Exam 22: Budgeting

As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000 and $150,000. 20% of each month's sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of March?

What is a capital expenditures budget?

If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for 2012 is 202,000 units.

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.

Describe a master budget and the sequence in which the individual budgets within the master budget are prepared.

The Svelte Jeans Company produces two different types of jeans. One is called the "Simple Life" and the other is called the "Fancy Life". The company sales budget estimates that 350,000 of the Simple Life Jeans and 200,000 of the Fancy Life will be sold during 20xx. The Production Budget requires 353,500 units of Simple Life jeans and 196,000 Fancy Life jeans be manufactured. The Simple Life jeans require 3 yards of denim material, a zipper, and 25 yards of thread. The Fancy Life jeans require 4.5 yards of denim material, a zipper, and 40 yards of thread. Each yard of denim material costs $3.25, the zipper costs $.75 each, and the thread is $.01 per yard. There is enough material to make 2,000 jeans of each type at the beginning of the year. The desired amount of materials left in ending inventory is to have enough to manufacture 3,500 jeans of each type. Prepare a Direct Materials Purchases Budget.

The budgeting process is used to effectively communicate planned expectations regarding profits and expenses to the entire organization.

Budget preparation is best determined in a top-down managerial approach.

Truliant co. sells a product called Withall and has predicted the following sales for the first four months of the current year: Ending inventory for each month should be 20% of next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?

As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000 and $150,000. 20% of each month's sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of February?

The budget process involves doing all the following except:

The budgeted volume of production is based on the sum of (1) the expected sales volume and (2) the desired ending inventory, less (3) the estimated beginning inventory.

Below is budgeted production and sales information for Flushing Company for the month of December: The unit selling price for product XXX is $5 and for product ZZZ is $15. Budgeted production for product ZZZ during the month is:

Management accountants usually provide for a minimum cash balance in their cash budgets for which of the following reasons:

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

Door & Window Co. was organized on August 1 of the current year. Projected sales for the next three months are as follows: The company expects to sell 40% of its merchandise for cash. Of the sales on account, 25% are expected to be collected in the month of the sale and the remainder in the following month. Prepare a schedule indicating total cash collections for August, September, and October.

The budgeting process does not involve which of the following activities:

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

After the sales budget is prepared, the capital expenditures budget is normally prepared next.

If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and budgeted cost of goods sold is $10,260, budgeted purchases should be: