Exam 9: Financial Planning and Analysis: the Master Budget

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 expected cash balance at the end of February is:

Verna's makes all sales on account, subject to the following collection pattern: 20% are collected in the month of sale; 70% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for October, November, and December were $70,000, $60,000, and $50,000, respectively, what was the budgeted receivables balance on December 31?

Bentson Corporation, a wholesaler, provided the following information: Merchandise Month Purchases Sales January \ 142,000 \ 172,000 February 148,000 166,000 March 136,000 165,000 April 154,000 178,000 May 160,000 166,000 Customers pay 60% of their balances in the month of sale, 30% in the month following sale, and 10% in the second month following sale. The company pays all invoices in the month following purchase and takes advantage of a 3% discount on all amounts due. Cash payments for operating expenses in May will be $119,500; Bentson's cash balance on May 1 was $127,800. Required: Determine the following: A. Expected cash collections during May. B. Expected cash disbursements during May. C. Expected cash balance on May 31.

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 the quarter would be budgeted at:

Northwest's production data for one of its products were taken from the most recent quarterly production budget: If it takes two direct labor hours to produce each unit and Northwest's cost per labor hour is $15, direct labor cost for August would be budgeted at:

The comprehensive set of budgets that serves as a company's overall financial plan is commonly known as:

Consider the following statements about companies that are involved with international operations: I. Budgeting for these firms is often very involved because of fluctuating values in foreign currencies. II. Multinational firms may encounter hyperinflationary economies. III. Such organizations often face changing laws and political climates that affect business activity. Which of the above statements is (are) true?

Scotch Company plans to sell 400,000 units of finished product in July 20x1. Management (1) anticipates a growth rate in sales of 5% per month thereafter and (2) desires a monthly ending finished-goods inventory (in units) of 80% of the following month's estimated sales. There are 300,000 completed units in the June 30, 20x1 inventory. Each unit of finished product requires four pounds of direct material at a cost of $1.50 per pound. There are 1,600,000 pounds of direct material in inventory on June 30, 20x1. Required: A. Prepare a production budget for the quarter ended September 30, 20x1. Note: For both part "A" and part "B" of this problem, prepare your budget on a quarterly (not monthly) basis. B. Independent of your answer to part "A," assume that Scotch plans to produce 1,200,000 units of finished product for the quarter ended September 30. If the firm desires to stock direct materials at the end of this period equal to 25% of current production usage, compute the cost of direct material purchases for the quarter.

A formal budget program will almost always result in:

A company's sales forecast would likely consider all of the following factors except:

Santorini Corporation has experienced a number of out-of-stock situations with respect to its finished-goods inventories. Inventory at the end of May, for example, was only 50 units-an all-time low. Management desires to implement a policy whereby finished-goods inventory is 70% of the following month's sales. Budgeted sales for June, July, and August are expected to be 5,000 units, 5,600 units, and 5,500 units, respectively. Required: Determine the number of units that Santorini must produce in June and July.

The comprehensive set of budgets that serves as a company's overall financial plan is commonly known as the financial budget.

A company's plan for the issuance of stock or incurrence of debt is commonly called a:

That employees make little effort to achieve budgetary goals is an outcome sometimes associated with participative budgeting.

Wilmar Corporation is budgeting its equipment needs on an on-going basis, with a new quarter being added to the budget as the current quarter is completed. This type of budget is most commonly known as a:

When an organization involves its many employees in the budgeting process in a meaningful way, the organization is said to be using an approach most commonly known as:

Swansong plans to sell 10,000 units of a particular product during July, and expects sales to increase at the rate of 10% per month during the remainder of the year. The June 30 and September 30 ending inventories are anticipated to be 1,100 units and 950 units, respectively. On the basis of this information, how many units should Swansong purchase for the quarter ended September 30?

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 expected cash balance at the end of January is:

Virginia State University (VSU) is preparing its master budget for the upcoming academic year (an academic year consists of two semesters). Currently, 12,000 students are enrolled on campus; however, the admissions office is forecasting a 5% growth in the student body despite a tuition hike to $80 per credit hour. The following additional information has been gathered from an examination of university records and conversations with university officials: • VSU is planning to award 150 tuition-free scholarships. • The average class has 30 students, and the typical student takes 15 credit hours each semester. • Each class is three credit hours. • Each faculty member teaches five classes during the academic year. Required: A. Compute the budgeted tuition revenue for the upcoming academic year. B. Determine the number of faculty members needed to cover classes. C. In preparing the university's master budget, should the administration begin with a forecast of students or a forecast of faculty members? Briefly explain.

Which of the following would have no effect, either direct or indirect, on an organization's cash budget?