Exam 7: Master Budgets and Performance Planning

Cameroon Corp. manufactures and sells electric staplers for $16 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the dollar amount of electric stapler sales budgeted for February should be:

Grason Corporation is preparing a budgeted balance sheet for 2018. The retained earnings balance at December 31, 2017 was $533,500. The 2018 budgeted income statement shows expected net income of $112,000. The company expects to declare dividends during 2018 amounting to $40,000. The expected balance in retained earnings on the 2018 budgeted balance sheet is:

Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $6,500. The budgeted cash payments for materials in January are:

Zhang Industries is preparing a cash budget for June. The company has $25,000 cash at the beginning of June and anticipates $95,000 in cash receipts and $111,290 in cash payments during June. The company has no loans outstanding on June 1. Compute the amount the company must borrow, if any, to maintain a $20,000 cash balance.

The sales budget for Modesto Corp. 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 Product B is 3,000 units. Budgeted purchases of Product A for the year would be:

The ________ , prepared by manufacturing firms, shows the number of units to be produced in a period based on the unit sales projected in the sales budget, along with inventory considerations.

What are rolling budgets? Why are rolling budgets prepared?

Budgets are long-term financial plans that generally cover more than a one-year period.

A capital expenditures budget is prepared before the operating budgets.

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 ________.

Ballentine Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month following sale, 45% in the second month following sale, and 5% are not collected. What are the company's expected cash receipts for August from its current and past sales?

A budget can be an effective means of communicating management's plans to employees.

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

To develop the sales budget, companies must estimate both unit sales and the production cost per unit.

Snap, Inc., provides the following data for the next three months: Desired ending inventory: Raw Materials = 30% of next month's production needs Pounds of raw material required for each finished Unit = 5 lbs. Calculate the amount of purchases of raw materials in pounds for April and May.

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

A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter and 30,000 pairs in the second quarter of the upcoming year. Each pair of boots requires 2 kilograms (kg) of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 18,000 kg and the cost per kg is $8. What is the budgeted materials needed in kg. in the first quarter?

Which of the following is not a result of following a well-designed budgeting process?

Preparing a budget should be the sole task of the most important department in an organization.

Use the following information to prepare a budgeted income statement for Stellar Company for the month of June. a. Beginning cash balance on June 1 is $52,000. b. Sales amounts are: April (actual), $1,450,000, May (actual), $1,600,000, and June (budgeted), $1,700,000. c. Cost of goods sold is 53% of sales. d. Budgeted cash payments for salaries in June: $260,000. Salaries payable on May 31 are $60,000 and are expected to be $50,000 on June 30. e. Budgeted depreciation expense for June: $24,000. f. Other cash expenses budgeted for June: $282,000. g. Accrued income taxes due in June: $48,000. h. Bank loan interest due in June: $8,000 which represents the 1% monthly expense on a bank loan of $800,000. i. The income tax rate applicable to the company is 30%.