Exam 12: Fixed and Rolling Budgets for Planning and Decision Making

Upton Products Inc.would like to prepare a summary cash budget for the first quarter of 2009.The following information regarding operating activities from the cash receipts and cash disbursements budgets are available: Cash receipts \ 15000 \ 23000 \ 340000 Cash disbursements 13000 26000 30000 The following information is also available: ?The cash balance on 1 January 2009 was $\$ 2000$ . ?Equipment costing $\$ 4000$ will be purchased in February. A down payment of $\$ 1000$ will be made in February and payments of $\$ 1000$ will be made in each subsequent month thereafter. ?Dividends in the amount of $\$ 2000$ will be paid in March. What is the cash balance at the end of March expected to be?

Ligon Enterprises has prepared a production budget for October.Management has determined that the total required production for October is 425 000 units when an ending inventory of 20 000 units is desired and the beginning inventory is 8000 units. Based on the above information,what were October's budgeted sales?

Sallinger Products Inc.makes and sells grill covers.On 31 March,the company had 400 covers in inventory.The company's policy is to maintain a cover inventory equal to 10 per cent of next month's projected sales.The company expects the following sales activity for the second quarter of the year: April 4000 units May 5000 units June 7000 units Sales for both July and August are expected to be 8000 units each.Each completed unit of finished product requires 6 metres of a plastic material which costs $.60 per metre.The company has determined that it needs 15 per cent of next month's raw material needs on hand at the end of each month.The company had 3000 metres of plastic material on hand at the end of March. Required: A. Prepare a production budget far the second quarter of the year. B. Prepare a budiget far the second quarter of the year showing the prajected cost of the direct materials (plastic) that will be needed.

Keep-it-Cool Products Inc.manufactures a medium-sized drink cooler.At 30 June,the company had 5000 coolers in inventory.The company's policy is to maintain a cooler inventory equal to 15 per cent of next month's sales.The company expects the following sales activity for the third quarter of the year: July 50000 coolers August 40000 coolers September 25000 coolers How many coolers should be produced in August?

Which type(s)of activities are flexible budgets most useful for?

Cash received from the borrowing of long-term debt will be shown:

Vela Enterprises Inc.would like to prepare a summary cash budget for March.The following information is available: ?The cash balance at 1 March was estimated to be $\$ 3000$ . ?March sales, all on account, were estimated to be $\$ 50$ 000. Sales are collected over a two-month period with 65 per cent collected in the month of sale and the remainder in the subsequent month. February sales on account were $\$ 60000$ . ?Inventory purchases are expected to be $\$ 20000$ in March. The company pays for one-half of inventory purchases in the month of purchase and the remainder in the subsequent month. February's purchases were $\$ 18000$ ?Cash disbursements for selling and administrative expenses are expected to be $\$ 4000$ in March. ?Depreciation expense for March is expected to be $\$ 5000$ ?Loan and interest payments for March are expected to be $\$ 25000$ . What is the cash balance at the end of March expected to be?

A budget built from the ground up each year rather than by simply adding a percentage increase to last year's numbers is called:

List and describe the three sections that comprise a summary cash budget.For each section,give an example of a type of activity that would be shown in that section.

Camden Products Inc.manufacturers travel accessories.The company's controller has prepared the following static budget of one of the product lines for the month of November: Estimated production 1000 units Direct labour per unit 12 minutes Direct labour required for estimated production 200 hours Average direct labour rate per hour \9 Estimated direct labour cost \1 800 Actual production during November was 1 300 units and actual direct labour cost was $2520. If Camden prepares a flexible budget for November,direct labour cost is estimated to be:

Which of the following statements is false regarding a company's budgeted financial statements?

Tunstall Manufacturing sells medical supplies,including stethoscopes.At 30 September,the company had 1000 stethoscopes in inventory.The company's policy is to maintain an inventory equal to 8 per cent of next month's sales.The company expects the following sales activity for the fourth quarter of the year: October 11000 stethoscopes November 15000 stethoscopes December 14000 stethoscopes In addition,January sales for the following year are projected to be 16 000 stethoscopes.What is the total required production for the fourth quarter?

What is the difference between a static budget and a flexible budget?

Which type of activity includes ensuring that the objectives and goals developed by the organisation are being attained?

Cash paid for the purchase of property,plant,and equipment will be shown:

Thurston Products Thurston Products sells a popular style of running shoe. The company has prepared the following sales forecast for the second quarter of 2010: April 80000 pairs May 100000 pairs June 130000 pairs Ending inventory at 31 March 2010 was budgeted at 5000 pairs. Management would like the desired quantity of finished goods inventory at the end of each month to be equal to 6 per cent of next month’s budgeted unit sales. July’s sales are projected to be 120 000 pairs. Each completed unit of finished product requires 1.5 pounds of rubber material at a cost of $.75 per pound. The company has determined that it needs 10 per cent of next month’s raw material needs on hand at the end of each month. -The total required production of running shoes for the second quarter of 2010 is:

Carteret Inc. Carteret Inc. manufactures hammocks under various brand names. The company sells most of its hammocks in the second quarter of each year. Their production budget for the second quarter shows the following number of hammocks needs to be produced: April 6000 units May 10000 units June 15000 units Each unit requires 30 feet of cotton rope cord which costs $.50 per foot. The company has determined that it needs 20 per cent of next month’s raw material needs on hand at the end of each month. In addition, each hammock requires 45 minutes of direct labour for assembly and inspection at a cost of $.25 per minute. The company currently applies manufacturing overhead to production at the rate of $8 per direct labour hour. -The total cost of direct labour and manufacturing overhead for the month of May is:

Jones Manufacturing Jones Manufacturing sells unique decorative water fountains. The company has prepared the following forecast for the first quarter of 2010: January 1000 units February 1400 units March 2000 units Ending inventory at 31 December 2009 was budgeted at 80 units. Management would like the desired quantity of finished goods inventory at the end of each month to be equal to 10 per cent of next month’s budgeted unit sales. April’s sales are projected to be 1600 units. Each completed unit of finished product requires 3 pounds of compounding material at a cost of $2.00 per pound. The company has determined that it needs 15 per cent of next month’s raw material needs on hand at the end of each month. -The total required production of water fountains for the first quarter of 2009 is:

Hillman Products produces and sells limited edition decorative mugs.The company's controller has the following information available from the static budget of one of the product lines for the month of April: Estimated production 5000 units Direct material per unit 12 gram Direct material cost per unit \ .20 per gram Actual production during April was 5400 units. Required: Prepare a flexible budget for the month of April.

_________ activities involve developing objectives and goals for the organisation as well as the actual preparation of the budget.