Exam 22: The Budgeting Process

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

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?

Green Garden Inc.bills and pays selling and administrative expenses the month after they occur.Selling and administrative expenses have both a fixed and a variable component.The fixed component is a constant $47,000 a month.The variable component equals 15 percent of revenues.Given revenues of $800,000 for March,$950,000 for April,and $925,000 for May,what would be the budgeted selling and administrative expenses that would be paid in April?

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

Which of the following budgets is a financial budget?

Crosson Wineries & Bottling is preparing its budget for 2014 and has completed the sales budget for the first six months of the year.The projected volume is as follows: The desired ending inventory for each month must be equal to 30 percent of the next month's sales.The December 31,2013,inventory was 15,000 bottles. a.Prepare the production budget for the first four months of 2014. b.Explain why Crosson Wineries & Bottling must produce more bottles than it sells in January and February,and why it must produce fewer bottles than it sells in March and April. c.Assume each finished bottle requires 25 ounces of wine and that the ending inventory each month must be equal to 20 percent of the next month's production needs.The December 31,2013,inventory of wine was 265,000 ounces.Prepare the direct materials purchases budget for the first three months of 2014.

Purchases of buildings and equipment are formally planned in the

Operating budgets are limited to service organizations.

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

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

The following information was reported in a cash budget: How much cash will the company have to borrow in order to meet its required needs?

Which type of budgeting considers inputs from employees at all levels of a company?

Budgets identify potential constraints before they become problems.