Exam 11: Operational Budgets

Favorable variances are positive amounts; unfavorable variances are negative amounts.

To overcome possible problems with budgets that are developed only by top level managers, an alternative is to use

BNN Ltd expects to operate at a profit in its next fiscal year. Which statement about its budgeted income statement is true?

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 are the anticipated cash disbursements for October?

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 What will be the ending cash balance for January?

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 goods sold for October?

Which of the following items is least likely to be included in a cash budget?

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 the ending inventory for material B in quarter 1?

A formalised financial plan for organisational operations is called a long-term strategy.

A financial budget is the master budget component that leads to all budgeted financial statements.

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 sold for the next fiscal year will be

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 number of finished units to be produced?

The ending inventories budget is typically expressed in terms of costs, while the production budget is typically expressed in units.

ATR's budgeted product costs for the third quarter of 2010 were based on an expected volume of 1,500 units. The budgeted unit costs appear below: If ATR's actual volume for the third quarter of 2010 was 15% above its expected volume

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 gross margin is

Budgets provide a mechanism for defining which of the following for individual managers?

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 are the anticipated cash receipts for November?

Cash paid or received from the purchase or sale of property or equipment is shown in the capital budget and does not appear in the cash budget.

Managers need information from about current beginning inventories and required ending inventories to prepare the production budget.

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: Which items in the table have favorable variances?