Exam 22: Budgeting

Detailed supplemental schedules based on department responsibility are often prepared for major items in the operating expenses budget.

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:

In preparing flexible budgets, the first step is to identify the fixed and variable components of the various costs and expenses being budgeted.

Part of the cash budget is based on information drawn from the capital expenditures budget.

A capital expenditures budget is prepared before the operating budgets.

Sweet Dreams, Inc. manufactures bedding sets. The budgeted production is for 52,000 comforters in 2012. Each comforter requires 1.5 hours to cut and sew the material. If cutting and sewing labor costs $11.00 per hour, determine the direct labor budget for 2012.

Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $260,000, $375,000, and $400,000, respectively, for September, October, and November. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale. The cash collections in September from accounts receivable are:

A process whereby the effect of fluctuations in the level of activity is built into the budgeting system is referred to as flexible budgeting.

At the beginning of the period, the Cutting Department budgeted direct labor of $155,000, direct material of $165,000 and fixed factory overhead of $15,000 for 9,000 hours of production. The department actually completed 10,000 hours of production. What is the appropriate total budget for the department, assuming it uses flexible budgeting?

Mandy Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below. Material A .50 lb. per unit @ $ .60 per pound Material B 1.00 lb. per unit @ $1.70 per pound Material C 1.20 lb. per unit @ $1.00 per pound The dollar amount of direct material B used in production during the year 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:

The flexible budget is, in effect, a series of static budgets for different levels of activity.

Southern Company is preparing a cash budget for April. The company has $12,000 cash at the beginning of April and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during April. Southern Company has an agreement with its bank to maintain a cash balance of at least $10,000. To maintain the $10,000 required balance, during April the company must:

Manicotti Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 108,000 units, and desired ending inventory is 90,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below. Material A .50 lb. per unit @ $ .60 per pound Material B 1.00 lb. per unit @ $1.70 per pound Material C 1.20 lb. per unit @ $1.00 per pound The dollar amount of direct material A used in production during the year is:

Consulting the persons affected by a budget when it is prepared can provide an effective means of motivation and cooperation.

Doran Technologies produces a single product. Expected manufacturing costs are as follows: Variable costs Direct materials $4.00 per unit Direct labor $1.20 per unit Manufacturing overhead $0.95 per unit Fixed costs per month Depreciation $6,000 Supervisory salaries $13,500 Other fixed costs $3,850 Required: Estimate manufacturing costs for production levels of 25,000 units, 30,000 units, and 35,000 units per month.

A department store has budgeted sales of 12,000 men's suits in September. Management wants to have 6,000 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 units. What is the dollar amount of the purchase of suits? Each suit has a cost of $75.

The first budget customarily prepared as part of an entity's master budget is the:

The financial budgets of a business include the cash budget, the budgeted income statement, and the budgeted balance sheet.

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.