Exam 23: Master Budgets and Planning

What is a manufacturing budget?

Ecology Co. sells a biodegradable product called Dissol and has predicted the following sales for the first four months of the current year: Ending inventory for each month should be 20% of the next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?

The ______________________________ shows the budgeted costs for direct materials, direct labor, and overhead, based on the budgeted production volume from the production budget.

Slim Corp. requires a minimum $8,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Loans are repaid at month's end from any excess cash. The cash balance on July 1 is $8,400. Cash receipts other than for loans received for July, August, and September are forecasted as $24,000, $32,000, and $40,000, respectively. Payments other than for loan or interest payments for the same period are planned at $28,000, $30,000, and $32,000, respectively at July 1, there are no outstanding loans. Required: Prepare a cash budget for July, August, and September.

Briefly describe the process by which budgets are developed and administered.

The merchandise purchases budget depends on information provided by the sales budget.

A budget system based on expected activities and their levels that enables management to plan for resources required to perform the activities is:

Kent Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales for May.

To determine the production budget for an accounting period, consideration is given to all of the following except:

Activity-based budgeting is a budget system based on expected activities and their activity levels, which helps management plan for the resources required.

A June sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit. The desired ending inventory of units is 15% higher than the beginning inventory of 1,000 units. Total June sales are anticipated to be:

A plan that states the number of units to be manufactured during each future period covered by the budget, based on the budgeted sales for the period and the levels of inventory needed to support future sales, is the:

Kent Company's May sales budget calls for sales of $900,000. The store expects to begin May with $50,000 of inventory and to end the month with $55,000 of inventory. Gross margin is typically 45% of sales. Compute the budgeted cost of merchandise purchases for May.

Operating budgets include all the following budgets except the:

The process of planning future business actions and expressing them as a formal plan is called:

If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and cost of goods sold is expected to be $10,260, then budgeted purchases should be $9,160. Budgeted purchases = $9,400 + $10,260 - $8,300 = $11,360

The Lamb Company budgeted sales for January, February, and March of $96,000, $88,000, and $72,000, respectively. Seventy percent of sales are on credit. The company collects 60% of its credit sales in the month following sale, 35% in the second month following sale, and 5% is not collected. What are Lamb's expected cash receipts for March related to all current and past sales?

A plan showing the planned sales units and the revenue to be derived from these sales, and is the usual starting point in the budgeting process, is called the:

A budget can be an effective means of communicating management's plans to the employees of a business.

The responsibility for coordinating the preparation of a master budget should be assigned to the Chief Executive Officer.