Exam 20: The Budgeting Process

Sarusse Inc.produces two products in a single plant utilizing two departments: Shaping and Assembly.Direct labor hour and dollar requirements for 2014 are being projected using 2013 unit standard labor information.Departmental data and routing sequence information are shown below. Management has forecasted that 20,000 units of product R2D2 and 70,000 units of product T3E3 must be produced during 2014. Prepare a direct labor budget for 2014 that shows the budgeted direct labor cost for each department and the company as a whole.

Which of the following is not true of the direct materials purchases budget?

Which of the following budgets is prepared before the preparation of production budget?

Budgets identify,gather,summarize,and communicate

Which of the following budgets must managers prepare before they can prepare a direct materials purchases budget?

A continuous budget is prepared

Cellular Solutions Inc.had a very successful year in 2013.Based on a $125 average unit selling price,monthly sales during 2013 were as follows: Mr.James,vice president of sales,is preparing the sales budget for 2014.Increased manufacturing costs will make it necessary to increase the selling price by 12 percent.Even with this price increase,the unit volume of sales is expected to increase by 25 percent.The seasonal sales pattern shown for 2013 is expected to continue in 2014. a.Prepare the monthly sales unit and dollar budgets for the first quarter of 2014. b.Mr.Serene is considering the possibility of raising the average selling price by 20 percent in 2014.If this action is taken,he projects that the sales volume for the year will increase by only 10 percent.What would forecasted sales in units and dollars be in 2014 if his projection is correct?

The cash budget is derived exclusively from the sales and production budgets.

Fantastic Futons manufactures futons.The estimated number of futon sales for the first three months of 2014 are as follows: Finished goods inventory at the end of 2013 was 10,000 units.On average,25 percent of the futons to be sold in the next month are produced and kept as ending balance in finished goods inventory.The planned selling price is $150 per unit. -How many futons are budgeted to be produced in February by Fantastic Futons?

Lee Carter Inc.forecast of sales is as follows: July,$50,000;August,$80,000;September,$150,000.Sales are normally 75 percent cash and 25 percent credit.Credit sales are collected in full in the following month.Merchandise cost averages 70 percent of sales price.The company desires an inventory as of September 30 of $50,000.The inventory as of June 30 was $30,000.The accounts receivable had zero balance on June 30. -The July 31 balance of accounts receivable of Lee Carter will be

Financial budgets include

James International is in the construction business.In 2014,it is expected that 30 percent of a month's sales will be received in cash,with the balance being received the following month.Of the purchases,50 percent are paid the following month,40 percent are paid in two months,and the remaining 10 percent are paid during the month of purchase. The sales force receives $1,500 a month base pay plus a 4 percent commission.Labor expenses are expected to be $4,000 a month.Other operating expenses are expected to run about $4,500 a month,including $500 for depreciation.The ending cash balance for 2013 was $18,000. a.Prepare a cash budget and determine the projected ending cash balances for the first three months of 2014. b.Determine the months that the company would either borrow or invest cash.

Tough and Strong Inc.expects to sell 51,000 units of its product in the coming year.Each unit sells for $45.Sales brochures and supplies for the year are expected to cost $7,000.Three sales representatives cover the Northeast region.Each one's base salary is $25,000,and each earns a sales commission of 5 percent of the selling price of the units he or she sells.The sales representatives use their own transportation;they are reimbursed for travel at a rate of $0.40 per mile.The company estimates that the sales representatives will drive a total of 75,000 miles next year.From the information provided,calculate the company's budgeted selling expenses for the coming year.

After management has set short-term goals,the budgeting process typically starts with

It is necessary to know the budgeted number of unit sales to prepare production budget.

The long-term plan or budget involves every part of the enterprise and is much more detailed than the short-term plan.

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

The direct labor budget is needed to prepare the production budget.

Lee Carter Inc.forecast of sales is as follows: July,$50,000;August,$80,000;September,$150,000.Sales are normally 75 percent cash and 25 percent credit.Credit sales are collected in full in the following month.Merchandise cost averages 70 percent of sales price.The company desires an inventory as of September 30 of $50,000.The inventory as of June 30 was $30,000.The accounts receivable had zero balance on June 30. -Total purchases that must be made in order to meet sales and inventory requirements of Lee Carter for the quarter amount to

One of the limitation of the direct materials purchases budget is that it reflects only the quality of direct materials purchases.