Exam 20: Master Budgets and Performance Planning

Reference: 20_02 Julia's Candy Co. reports the following information from its sales account and sales budget: Sales May \ 105,000 June 93,000 Expected July \ 90,000 Sales: August 110,000 September 120,000 Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. -If Julia's pays sales commission of 10% each month,in addition to monthly fixed costs of $4,000,what are selling expenses for the third quarter?

The ______________________________ shows the budgeted costs for direct materials,direct labor,and overhead based on the budgeted production volume from the production budget.

Financial budgets are normally completed after preparation of operating and capital expenditure budgets.

Tappet Corporation is preparing its master budget for the quarter ending March 31.It sells a single product for $25 a unit.Budget 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: January February March April Sales in units 1,200 1,000 1,600 1,400 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.If an excess of cash exists,loan repayments are made at the end of the month.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 Table of cash receipts Merchandise purchases budget Table of cash disbursements for merchandise purchases Table of cash disbursements for selling and administrative expenses Cash budget,including information on the loan balance Budgeted income statement

Briefly describe the process by which budgets are developed and administered.

Reference: 20_02 Julia's Candy Co. reports the following information from its sales account and sales budget: Sales May \ 105,000 June 93,000 Expected July \ 90,000 Sales: August 110,000 September 120,000 Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. -Based on the information from Julia's,the total amount of cash expected to be received from customers in September is:

Part of the cash budget is based on information drawn from the capital expenditures budget.

Briefly describe a master budget and the sequence in which the individual budgets within the master budget are prepared.

Harold's expects its September sales to be 20% higher than its August sales of $150,000.Purchases were $100,000 in August and are expected to be $120,000 in September.All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month.Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month.The beginning cash balance on September 1 is $7,500.The ending cash balance on September 30 would be:

Which budget must be completed after a cash budget is prepared?

There are three major subgroups of the master budget.These are ________________________,___________________,and _______________________.

A master budget refers to a company's sales budget that includes all of its segments or departments.

A company's gross profit rate is 30% of sales.Expected January sales are $78,000 and desired January 31^st inventory is $7,500.Assuming the December 31^st inventory is $6,200 what amount of purchases should this company budget for the month of January?

Pantheon Company has prepared the following forecasts of monthly sales: July August September October Sales (in units) 4,500 5,300 4,000 3,700 Pantheon 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? (3)How many units should be purchased in September?

Sweeny Co.is preparing a cash budget for the second quarter of the coming year.The following data have been forecasted: April May Sales \ 150,000 \ 157,500 Merchandise purchases 107,000 112,400 Operating expenses: Payroll 13,600 14,280 Advertising 5,400 5,700 Rent 1,500 1,500 Depreciation 7,500 7,500 End of April balances: Cash 40,000 Bank loan pavable 16,000 Additional data: (1)Sales are 40% cash and 60% credit.The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter.Total sales in March were $125,000. (2)Purchases are all on credit,with 40% paid in the month of purchase and the balance paid in the following month. (3)Operating expenses are paid in the month they are incurred. (4)A minimum cash balance of $40,000 is required at the end of each month. (5)Loans are used to maintain the minimum cash balance.At the end of each month,interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month.Repayments are made whenever excess cash is available. Required: Calculate the following items for May a.Cash collections from customers. b.Cash payments made for merchandise purchases. c.Cash paid for other operating expenses,including interest. d.What is the preliminary cash balance for May 31? e.What loan activity will take place at the end of May? f.What is the ending cash balance?

A company's history indicates that 20% of its sales are for cash and the rest are on credit.Collections on credit sales are 20% in the month of the sale,50% in the next month,and 30% the following month.Projected sales for January,February,and March are $75,000,$92,000,and $60,000,respectively.The March expected cash receipts from all current and prior credit sales are $80,500.

What are rolling budgets? Why are rolling budgets prepared?

A managerial accounting report that presents predicted amounts of the company's assets,liabilities,and equity as of the end of the budget period is called a(n):

A capital expenditures budget is prepared before the operating budgets.

There are at least five benefits from budgeting.Identify two of these benefits: (1)_______________________________________ (2)_______________________________________