Question 1

Budgeting can be an important management tool if implemented properly. Identify several positive results when budgets are used properly. Since budgets affect people identify several negative aspects if budgets are not implemented properly.

Accepted Answer

The answer of Budgeting can be an important management tool...

Question 2

Doe Manufacturing plans to sell 6000 purple lawn chairs during May 5700 in June and 6000 during July. The company keeps 15% of the next month's sales as ending inventory. How many units should Doe produce during June?

Accepted Answer

A)  5745 
B)  6600 
C)  5655 
D)  Not enough information to determine.

Question 3

Which one of the following items would never appear on a cash budget?

Accepted Answer

A)  Office salaries expense 
B)  Interest expense 
C)  Depreciation expense 
D)  Travel expense

Question 4

Butler Manufacturing manufactures two products (1) Regular and (2) Deluxe. The budgeted units to be produced are as follows:  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $$\text { Units of Product }$
$\begin{array}{lr}
2016 & \text { Regular }& \text { Deluxe } &\text { Total }\
\text { July } & 10,000&15,000&25,000 \
\text { August } & 6,000 &10,000&16,000\
\text { September } & 9,000&14,000&23,000 \
\text { October } & 8,000&12,000&20,000
\end{array}$ It takes 2 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product. It is the company's policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month's production needs for the Regular product and 20% of the next month's production needs for the Deluxe product. Direct materials inventory on hand at June 30 were 6000 pounds for the Regular product and 15000 pounds for the Deluxe product. The cost per pound of materials is $5 Regular and $8 Deluxe.
Instructions
Prepare separate direct materials budgets for each product for the third quarter of 2016.

Accepted Answer

The answer of Butler Manufacturing manufactures two products (1) Regular...

Question 5

The ____________________ is the starting point in preparing the master budget.

Accepted Answer

The answer of The ____________________ is the starting point in...

Question 6

In service enterprises the critical factor in budgeting is coordinating materials and equipment with anticipated services.

Accepted Answer

A) True 
 B)False

Question 7

The following information is taken from the production budget for the first quarter: $$\begin{array} { l r } 
\text { Beginning inventory in units } & 1,200 \
\text { Sales budgeted for the quarter } & 426,000 \
\text { Capacity in units of production facility } & 472,000
\end{array}$$ How many finished goods units should be produced during the quarter if the company desires 3200 units available to start the next quarter?

Accepted Answer

A)  428000 
B)  424000 
C)  474000 
D)  429200

Question 8

If there were 60000 pounds of raw materials on hand on January 1 120000 pounds are desired for inventory at January 31 and 410000 pounds are required for January production how many pounds of raw materials should be purchased in January?

Accepted Answer

A)  350000 pounds 
B)  530000 pounds 
C)  290000 pounds 
D)  470000 pounds

Question 9

The formula for developing a production budget is ___________________ plus ______________________ minus _______________________.

Accepted Answer

The answer of The formula for developing a production budget...

Question 10

Pulham Company is preparing its direct labor budget for 2016 from the following production budget based on a calendar year: $\begin{array}{ll}\text { Quarter }&\text { Units }\
\hline 1 & 60,000 \
2 & 30,000 \
3 & 45,000 \
4 & 75,000
\end{array}$ Each unit requires 2 hours of direct labor. The union contract provides for a 10% increase in wage rate to $11 per hour on October 1.
Instructions
Prepare a direct labor budget for 2016.

Accepted Answer

The answer of Pulham Company is preparing its direct labor...

Question 11

Budgets are statements of management's plans stated in financial terms.

Accepted Answer

A) True 
 B)False

Question 12

Teller Co. is planning to sell 900 boxes of ceramic tile with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3900 pounds of clay mix in beginning inventory and wants to have 4500 pounds in ending inventory. What is the total amount to be budgeted in pounds for direct materials to be purchased for the month?

Accepted Answer

A)  38280 
B)  37680 
C)  38880 
D)  40200

Question 13

A budget

Accepted Answer

A)  is a substitute for management. 
B)  is an aid to management. 
C)  can operate or enforce itself. 
D)  is the responsibility of the accounting department.

Question 14

Many companies use ____________________________ budgets by dropping the month just ending and adding a future month.

Accepted Answer

The answer of Many companies use ____________________________ budgets by dropping...

Question 15

The budget components for Park Company for the quarter ended June 30 appear below. Park sells trash cans for $12 each. Budgeted sales and production for the next three months are: $\begin{array}{lll}
&\text {Sales}&\text { Production}\
\text { April } & 20,000 \text { units } & 26,000 \text { units } \
\text { May } & 50,000 \text { units } & 46,000 \text { units } \
\text { June } & 30,000 \text { units } & 29,000 \text { units }
\end{array}$ Park desires to have trash cans on hand at the end of each month equal to 20 percent of the following month's budgeted sales in units. On March 31 Park had 4000 completed units on hand. Five pounds of plastic are required for each trash can. At the end of each month Park desires to have 10 percent of the following month's production material needs on hand. At March 31 Park had 13000 pounds of plastic on hand. The materials used in production cost $0.60 per pound. Each trash can produced requires 0.10 hours of direct labor.
Instructions
Determine how much the materials purchases budget will be for the month ending April 30.

Accepted Answer

The answer of The budget components for Park Company for...

Question 16

Budgeting and long-range planning are both important aids to management in achieving a company's goals and objectives. Briefly distinguish between budgeting and long-range planning and indicate how they help managers perform their functions.

Accepted Answer

The answer of Budgeting and long-range planning are both important...

Question 17

Sable Inc. has budgeted direct materials purchases of $400000 in March and $500000 in April. Past experience indicates that the company pays for 60% of its purchases in the month of purchase and the remaining 40% in the next month. Other costs are all paid during the month incurred. During April the following items were budgeted: $\begin{array}{lr}
\text { Wages expense } & \$ 120,000 \
\text { Purchase of office equipment } & 200,000 \
\text { Selling and administrative expenses } & 126,000 \
\text { Depreciation expense } & 18,000
\end{array}$ Instructions
Compute the amount of budgeted cash disbursements for April.

Accepted Answer

The answer of Sable Inc. has budgeted direct materials purchases...

Question 18

Which is true of budgets?

Accepted Answer

A)  They are voted on and approved by stockholders. 
B)  They are used in the planning but not in the control process. 
C)  There is a standard form and structure for budgets. 
D)  They are used in performance evaluation.

Question 19

In May 2016 the budget committee of Crater Inc. assembles the following data in preparation of budgeted merchandise purchases for the month of June.
1. Expected sales: June $750000 July $900000.
2. Cost of goods sold is expected to be 80% of sales.
3. Desired ending merchandise inventory is 40% of the following (next) month's cost of goods sold.
4. The beginning inventory at June 1 will be the desired amount.
Instructions
(a) Compute the budgeted merchandise purchases for June.
(b) Prepare the budgeted income statement for June through gross profit.

Accepted Answer

The answer of In May 2016 the budget committee of...

Question 20

A major difference between the annual budget and long-range planning is the ____________________ over which the data pertain.

Accepted Answer

The answer of A major difference between the annual budget...

Exam 23: Budgetary Planning