Exam 13: Planning and Budgeting

T.Jackson Retail seeks your assistance to develop cash and other budget information for May,June,and July.At April 30,the company had cash of $5,500,accounts receivable of $437,000,inventories of $309,400,and accounts payable of $133,055.The budget is to be based on the following assumptions: SALES: Each month's sales are billed on the last day of the month.Customers are allowed a 3% discount if payment is made within 10 days after the billing date.Receivables are recorded in the accounts at their gross amounts (not net of discounts).55% of the billings are collected within the discount period;30% are collected by the end of the month;9% are collected by the end of the second month;and 6% turn out to be uncollectible.PURCHASES: 60% of all purchases of merchandise and the marketing,general,and administrative expenses are paid in the month purchased and the remainder in the following month.The number of units in each month's ending inventory is equal to 125% of the next month's units of sales.The cost of each unit of inventory is $30.Marketing,general,and administrative expenses,of which $3,000 is depreciation,are equal to 15% of the current month's sales.Actual and projected sales are as shown below: What are the budgeted merchandise purchases (in dollars)for May?

The statistical method of forecasting that relies heavily on regression models is called:

Which of the following types of accounts would not be included on a budgeted balance sheet?

Pardee 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 the current year: Total cash receipts in Month 4 will be:

A company is formulating its plans for the coming year,including the preparation of its cash budget.Historically,the company's sales are 30% cash.The remaining sales are on credit with the following collection pattern: Sales for the first 5 months of the coming year are forecast as follows: For the month of April,the total cash receipts from sales and collections on account would be: (CIA adapted)

Long-range planning as a management function is more important:

Pardee 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 Pardee's first year of operations: Total cash receipts in Month 3 will be:

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

Davis Corporation had the following transactions in its first year of operations: What is the cash balance at year end?

T.Jackson Retail seeks your assistance to develop cash and other budget information for May,June,and July.At April 30,the company had cash of $5,500,accounts receivable of $437,000,inventories of $309,400,and accounts payable of $133,055.The budget is to be based on the following assumptions: SALES: Each month's sales are billed on the last day of the month.Customers are allowed a 3% discount if payment is made within 10 days after the billing date.Receivables are recorded in the accounts at their gross amounts (not net of discounts).55% of the billings are collected within the discount period;30% are collected by the end of the month;9% are collected by the end of the second month;and 6% turn out to be uncollectible.PURCHASES: 60% of all purchases of merchandise and the marketing,general,and administrative expenses are paid in the month purchased and the remainder in the following month.The number of units in each month's ending inventory is equal to 125% of the next month's units of sales.The cost of each unit of inventory is $30.Marketing,general,and administrative expenses,of which $3,000 is depreciation,are equal to 15% of the current month's sales.Actual and projected sales are as shown below: What are the budgeted number of inventory units that need to be purchased in July?

Individual managers' beliefs and expectations are incorporated into the budgeting process using grass roots budgeting procedures.This concept is also called participative budgeting.

Both variable and fixed manufacturing overhead costs are included in the manufacturing overhead budget.Expense items with both types of cost behavior are identified in manufacturing overhead.

The Task 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?

The forecasting method in which individual forecasts of group members are submitted anonymously and evaluated by the group as a whole is called:

An organization's sales staff is more likely to provide a lower sales forecast than a forecast provided by market researchers.Salespeople have an incentive to bias their forecast since they may be evaluated based on their forecast.

The major objectives of any budget system are to: (CIA adapted)

A budget is the plan,stated in financial terms,of how an organization expects to carry out its activities and meet its goals.This statement is a basic definition of a budget.

A production budget is not needed for a service organization.This is because there are no inventories in a service organization.The focus shifts to direct (billable)labor.

The Sport Company is preparing a cash budget for the month of July.The following information on accounts receivable collections is available from Sport's past collection experience: The remaining 4% are not collected and are written off as bad debts.Credit sales to date are as follows: What are the estimated collections in July?

Brown Company has developed the following sales projections for the calendar year: Normal cash collection experience has been that 50% of sales is collected during the month of sale and 45% in the month following the sale.The remaining 5% of sales are never collected.Brown's budgeted cash collections for the third calendar quarter are: (CMA adapted)