Exam 7: Master Budgets and Performance Planning

What is a sales budget? How is the sales budget prepared?

Which of the following factors is least likely to be considered in preparing a sales budget?

Hammerly Corporation is preparing its master budget for the quarter ending March 31. It sells a single product for $25 a unit. Budgeted sales are 40% cash and 60% on credit. All credit sales are collected in the month following the sales. Budgeted sales for the next four months follow: At December 31, the balance in accounts receivable is $10,000, which represents the uncollected portion of December sales. The company desires merchandise inventory equal to 30% of the next month's sales in units. The December 31 balance of merchandise inventory is 340 units, and inventory cost is $10 per unit. Forty percent of the purchases are paid in the month of purchase and 60% are paid in the following month. At December 31, the balance of Accounts Payable is $8,000, which represents the unpaid portion of December's purchases. Operating expenses are paid in the month incurred and consist of: · Sales commissions (10% of sales) · Freight (2% of sales) · Office salaries ($2,400 per month) · Rent ($4,800 per month) Depreciation expense is $4,000 per month. The income tax rate is 40%, and income taxes will be paid on April 1. A minimum cash balance of $10,000 is required, and the cash balance at December 31 is $10,200. Loans are obtained at the end of a month in which a cash shortage occurs. Interest is 1% per month, based on the beginning of the month loan balance, and must be paid each month (The interest payment is rounded to the nearest whole dollar). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At December 31, the loan balance is $0. Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of January, February, and March that includes the: · Sales budget · Schedule of cash receipts · Merchandise purchases budget · Schedule of cash disbursements for merchandise purchases · Schedule of cash disbursements for selling and administrative expenses (combined) · Cash budget, including information on the loan balance · Budgeted income statement for the quarter

Which of the following is a benefit derived from budgeting?

Which of the following statements about budgeting is false?

To develop the sales budget, companies must estimate both unit sales and the production cost per unit.

Budgets that are periodically revised and have new periods added to replace those that have lapsed are called:

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 credit sales during the month of June.

What is a production budget?

Garcia Corporation's April sales forecast projects that 5,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units. Budgeted purchases of units in April would be:

A plan that lists the types and amounts of operating expenses expected that are not included in the selling expenses budget is a:

What is a capital expenditures budget?

Masterson Company's budgeted production calls for 56,000 liters in April and 52,000 liters in May of a key raw material that costs $1.85 per liter. Each month's ending raw materials inventory should equal 30% of the following month's budgeted materials. The April 1 inventory for this material is 16,800 liters. What is the budgeted materials need in liters for April?

Use the following information to prepare a budgeted income statement for Stellar Company for the month of June. a. Beginning cash balance on June 1 is $52,000. b. Sales amounts are: April (actual), $1,450,000, May (actual), $1,600,000, and June (budgeted), $1,700,000. c. Cost of goods sold is 53% of sales. d. Budgeted cash disbursements for salaries in June: $260,000. Salaries payable on May 31 are $60,000 and are expected to be $50,000 on June 30. e. Budgeted depreciation expense for June: $24,000. f. Other cash expenses budgeted for June: $282,000. g. Accrued income taxes due in June: $48,000. h. Bank loan interest due in June: $8,000 which represents the 1% monthly expense on a bank loan of $800,000. i. The income tax rate applicable to the company is 30%.

Use the following information to prepare the June cash budget for Springer Company. It should show expected cash receipts and cash disbursement for the month and the cash balance expected on June 30. a. Beginning cash balance on June 1 is $52,000. b. Cash receipts from sales are expected to be $1,625,000. c. Cash payments for direct materials and direct labor are expected to be $246,500 and 573,100, respectively. d. Budgeted cash payments for variable overhead is $340,000. e. Budgeted depreciation, the only fixed overhead estimated for June: $24,000. f. Cash selling and administrative expenses budgeted for June are $282,000. g. Bank loan interest due in June: $8,000. i. Loan payment of $50,000 should be made if the preliminary cash balance is greater than $200,000.

A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter and 30,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 18,000 kg and the cost per kg is $8. What is the budgeted materials purchases cost for the first quarter?

The ________ , prepared by manufacturing firms, shows the number of units to be produced in a period based on the unit sales projected in the sales budget, along with inventory considerations.

Greco Company has prepared the following forecasts of monthly sales: Greco has decided that the number of units in its inventory at the end of each month should equal 25% of the next month's sales. The budgeted cost per unit is $30. (1) How many units should be in July's beginning inventory? (2) What amount should be budgeted for the cost of merchandise purchases in July?

A July sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit. The management forecasts 2% growth in sales each month. Total July sales are anticipated to be:

Webster Corporation's monthly projected general and administrative expenses include $5,000 administrative salaries, $2,400 of other cash administrative expenses, $1,350 of depreciation expense on the administrative equipment, and 0.5% monthly interest on an outstanding bank loan of $10,000. Compute the total general and administrative expenses to be reported on the general and administrative expense budget per month.