Exam 11: Operational Budgets

When an organisation's actual revenues are greater than its budgeted revenues, the difference is referred to as a favorable variance.

When managers intentionally set budgeted costs too low and budgeted revenues too high, they are creating budgetary slack.

Matz Ltd expects to sell 24,000 units of finished goods over the next 6-month period. The company has 10,000 units on hand and its managers want to have 14,000 units on hand at the end of the period. To produce one unit of finished product, two units of direct materials are needed. Matz has 100,000 units of direct material on hand and has budgeted for an ending inventory of 110,000 units. What is the amount of direct material to be purchased (in units)?

Ray Company's projected sales budget for the next four months is as follows: Beginning inventory for the year is 27,000 units. Ending inventory for each month should be 30% of the next month's sales. How many units need to be available for sale in February?

Sales of $250,000 are forecast for the third quarter. Gross profit is 60% of sales, and beginning inventory is $165,000. If ending inventory is budgeted as $183,000, what are the budgeted purchases?

Gold Company has the following balances at 31^st December 31 2010: Cash $6,000; accounts receivable $34,000 ($10,000 from November and $24,000 from December); merchandise inventory $40,000; and accounts payable $20,000 (for merchandise purchases only). Budgeted sales follow: Other data: · Sales are 40% cash, 50% collected during the following month, and 10% collected during the second month after sale. A 3% cash discount is given on cash sales · Cost of goods sold is 40% of sales · Ending inventory must be 140% of the next month's cost of sales · Purchases are paid 70% in month of purchase and 30% in the following month · The selling and administrative cost function is: $6,000 + $0.2 × sales. This includes $1,000 for depreciation · All costs are paid in the month incurred · Minimum cash balance requirement is $6,000 What is the budgeted cost of purchases for February?

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: The variance for cost of goods sold could be explained by

One disadvantage of participative budgeting is employees' tendency to set targets too high to impress management with their motivation.

At the end of 2009, SWP prepared its master budget for 2010. Selected amounts from that budget, along with actual results for 2010, are presented below: The research and development cost variance could be explained by

The master budget includes two components: an operating budget and a time budget.

Kelita Ltd, projects sales for its first three months of operation as follows: Inventory on 1^st October is $40,000. Subsequent beginning inventories should be 40% of that month's cost of goods sold. Goods are priced at 140% of their cost. 50% of purchases are paid for in the month of purchase; the balance is paid in the following month. It is expected that 50% of credit sales will be collected in the month following sale, 30% in the second month following the sale, and the balance the third month. A 5% discount is given if payment is received in the month following sale. What is the projected cost of purchases for October?

Planning Systems has forecast the following unit sales and production for the next year, by quarter: A finished unit requires one unit of material A and two units of material B. There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories. What is ending finished goods inventory for quarter 2?

TNR is preparing its budgeted income statement for the month of August. Budgeted sales are $18,000. Cost of goods sold is twice the amount of operating costs, and operating costs plus cost of goods sold equals 40% of net profit. Return on sales (net profit / sales) is anticipated to be 50%. TNR's budgeted operating costs are

A flexible budget reflects a range of operations.

Gold Company has the following balances at 31^st December 2010: Cash $6,000; accounts receivable $34,000 ($10,000 from November and $24,000 from December); merchandise inventory $40,000; and accounts payable $20,000 (for merchandise purchases only). Budgeted sales follow: Other data: · Sales are 40% cash, 50% collected during the following month, and 10% collected during the second month after sale. A 3% cash discount is given on cash sales · Cost of goods sold is 40% of sales · Ending inventory must be 140% of the next month's cost of sales · Purchases are paid 70% in month of purchase and 30% in the following month · The selling and administrative cost function is: $6,000 + $0.2 × sales. This includes $1,000 for depreciation · All costs are paid in the month incurred · Minimum cash balance requirement is $6,000 The cash disbursements for purchases in March are

Master budgets are often summarised in a company's short-term operating plans.

TFS Ltd, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below: Which of the following amounts is irrelevant in the preparation of TFS' budgeted income statement?

TFS Ltd, a retail company selling hotel furniture, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below: TFS' budgeted cost of goods available for sale for the next fiscal year will be

Which of the following is not required to develop a budgeted income statement?

A formalised financial plan for organisational operations in the coming year is best described as a