Exam 14: Planning for Profit and Cost Control

How do short-term plans differ from long-term plans?

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

Which of the following would not be included in a selling and administrative expenses budget?

Which section is not included on the cash budget?

Scranton Company expects to begin operating on July 1, 2014. 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 Miscellaneous 1,800 1,800 1,800 Total operating expenses \ 78,800 \ 80,800 \ 772,800 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 September 30, 2012 pro forma balance sheet is:

Budgeting that involves decisions such as whether to buy or lease equipment or build a new factory is referred to as:

Virginia Jackson is opening Jackson Realty on January 2. For several weeks she has been busy putting together an operating budget for the first quarter of operation for her new business. Virginia has estimated her selling and administrative (S&A) costs as follows: January February March Depreciation \ 1,000 \ 1,000 \ 1,000 Marketing expenses 2,000 1,400 1,000 Miscellaneous costs 500 400 400 Rent expense 5,000 5,000 5,000 Salary expense 4,000 8,000 8,000 Sales commissions 1,000 1,200 1,400 Utilities expense 1,000 800 1,000 Total S\&A costs before interest \ 14,500 \ 17,800 \ 17,800 All selling and administrative costs are paid when incurred except utilities, marketing expenses, and sales commissions. These items are paid in the month following the month incurred. Required: 1) Prepare a schedule of cash payments for selling and administrative expenses for January through March. 2) What liabilities, in what amounts, would be reported on the pro forma balance sheet as of March 31?

Which of the following would not be included in the cash budget?

Chu Company provided the following information related to its inventory sales and purchases for December 2013 and the first quarter of 2014: Dec. 2013 Jan. 2014 Feb. 2014 Mar. 2014 (Actual) (Budgeted) (Budgeted) (Budgeted) Cost of goods sold \ 80,000 \ 140,000 \ 180,000 \ 120,000 Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February 2014 would be:

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

Vector Company seeks input from salespeople regarding the number of units they believe they can sell during the upcoming budget period. This is an example of participative budgeting.

The master budget generally starts with a sales forecast.

Dobson Company expects to begin operating on January 1. The company's master budget contained the following operating expense budget: January February March Salary expense \ 40,000 \ 36,000 \ 36,000 Sales commissions, 5\% of sales 24,000 30,000 28,000 Utilities 2,800 2,800 2,800 Depreciation on store equipment 1,800 1,800 1,800 Rent 7,200 7,200 7,200 Miscellaneous 1,800 1,800 1,800 Total operating expenses \ 77,600 \ 79,600 \ 77,600 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 cash to be paid for operating expenses during the month of January 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. The shortage or surplus of cash before considering cash borrowed in March would be:

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:

Select the correct statement about budgeting and human behavior.

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

Hernandez Company expects credit sales for January to be $100,000. Cash sales are expected to be $60,000. The company expects credit and cash sales to increase 10% for the month of February. Credit sales are collected in the month following the month in which sales are made. Based on this information the amount of cash collections in February would be:

Select the term from the list provided that best matches the description provided. Your Answer Definition or Description Term A. Composed of numerous separate but interdependent departmental budgets covering sales, production, and administrative expenses 1. Budgeting B. Budgeting technique that allows subordinates and upper-level managers to work together in setting budgetary targets 2. Capital budget C. Financial planning activities that cover the intermediate range of time (such as whether to buy or lease equipment) 3. Pro forma financial statements D. Activities associated with long-range decisions such as defining the scope of the business and deciding which products to develop 4. Budget committee E. Budgeted financial statements 5. Master budget F. The group of individuals responsible for the coordination of budgeting activities Operating budget G. Examples of these budgets include sales budget, inventory purchases budget, and cash budget 7. Strategic planning H. Budgeting technique that keeps managers constantly involved in the budget process 8. Participative budgeting I. Form of planning that formalizes goals and objectives of a company in financial terms 9. Perpetual budgeting

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