Exam 13: Planning and Budgeting

The Kansas Company is preparing a cash budget for the month of July.The following information on accounts receivable collections is available from Kansas' past collection experience: Percent of current month's sales collec ted this 15\% month Percent of prior month's sales collected this month 72\% Percent of sales two months prior to current month 6\% collected this month Percent of sales three months prior to current month 3\% collected this month The remaining 4% are not collected and are written off as bad debts.Credit sales to date are as follows: Juby-estimated \ 150,000 June \ 135,000 May \ 120,000 April \ 145,000 What are the estimated collections in July?

Participative budgeting streamlines the budgeting process by reducing budget development time.

Adair Credit,Inc.has $35.0 million in consumer loans with an average interest rate of 12.0%.The bank also has $30.0 million in home equity loans with an average interest rate of 8.0%.Finally,the bank owns $5.0 million in corporate securities with an average interest rate of 6%.Next year,consumer loans will increase to $40.0 million because of a rate decrease to 10.0%,while home equity loans will increase to $32.0 million at an average interest rate of 6.5%.Unfortunately,the investment in corporate securities will decrease by 20% and the average interest rate will be only 9.0%.What is Adair's estimated change in revenues next year?

The production budget must be prepared before the direct materials,direct labor,and overhead budgets can be prepared.

Describe the difference between the following sales forecasting techniques: Delphi technique,trend analysis,and econometric models.

The following budgeted information is provided: Month Sales in units 15,000 20,000 18,000 Production in units 16,000 22,000 15,000 One pound of material is required for each finished unit.The inventory of materials at the end of each month should equal 20% of the following month's production needs.At the beginning of Month 1,there was 3,200 lbs.of materials on hand.Purchases of raw materials for Month 1 would be (in pounds):

The amount of materials to be purchased during the budget period is equal to budgeted:

When assembling the master budget,the budgeted balance sheet is the last budget prepared in the process.

Cash disbursements would not include payments for:

Arctic Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.41 direct labor-hours.The direct labor rate is $8.50 per direct labor-hour.The production budget calls for producing 2,300 units in August and 2,200 units in September.The company guarantees its direct labor workers a 40-hour paid work week.With the number of workers currently employed,that means that the company is committed to paying its direct labor work force for at least 960 hours in total each month even if there is not enough work to keep them busy. Required: Construct the direct labor budget for the next two months.

Merriweather Corporation is a manufacturer of tables sold to schools,restaurants,hotels,and other institutions.The table tops are manufactured by Merriweather,but the table legs are purchased from an outside supplier.The Assembly Department takes a manufactured table top and attaches the four purchased table legs.It takes 20 minutes of labor to assemble a table.The company follows a policy of producing enough tables to insure that 40% of next month's sales are in the finished goods inventory.Merriweather also purchases sufficient raw materials (legs)to insure that raw materials (legs)inventory is 60% of the following month's scheduled production needs.Merriweather's sales budget in units for the next quarter is as follows: (CMA adapted) Merriweather's ending inventories in units for June 30 are: July 2,300 August 2,500 September 2,100 The number of tables to be produced during August is: Finished goods 1,900 Raw materials (legs) 4,000

Xenos Company has the following sales projections for the coming months: Month Sales January \ 60,000 February 68,000 March 75,000 April 80,000 May 95,000 June 90,000 Xenos collects 20% of its sales in the month of sale,45% in the month following the sale,and 35% in the second month following the sale.Required: a.Prepare a schedule of cash receipts for the three months April through June.b.What would be the accounts receivable balance on June 30?

The production budget allows management to plan for the resources needed to meet the current sales demand and ensure that inventory levels are sufficient for future sales.

The Arkansas Company makes and sells a product called Product K.Each unit of Product K sells for $24 dollars and has a unit variable cost of $18.The company has budgeted the following data for November: • Sales of $1,152,000,all in cash.• A cash balance on November 1 of $48,000.• Cash disbursements (other than interest)during November of $1,160,000.• A minimum cash balance on November 30 of $60,000.If necessary,the company will borrow cash from a bank.The borrowing will be in multiples of $1,000 and will bear interest at 2% per month.All borrowing will take place at the beginning of the month.The November interest will be paid in cash during November.The amount of cash needed to be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 cash balance is:

Which of the following statements does not reflect a difficulty in preparing the marketing and administrative budget?

The Model Company is to begin operations in April.It has budgeted April sales of $30,000,May sales of $34,000,June sales of $40,000,July sales of $42,000,and August sales of $38,000.Note that 10% of each month's sales will represent cash sales;75% of the balance will be collected in the month following the sale,17% the second month,6% the third month,and the balance is bad debts.What is the amount of cash to be collected in the month of July?

Page Company makes 30% of its sales for cash and 70% on account.60% of the account sales are collected in the month of sale,25% in the month following sale,and 12% in the second month following sale.The remainder is uncollectible.The following information has been gathered for Page's first year of operations: Month Total \ 60,000 \ 70,000 \ 50,000 \ 30,000 sales Total cash receipts in Month 3 will be:

The Model Company is to begin operations in April.It has budgeted April sales of $30,000,May sales of $34,000,June sales of $40,000,July sales of $42,000,and August sales of $38,000.Note that 10% of each month's sales will represent cash sales;75% of the balance will be collected in the month following the sale,17% the second month,6% the third month,and the balance is bad debts.What is the amount of cash to be collected in the month of August?

Budgeted Balance sheets combine all of the following except:

The Colson Company has budgeted sales for the year as follows: Quarter Sales in units 12,000 14,000 18,000 16,000 The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units.The finished goods inventory at the start of the year is 3,000 units.Scheduled production for the third quarter is (in units)