Exam 13: Planning and Budgeting

Albert Corporation is a wholesaler of industrial goods.Data regarding the store's operations follow: • Sales are budgeted at $350,000 for November,$360,000 for December,and $340,000 for January.• Collections are expected to be 60% in the month of sale,39% in the month following the sale,and 1% uncollectible.• The cost of goods sold is 75% of sales.• The company purchases 40% of its merchandise in the month prior to the month of sale and 60% in the month of sale.Payment for merchandise is made in the month following the purchase.• The November beginning balance in the accounts receivable account is $70,000.• The November beginning balance in the accounts payable account is $257,000.Required: a.Prepare a Schedule of Expected Cash Collections for November and December.b.Prepare a Merchandise Purchases Budget for November and December.

The master budget process usually begins with the: (CMA adapted)

The Tori Company had budgeted production for the year as follows: Quarter Production in units 10,000 12,000 16,000 14,000 Four pounds of raw materials are required for each unit produced.Raw materials on hand at the start of the year total 4,000 lbs.The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in materials.Budgeted purchases of raw materials in the third quarter would be (in lbs. ):

Templeton Enterprises expects the following unit sales over the next few months: Month Unit Sales June 100,000 July 120,000 August 135,000 September 150,000 October 140,000 November 125,000 Templeton's goal is to maintain an inventory equal to a 6 day supply.March 31^st inventory is projected to be 18,000 units.Required: Prepare a purchases budget (in units)for Templeton for as many months as is possible.Assume a 30-day month.

Virginia Company's total costs of operating five sales offices last year were $500,000,of which $70,000 represented fixed costs.Virginia has determined that total costs are significantly influenced by the number of sales offices operated.Last year's costs and number of sales offices can be used as the basis for predicting annual costs.What would be the budgeted cost for the coming year if Virginia were to operate seven sales offices? (CPA adapted)

The Delphi technique uses highly sophisticated computerized time series analysis to reduce the subjectivity surrounding the sales forecast.

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 second quarter is (in units):

Marino Company has projected sales and production in units for the second quarter of the year as follows: April May June Sales 30,000 20,000 25,000 Production 25,000 25,000 30,000 Required: a.Cash production costs are budgeted at $6 per unit produced.Of these production costs,40% are paid in the month in which they are incurred and the balance in the following month.Marketing and administrative expenses (all paid in cash)amount to $60,000 per month.The accounts payable balance on March 31 totals $96,000,all of which will be paid in April.Prepare a schedule for each month showing budgeted cash disbursements for Marino Company.b.Assume that all units will be sold on account for $15 each.Cash collections from sales are budgeted at 60% in the month of sale,30% in the month following the month of sale and the remaining 10% in the second month following the month of sale.Accounts receivable on March 31 totaled $255,000 ($45,000 from February's sales and the remainder from March. )Prepare a schedule for each month showing budgeted cash receipts for Marino Company.

The manufacturing overhead budget at Levetron Corporation is based on budgeted direct labor-hours.The direct labor budget indicates that 7,100 direct labor-hours will be required in August.The variable overhead rate is $8.60 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $132,770 per month,which includes depreciation of $24,850.All other fixed manufacturing overhead costs represent current cash flows.The company recomputes its predetermined overhead rate every month.The predetermined overhead rate for August should be:

Which of the following statements is(are)true regarding the master budget? (A)A master budget consists of (a)organizational goals, (b)strategic long-range profit plan,and (c)tactical short-range profit plan. (B)A master budget consists of only a budgeted (a)income statement, (b)balance sheet,and (c)stockholders' equity statement.

James,Inc.makes a product that has peak sales in September of each year.The company has prepared a sales budget for the third quarter as shown below: Budgeted Sales July \ 200,000 August 400,000 September 600,000 The company is in the process of preparing a cash budget for the third quarter and must determine the expected cash collections by month.To this end,the following information has been assembled: Colections on Sales In month of sale 60\% In month tollowing sale 25\% In second month following sale 15\% The company gives a 3% cash discount to customers paying in the month of their sale.The company charges 2% interest to customers who pay in the second month following their sales.The accounts receivable balance to start the quarter is $150,000: $35,000 from May's sales and $115,000 from June's sales.Required: Prepare a cash receipts budget for the third quarter.

In developing a master budget for a manufacturing company,which one of the following items should be done first?

Oklahoma Telephone Company has been forced by competition to put much more emphasis on planning and controlling its costs.Accordingly,the company's controller has suggested initiating a formal budgeting process.Which of the following steps will not help the company gain maximum acceptance by employees of the proposed budgeting system? (CMA adapted)

The Molson Company had budgeted production for the year as follows: Quarter Production in units 10,000 12,000 16,000 14,000 Four pounds of raw materials are required for each unit produced.Raw materials on hand at the start of the year total 4,000 lbs.The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in materials.Budgeted purchases of raw materials in the second quarter would be (in lbs. ):

Rerun Manufacturing Company is in the process of preparing its 2016 budget and is anticipating the following changes: 30% increase in the number of units sold.20% increase in the direct material unit cost.15% increase in the direct labor cost per unit.10% increase in the manufacturing overhead cost per unit.14% increase in the marketing price.7% increase in the administrative expenses.Rerun does not keep any units in inventory.The composition of the cost of finished products during 2016 for materials,direct labor,and factory overhead,respectively,was in the ratio of 3:2:1.The condensed income statement for 2016 is as follows: Sales (30,000 units ) \ 460,000 Less sales returns Net sales 436,500 Cost of Goods Sold Gross Profit \ 130,500 Selling Expenses \ 60,000 Admin. Expenses 30,000 90,000 Net Income What are estimated net sales for 2016,assuming the sales return/gross sales relationship remains constant?

Parker Company has forecast its sales as follows: November \ 190,000 (actual) December \ 240,000 (actual) January \ 280,000 February \ 300,000 March \ 350,000 April \ 320,000 Parker has experienced collections of 55% during the month of sale,38% the month after the sale,and 7% the second month after the sale.Required: a.Prepare a schedule of cash receipts for the 4 month period January - April.b.What will the Accounts Receivable balance be on April 30?

Endpoint Inc.bases its manufacturing overhead budget on budgeted direct labor-hours.The variable overhead rate is $1.30 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $98,900 per month,which includes depreciation of $19,780.All other fixed manufacturing overhead costs represent current cash flows.The September direct labor budget indicates that 8,600 direct labor-hours will be required in that month. Required: a.Determine the cash disbursement for manufacturing overhead for September. b.Determine the predetermined overhead rate for September.

The number of units required for production is equal to:

Why is it more difficult to prepare a marketing and administrative budget than it is to prepare a production budget?

Ng Inc.bases its marketing and administrative expense budget on the number of units sold.The variable marketing and administrative expense is $4.30 per unit.The budgeted fixed marketing and administrative expense is $30,240 per month,which includes depreciation of $3,510.The remainder of the fixed marketing and administrative expense represents current cash flows.The sales budget shows 2,700 units are planned to be sold in April.Required: Prepare a schedule showing total marketing and administrative expenses for April,as well as the cash disbursements for marketing and administrative expenses.