Exam 13: Planning and Budgeting

Hawle Manufacturing Company is in the process of preparing its 2012 budget and is anticipating the following changes: 30% increase in the number of units sold.20% increase in the direct material unit cost.15% increase in the direct labor cost per unit.10% increase in the manufacturing overhead cost per unit.14% increase in the marketing price.7% increase in the administrative expenses.Hawle does not keep any units in inventory.The composition of the cost of finished products during 2012 for materials,direct labor,and factory overhead,respectively,was in the ratio of 3 to 2 to 1.The condensed income statement for 2012 is as follows: What is the estimated cost of goods sold for 2012 assuming the number of units sold does not change?

Sensitivity analysis can best be used in the budgeting process to:

The use of sensitivity analysis techniques allows managers to ask "what-if" questions regarding budget assumptions and estimates.This is the definition of sensitivity analysis.

A company has the following annual budget data: What are total budgeted production costs for the year? (CIA adapted)

A continuous (rolling)budget:

Which of the following statements is (are)true regarding the benefits associated with participative budgeting? (A)Goal congruence by divisions means top management need not be concerned with overall profitability.(B)Budget assumptions and estimates are prepared by those closest to the budgeted activity.

The Jack Company is preparing its cash budget for the month of June.The following information is available concerning its inventories: What are the estimated cash disbursements for inventories in June?

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: Assume that Lynndorf Corporation will produce 1,800 units in the month of September.How many employees will be required for the Assembly Department? (Fractional employees are acceptable since employees can be hired on a part-time basis.Assume a 40-hour week and a 4-week month. )

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 July?

The Waverly Company has budgeted sales for the year as follows: The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units.The finished goods inventory at the start of the year is 3,000 units.Scheduled production for the second quarter is (in units):

Which of the following terms is not an alternative for master budget?

Which of the following statements is (are)true regarding the master budget? (A)A master budget consists of (a)organizational goals, (b)strategic long-range profit plan,and (c)tactical short-range profit plan.(B)A master budget consists of only a budgeted (a)income statement, (b)balance sheet,and (c)stockholders' equity statement.

The Waverly Company has budgeted sales for the year as follows: The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units.The finished goods inventory at the start of the year is 3,000 units.Scheduled production for the third quarter is (in units)

Hawle Manufacturing Company is in the process of preparing its 2012 budget and is anticipating the following changes: 30% increase in the number of units sold.20% increase in the direct material unit cost.15% increase in the direct labor cost per unit.10% increase in the manufacturing overhead cost per unit.14% increase in the marketing price.7% increase in the administrative expenses.Hawle does not keep any units in inventory.The composition of the cost of finished products during 2012 for materials,direct labor,and factory overhead,respectively,was in the ratio of 3 to 2 to 1.The condensed income statement for 2012 is as follows: What are estimated net sales for 2012,assuming the sales return/gross sales relationship remains constant?

Kaufman Industries has just completed its sales forecasts and its marketing department estimates that the company will sell 36,000 units during the upcoming year.In the past,management has maintained inventories of finished goods at approximately three months' sales.However,the estimated inventory at the start of the year of the budget period is only 6,000 units.Sales occur evenly throughout the year.What is the estimated production level (units)for the first month of the upcoming budget year?

A company is preparing its cash budget for the coming month.All sales are on account.Given the following: What is the expected cash balance of the company at the end of the coming month? (CIA adapted)

The master budget process usually begins with the: (CMA adapted)

The Delphi technique uses highly sophisticated computerized time series analysis to reduce the subjectivity surrounding the sales forecast.The Delphi method is qualitative.

A master budget consists of (a)organizational goals, (b)strategic long-range profit plan,and (c)tactical short-range profit plan.The master budget is the tactical short-range profit plan.These three are part of an overall organization plan.

TLC Credit,Inc.has $35.0 million in consumer loans with an average interest rate of 12.0%.The bank also has $30.0 million in home equity loans with an average interest rate of 8.0%.Finally,the bank owns $5.0 million in corporate securities with an average interest rate of 6%.Next year,consumer loans will increase to $40.0 million because of a rate decrease to 10.0%,while home equity loans will increase to $32.0 million at an average interest rate of 6.5%.Unfortunately,the investment in corporate securities will decrease by 20% and the average interest rate will be only 9.0%.What is TLC's estimated change in revenues next year?