Exam 7: Planning for Profit and Cost Control

Select the correct statement.

Valley Farm Supply started the period with $80,000 cash. Cash receipts for January expected to total $350,000. Cash disbursements for January were expected to be $290,000. What is the expected cash balance at the end of January?

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

The inventory purchases budget is based on which budget?

What is the relationship or connection between a company's pro forma financial statements and the end-of-period financial statements reported to stockholders and other external users?

The type of planning that involves long term decisions, such as defining the scope of the business and deciding what products to make is known as:

Sales for January are budgeted at 50,000 units, and the company expects sales to increase 4% each month. How many units will need to be purchased in February if the company's policy is to keep ending inventory each month at 10,000 units?

Which of the following would represent the order in which most master budgets are prepared?

The following budget information is available for the Arch Company for January Year 2: Sales \ 860,000 Cost of goods sold 540,000 Utilities expense 2,800 Administrative salaries 100,000 Sales commissions 5\% of sales Advertising 20,000 Depreciation on store e quipment 50,000 Rent on administration building 60,000 Miscellane ous administrative expenses 10,000 All operating expenses are paid in cash in the month incurred. Compute total budgeted selling and administrative expenses (excluding interest) amount for January Year 2.

What is the amount of sales commissions payable that the company will report on its pro forma balance sheet at the end of the fourth quarter?

Which of the following budgets needs to be prepared prior to preparing an inventory purchases budget?

The budgeting process that involves adding a month to the end of the budget period at the end of each month, thus maintaining a twelve-month planning horizon, is referred to as:

The responsibility for the coordination of a company's budgeting activities normally rests with the Chief Financial Officer (CFO).

Interest expense is not included in the selling and administrative budget because a company cannot estimate interest expense until it prepares the cash budget and makes borrowing projections.

Under continuous budgeting a new month is added to the end of the budget period each time the present month expires so that a twelve-month budget is available at all times.

The cash budget includes three sections: (1) operating activities, (2) investing activities, and (3) financing activities.

What is the ending accounts receivable balance that would be reported on the pro forma balance sheet prepared as of June 30?

One advantage of participatory budgeting is that it allows subordinates to perform the budgeting function thus freeing up upper management for more important tasks.

O'Hare Company is in the process of preparing a purchases budget for the first quarter of Year 2. The company has budgeted sales as follows: Dec. Year 1 \ 44,000 Jan. Year 2 \ 46,500 Feb. Year 2 \ 51,000 Mar. Year 2 \ 61,500 Cost of goods sold is expected to be 75% of sales. The company would like to have ending inventory each month equal to 25% of the following month's predicted cost of sales. The total cost of purchases in January Year 2 is:

A company's numerous specific budgets (sales, inventory purchases, etc.) together are referred to as the: