Exam 7: Master Budgets and Performance Planning

Stanley 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 payments during February. Stanley Company has an agreement with its bank to maintain a cash balance of $10,000. What amount, if any, must the company borrow at the end of February to maintain a $10,000 cash balance?

The following information is available for Jergenson Company: a. The Cash Budget for March shows a bank loan of $10,000 and an ending cash balance of $48,000. b. The Sales Budget for March indicates sales of $120,000. Accounts receivable is expected to be 70% of March sales. c. The Merchandise Purchases Budget indicates that $90,000 in merchandise will be purchased in March on account. Ending inventory for March is predicted to be 600 units at a cost of $35 per unit. Purchases on account are paid 100% in the month following the purchase. d. The Budgeted Income Statement shows depreciation expense of $4,000, net income of $44,000 and $21,000 in income tax expense for the quarter ended March 31. Accrued taxes will be paid in April. e. The Balance Sheet for February 28 shows equipment of $77,000 with accumulated depreciation of $28,000, common stock of $25,000 and retained earnings of $8,000. There are no changes budgeted in the equipment or common stock accounts for March Prepare a budgeted balance sheet as of March 31.

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

The manufacturing budgets include the sales budget and the budgeted income statement.

Budgets that are periodically revised and have new periods added to replace those that have lapsed are called:

Production budgets always show both budgeted units of product and total costs for the budgeted units.

The sales budget comes from a careful analysis of forecasted economic and market conditions, business capacity, and advertising plans.

The practice of preparing budgets for each of several future periods and revising those budgets as each period is completed, adding a new budget each period so that the budgets always cover the same number of future periods, is called:

Describe at least five benefits of budgeting.

All of the following are necessary for budgets to be effective except:

List the three important guidelines that should be followed in the budgeting process.

Junior Snacks reports the following information from its sales budget: All sales are on credit and are expected to be collected 40% in the month of sale and 60% in the month following sale. The total amount of cash expected to be received from customers in November is:

A department store has budgeted sales of 12,000 men's coats in September. Management wants to have 6,000 coats in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 coats. What is the dollar amount of the purchase of suits if each coat has a cost of $75?

Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales during the month of May.

What is a capital expenditures budget?

Cahuilla Corporation predicts the following sales in units for the coming four months: Each month's ending Finished Goods Inventory in units should be 40% of the next month's sales. March 31 Finished Goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of direct material B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted purchases of pounds of direct material B during May should be:

Zhang Industries budgets production of 300 units in June and 310 units in July. Each finished unit requires 4 pounds (lbs.) of raw material K, which costs $5 per pound. Each month's ending inventory of raw materials should be 30% of the following month's budgeted production. The June 1 raw materials inventory has 360 pounds of raw material K. Compute the budgeted purchases for raw material K in pounds for June.

A cash budget shows the expected cash receipts and cash payments during the budget period.

A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a:

Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales during the month of June.