Exam 20: Master Budgets and Performance Planning

Kyoto, Inc. predicts the following sales in units for the coming four months: April May June July Sales in units 240 280 300 240 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:

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:

Sweeny Co. is preparing a cash budget for the second quarter of the coming year. The following data have been forecasted: 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.

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?

The master budget process usually ends with:

Why is the sales budget usually prepared first?

If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and cost of goods sold is expected to be $10,260, then budgeted purchases should be $9,160.

The Lamb Company budgeted sales for January, February, and March of $96,000, $88,000, and $72,000, respectively. Seventy percent of sales are on credit. The company collects 60% of its credit sales in the month following sale, 35% in the second month following sale, and 5% is not collected. What are Lamb's expected cash receipts for March related to all current and past sales?

When preparing the cash budget, all the following should be considered except:

Miles Company is preparing a cash budget for February. The company has $30,000 cash at the beginning of February and anticipates $75,000 in cash receipts and $96,250 in cash disbursements during February. Miles Company has an agreement with its bank to maintain a cash balance of $10,000. What amount, if any, must the company borrow during February to maintain a $10,000 cash balance?

Budgets are normally more effective when all levels of management are involved in the budgeting process.

What is a manufacturing budget?

The set of periodic budgets that are prepared and periodically revised in the practice of continuous budgeting is called:

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 B for the year would be:

The purchases budget depends on information provided by the sales budget.

What is a production budget?

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:

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 fixed costs of $4,000, calculate the selling expenses for the third quarter.

Kyoto, Inc. predicts the following sales in units for the coming four months: April May June July Sales in units 240 280 300 240 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 May is:

The financial budgets include the cash budget and the capital expenditures budget.