Exam 21: Budgeting

Motorcycle Manufacturers, Inc. projected sales of 78,000 machines for 2012. The estimated January 1, 2012, inventory is 6,500 units, and the desired December 31, 2012, inventory is 7,000 units. What is the budgeted production (in units) for 2012?

Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12 per unit, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted purchases of Product B for the year would be:

Production and sales estimates for March for the Robin Co. are as follows: The number of units expected to be manufactured in March is:

Flexible budgeting builds the effect of changes in level of activity into the budget system.

For March, sales revenue is $1,000,000; sales commissions are 5% of sales; the sales manager's salary is $80,000; advertising expenses are $75,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are $2,100 plus 1% of sales. Total selling expenses for the month of March are:

The Warbler Jeans Company produces two different types of jeans. One is called the "Simple Life" and the other is called the "Fancy Life" The company's Production Budget requires 353,500 units of Simple jeans and 196,000 Fancy jeans to be manufactured. It is estimated that 2.5 direct labor hours will be needed to manufacture one pair of Simple Life jeans and 3.75 hours of direct labor hours for each pair of Fancy Life jeans. What is the total number of direct labor hours needed for both lines of jeans?

Supervisor salaries, maintenance, and indirect factory wages would normally appear in the operating expenses budget.

Planning for capital expenditures is necessary for all of the following reasons except:

Below is budgeted production and sales information for Bluebird Company for the month of December: The unit selling price for product XXX is $5 and for product ZZZ is $14. Budgeted production for product XXX during the month is:

If the expected sales volume for the current period is 7,000 units, the desired ending inventory is 400 units, and the beginning inventory is 300 units, the number of units set forth in the production budget, representing total production for the current period, is:

Magnolia, Inc. manufactures bedding sets. The budgeted production is for 55,000 comforters in 2012. Each comforter requires 7 yards of material. The estimated January 1, 2012, beginning inventory is 31,000 yards. The desired ending balance is 30,000 yards of material. If the material costs $4.00 per yard, determine the materials budget for 2012.

A budget procedure that provides for the maintenance at all times of a twelve-month projection into the future is called continuous budgeting.

When preparing the cash budget, all the following should be considered except:

Production estimates for August are as follows: For each unit produced, the direct materials requirements are as follows: The total direct materials purchases (assuming no beginning or ending inventory of material) of materials A and B required for August production is:

For February, sales revenue is $700,000; sales commissions are 5% of sales; the sales manager's salary is $96,000; advertising expenses are $80,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are $2,500 plus 1/2 of 1% of sales. Total selling expenses for the month of February are:

After the sales budget is prepared, the production budget is normally prepared next.

Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. If sales on account are budgeted to be $150,000 for March and receipts from sales on account total $162,500 in April, what are budgeted sales on account for April?

Once a static budget has been determined, it is changed regularly as the underlying activity changes.

Purple Inc. production budget for Product X for the year ended December 31 is as follows: In Purple's production operations, Materials A, B, and C are required to make Product X. The quantities of direct materials expected to be used for each unit of product are as follows: Prepare a direct materials purchases budget for Product X, assuming that there are no beginning or ending inventories for direct materials (all units purchased are used in production).

Flexible budgeting requires all levels of management to start from zero and estimate sales, production, and other operating data as though operations were being started for the first time.