Exam 22: The Budgeting Process

Seymore Company manufactures three products,Ace,Deuce,and Trey,requiring the following inputs of raw materials: Unit cost and inventory for each raw material: Prepare a direct materials purchases budget for the year ended December 31,2014.

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.

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

Which of the following do not serve as a source of data while preparing a cash budget?

A sales forecast for a retail organization is based on purchases and cost of goods sold budgets.

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

Once cash receipts and cash payments have been established,the cash increase or decrease is added to the period's beginning balance to arrive at a projected cash balance at period end.

If the cash budget of a company shows a cash shortage,the company would most likely

The expected sales for Uptown Clothing in the month of May are shown in the table below.Chelsea Rogers,the owner,gives credit to a select group of customers (20 percent of sales),but all others must pay cash.Of Chelsea's credit customers,80 percent pay her the month after the sale and 20 percent in the second month after sales. Chelsea pays cash for 10 percent of her purchases.The other 90 percent she pays off by the end of the next month.Chelsea's operating expenses are paid the month after incurrence.Her operating expenses are about $7,000 each month,$500 of which is depreciation.Selling expenses have a fixed and a variable component.The fixed is $1,500 a month,and the variable is 10 percent of sales.Chelsea began May with $9,000 in cash. Prepare a cash budget to determine Uptown Clothing's ending cash balance for May.

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

Managers do not need to know why a budget is being prepared,as these are prepared by higher authorities.

The cost of goods manufactured budget is an operating 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. -The July 31 balance of accounts receivable of Lee Carter will be

Richard Inc.expects to sell 28,000 units.Each unit requires 4 pounds of direct materials at $15 per pound and 3 direct labor hours at $12 per direct labor hour.The overhead rate is $9 per direct labor hour.The beginning inventories are as follows: direct materials,2,500 pounds;finished goods,3,100 units.The planned ending inventories are as follows: direct materials,4,000 pounds;finished goods,3,200 units. -Given a planned production of 5,000 units,what are the planned direct materials purchases of Richard?

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. -How many beehives would the 2014 production budget,of Johnson,identify as needing to be produced?

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?

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 January by Fantastic Futons?

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

Financial budgets include