Exam 20: The Budgeting Process

Chad has been making skateboards for his friends and now has more orders than he can handle.He has decided to turn the business into a full-time venture and plans to develop the company into a Fortune 500 company.However,he does not have enough cash and has decided to apply for a Small Business Administration loan.The loan officer informed him that she will need to see projected financial statements with supporting schedules for the next 12 months of operations. a.Identify the financial statements and supporting schedules you believe are appropriate. b.What information will you need to include in the budgeted financial statements,and where will you get this information?

Receipt of stock dividends,depreciation,and amortization expense will not be recorded in the cash budget prepared by an organization.

The cash payments in November for payment for the new machine of Great Lake are expected to be

The main difference in the master budget process for manufacturing,retail,and service organizations is found in the kinds of operating budgets prepared by the organization.

A continuous budget is a 12-month forward-rolling budget that summarizes budgets for the next 12 months.

Emerald Corporation's overhead budget for 2013 was as follows: 750,000 units were produced in 2013. Direct labor cost is $42,000,000. For both 2013 and 2014,each unit required 4 direct labor hours at $14 per hour. In 2014,property taxes,insurance,and depreciation are expected to stay at 2013 levels. Utilities costs vary proportionally with units produced. Factory supervision increases by increments of $45,000 for every 300,000 increase in direct labor hours. The 2014 expected production is 1,200,000 units. -If the expected 2014 expense for factory supervision and for utilities costs is $600,000 and $150,000,respectively,then the total for the 2014 overhead budget of Emerald is

Great Lake Corporation wishes to prepare a cash budget for November 2014.Sales,purchases,and expenses for October (actual)and November and December (estimated)are as follows: Sales: All sales are on credit,and the company's experience shows that,on an 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 1,2014,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 of Great Lake are expected to be

A combined set of operational budgets and a set of financial budgets for the entire organization is known as a

The process of developing a master budget differs among manufacturing,retail,and service organizations in terms of preparation of

J.J.Johnson has decided to supplement his income by selling beehives.He expects to sell 25,000 hives in 2014.He ended 2013 with 2,500 completed hives in inventory and would like to complete operations in 2014 with at least 2,800 completed hives in inventory.There is no ending work in process inventory.One beehive holds about 250 bees.The bees are purchased for $4.00 per 1,000 bees.The hives sell for $15.00 each. -How many beehives would the 2014 production budget,of Johnson,identify as needing to be produced?

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

Which of the following is prepared directly after the cash budget?

Budgeting is the process of identifying,gathering,summarizing,and communicating financial and nonfinancial information about an organization's future activities.

Which of the following budgets should be prepared before the others listed?

Which of the following is true of the cash budget?

List the contents of a master budget for a manufacturing organization by identifying the two major components and the budgets within each of them.

Sol Del Inc.was preparing the master budget for 2014 when a computer virus deleted some of the data contained in the cash budget for the first quarter shown below: a.Determine the missing amounts. b.Should Sol Del Inc.anticipate borrowing during the quarter? How much and when? What effect would this have on the cash budget shown? When will the company have sufficient funds available to pay back any loans?

Harrisburg Manufacturing produces three products requiring the following inputs of raw materials: Unit cost and inventory for each raw material: Scheduled production: Prepare a direct materials purchases budget for the year ended December 31,2014.

The budgeting function begins with the preparation of a production budget.

Zero-based budgeting requires the preparation of budget from scratch.