Exam 23: Master Budgets and Planning

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

Keegan Company manufactures a single product and has a JIT policy that ending inventory must equal 10% of the next month's sales. It estimates that May's ending inventory will consist of 20,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively. Keegan assigns variable overhead at a rate of $1.80 per unit of production. Fixed overhead equals $400,000 per month. Compute the number of units to be produced and use to compute the total budgeted overhead that would appear on the factory overhead budget for month ended June 30.

Why is the sales budget usually prepared first?

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

The budgets within the master budget must be prepared in a definite sequence as dictated by GAAP.

A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, and 30% the following month. Projected sales for January, February, and March are $75,000, $92,000 and $60,000, respectively. The March expected cash receipts from all current and prior credit sales are $80,500.

The merchandise purchases budget is the starting point for preparing the master budget.

Grafton sells a product for $700. Unit sales for May were 400 and a 3% growth in unit sales is forecasted for each month. Compute the total sales to be reported on the sales budget for month ended June 30.

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:

Northern Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during June. Northern Company has an agreement with its bank to maintain a cash balance of at least $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:

The master budget includes:

Barrett's Fashions forecasts sales of $125,000 for the quarter ended December 31. Its gross profit rate is 20% of sales, and its September 30 inventory is $32,500. If the December 31 inventory is targeted at $41,500, budgeted purchases for the fourth quarter should be:

The usual budget period is:

The __________________________ shows expected cash inflows and outflows during the budget period.

Bentels Co. desires a December 31 ending inventory of 2,840 units. Budgeted sales for December are 4,000 units. The November 30 inventory was 1,800 units. Budgeted purchases are:

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

A budget is best described as:

The ___________________________ is prepared by manufacturing firms, and takes the place of the purchases budget prepared by merchandising firms.

Nano, Inc. is preparing its budget for the second quarter. The following sales data have been forecasted: How many units should be purchased in April, May, and June? How many units should be purchased in the second quarter in total?

A department store has budgeted cost of goods sold for August of $60,000 for its women's coats. Management wants to have $12,000 of coats in inventory at the end of the month to prepare for the winter season. Beginning inventory in August was $8,000. What dollar amount of coats should be purchased to meet the above plans?