Exam 7: Planning for Profit and Cost Control

Managerial accounting is not bound by generally accepted accounting principles (GAAP)but clearly is influenced by GAAP.How do budgets and the budgeting process demonstrate connections to GAAP?

The budgeting process formalizes and documents managerial plans to clearly communicate objectives to both superiors and subordinates.This budgeting requirement is an example of:

Which of the following would represent the order in which most master budgets are prepared?

Which of the following budgets needs to be prepared prior to preparing an inventory purchases budget?

The following budget information is available for Crescent Company for January Year 2: Sales \ 800,000 Cost of goods sold 540,000 Utilities expense 2,500 Administrative salaries 100,000 Sales commisissions 5\% of sales Advertising 20,000 Depreciation on store equipment 50,000 Rent on administration building 60,000 Miscellaneous administrative expenses 10,000 Percentage of sales on credit 80\% All operating expenses are paid in cash in the month incurred.The amount of expected cash outflow for selling and administrative expenses would be:

Select the incorrect statement regarding the cash budget.

Valley Farm Supply started the period with $80,000 cash.Cash receipts for January were expected to total $350,000.Cash disbursements for January were expected to be $290,000.What is the expected cash balance at the end of January?

Purchases on account are given below: October November December 30,000 40,000 50,000 55% of the month's purchases will be paid in the month of the purchase; the remaining 45% will be paid in the following month. How much will the cash payments for purchases be in November?

When a company's district managers submitted their preliminary budget proposals,top management discovered that the southern district manager had requested a new project management information system.Unfortunately,the system is incompatible with the system used at headquarters.Which of the following advantages of budgeting reduces the likelihood that the company will end up with two incompatible systems?

O'Hare Company is in the process of preparing a purchases budget for the first quarter of Year 2.The company has budgeted sales as follows: Dec. Year 1 \ 44,000 Jan. Year 2 \ 46,500 Feb. Year 2 \ 51,000 Mar. Year 2 \ 61,500 Cost of goods sold is expected to be 75% of sales.The company would like to have ending inventory each month equal to 25% of the following month's predicted cost of sales.The total cost of purchases in January Year 2 is:

Which of the following accounts would appear on the inventory purchases budget and pro forma balance sheet?

Sentra Sporting Company sells tennis rackets and other sporting equipment.The purchasing department manager prepared the inventory purchases budget.Sentra's policy is to maintain an ending inventory balance equal to 15% of the following month's cost of goods sold.January's budgeted cost of goods sold is $70,000. October November December Budgeted Cost of Goods Sold 60,000 40,000 50,000 Plus: Desired Ending Inventory 6,000 ? ? Inventory Needed 66,000 ? ? Less: Beginning Inventory 9,000 ? ? Required purchases (on Account) 57,000 ? ? What would be the required purchases (on account)for December?

One advantage of participatory budgeting is that it allows subordinates to perform the budgeting function,thus freeing up upper management for more important tasks.

Why is cash management important to a business?

Under continuous budgeting,a new month is added to the end of the budget period each time the present month expires,so that a twelve-month budget is available at all times.

Which of the following items is not needed to prepare a sales budget by product line?

The budgeting process that involves adding a month to the end of the budget period at the end of each month,thus maintaining a twelve-month planning horizon,is referred to as:

If a financial statement is labeled "pro forma," this means that the statement was prepared by a professional accountant (usually the firm's auditor)following a prescribed format.

Indicate whether each of the following statements is true or false.