Exam 8: Budgeting for Planning and Control

Freedom Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month.Cash sales are 20 percent of total sales each month.Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale.Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March, $90,000. Accounts receivable on December 31 were $45,000. - The expected cash collections of Freedom Manufacturing Company for March are

Myopic behavior occurs when

Kara Corporation has the following sales forecasts for the selected three-month period in 2011: Seventy percent of sales are collected in the month of the sale, and the remainder are collected in the following month. Minimum cash balance is $10,000.Cash can be borrowed in $1,000 increments from the local bank (assume no interest charges). - What is the cash balance at the end of July, assuming that cash is received only from customers and that $40,000 is paid out during April?

Glenn, Inc., has done a cost analysis for its production of T-shirts.The following activities and cost drivers have been developed: Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20 purchase orders -What is the budget variance for machining in an activity-based performance report?

A _______________ is a moving twelve-month budget.

Klamaty, Inc., is looking for feedback on performance.The company compares the budget for the year with the actual costs. Klamaty, Inc., had the following budgeted data: Required:

Amy Company produces and sells bikes.It expects to sell 15,000 bikes in March 2011 and had 1,200 bikes in finished goods inventory at the end of February 2011.Amy Company would like to complete operations in March with at least 1,500 completed bikes in inventory.The bikes sell for $100 each. -What would be the total sales for March 2011?

Rydingsward, Inc., has done a cost analysis for its production of reflectors.The following activities and cost drivers have been developed: - What is the machining cost for production of 50,000 reflectors that will require 8,000 machine hours, 25 batches, and 15,000 purchase orders?

Gerald Company manufactures books.Manufacturing a book takes 10 units of A1 and 1 unit of A2.Scheduled production of books for the next two months is 1,000 and 1,200 units, respectively.Beginning inventory is 4,000 units of A1 and 30 units of A2.The ending inventory of A1 is planned to decrease 500 units in each of the next two months, and the A2 inventory is expected to increase 5 units in each of the next two months. - Based on this information, the number of units of A1 that needs to be purchased by Gerald during the first month is

Figure 8-7 Schrandt Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget.Data for the July master budget are given below: The June 30th balance sheet follows: Actual sales for June and budgeted sales for July, August, and September are given below: Sales are 20 percent for cash and 80 percent on credit.All credit sales are collected in the month following the sale.There are no bad debts. The gross margin percentage is 40 percent of sales.The desired ending inventory is equal to 25 percent of the following month's sales.One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000. - Refer to Figure 8-7.What is the balance of the cash account at the end of July?

Freedom Manufacturing Company needs to know its anticipated cash inflows for the next quarter by month.Cash sales are 20 percent of total sales each month.Historically, sales on account have been collected as follows: 50 percent in the month of the sale, 35 percent in the month after the sale, and the remaining 15 percent two months after the sale.Sales for the quarter are projected as follows: January, $60,000; February, $30,000; and March, $90,000. Accounts receivable on December 31 were $45,000. - Freedom Manufacturing Company would expect to have an accounts receivable balance on March 31 of

Goal congruence means

Figure 8-3 Bug Company manufactures buggies.Manufacturing a buggy takes 20 units of wood and 1 unit of steel.Scheduled production of buggies for the next two months is 500 and 600 units, respectively.Beginning inventory is 4,000 units of wood and 30 units of steel.The ending inventory of wood is planned to decrease 500 units in each of the next two months, and the steel inventory is expected to increase 5 units in each of the next two months. - Refer to Figure 8-3.How many units of wood are expected to be used in production during the second month?

An example of a negative incentive is

Jordan Manufacturing Company expects to incur the following per unit costs for 1,000 units of production: -What is the total amount of direct labor included in the direct labor budget?

Judy's Company has a sales budget for next month of $150,000.Cost of goods sold is expected to be 40 percent of sales.All goods are purchased in the month used and paid for in the month following purchase.The beginning inventory of merchandise is $5,000, and an ending inventory of $6,000 is desired.Beginning accounts payable is $38,000. -The cost of goods sold for next month is expected to be

Which of the following factors is NOT an advantage of preparing operating budgets?

Figure 8-7 Schrandt Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly master budget.Data for the July master budget are given below: The June 30th balance sheet follows: Actual sales for June and budgeted sales for July, August, and September are given below: Sales are 20 percent for cash and 80 percent on credit.All credit sales are collected in the month following the sale.There are no bad debts. The gross margin percentage is 40 percent of sales.The desired ending inventory is equal to 25 percent of the following month's sales.One fourth of the purchases are paid for in the month of purchase and the others are purchased on account and paid in full the following month. The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000. - Refer to Figure 8-7.What is the balance of the building and equipment (net) account at the end of July?

Olson Company has a sales budget for next month of $50,000.Cost of goods sold is expected to be 60 percent of sales.All goods are purchased in the month used and paid for in the month following their purchase.The beginning inventory of merchandise is $1,500 and an ending inventory of $2,000 is desired.Beginning accounts payable is $13,000. -How much merchandise inventory will Olson Company need to purchase next month?

_______________ are concerned with the income-generating activities of a firm.