Exam 21: Budgeting

A series of budgets for varying rates of activity is termed a(n):

Tanya Inc.'s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor salaries of $20,000. A flexible budget for 12,000 units of production would show:

Production and sales estimates for June are as follows: The number of units expected to be manufactured in June is:

The budgetary unit of an organization which is led by a manager who has both the authority over and responsibility for the unit's performance is known as a:

Budgeting supports the planning process by encouraging all of the following activities except:

The first budget to be prepared is usually the production budget.

Cuisine Inc. manufactures flatware sets. The budgeted production is for 80,000 sets in 2012. Each set requires 2.5 hours to polish the material. If polishing labor costs $15.00 per hour, determine the direct labor budget for 2012.

If the expected sales volume for the current period is 8,000 units, the desired ending inventory is 1,400 units, and the beginning inventory is 1,200 units, the number of units set forth in the production budget, representing total production for the current period, is:

The budgeted direct materials purchases is based on the sum of (1) the materials needed for production and (2) the desired ending materials inventory, less (3) the estimated beginning materials inventory.

Finch Company began its operations on March 31 of the current year. Finch Co. has the following projected costs: (1) 3/4 of the manufacturing costs are paid for in the month they are incurred. 1/4 is paid in the following month. (2) Insurance expense is $1,000 a month, however, the insurance is paid four times yearly in the first month of the quarter, i.e. January, April, July, and October. (3) Property tax is paid once a year in November. The cash payments for Finch Company in the month of May are:

The master budget of a small manufacturer would normally include all necessary component budgets except the budgeted balance sheet.

A formal written statement of management's plans for the future, expressed in financial terms, is a:

Heedy Company is trying to decide how many units of merchandise to order each month. The company policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?

At the beginning of the period, the Molding Department budgeted direct labor of $33,000 and supervisor salaries of $24,000 for 3,000 hours of production. The department actually completed 2,500 hours of production. Determine the budget for the department assuming that it uses flexible budgeting?

The objectives of budgeting are (1) establishing specific goals for future operations, (2) executing plans to achieve the goals, and (3) periodically comparing actual results with these goals.

The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales. What would be the budgeted inventory for March 31st?

Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following is not considered a human behavior problem?

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 A for the year would be:

The budget procedure that requires all levels of management to start from zero in estimating sales, production, and other operating data is called continuous budgeting.

The treasurer of Systems Company has accumulated the following budget information for the first two months of the coming year: The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are expected to be collected in full in the month of the sale and the remainder in the month following the sale. One-fourth of the manufacturing costs are expected to be paid in the month in which they are incurred and the other three-fourths in the following month. Depreciation, insurance, and property taxes represent $6,400 of the probable monthly selling and administrative expenses. Insurance is paid in February and a $40,000 installment on income taxes is expected to be paid in April. Of the remainder of the selling and administrative expenses, one-half are expected to be paid in the month in which they are incurred and the balance in the following month. Capital additions of $250,000 are expected to be paid in March. Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current liabilities as of March 1 are composed of accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for operating expenses). Management desires to maintain a minimum cash balance of $20,000. Prepare a monthly cash budget for March and April.