Exam 9: Financial Planning and Analysis: the Master Budget

To derive the raw material to purchase during an accounting period, an accountant would calculate the raw material required for production and then:

Yorkley Corporation plans to sell 41,000 units of its single product in March. The company has 2,800 units in its March 1 finished-goods inventory and anticipates having 2,400 completed units in inventory on March 31. On the basis of this information, how many units does Yorkley plan to produce during March?

The Gingham Company's budgeted income statement reflects the following amounts: January \ 120,000 \ 78,000 \ 24,000 February 110,000 66,000 24,200 March 125,000 81,250 27,000 April 130,000 84,500 28,600 Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the second month following sale. One percent of sales is uncollectible and expensed at the end of the year. Gingham pays for all purchases in the month following purchase and takes advantage of a 3% discount. The following balances are as of January 1: Cash \ 88,000 Accounts receivable* 58,000 Accounts payable 72,000 *Of this balance, $35,000 will be collected in January and the remaining amount will be collected in February. The monthly expense figures include $5,000 of depreciation. The expenses are paid in the month incurred. Gingham's budgeted cash receipts in February are:

Northcutt's production data for a new deluxe product were taken from the most recent quarterly production budget: In addition, Northcutt produces 5,000 units a month of its standard product. It takes two direct labor hours to produce each standard unit and 2.25 direct labor hours to produce each deluxe unit. Northwest's cost per labor hour is $15. Direct labor cost for September would be budgeted at:

Quattro began operations in April of this year. It makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the firm's budgeted collections for June?

Quattro began operations in April of this year. It makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the firm's budgeted collections for May?

Mayze Production Company, which uses activity-based budgeting, is in the process of preparing a manufacturing overhead budget. Which of the following would likely appear on that budget?

End-of-period figures for accounts receivable and payables to suppliers would be found on the:

The following events took place when Managers A, B, and C were preparing budgets for the upcoming period: I. Manager A increased property tax expenditures by 2% when she was informed of a recent rate hike by local authorities. II. Manager B reduced sales revenues by 4% when informed of recent aggressive actions by a new competitor. III. Manager C, who supervises employees with widely varying skill levels, used the highest wage rate in the department when preparing the labor budget. Assuming that the percentage amounts given are reasonable, which of the preceding cases is (are) an example of building slack in budgets?

Northwest manufactures a product requiring 0.5 ounces of platinum per unit. The cost of platinum is approximately $360 per ounce; the company maintains an ending platinum inventory equal to 10% of the following month's production usage. The following data were taken from the most recent quarterly production budget: The cost of platinum to be purchased to support August production is:

Dragon makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for June, July, and August were $120,000, $160,000, and $220,000, respectively, what were the firm's budgeted collections for August and the company's budgeted receivables balance on August 31?

A company's expected receipts from sales and planned disbursements to pay bills is commonly called a:

FastTec sells electronics in retail outlets and on the Internet. It uses activity-based budgeting in the preparation of its selling, general, and administrative expense budget. Which of the following costs would the company likely classify as a unit-level expense on its budget?

Tidewater plans to sell 85,000 units of product no. 794 in May, and each of these units requires three units of raw material. Pertinent data follow. On the basis of the information presented, how many units of raw material should Tidewater purchase for use in May production?

A budget serves as a benchmark against which:

The following information relates to DFW Corporation: • All sales are on account and are budgeted as follows: February, $350,000; March, $360,000; and April, $400,000. DFW collects 70% of its sales in the month of sale and 30% in the following month. • Cost of goods sold averages 60% of sales. Purchases total 65% of the following month's sales and are paid in the month following acquisition. • Cash operating expenses total $60,000 per month and are paid when incurred. Monthly depreciation amounts to $18,000. • Selected amounts taken from the January 31 balance sheet were: accounts receivable, $115,000; plant and equipment (net), $107,000; and retained earnings, $85,000. Required: (NOTE: Ignore income taxes in answering these questions). A. Prepare a budgeted income statement that summarizes activity for the two months ended March 31, 20x1. B. Compute the amounts that would appear on the March 31 balance sheet for accounts receivable, plant and equipment (net), and retained earnings.

Consider the following statements about budgetary slack: I. Managers build slack into a budget so that they stand a greater chance of receiving favorable performance evaluations. II. Budgetary slack is used by managers to guard against uncertainty and unforeseen events. III. Budgetary slack is used by managers to guard against dollar cuts by top management in the resource allocation process. Which of the above statements is (are) true?

An examination of Shorter Corporation's inventory accounts revealed the following information: Raw materials, June 1: 46,000 units Raw materials, June 30: 51,000 units Purchases of raw materials during June: 185,000 units Shorter's finished product requires four units of raw materials. On the basis of this information, how many finished products were manufactured during June?

Sainte Claire Corporation has a highly automated production facility. Production volume and management judgment are the two factors that would likely have the most direct influence on the company's manufacturing overhead budget.

List several factors that an organization might consider when developing a sales forecast.