Exam 7: Master Budgets and Performance Planning

Describe at least five benefits of budgeting.

Zhang Industries is preparing a cash budget for June. The company has $25,000 cash at the beginning of June and anticipates $95,000 in cash receipts and $111,290 in cash disbursements during June. The company has no loans outstanding on June 1. Compute the amount the company must borrow, if any, to maintain a $20,000 cash balance.

Cameroon Corp. manufactures and sells electric staplers for $16 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the number of electric stapler sales budgeted for March should be:

Webster Corporation's budgeted sales for February are $325,000. Webster pays sales representatives a commission of 6% of sales dollars. The company pays a sales manager a monthly salary of $4,400 and expects advertising expense of $2,000 per month. Compute the total selling expenses to be reported on the selling expense budget for the month of February.

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

A ________ is a continuously revised budget that adds future months or quarters to replace months or quarters that have lapsed.

The selling expenses budget is normally prepared before the sales budget because selling expenses affect the amount of sales.

Boulware Company's budgeted production calls for 5,000 units in October and 8,000 units in November. Each unit requires 8 pounds (lbs.) of raw material A. Each month's ending inventory of raw materials should equal 20% of the following month's budgeted materials requirements. The October 1 inventory for this material is 8,000 pounds. What is the budgeted materials purchases for this key material in pounds for October?

The master budgeting process typically begins with the sales budget and ends with a cash budget and:

The budget process rarely coincides with the accounting period.

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. The amount Webster must borrow during April is:

Coomb's Fashions forecasts sales of $125,000 for the quarter ended December 31. Its gross profit rate is 20% of sales, and its September 30 inventory is $32,500. If the December 31 inventory is targeted at $41,500, budgeted purchases for the fourth quarter should be:

Operating budgets include all the following except the:

Zhang Industries budgets production of 300 units in June and 310 units in July. Each finished unit requires 4 pounds 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 cost of purchases for raw material K for June.

The Gardner Company expects sales for October of $248,000. Experience suggests that 45% of sales are for cash and 55% are on credit. The company collects 50% of its credit sales in the month of sale and 50% in the month following sale. Budgeted Accounts Receivable on September 30 is $67,000. What is the amount of cash expected to be collected in October?

Ratchet Manufacturing anticipates total sales for August, September, and October of $200,000, $210,000, and $220,500 respectively. Cash sales are normally 25% of total sales and the remaining sales are on credit. All credit sales are collected in the first month after the sale. Compute the amount of accounts receivable to be reported on the company's budgeted balance sheet for August.

Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct labor requirement per unit is 0.50 hours. Labor is paid at the rate of $21 per hour. The total cost of direct labor for the month of August is:

The budgeted balance sheet is prepared primarily from data contained in the previously prepared components of the master budget.

In a company that employs continuous budgeting on a quarterly basis and has an accounting period that ends December 31 of each year, what period would the first revision and update to the January through December 2017 budget cover?

Funcycle Manufacturing's budget includes the following credit sales for the current year: September, $145,000; October, $136,000; November, $120,000; December, $157,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 50% in the first month after sale, and 35% in the second month after sale. What are the cash collections of credit sales in the month of December?