Question 1

What is a cash budget? How can management use a cash budget?

Accepted Answer

A cash budget shows expected cash inflow

Question 2

Ecology Co.sells a biodegradable product called Dissol and has predicted the following sales for the first four months of the current year:
$\begin{array}{ccccc} 
& \text { Jan. } & \text { Feb. } & \text { March } & \text { April } \
\text { Sales in units } & 1,700 & 1,900 & 2,100 & 1,600
\end{array}$

Ending inventory for each month should be 20% of the next month's sales,and the December 31 inventory is consistent with that policy.How many units should be purchased in February?

Accepted Answer

A)  1,860 
B)  1,900 
C)  1,940 
D)  1,980 
E)  2,320 
A)  1,860 
B)  1,900 
C)  1,940 
D)  1,980 
E)  2,320

Question 3

The usual starting point for preparing a master budget is forecasting or estimating:

Accepted Answer

A)  Expenditures 
B)  Sales 
C)  Production 
D)  Income 
E)  Cash payments 
A)  Expenditures 
B)  Sales 
C)  Production 
D)  Income 
E)  Cash payments

Question 4

Sweeny Co.is preparing a cash budget for the second quarter of the coming year.The following data have been forecasted:
 $\begin{array}{lrr}
&\text { April}&\text { ???}\ 
\text { Sales } & \$ 150,000 & \$ 157,500 \
\text { Merchandise purchases } & 107,000 & 112,400 \
\text { Operating expenses: } & & \
\text { Payroll } & 13,600 & 14,280 \
\text { Advertising } & 5,400 & 5,700 \
\text { Rent } & 1,500 & 1,500 \
\text { Depreciation } & 7,500 & 7,500\
\text { End of April balances: } \
\text { Cash } & 40,000 \
\text { Bank loan payable } & 16,000
\end{array}$
 
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.
Prepare the company's cash budget for May.Show the ending loan balance at May 31.

Accepted Answer

@#IMG-DLM&_TB6312_00

Question 5

Past performance is the best overall basis for evaluating current performance and assessing the need for corrective action.

Accepted Answer

A) True 
 B)False

Question 6

The budget that lists the dollar amounts to be both received from plant asset disposals and spent to purchase additional plant assets to carry out the budgeted business activities is the __________________________.

Accepted Answer

capital ex

Question 7

The budget process is a continuous activity of planning,revising,and evaluating business activities.

Accepted Answer

A) True 
 B)False

Question 8

A June sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit.The desired ending inventory of units is 15% higher than the beginning inventory of 1,000 units.Total June sales are anticipated to be:

Accepted Answer

A)  $63,000 
B)  $67,500 
C)  $61,250 
D)  $74,250 
E)  $60,000 
A)  $63,000 
B)  $67,500 
C)  $61,250 
D)  $74,250 
E)  $60,000

Question 9

Reference: 20_01
Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units.
-Budgeted purchases of Product A for the year would be:

Accepted Answer

A)  22,400 units 
B)  20,400 units 
C)  20,000 units 
D)  19,500 units 
E)  12,200 units 
A)  22,400 units 
B)  20,400 units 
C)  20,000 units 
D)  19,500 units 
E)  12,200 units

Question 10

Bentels Co.desires a December 31 ending inventory of 2,840 units.Budgeted sales for December are 4,000 units.The November 30 inventory was 1,800 units.Budgeted purchases are:

Accepted Answer

A)  5,040 units 
B)  1,240 units 
C)  6,840 units 
D)  4,000 units 
E)  5,800 units 
A)  5,040 units 
B)  1,240 units 
C)  6,840 units 
D)  4,000 units 
E)  5,800 units

Question 11

Which of the following is not a benefit derived from budgeting?

Accepted Answer

A)  Budgeting focuses management's attention on the future. 
B)  Budgeting provides coordination of departments. 
C)  Budgeting provides a basis for evaluating performance. 
D)  Budgeting provides motivation for managers and employees. 
E)  Budgeting ensures the achievement of all goals. 
A)  Budgeting focuses management's attention on the future. 
B)  Budgeting provides coordination of departments. 
C)  Budgeting provides a basis for evaluating performance. 
D)  Budgeting provides motivation for managers and employees. 
E)  Budgeting ensures the achievement of all goals.

Question 12

Clic,Inc.provides the following data for the next four months:
 $\begin{array}{llllll}
&\text { March }&\text {April  }&\text {May  }&\text {June  }&\text {July }\
\text { Unit Sales } & & 500 & 580 & 530 & 600 \
\text { Ending Raw Materials Inventory } & 663 \mathrm{lbs} & & & & \
\text { Ending Finished Goods Inventory } & 174 \text { units } & & & &
\end{array}$
 
Desired ending inventory:
Raw materials = 30% of next month's production needs
Finished goods = 20% of next month's sales
Pounds of raw material required for each finished Unit = 5 lbs.
Direct labor hours per unit = 0.5 hrs
Direct labor rate = $12/hour
Required:
a.Calculate the budgeted production for April and May.
b.Calculate the amount of purchases of raw materials in pounds for April and May.
c.Calculate the cost of direct labor for May.

Accepted Answer

@#IMG-DLM&_TB6312_00

Question 13

A plan that lists the types and amounts of selling expenses expected during the budget period is called a(n):

Accepted Answer

A)  Sales budget 
B)  Operating budget 
C)  Capital expenditures budget 
D)  Selling expense budget 
E)  Purchases budget 
A)  Sales budget 
B)  Operating budget 
C)  Capital expenditures budget 
D)  Selling expense budget 
E)  Purchases budget

Question 14

Consulting the persons affected by a budget when it is prepared can provide an effective means of motivation and cooperation.

Accepted Answer

A) True 
 B)False

Question 15

Larger,more complex organizations usually require a longer time to prepare their budgets than smaller organizations because of the considerable effort to coordinate the different units within the business.

Accepted Answer

A) True 
 B)False

Question 16

Reference: 20_04
Kyoto, Inc. predicts the following sales in units for the coming four months:
 $\begin{array}{llr}
&\text { April}&\text { May}&\text { June}&\text { July }\
\text { Sales in units } &240&280&300&240\
\end{array}$
 Although each month's ending inventory of finished units should be 60% of the next month's sales, the March 31 finished goods inventory is only 100 units. A finished unit requires five pounds of raw material B. The March 31 raw materials inventory has 200 pounds of B. Each month's ending inventory of raw materials should be 30% of the following month's production needs.
-Kyoto's budgeted production for the second quarter is:

Accepted Answer

A)  820 units 
B)  864units 
C)  492 units 
D)  449 units 
E)  878 units 
A)  820 units 
B)  864units 
C)  492 units 
D)  449 units 
E)  878 units

Question 17

Reference: 20_01
Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units.
-Total budgeted sales of both products for the year would be:

Accepted Answer

A)  $42,000 
B)  $200,000 
C)  $264,000 
D)  $464,000 
E)  $500,000 
A)  $42,000 
B)  $200,000 
C)  $264,000 
D)  $464,000 
E)  $500,000

Question 18

The financial budgets of a business include the cash budget,the budgeted income statement,and the budgeted balance sheet.

Accepted Answer

A) True 
 B)False

Question 19

The sales budget is derived from the production budget.

Accepted Answer

A) True 
 B)False

Question 20

Reference: 20_03
Berkley Co.'s sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the following month. On December 31, the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales.
-Assume that total sales for January and February are budgeted to be $50,000 and $100,000,respectively.What are the expected cash receipts for February from current and past sales? Round all calculations to full dollar amounts.

Accepted Answer

A)  $80,500 
B)  $71,500 
C)  $34,500 
D)  $61,500 
E)  $59,500 
A)  $80,500 
B)  $71,500 
C)  $34,500 
D)  $61,500 
E)  $59,500

Exam 20: Master Budgets and Performance Planning

What is a cash budget? How can management use a cash budget?

The usual starting point for preparing a master budget is forecasting or estimating:

Past performance is the best overall basis for evaluating current performance and assessing the need for corrective action.

The budget that lists the dollar amounts to be both received from plant asset disposals and spent to purchase additional plant assets to carry out the budgeted business activities is the __________________________.

The budget process is a continuous activity of planning,revising,and evaluating business activities.

A June sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit.The desired ending inventory of units is 15% higher than the beginning inventory of 1,000 units.Total June sales are anticipated to be:

Bentels Co.desires a December 31 ending inventory of 2,840 units.Budgeted sales for December are 4,000 units.The November 30 inventory was 1,800 units.Budgeted purchases are:

Which of the following is not a benefit derived from budgeting?

A plan that lists the types and amounts of selling expenses expected during the budget period is called a(n):

Consulting the persons affected by a budget when it is prepared can provide an effective means of motivation and cooperation.

Larger,more complex organizations usually require a longer time to prepare their budgets than smaller organizations because of the considerable effort to coordinate the different units within the business.

The financial budgets of a business include the cash budget,the budgeted income statement,and the budgeted balance sheet.

The sales budget is derived from the production budget.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing

Activity-Based Costing and Analysis

Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Flexible Budgets and Standard Costs

Decentralization and Performance Measurement

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Accounting With Special Journals

Time Value of Money

Investments and International Operations

Accounting for Partnerships

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