Exam 24: The Budgeting Process

Fantastic Futons manufactures futons. The estimated number of futon sales for the first three months of 2010 are as follows: January 40,000 February 50,000 March 60,000 Finished goods inventory at the end of 2009 was 12,000 units. On average, 25 percent of the futons are produced during the month before they are sold, which normally accounts for the ending balance in finished goods inventory. The planned selling price is $150 per unit. How many futons are budgeted to be produced in February?

Leaverton's forecast of sales is as follows: July, $60,000; August, $90,000; September, $130,000. Sales are normally 80 percent cash and 20 percent credit in any month. Credit sales are collected in full in the following month. Merchandise cost averages 60 percent of sales price. The company desires an inventory as of September 30 of $52,000. The inventory as of June 30 was $25,000. Total cash receipts for August will be

In estimating cash receipts and cash payments for the cash budget, many organizations prepare supporting schedules.

Successful budget implementation depends on two factors-clear communication and the support of top management.

Fill in the blanks. 1. The cash budget serves two purposes. First, it shows the ending _________, which is needed to complete the __________. Second, it highlights period's excess cash reserves or cash shortages. 2. A projection of cash receipts and cash payments for a future period of time is called a(n) ______________. 3. Since the __________ is a summary of all expected transactions for a future time period, it also must be the key to all expected cash transactions. 4. The _________________________ oversees each stage in the preparation of the _______________ budget, decides any departmental disputes that may rise in the process, and gives final approval to the budget.

Financial budgets include

Mi Casa Corporation wishes to prepare a cash budget for November 2010. Sales, purchases, and expenses for October (actual) and November and December (estimated) are as follows: Sales Purchases Expenses October \ 48,000 \ 35,000 \ 14,000 November 40,000 30,000 11,000 December 45,000 22,000 9,500 Sales: All sales are on credit, and the company's experience shows that, on the average, 80 percent of sales are collected in the month of sale and the balance in the following month. A 2 percent discount is allowed on all collections in the month of sale. Purchases: The company pays 60 percent of purchases in the month of purchase and the balance in the following month. The company is allowed an average discount of 1 percent on payments made in the month of purchase. Expenses: The monthly expenses for November include charges for depreciation amounting to $1,000 and $100 of prepaid expenses, which will expire. All other expenses are paid as incurred. Other: On September 1, 2010, a new machine was purchased for $5,000. A down payment of $500 was made, and it was agreed that the balance would be paid in equal installments in the following three months. The cash receipts in November for November sales are expected to be

Ceiling Fans by Ike's overhead budget for 2009 was as follows: 600,000 units were produced in 2009. Direct labor cost is $18,000,000. For both 2009 and 2010, each unit required 3 direct labor hours at $10 per hour. In 2010, property taxes, insurance, and depreciation are expected to stay at 2009 levels. Utilities costs vary proportionally with units produced. Factory supervision increases by increments of $30,000 for every 200,000 increase in direct labor hours. The 2010 expected production is 1,200,000 units. What will be the value for factory supervision in the 2010 overhead budget?

Hang 12 manufactures surfboards. During the upcoming quarter, it expects to sell 4,100 surfboards, after which it plans to have 500 surfboards remaining in inventory. If it currently has 200 surfboards on hand, how many surfboards will Hang 12 have to produce for the upcoming quarter?

Which of the following budgets probably would be prepared immediately after the preparation of the production budget?

Each period's ending cash balance becomes the beginning cash balance for the next period.

Fantastic Futons goes through two departments in the production process. Each futon requires two direct labor hours in Department A and one hour in Department B. Labor cost is $8 per hour in Department A and $10 per hour in Department B. The budgeted overhead rate is $5 per direct labor hour. What is the budgeted overhead cost for January given a budgeted production of 30,000 units?

Budgets are synonymous with managing an organization.

The selling and administrative expense budget is typically separated into variable and fixed cost components.

As part of the budgeting process, managers evaluate operational, tactical, value chain, and capacity issues.

Given that the cost of goods manufactured is $485,000 and the dollar values of the beginning and ending finished goods inventory are $130,000 and $90,000, respectively, what is the cost of goods sold?