Exam 1: Master Budgeting

Home Corporation will open a new store on January 1. Based on experience from its other retail outlets, Home Corporation is making the following sales projections: Home Corporation estimates that 70% of the credit sales will be collected in the month following the month of sale, with the balance collected in the second month following the month of sale. -Based on these data, the balance in accounts receivable on January 31 will be:

Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales at Fab (in units) for the next three months are as follows: Fab likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. How many mugs should Fab plan on producing during the month of November?

Home Corporation will open a new store on January 1. Based on experience from its other retail outlets, Home Corporation is making the following sales projections: Home Corporation estimates that 70% of the credit sales will be collected in the month following the month of sale, with the balance collected in the second month following the month of sale. -The March 31 balance in accounts receivable will be:

Shocker Corporation's sales budget shows quarterly sales for the next year as follows: Unit sales Corporation policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production for the second quarter of the next year would be:

Rogers Corporation is preparing its cash budget for July. The budgeted beginning cash balance is $25,000. Budgeted cash receipts total $141,000 and budgeted cash disbursements total $139,000. The desired ending cash balance is $30,000. -The excess (deficiency) of cash available over disbursements for July is:

Two yards of a fabric are required for each blouse produced by Northern Shirt Corporation. The cost of the fabric is $4 per yard. Budgeted production of blouses is given below for the fourth quarter and the first month of the following quarter. To prevent against stock outs of the fabric, the company maintains an ending inventory each month equal to 10% of the next month's production needs. The beginning inventory of the fabric in October will be 3,600 yards. Required: Prepare a direct materials budget for the fabric, by month and in total for the fourth quarter. Be sure to include both the quantity to be purchased and its cost for each month.

Which of the following represents the normal sequence in which the below budgets are prepared?

Parliman Corporation is preparing its cash budget for August. The budgeted beginning cash balance is $12,000. Budgeted cash receipts total $159,000 and budgeted cash disbursements total $162,000. The desired ending cash balance is $20,000. The company can borrow up to $160,000 at any time from a local bank, with interest not due until the following month. Required: Prepare the company's cash budget for August in good form.

The first budget a company prepares in a master budget is the production budget.

The Fraley Corporation, a merchandising firm, has planned the following sales for the next four months: Sales are made 40% for cash and 60% on account. From experience, the company has learned that a month's sales on account are collected according to the following pattern: The company requires a minimum cash balance of $4,000 to start a month. Required: a. Compute the budgeted cash receipts for June. b. Assume the following budgeted data for June: Using this data, along with your answer to part (a) above, prepare a cash budget for June. Clearly show any borrowing needed during the month. The company can borrow in any dollar amount, but will not pay any interest until the following month.

Cowles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows: The company wants to maintain monthly ending inventories of Material K equal to 30% of the following month's production needs. On July 31, this requirement was not met because only 3,500 yards of Material K were on hand. The cost of Material K is $0.80 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year. -The total needs (i.e., production requirements plus desired ending inventory) of Material K for November are:

Only variable manufacturing overhead costs are included in the manufacturing overhead budget.

Edgington Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $4.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $39,590 per month, which includes depreciation of $5,920. All other fixed manufacturing overhead costs represent current cash flows. The November direct labor budget indicates that 3,700 direct labor-hours will be required in that month. Required: a. Determine the cash disbursements for manufacturing overhead for November. b. Determine the predetermined overhead rate for November.

The following information is budgeted for McCracken Plumbing Supply Corporation for next quarter: All sales at McCracken are on credit. Forty percent are collected in the month of sale, 58% in the month following the sale, and the remaining 2% are uncollectible. Merchandise purchases are paid in full the month following the month of purchase. The selling and administrative expenses above include $8,000 of depreciation on display fixtures and warehouse equipment. All other selling and administrative expenses are paid as incurred. McCracken wants to maintain a cash balance of $15,000. Any amount below this can be borrowed from a local bank as needed in increments of $1,000. All borrowings are made at month end. Required: Prepare McCracken's cash budget for May. McCracken expects to have $24,000 of cash on hand at the beginning of May.

For May, Young Corporation has budgeted its cash receipts at $125,000 and its cash disbursements at $138,000. The company's cash balance on May 1 is $17,000. If the desired May 31 cash balance is $20,000, then how much cash must the company borrow during the month (before considering any interest payments)?

Both variable and fixed manufacturing overhead costs are included in the selling and administrative expense budget.

Parsons Corporation plans to sell 18,000 units during August. If the company has 5,500 units on hand at the start of the month, and plans to have 6,000 units on hand at the end of the month, how many units must be produced during the month?

A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels.

The selling and administrative expense budget of Gullette Corporation is based on the number of units sold, which are budgeted to be 2,700 units in April. The variable selling and administrative expense is $1.90 per unit. The budgeted fixed selling and administrative expense is $35,640 per month, which includes depreciation of $7,290. The remainder of the fixed selling and administrative expense represents current cash flows. Required: Prepare the selling and administrative expense budget for April.

The basic idea underlying responsibility accounting is that each manager should be held responsible for the overall profit of the company to ensure that all managers are acting together.