Exam 7: Master Budgets and Performance Planning

The master budget includes individual budgets for sales, production or purchases, various expenses, capital expenditures, and cash.

A budget system based on expected activities and their levels that enables management to plan for resources required to perform the activities is:

If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and budgeted cost of goods sold is $10,260, budgeted purchases should be:

A department store has budgeted sales of 12,000 men's suits in September. Management wants to have 6,000 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 suits. What is the dollar amount of the purchase of suits if each suit has a cost of $75.

The Ballentine Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month following sale, 45% in the second month following sale, and 5% are not collected. What are the company's expected cash receipts for August from its current and past sales?

Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $6,500. The expected January 31 Accounts Payable balance is:

Which of the following must be prepared before the direct labor budget?

Schrank Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?

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

The Ewing Company budgeted sales for January, February, and March of $96,000, $88,000, and $72,000, respectively. Seventy percent of sales are on credit. The company collects 60% of its credit sales in the month following sale, and 40% in the second month following sale. What are Ewing's expected cash receipts for March related to all current and past sales?

A master budget refers to a company's sales budget that includes all of its segments or departments.

Which of the following would not be used in preparing a cash budget for October?

The following information is available for Jergenson Company: a. The Cash Budget for March shows a bank loan of $10,000 and an ending cash balance of $48,000. b. The Sales Budget for March indicates sales of $120,000. Accounts receivable is expected to be 70% of the current-month sales. c. The Merchandise Purchases Budget indicates that $90,000 in merchandise will be purchased in March on account and ending inventory for March is predicted to be 600 units @ $35. Purchases on account are paid 100% in the month following the purchase. d. The Budgeted Income Statement shows a net income of $48,000 and $21,000 in income tax expense for the quarter ended March 31. Accrued taxes will be paid in April. e. The Balance Sheet for February shows equipment of $77,000 with accumulated depreciation of $28,000, common stock of $25,000 and retained earnings of $8,000. There are no changes budgeted in the equipment or common stock accounts. Prepare a budgeted balance sheet for March.

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

The most useful budget figures are developed:

Bioclean Co., a merchandiser, sells a biodegradable cleaning product and has predicted the following sales for the first four months of the current year: Ending inventory for each month should be 20% of the next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?

Dado, Inc. is preparing its budget for the second quarter. The following sales data have been forecasted: Prepare a merchandise purchases budget for the total units to be purchased in the months of April, May, and June, as well as the total unit purchases for entire the quarter.

Wichita Industries' sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the following month. On December 31, the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales. Assume that total sales for January and February are budgeted to be $50,000 and $100,000, respectively. What are the expected cash receipts for February from current and past sales?

Cahuilla Corporation predicts the following sales in units for the coming four months: Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 finished goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted production for May is:

A budget is best described as: