Exam 13: Planning and Budgeting

Budgeted production needs are determined by:

Sensitivity analysis is more likely to be used for sales forecasts than for fixed overhead costs.Sales forecasts are the starting point of budgeting,so more effort will be spent assessing the uncertainties.

The number of units required for production is equal to:

The Tobler Company had budgeted production for the year as follows: 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. ):

The amount of materials to be purchased during the budget period is equal to budgeted:

ABC Company wants to have 10,000 units on hand at the end of the year after marketing 100,000 units during the year.If the beginning inventory is 5,000 units,ABC needs to produce 105,000 units during the year.The production will need to be 105,000 units (5,000 + 105,000 - 100,000 = 10,000)

Cash disbursements would not include payments for:

Assume the Task Company charges 1 1/2% on any balance that is not collected in the month following the month of sale.This charge will also change the collection percentages to 15% cash sales,80% of the balance collected in the month following the sale,16% the second month,and 3% the third month.This stricter credit policy will reduce the estimated sales budgets by 7% each month.What is the amount of cash to be collected in July?

A master budget:

Which of the following statements does not reflect a difficulty in preparing the marketing and administrative budget?

In general,the first budget prepared is the:

TRS is a large securities dealer.Last year,the company made 120,000 trades with an average commission of $120.Because of the general economic climate,TRS expects trade volume to decline by 20%.Fortunately,the average commission per trade is likely to increase by 10% because trades are expected to be large in the coming year.What are the estimated commission's revenues for TRS in the coming year?

The starting point in preparing a comprehensive budget for a manufacturing company limited by its ability to produce and not by its ability to sell is

The Sun Company manufactures a special line of graphic tubing items.The company estimates it will sell 75,000 units of this item in 2012.The beginning finished goods inventory contains 20,000 units.The target for each year's ending inventory is 10,000 units.Each unit requires five feet of plastic tubing.The tubing inventory currently includes 70,000 feet of the required tubing.Materials on hand are targeted to equal three months' production.Any shortage in materials will be made up by the immediate purchase of materials.Sales take place evenly throughout the year.What are the materials requirements (in feet)for 2012?

Sales projections are often the most difficult part of the budgeting process because it involves a considerable amount of subjectivity.Sales are uncertain and there are a number of ways of forecasting.

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 June?

The Tobler Company had budgeted production for the year as follows: 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. ):

Which of the following statements is not correct?

Lynndorf Corporation is a manufacturer of tables sold to schools,restaurants,hotels,and other institutions.The table tops are manufactured by Lynndorf,but the table legs are purchased from an outside supplier.The Assembly Department takes a manufactured table top and attaches the four purchased table legs.It takes 20 minutes of labor to assemble a table.The company follows a policy of producing enough tables to insure that 40% of next month's sales are in the finished goods inventory.Lynndorf also purchases sufficient raw materials (legs)to insure that raw materials (legs)inventory is 60% of the following month's scheduled production needs.Lynndorf's sales budget in units for the next quarter is as follows: (CMA adapted) Lynndorf's ending inventories in units for June 30 are: The number of tables to be produced during August is:

The production budget allows management to plan for the resources needed to meet the current sales demand and ensure that inventory levels are sufficient for future sales.This statement describes the basic function of integrating sales and inventory levels to take into account the seasonality found in all businesses.