Exam 10: Setting Performance Expectations at the Entity Level

Swan Company is a maker of men's slacks. The company would like to maintain 20,000 yards of fabric in ending inventory. The beginning fabric inventory is expected to contain 25,000 yards. The expected yards of fabric needed for sales is 90,000. Compute the yards of fabric that Swan needs to purchase.

Walsh Enterprises, Inc., is a retailer of parts for exotic automobiles. The company has budgeted parts purchases for the next three months as follows: All purchases are made on a credit basis. The company expects that 60% of its payables related to purchases will be paid in the month of purchase, with the remaining 40% paid in the following month. The ending balance in accounts payable related to parts purchases on March 31 was $80,000. What amount of cash disbursement for parts purchases will be budgeted for May?

Compared to a static budget, a flexible budget based on varying levels of sales volume provides a better basis for performance evaluation because:

Which type of business organization has the greatest need for a performance measurement system to coordinate actions across the organization?

The sequence of budgeting schedules will always begin with the sales forecast and sales budget.

Streeter Company produces plastic microwave turntables. Sales for the next year are expected to be 65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter, and 66,000 units in the fourth quarter. Streeter maintains a finished goods inventory at the end of each quarter equal to one-half of the units expected to be sold in the next quarter. How many units should Streeter produce in the second quarter?

A primary purpose of developing multiple plans or budgets based on a variety of future scenarios would be to:

A flexible budget is a more effective tool for performance evaluation than is a static budget.

Projected monthly sales of Wallstead Corporation for January, February, March, and April are as follows: .The company bills each month's sales on the last day of the month. .Receivables are booked gross and credit terms of sale are: 2/10, n/30. .50% of the billings is collected within the discount period, 30% is collected by the end of the month, 15% is collected by the end of the second month, and 5% becomes uncollectible. Budgeted cash collections for Wallstead Company during April would be:

Sandbagging or creating slack in an operational plan is a common problem in small organizations, but rarely in functional or divisional ones.

Walsh Enterprises, Inc., is a retailer of parts for exotic automobiles. The company has budgeted parts purchases for the next three months as follows: All purchases are made on a credit basis. The company expects that 60% of its payables related to purchases will be paid in the month of purchase, with the remaining 40% paid in the following month. The ending balance in accounts payable related to parts purchases on March 31 was $80,000. What will be the budgeted balance in accounts payable at the end of June?

Preparation of the budgeted income statement must precede the budgeted balance sheet in order to provide:

One potential drawback to a bottom-up planning process is that:

Myers Company uses a calendar year and prepares a cash budget for each month of the year. Which one of the following items should be considered when developing July's cash budget?

Based on existing orders and forecasts, Foster Corporation expects sales of 18,000 units in the first quarter of the coming year and an additional 24,000 units in the second quarter. The company always maintains a finished goods inventory sufficient to supply 20% of the following quarter's sales needs, and has that quantity on hand as the first quarter is about to begin. What number of units must Foster Corporation produce in the first quarter of the coming year?

Which of the following benefits accrue to planning in small organizations?

Monroe Company has developed the quarterly sales budget for the upcoming year that appears below: The company's variable selling and administrative expenses consist of a 5% selling commission paid on sales revenues plus shipping expenses of $3 per unit. Fixed annual selling and administrative costs consisting of executive salaries, advertising, and depreciation occur evenly throughout the year and are budgeted at a total of $126,000. In addition, the company will make insurance payments of $7,500 in each of the first and third quarters. What amount of selling and administrative expense will Monroe budget for the third quarter?

Granite Company sells products exclusively on account, and has experienced the following collection pattern: 60% in the month of sale, 25% in the month after sale, and 15% in the second month after sale. Uncollectible accounts are negligible. Customers who pay in the month of sale are given a 2% discount. If sales are $220,000 in January, $200,000 in February, $280,000 in March, and $260,000 in April, Granite's accounts receivable balance on May 1 will be:

Highland Corporation has budgeted production of 94,000 units for the upcoming three-month period. Each unit requires 4.5 kilograms of a particular raw material. As the quarter is about to begin, Highland holds an inventory of 84,600 kilograms of this material and has targeted an ending inventory of 90,000 kilograms. What amount of this raw material will need to be purchased during the upcoming quarter?

Side Spin has begun production of a new lightweight tennis racket. For the coming year, it predicts that it will sell 125,000 units in the first quarter, 156,250 units in the second quarter, 175,000 units in the third quarter, and 187,500 in the fourth quarter. It also expects that it will sell 187,500 units in the first quarter of the following year. The company's inventory policy is to retain 20% of next quarter's sales on hand as ending inventory. Opening inventory is 25,000 units. Required. Prepare in good form a production budget for Side Spin's coming year.