Exam 7: Master Budgets and Performance Planning

To determine the production budget for an accounting period, consideration is given to all of the following except:

The usual budget period for most companies is:

Ratchet Manufacturing's August sales budget calls for sales of 8,000 units. Each month's sales are expected to exceed the prior month's results by 5%. The product selling price is $25 per unit. The expected total sales dollars for September's sales budget are:

Zhang Industries budgets production of 300 units in June and 310 units in July. Each finished unit requires 4 pounds (lbs.) of raw material K, which costs $5 per pound. Each month's ending inventory of raw materials should be 30% of the following month's budgeted production. The June 1 raw materials inventory has 360 pounds of raw material K. Compute budgeted purchases for raw material K in pounds for June.

Guidance for the budget process is usually supplied by a ________ of department heads and other executives responsible for seeing that budgeted amounts are realistic and coordinated.

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

A rolling budget is a specific budget application relevant only to a merchandising company.

The process of planning future business actions and expressing them as a formal plan is called:

Webster Corporation is preparing its cash budget for April. The March 31 cash balance is $36,400. Cash receipts are expected to be $641,000 and cash payments for purchases are expected to be $608,500. Other cash expenses expected are $27,000 selling and $33,500 general and administrative. The company desires a minimum cash balance at the end of each month of $30,000. If necessary, the company borrows enough cash to meet the minimum using a short-term note. Webster's preliminary cash balance before loan activity for April is expected to be:

Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct materials requirement per unit is 2 ounces (oz.). The company has determined that it wants to have safety stock of direct materials on hand at the end of each month to complete 20% of the units budgeted in the following month. There was 3,160 ounces of direct material in inventory at the start of July. The total amount of direct materials in ounces, to be purchased in July is:

Western 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. Western Company has an agreement with its bank to maintain a minimum cash balance of $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:

One of the major benefits of formal budgeting is the positive effect it can have on employee attitudes if applied correctly.

Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from total sales during the month of June.

On its December 31, 2017, balance sheet, Calgary Industries reports equipment of $370,000 and accumulated depreciation of $74,000. During 2018, the company plans to purchase additional equipment costing $80,000 and expects depreciation expense of $30,000. Additionally, it plans to dispose of equipment that originally cost $42,000 and had accumulated depreciation of $5,600. The balances for equipment and accumulated depreciation, respectively, on the December 31, 2018 budgeted balance sheet are:

Budget preparation is best determined in a top-down managerial approach.

Why is the sales budget usually prepared first?

Aloan Co. provides the following sales forecast for the next three months: The company wants to end each month with ending finished goods inventory equal to 10% of the next month's sales. Finished goods inventory on December 31 is 300 units. The budgeted production units for January are:

Briefly describe a master budget and the sequence in which the individual budgets within the master budget are prepared.

A budget can be an effective means of communicating management's plans to the employees of a business.

A budget is a formal statement of future plans, usually expressed in monetary terms.