Exam 20: The Budgeting Process

United Insurance Company specializes in term life insurance contracts.Cash collection experience shows that 30 percent of billed premiums are collected in the month before they are due,60 percent are collected in the month they are due,and 6 percent are collected in the month following their due date.Four percent of the billed premiums are collected late (in the second month following their due date).Total billing notices in January were $50,000;in February,$60,000;in March,$66,000;in April,$65,000;in May,$60,000;and in June,$70,000.How much cash does the company expect to collect in May?

A company pays for 25 percent of its purchases by credit terms n/60,40 percent of its purchases by credit terms n/30,and the remaining 35 percent by a two-month advance payment.The sources for June's cash payments schedule for direct materials would not include which of the following?

Which of the following is an advantage of budgeting?

Which of the following budgets is a financial budget?

Wean Corporation's budgeted balance sheet for the coming year shows total assets of $5,000,000 and total liabilities of $2,000,000.Common stock and retained earnings make up the entire stockholders' equity section of the balance sheet.Common stock remains at its beginning balance of $1,500,000.The projected net income for the year is $333,000.The company pays no dividends.What is the balance of retained earnings at the beginning of the budget period?

Operating budgets are limited to service organizations.

Which of the following forms the base of all operating budgets?

Hang12 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 Hang12 have to produce for the upcoming quarter?

Revising the budgets to include all planning decisions will improve the quality of the budgets.

Sondari Corporation estimates the following for 2014: Ending cash balance for 2013 was $150,000. Prepare a cash budget to determine the ending cash balance for 2014.

Budgets assign resources and the responsibility to use them wisely to managers who are held accountable for their results.

Budgets facilitate congruence between organizational and personal goals.

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. -What would be the yearly total on the direct materials purchases budget for bee purchases of Johnson? (Assume for this question that 40,000 beehives will be produced. )