are the total cash receipts budgeted for July?

Which of the following appears on the budgeted balance sheet?

What is the most common starting point in the information-gathering process for budgeting?

The direct labour budget includes units to be produced, direct labour time needed, and the beginning inventory.

A company has had stable sales and production for several years. Next year, sales are expected to increase by at least 50%. Assume that the company maintains its policy for desired ending inventories of finished product and direct materials purchases. What will be the likely effect on the desired ending finished goods inventory?

Which budget shows depreciation expenses on sales equipment in a separate line?

It is May 28 and you have just landed a summer job that will pay you (net of taxes) $800 per month. You start June 1 and will work until mid-August. Your scholarship pays for tuition, room, and board. But you must buy books, pay for transportation to and from school, and pay for clothing, any extra meals, entertainment, and so on. You have gathered the following data: 1 One round trip airline ticket is $260, and you'd like to come home for Thanksgiving (your parents will drive you there in August, and you will try to catch a ride home with another student in December). 2 Books are estimated to cost about $500 per semester for your anticipated major. 3 Supplies should be another $150. 4 Clothing might run $100-you already have almost everything you think you'll need. 5 There are 16 weeks in the semester, and you think you'll need $50 per week to cover extra meals and entertainment. 6 Before school even starts, you need to cover any summer expenses, including going out with friends. $30 a week sounds about right, since all your friends will be working and saving for college as well. There are 11 weeks of summer. Right now, you have $200 in your chequing account. Required: A. Prepare a cash budget for the summer and the first semester of university. (Do the entire time period; do not break it down by week or by month.) B. Comment on the estimated ending balance. What actions can you take, if any, to increase it?

Suppose that a company has the following accounts receivable collection pattern: Paid in the month of sale 30% Paid in the month following sale 70% All sales are on credit. Suppose credit sales for March and April are $300,000 and $200,000, respectively. What would be the company's cash collection for April?

Refer to Stumble Inc. What is the direct labour cost budgeted for March?

CleanFace Company makes and sells two types of shaving cream: foamy and gel. Last year, foamy cream sold for $2.35 per can, and gel sold for $3.15 per can. Sales volume was as follows: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Foamy 75,000 82,000 84,000 72,000 Gel 50,000 80,000 90,000 60,000 The company expects sales for foamy cream to increase by 6% in each quarter as long as selling price remains constant. The selling price of will increase to $3.50, but an aggressive advertising is expected to raise volume by 5% in quarters 1 and 4 and by 10% in quarters 2 and 3. Required: Prepare a sales budget for the coming year.

Which budget is the first one that must be done in the master budgeting process, and why?

A company requires 400 kg of plastic to meet the production needs of a product. It currently has 40 kg of plastic inventory. The desired ending inventory of plastic is 120 kg. How many kilograms of plastic should be budgeted for purchasing during the coming period?

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 are the total cash disbursements expected during the month of July?

Briefly describe the attributes of an ideal budgetary system. What features of budgeting have been identified that encourage positive behaviour?

You have decided to throw a party next weekend for 20 friends. Your friends are going to bring food, so all you have to have available are the drinks. You estimate that, on average, each person will drink five bottles of soft drinks. Three of your friends will drink only natural soda, so Sulo Ginger Ale should work well for them. For the others, you decide to buy Sulo Cola. You check the refrigerator. You already have eight bottles of Sulo Ginger Ale and 12 bottles of Sulo Cola. Since this is the end of the semester, you decide that you don't really want any of the soft drinks on hand after the party. Required: A. How many bottles of Sulo Ginger Ale do you plan to buy? B. How many bottles of Sulo Cola do you plan to buy?

Doitall Company Doitall Company makes all its sales on account. The company's accounts receivable payment experience is as follows: Percent paid in the month of sale 18\% Percent paid in the month after the sale 77\% Percent paid in the second month after the sale 3\% The company provided information on sales as follows: September \ 120,000 October \ 150,000 November \ 220,000 December (expected) \ 250,000 -Refer to Doitall Company. What are the expected cash receipts for December?

What calculation is used when budgeting direct labour hours for the coming year?

There are as many direct materials purchases budgets as there are products.

What is characteristic of the master budget?