Exam 7: Planning for Profit and Cost Control

Select the correct statement.

The following budget information is available for the Arch Company for January Year 2: Sales \ 860,000 Cost of goods sold 540,000 Utilities expense 2,800 Administrative salaries 100,000 Sales commissions 5\% of sales Advertising 20,000 Depreciation on store equipment 50,000 Rent on administration building 60,000 Miscellaneous administrative expenses 10,000 All operating expenses are paid in cash in the month incurred.Compute the total budgeted selling and administrative expenses (excluding interest)amount for January Year 2.

Which of the following accounts would appear on the sales budget and the pro forma income statement?

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Dec. Year 1 (Actual) Jan. Year 2 (Budgeted) Feb. Year 2 (Budgeted) Mar. Year 2 (Budgeted) Cost of goods sold \ 80,000 \ 140,000 \ 180,000 \ 120,000 Desired ending inventory levels are 25% of the following month's projected cost of goods sold.Budgeted purchases of inventory in February Year 2 would be:

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 is the amount of ending inventory that the company will report on its pro forma balance sheet?

Which of the following would not be included in the cash budget?

Planning concerned with long-range decisions such as defining the scope of the business is referred to as:

The pro forma income statement gives managers an advance estimate of a company's profitability.

The cash budget includes three sections: (1)operating activities,(2)investing activities,and (3)financing activities.

Compton Company expects the following total sales: Month Sales March \ 30,000 April \ 20,000 May \ 30,000 June \ 25,000 The company expects 60% of its sales to be credit sales and 40% for cash.Credit sales are collected as follows: 30% in the month of sale,70% in the month following the sale.The budgeted accounts receivable balance on May 31 is:

Which of the following budgets or schedules uses data contained in the selling and administrative expense budget?

October November December Budgeted S\&A Expenses Salary Expense 10,000 10,500 11,000 Sales Commissions 5\% of Sales 5,000 5,500 5,300 Insurance Expense 2,000 2,000 2,000 Rent 2,400 2,400 2,400 Depreciation on equipment 1,500 1,500 1,500 Utilities Total Operating Expenses Schedule of Cash Payments for S\&A Expenses Salary Expense ? 10,500 ? 100\% of Prior Month Sales Commissions 5,100 ? ? Insurance Expense 2,000 2,000 2,000 Rent ? ? ? 100\% of Prior Months Utilities Expense Total Payments for S\&A Expenses ? ? ? What is the total amount of S&A expenses for the fourth quarter that the company will report on its pro forma income statement?