Exam 7: Operating Budgets: Bridging Planning and Control

Jackson Company's credit history indicates that 60 percent of revenue is collected in the quarter the sales occur, 35 percent in the quarter following the month of sales, and 5 percent in the quarter thereafter.Assume Jackson's cash sales remain steady at $25,000 each quarter, credit sales are $600,000 in quarter 1, $520,000 in quarter 2, $480,000 in quarter 3, and $650,000 in quarter 4.What will Jackson's cash collections from sales be for the quarter 3?

The Murcer Company has budgeted the following activity for October: Sales of $300,000 all in cash Inventory of finished goods at September 30^th is $120,000 The cost of goods sold is 60% of the selling price Planned merchandise inventory at October 31^st is $100,000 All purchases were paid for in cash Budgeted inventory purchases for October are:

Wallace Company makes and sells a single product.Each unit requires two hours of labor at $8 per hour.The company has budgeted to sell 8,000 units and produce 10,000 units during the current month.Each product requires three pounds of material for each unit produced.Budgeted direct labor costs for the current month would be:

The sales budget of the Owens Company for each of the next three months is shown: January 40,000 units February 50,000 units March 30,000 units The company's policy requires that 20% of the following month's budgeted sales units are on hand at the beginning of each period.How many units must be produced in February?

Which of the following is not a characteristic of bottom-up budgeting?

Which of the following is not a common form of a responsibility center?

The Tafoya Company has budgeted the following sales for the 1^st quarter of 2012: January \ 80,000 February \ 70,000 March \ 90,000 All sales are made on account.The company expects to collect 40% of sales on account in the month of the sale, 50% in the month following the sale, and the final 10% two months following the sale.Bad debts are immaterial to the budget.The balance in accounts receivable at the end of March will be:

The Brady Company has budgeted the following activity for April: Sales of $1,000,000 all in cash The cost of goods sold is 75% of the selling price Inventory purchases of $800,000 were paid for in cash Selling and Administrative expenses are budgeted at $80,000 and are paid in cash in the period incurred. Depreciation expense for April is budgeted at $14,000 The cash balance at March 31^st is $45,000 The budgeted cash balance at the end of April will be:

The Ramirez Company budgets variable manufacturing overhead at 60% of direct labor costs.If the company estimates that 10,000 direct labor hours will be used at an average rate of $8.50 per hour.Fixed manufacturing overhead costs are budgeted at $45,000 with $10,000 of that amount being depreciation on plant machinery.Total budgeted manufacturing overhead will be:

Which is the correct order of budget preparation for a merchandising company?

Which of the following is not a benefit of budgeting?

In preparing a direct labor budget, the cash outflow for labor depends on production volume and not on sales volume.

Many firms use cross-functional teams that include employees from several departments to prepare the budget.

The Ferguson Company makes and sells a single product.The company has estimated the following costs in order to prepared their selling and administrative expenses budget for 2013: Variable Cost per Fixed Costs Unit Sold Sales Commission \ .40 -- Shipping \ .60 -- Advertising \ .30 \3 5,000 Depreciation on Office Equipment - \1 6,000 Other \ .35 \9 6,000 If the sales budget indicates that 120,000 units will be sold in 2013, the total budgeted selling and administrative expenses will be:

The Yow Company makes and sells a single product, the Zingo.Each Zingo requires 1.5 direct labor hours at an average rate of $7.60 per hour.If the budgeted direct labor cost for June is $151,050, the company's budgeted production must be:

In preparing a cash budget, making a scheduled payment on a loan would not be included in cash flows from operations.

All of the following would be found on a cash budget except:

The production budget combines the demand information provided by the revenue budget and the company's inventory policy regarding finished goods to determine production levels in the coming period.

Which of the following is a concern of using prior performance as the starting point for developing budgets?

The Gretzky Company has budgeted the following sales for the 1^st quarter of 2012: January $120,000 February $150,000 March $160,000 Only 20% of the company's sales are made in cash.The company expects to collect 30% of sales on account in the month of the sale, 60% in the month following the sale, and the final 10% will be collected two months following the sale.Bad debts are immaterial to the budget.Total budgeted cash collections in March will be: