Exam 7: Planning for Profit and Cost Control

If a budgeting system is designed correctly, top management will not have to get involved in the process.

Which of the following items would be least useful in preparing a schedule of cash receipts?

The accountant for Haven Industries could not prepare the following budgets because an item of information is missing for each one. Identify the missing items needed prior to preparing each budget.

Scranton Company expects to begin operating on July 1, Year 1. The company's master budget contained the following operating expense budget: July August September Salary expense \ 36,000 \ 36,000 \ 36,000 Sales commissions, 5\% of sales 30,000 32,000 24,000 Utilities 2,800 2,800 2,800 Depreciation on store equipment 1,000 1,000 1,000 Rent 7,200 7,200 7,200 Miscellane ous 1,800 1,800 1,800 Total operating expenses \ 78,800 \ 80,800 \ 72,800 Sales commissions are paid in cash in the month following the month in which the expense is recognized. All other expense items requiring cash payment are paid in the month in which they are recognized. The amount of commissions payable that would appear on the company's pro forma balance sheet as of September 30, Year 1 is:

Bantam Industries has budgeted the following information for March: Cash receipts \ 271,000 Beginning cash balance 5,000 Cash payments 280,000 Desired ending cash balance 25,000 If there is a cash shortage, the company borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments and interest is paid monthly at 1% on the first day of the following month. The company had no debt before March 1^st. How much cash will the company need to borrowed in March?

Bonnie's Bakery is a relatively small company that makes pies, cakes, and cookies sold in supermarkets. Sales employees' bonuses are determined based on meeting or exceeding the budget. For the coming year, sales employees have set a budget target of 3 percent for sales growth. The market has been growing at 6 percent, and the company has averaged 10 percent growth for the last two years. What is the problem here, and how can it be fixed?

Select the correct statement regarding the selling and administrative (S&A) expense budget.

The budgeting technique that provides for employee input into the planning process is known as:

In a participative budgeting system, budget information flows in both directions, from bottom to top, and from top to bottom.

Hilliard Company budgeted the following transactions for April Year 2: Sales (75\% collected in month of sale) \ 200,000 Cash Operating Expenses 105,000 Cash Purchases of Investments 75,000 Cash Payment of Debt 15,000 Depreciation on Operating Assets 12,000 The beginning cash balance was $50,000. The company desires to have a $25,000 ending cash balance. The surplus (or shortage) of cash before considering any financing activities (that is, borrowings or repayments) during in April would be:

Four purposes or advantages for budgeting involve planning, coordination, performance measurement, and punitive action.

Which of the following items is not needed to prepare a sales budget by product line?

Which of the following cash budget equations is incorrect?

What is the total amount of S&A expenses for the fourth quarter that the company will report on its pro forma income statement?

Select the correct statement about budgeting and human behavior.

Which of the following accounts would appear on the inventory purchases budget and pro forma balance sheet?

The basic cash budget format is: Total cash available - Total cash disbursed = Surplus or shortage of cash +/ - Effects of financing = Ending cash.

The marketing department is primarily responsible for establishing the sales forecast.

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual. Which advantage of budgeting would have helped him identify this problem sooner?

Budgeted depreciation expense would not appear on a: