Deck 21: The Master Budget and Responsibility Accounting

Question 1

Which of the following is not an advantage of the budgeting process?

A) The budget process aids in performance evaluation.
B) The budget process helps coordinate the activities of the organization.
C) The budget process forces management to plan ahead.
D) The budget process is costly and time consuming.

Answer 1

The budget process is costly and time consuming.

Question 2

The master budget includes the operating budget, the capital expenditures budget and the financial budget.

Answer 2

True

Question 3

Which of the following budgets is a major part of the master budget and focuses on the income statement and its supporting schedules?

A) Operating budget
B) Cash budget
C) Capital expenditures budget
D) Sales budget

Answer 3

Operating budget

Question 4

Which of the following statements is incorrect?

A) The sales budget feeds into all other budgets.
B) The sales and ending inventory budgets determine the purchases and cost of goods sold budgets.
C) The sales and cash collections budgets determine the budgeted income statement.
D) The budgeting process provides benchmarks that motivate employees.

Question 5

The starting point of the budgeting process is to predict operating income for the upcoming period.

Question 6

Budgeted finished goods inventory will increase when budgeted sales are greater than budgeted production.

Question 7

Budgeted cash operating expenses include depreciation expense.

Question 8

Spencer Company expects cash sales for July of $12,000, and a 10% monthly increase during August and September. Credit sales of $4,000 in July should be followed by 25% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?

A) $13,200 and $6,000
B) $14,520 and $6,250
C) $14,520 and $6,000
D) $14,400 and $6,250

Question 9

Which of the following budgets is not an operating budget?

A) Budgeted income statement
B) Sales budget
C) Budgeted balance sheet
D) Inventory budget

Question 10

A March sales forecast projects that 10,000 units of Product A and 12,000 units of Product B are going to be sold at prices of $11 and $13, respectively. The desired ending inventory of Product A is 20% higher than the beginning inventory of 1,000 units. How much are total March sales for Product A anticipated to be?

A) $110,000
B) $130,000
C) $132,000
D) $156,000

Question 11

Wright Company expects cash sales for July of $12,000, and a 20% monthly increase during August and September. Credit sales of $4,000 in July should be followed by 10% decreases during August and September. What are budgeted cash sales and budgeted credit sales for September?

A) $17,280 and $3,240
B) $14,400 and $4,400
C) $9,600 and $4,400
D) $17,280 and $4,840

Question 12

Heath Company has beginning inventory of 21,000 units and expected sales of 48,000 units. If the desired ending inventory is 15,500 units, how many units should be produced?

A) 27,000
B) 42,500
C) 45,000
D) 53,000

Question 13

Janeway Corporation desires a December 31 ending inventory of 1,500 units. Budgeted sales for December are 2,300 units. The November 30 inventory was 850 units. What are budgeted purchases in units?

A) 2,350
B) 2,950
C) 3,150
D) 3,800

Question 14

Which of the following budgets or financial statements is an operating budget?

A) Capital expenditures budget
B) Budgeted balance sheet
C) Sales budget
D) Cash budget

Question 15

Griffith Company has budgeted purchases of inventory for December of $105,000. Expected beginning inventory on December 1 and ending inventory on December 31 are $120,000 and $129,000, respectively. If cost of goods sold averages 75% of sales, what are budgeted sales for December?

A) $114,000
B) $120,000
C) $128,000
D) $152,999

Question 16

Which of the following statements is incorrect?

A) Budgeted ending finished goods inventory will increase if budgeted production exceeds
Budgeted sales during the period.
B) Budgeted ending raw materials inventory will decrease if purchases of raw materials are less than the uses of raw materials.
C) An increase in budgeted accounts receivable occurs when budgeted sales exceed budgeted cash
Collections from customers.
D) An increase in budgeted accounts payable occurs when budgeted purchases are less than
Budgeted cash payments to suppliers.

Question 17

Hogan's management has forecasted sales of 50,000 units and an increase in finished goods of 10,000 units for the upcoming year. How many units is Hogan planning to produce next year?

A) 50,000
B) 40,000
C) 60,000
D) 30,000

Question 18

Yokeley Enterprises recorded sales of $160,000 during March. Management expects sales to increase 5% in April, 3% in May, and 5% in June. Cost of goods sold is expected to be 70% of sales. What is the budgeted gross profit for June?

A) $54,508
B) $112,000
C) $127,184
D) $181,692

Question 19

Lan Corporation had beginning inventory of 42,000 units and expects sales of 96,000 units during the year. Desired ending inventory is 31,000 units. How many units should Lan Corporation produce?

A) 65,000 units
B) 73,000 units
C) 85,000 units
D) 107,000 units

Question 20

Norton Company prepared the following sales budget:
$$\begin{array} { | l | l | } \hline \text { Month } & \text { Budgeted Sales } \\\hline \text { March } & \$ 200,000 \\\hline \text { April } & \$ 180,000 \\\hline \text { May } & \$ 220,000 \\\hline \text { June } & \$ 260,000 \\\hline\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $36,000. Desired inventory levels at the end of the month are 30% of the next month's cost of goods sold. What is the desired beginning inventory on June 1?

A) $36,000
B) $39,600
C) $43,200
D) $46,800

Question 21

Norton Company prepared the following sales budget:
$$\begin{array} { | l | l | } \hline \text { Month } & \text { Budgeted Sales } \\\hline \text { March } & \$ 200,000 \\\hline \text { April } & \$ 180,000 \\\hline \text { May } & \$ 220,000 \\\hline \text { June } & \$ 260,000 \\\hline\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $36,000. Desired inventory levels at the end of the month are 30% of the next month's cost of goods sold. What is the desired cost of goods sold for May?

A) $43,200
B) $72,000
C) $132,000
D) $144,000

Question 22

Norton Company prepared the following sales budget:
$$\begin{array} { | l | l | } \hline \text { Month } & \text { Budgeted Sales } \\\hline \text { March } & \$ 200,000 \\\hline \text { April } & \$ 180,000 \\\hline \text { May } & \$ 220,000 \\\hline \text { June } & \$ 260,000 \\\hline\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $36,000. Desired inventory levels at the end of the month are 30% of the next month's cost of goods sold. What are the total purchases budgeted for April?

A) $72,000
B) $108,000
C) $115,200
D) $147,600

Question 23

Norton Company prepared the following sales budget:
$$\begin{array} { | l | l | } \hline \text { Month } & \text { Budgeted Sales } \\\hline \text { March } & \$ 200,000 \\\hline \text { April } & \$ 180,000 \\\hline \text { May } & \$ 220,000 \\\hline \text { June } & \$ 260,000 \\\hline\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $36,000. Desired inventory levels at the end of the month are 30% of the next month's cost of goods sold. What are the total purchases budgeted for May?

A) $132,000
B) $135,600
C) $139,200
D) $175,200

Question 24

Whitaker Company budgets payroll at $3,000 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $10,500 with budgeted sales of $150,000. Sales for July are budgeted at $165,000, while purchases of inventory for July are budgeted at $85,000.
Depreciation and insurance for July are estimated at $750 and $500, respectively. Expenses related to purchasing inventory are budgeted at 5% of purchases for the month. The purchase of $3,000 in equipment and $1,200 in furniture is expected in July.
The July payroll should be budgeted at what amount?

A) $8,250
B) $11,250
C) $11,550
D) $14,550

Question 25

Whitaker Company budgets payroll at $3,000 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $10,500 with budgeted sales of $150,000. Sales for July are budgeted at $165,000, while purchases of inventory for July are budgeted at $85,000.
Depreciation and insurance for July are estimated at $750 and $500, respectively. Expenses related to purchasing inventory are budgeted at 5% of purchases for the month. The purchase of $3,000 in equipment and $1,200 in furniture is expected in July.
What are the total operating expenses budgeted for July?

A) $16,750
B) $17,050
C) $20,950
D) $21,250

Question 26

Whitaker Company budgets payroll at $3,000 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $10,500 with budgeted sales of $150,000. Sales for July are budgeted at $165,000, while purchases of inventory for July are budgeted at $85,000.
Depreciation and insurance for July are estimated at $750 and $500, respectively. Expenses related to purchasing inventory are budgeted at 5% of purchases for the month. The purchase of $3,000 in equipment and $1,200 in furniture is expected in July.
If the percentage used to budget payroll increased 20%, what is the total payroll budgeted for July?

A) $12,900
B) $13,500
C) $13,860
D) $44,250

Question 27

Bolin's, an elite clothier, expects its November sales to be 30% higher than its October sales of $200,000. Purchases were $100,000 in October and are expected to be $150,000 in November. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Purchases are paid 25% in the month of purchase and 75% in the following month. The cash balance on November 1 is $9,000. What will be the cash balance on November 30?

A) $87,000
B) $114,500
C) $140,000
D) $149,000

Question 28

Which of the following statements is incorrect?

A) The number of units budgeted to be produced exceeds the number of units budgeted to be sold
When the quantity of budgeted finished goods inventory increases.
B) The budgeted quantity of raw materials inventory increases when the budgeted quantity of raw
Material purchases exceeds the budgeted quantity of raw material uses.
C) The number of units budgeted for production is a function of budgeted unit sales and changes in
The quantity of finished goods inventory levels.
D) The number of units budgeted for raw material purchases considers only budgeted unit sales
And changes in the quantity of raw materials inventory levels

Question 29

Miller company's budgeted variable selling and administrative expenses are $8.50 per unit sold.
Miller's budgeted sales are 5,000 units during April, and budgeted selling and administrative fixed
Costs are $47,000 for the month, which includes depreciation expense of $7,000. What are Miller's
Budgeted cash disbursements for selling and administrative expenses?

A) $40,000
B) $47,000
C) $89,500
D) $82,500

Question 30

Margo Company manufactures a product that takes 10 direct labor hours to produce. Margo's
Budgeted sales are 2,000 units in August and 2,500 units in September. Margo's ending finished
Goods inventory is budgeted to be 20% of the following month's sales. How much was Margo's
Budgeted direct labor cost for the month of August, assuming that the hourly wage rate is $15.00?

A) $315,000
B) $300,000
C) $375,000
D) $240,000

Question 31

Margo Company manufactures a product that takes 20 pounds of material to produce. Margo's
Budgeted sales are 2,000 units in August and 2,500 units in September. Margo's ending finished
Goods inventory is budgeted to be 20% of the following month's sales. How much was Margo's
Budgeted materials purchases for the month of August, assuming that the material costs $3.75 per
Pound and the raw materials inventory quantity is not budgeted to change?

A) $150,000
B) $187,500
C) $120,000
D) $157,500

Question 32

A sporting goods store purchased $4,500 of ski boots in September. The store had $2,000 of ski boots on hand at the beginning of September, and expected to have $2,500 of ski boots at the end of September to cover part of anticipated October sales. What is the budgeted cost of goods sold for September?

A) $4,000
B) $4,500
C) $6,000
D) $6,500

Question 33

Martin Company sells a certain product for $15 per unit. The beginning inventory is 40,000 units and the desired ending inventory is 32,000 units. If budgeted production is 100,000 units, what is the forecasted sales revenue from the product?

A) $1,380,000
B) $1,500,000
C) $1,600,000
D) $1,620,000

Question 34

The cash budget impacts both the budgeted balance sheet and budgeted statement of cash flows.

Question 35

Budgeted cash collections and payments are independent of budgeted revenues and expenses.

Question 36

The cash budget should be prepared:

A) after the budgeted income statement has been prepared.
B) after the budgeted balance sheet has been prepared.
C) before the operating budget has been prepared.
D) after the capital expenditures budget has been prepared.

Question 37

Caribbean Tool and Die Company's forecasted sales for April, May, June and July are $150,000, $225,000, $180,000, and $210,000, respectively. Sales are 50% cash and 50% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 60% of sales and ending inventory is maintained at $85,000 plus 20% of the following month's cost of goods sold. All inventory purchases are paid 20% in the month of purchase and 80% in the following month.
What are the cash collections budgeted for June?

A) $112,500
B) $180,000
C) $202,500
D) $220,000

Question 38

Caribbean Tool and Die Company's forecasted sales for April, May, June, and July are $150,000, $225,000, $180,000, and $210,000, respectively. Sales are 50% cash and 50% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 60% of sales and ending inventory is maintained at $85,000 plus 20% of the following month's cost of goods sold. All inventory purchases are paid 20% in the month of purchase and 80% in the following month.
What are the budgeted cash payments in June for inventory purchases?

A) $86,400
B) $108,000
C) $126,000
D) $170,280

Question 39

Caribbean Tool and Die Company's forecasted sales for April, May, June, and July are $150,000, $225,000, $180,000, and $210,000, respectively. Sales are 50% cash and 50% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 60% of sales and ending inventory is maintained at $85,000 plus 20% of the following month's cost of goods sold. All inventory purchases are paid 20% in the month of purchase and 80% in the following month.
What is the balance of accounts payable on the June 30 budgeted balance sheet?

A) $74,880
B) $89,280
C) $101,760
D) $111,600

Question 40

Fasthound Express prepared the following sales budget:
$$\begin{array} { | l | l | l | } \hline \text { Month } & \text { Cash Sales } & \text { Credit sales } \\\hline \text { March } & \$ 10,000 & \$ 20,000 \\\hline \text { April } & \$ 20,000 & \$ 30,000 \\\hline \text { May } & \$ 30,000 & \$ 40,000 \\\hline \text { June } & \$ 40,000 & \$ 50,000 \\\hline\end{array}$$ Credit collections are 50% in the month of sale, 40% in the month following the sale, and 5% two months following the sale. The remaining 5% is expected to be uncollectible.
What are the total budgeted cash collections for May?

A) $30,000
B) $33,000
C) $63,000
D) $70,000

Question 41

Fasthound Express prepared the following sales budget:
$$\begin{array} { | l | l | l | } \hline \text { Month } & \text { Cash Sales } & \text { Credit sales } \\\hline \text { March } & \$ 10,000 & \$ 20,000 \\\hline \text { April } & \$ 20,000 & \$ 30,000 \\\hline \text { May } & \$ 30,000 & \$ 40,000 \\\hline \text { June } & \$ 40,000 & \$ 50,000 \\\hline\end{array}$$ Credit collections are 50% in the month of sale, 40% in the month following the sale, and 5% two months following the sale. The remaining 5% is expected to be uncollectible.
What are the total cash collections in June?

A) $42,500
B) $50,000
C) $82,500
D) $90,000

Question 42

Fasthound Express prepared the following sales budget:
$$\begin{array} { | l | l | l | } \hline \text { Month } & \text { Cash Sales } & \text { Credit sales } \\\hline \text { March } & \$ 10,000 & \$ 20,000 \\\hline \text { April } & \$ 20,000 & \$ 30,000 \\\hline \text { May } & \$ 30,000 & \$ 40,000 \\\hline \text { June } & \$ 40,000 & \$ 50,000 \\\hline\end{array}$$ Credit collections are 50% in the month of sale, 40% in the month following the sale, and 5% two months following the sale. The remaining 5% is expected to be uncollectible.
What is the total cash received in April from April sales?

A) $23,000
B) $35,000
C) $43,000
D) $50,000

Question 43

Della Company prepared the following purchases budget:
$$\begin{array} { | l | l | } \hline \text { Month } & \text { Budgeted Purchases } \\\hline \text { June } & \$ 67,000 \\\hline \text { July } & \$ 72,500 \\\hline \text { August } & \$ 76,300 \\\hline \text { September } & \$ 73,700 \\\hline \text { October } & \$ 69,200 \\\hline\end{array}$$ All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after purchase.
What are the cash disbursements in August for June purchases?

A) $7,630
B) $26,800
C) $30,520
D) $33,500

Question 44

Della Company prepared the following purchases budget:
$$\begin{array} { | l | l | } \hline \text { Month } & \text { Budgeted Purchases } \\\hline \text { June } & \$ 67,000 \\\hline \text { July } & \$ 72,500 \\\hline \text { August } & \$ 76,300 \\\hline \text { September } & \$ 73,700 \\\hline \text { October } & \$ 69,200 \\\hline\end{array}$$ All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after purchase.
What are the cash disbursements in October for September purchases?

A) $27,680
B) $29,480
C) $34,600
D) $36,850

Question 45

Acorn Company's budgeted credit sales are as follows:
April: $100,000
May: $120,000
June: $125,000
Acorn collects 30% of their credit sales during the month of sale, 50% during the month following the
Sale, and the remaining 20% two months after the month of sale. What is the budgeted accounts receivable balance on June 30^th?

A) $111,500
B) $87,500
C) $180,000
D) $100,000

Question 46

Acorn Company's budgeted credit sales are as follows:
April: $100,000
May: $120,000
June: $125,000
Acorn collects 30% of their credit sales during the month of sale, 50% during the month following the sale, and the remaining 20% two months after the month of sale. What are the budgeted cash collections from customers for the month of June?

A) $125,000
B) $85,000
C) $80,000
D) $117,500

Question 47

Walnut Company's budgeted inventory purchases are as follows:
October: $300,000
November: $350,000
December: $390,000
Walnut pays for 20% of their purchases during the month of purchase, 70% during the month following the purchase, and the remaining 10% two months after the month of purchase. What is the budgeted accounts payable balance on December 31^st?

A) $312,000
B) $347,000
C) $390,000
D) $425,000

Question 48

Walnut Company's budgeted inventory purchases are as follows:
October: $300,000
November: $350,000
December: $390,000
Walnut pays for 20% of their purchases during the month of purchase, 70% during the month following the purchase, and the remaining 10% two months after the month of purchase. What are the budgeted cash payments for purchases for the month of December?

A) $323,000
B) $347,000
C) $353,000
D) $273,000

Question 49

Chestnut Corporation has budgeted sales as follows:
April: $400,000
May: $360,000
June: $440,000
July: $520,000
Chestnut's gross margin is 20% of sales and their desired inventory levels are 40% of the next month's cost of goods sold. How much are Chestnut's budgeted inventory purchases for the month of June?

A) $352,000
B) $377,600
C) $166,400
D) $140,800

Question 50

Chestnut Corporation has budgeted sales as follows:
April: $400,000
May: $360,000
June: $440,000
July: $520,000
Chestnut's gross margin is 20% of sales and their desired inventory levels are 40% of the next month's cost of goods sold. Chestnut pays for their inventory purchases during the month after purchase. How much are Chestnut's budgeted payments for inventory purchases for the month of June?

A) $416,000
B) $166,400
C) $288,000
D) $313,600

Question 51

Pecan Corporation's budgeted March cash sales are $40,000 and budgeted credit sales are $260,000.
Pecan's budgeted accounts receivable balance was $65,000 at the beginning of March and $79,000
At the end of March. How much was Pecan's budgeted cash collections from customers during March?

A) $286,000
B) $314,000
C) $274,000
D) $246,000

Question 52

The following information has been provided by Jared Incorporated:
Budgeted sales for August and September are $120,000 and $140,000, respectively.
Budgeted inventory purchases for August and September are $60,000 and $84,000, respectively.
30% of purchases are paid for during the month of purchase, and the remaining 70% are paid for during the subsequent month.
20% of sales are collected during the month of sale, and the remaining 80% are collected during the subsequent month.
Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $21,000 monthly and include depreciation expense of $7,000. Operating costs are paid for in the month that they are incurred.
The cash balance on September 1st was $10,000. Jared's goal is to maintain a $10,000 cash balance. Jared can borrow cash in increments of $1,000.
How much cash will be paid to suppliers during September?

A) $84,000
B) $67,200
C) $76,800
D) $72,000

Question 53

The following information has been provided by Jared Incorporated:
Budgeted sales for August and September are $120,000 and $140,000, respectively.
Budgeted inventory purchases for August and September are $60,000 and $84,000, respectively.
30% of purchases are paid for during the month of purchase and the remaining 70% are paid for during the subsequent month.
20% of sales are collected during the month of sale and the remaining 80% are collected during the subsequent month.
Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $21,000 monthly and include depreciation expense of $7,000. Operating costs are paid for in the month that they are incurred.
The cash balance on September 1st was $10,000. Jared's goal is to maintain a $10,000 cash balance. Jared can borrow cash in increments of $1,000.
How much cash will be colleted from customers during September?

A) $130,000
B) $140,000
C) $136,000
D) $124,000

Question 54

The following information has been provided by Jared Incorporated:
Budgeted sales for August and September are $120,000 and $140,000, respectively.
Budgeted inventory purchases for August and September are $60,000 and $84,000, respectively.
30% of purchases are paid for during the month of purchase and the remaining 70% are paid for during the subsequent month.
20% of sales are collected during the month of sale and the remaining 80% are collected during the subsequent month.
Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $36,000 monthly and include depreciation expense of $7,000. Operating costs are paid for in the month that they are incurred.
The cash balance on September 1st was $10,000. Jared's goal is to maintain a $10,000 cash balance. Jared can borrow cash in increments of $1,000.
How much cash is budgeted to be paid in September for operating costs?

A) $36,000
B) $35,000
C) $71,000
D) $64,000

Question 55

The following information has been provided by Jared Incorporated:
Budgeted sales for August and September are $120,000 and $140,000, respectively.
Budgeted inventory purchases for August and September are $60,000 and $84,000, respectively.
30% of purchases are paid for during the month of purchase and the remaining 70% are paid for during the subsequent month.
20% of sales are collected during the month of sale and the remaining 80% are collected during the subsequent month.
Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $36,000 monthly and include depreciation expense of $7,000. Operating costs are paid for in the month that they are incurred.
The cash balance on September 1st was $10,000. Jared's goal is to maintain at least a $10,000 cash balance. Jared can borrow cash in increments of $1,000.
How much will Jared have to borrow during September in order to maintain the $10,000 minimum cash balance?

A) $8,000
B) $1,200
C) $9,000
D) $8,200

Question 56

The following information has been provided by Zeppelin Corporation:
Budgeted sales for January and February are $240,000 and $280,000, respectively.
Budgeted inventory purchases for January and February are $120,000 and $168,000, respectively.
40% of purchases are paid for during the month of purchase and the remaining 60% are paid for during the subsequent month.
10% of sales are collected during the month of sale and the remaining 90% are collected during the subsequent month.
Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $72,000 monthly and include depreciation expense of $14,000. Operating costs are paid for in the month that they are incurred.
The cash balance on February 1st was $20,000. Zeppelin's goal is to maintain at least a $20,000 cash balance. Zeppelin can borrow cash in increments of $1,000.
How much cash will be paid to suppliers during February?

A) $148,800
B) $139,200
C) $168,000
D) $115,200

Question 57

The following information has been provided by Zeppelin Corporation:
Budgeted sales for January and February are $240,000 and $280,000, respectively.
Budgeted inventory purchases for January and February are $120,000 and $168,000, respectively.
40% of purchases are paid for during the month of purchase and the remaining 60% are paid for during the subsequent month.
10% of sales are collected during the month of sale and the remaining 90% are collected during the subsequent month.
Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $72,000 monthly and include depreciation expense of $14,000. Operating costs are paid for in the month that they are incurred.
The cash balance on February 1st was $20,000. Zeppelin's goal is to maintain at least a $20,000 cash balance. Zeppelin can borrow cash in increments of $1,000.
How much cash will be collected from customers during February?

A) $234,000
B) $276,000
C) $244,000
D) $216,000

Question 58

The following information has been provided by Zeppelin Corporation:
Budgeted sales for January and February are $240,000 and $280,000, respectively.
Budgeted inventory purchases for January and February are $120,000 and $168,000, respectively.
40% of purchases are paid for during the month of purchase and the remaining 60% are paid for during the subsequent month.
10% of sales are collected during the month of sale and the remaining 90% are collected during the subsequent month.
Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $72,000 monthly and include depreciation expense of $14,000. Operating costs are paid for in the month that they are incurred.
The cash balance on February 1st was $20,000. Zeppelin's goal is to maintain at least a $20,000 cash balance. Zeppelin can borrow cash in increments of $1,000.
How much cash is budgeted to be paid in February for operating costs?

A) $118,000
B) $132,000
C) $142,000
D) $128,000

Question 59

The following information has been provided by Zeppelin Corporation:
Budgeted sales for January and February are $240,000 and $280,000, respectively.
Budgeted inventory purchases for January and February are $120,000 and $168,000, respectively.
40% of purchases are paid for during the month of purchase and the remaining 60% are paid for during the subsequent month.
10% of sales are collected during the month of sale and the remaining 90% are collected during the subsequent month.
Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $72,000 monthly and include depreciation expense of $14,000. Operating costs are paid for in the month that they are incurred.
The cash balance on February 1st was $20,000. Zeppelin's goal is to maintain at least a $20,000 cash balance. Zeppelin can borrow cash in increments of $1,000.
How much will Zeppelin have to borrow during February in order to maintain the $20,000 minimum cash balance?

A) $33,000
B) $24,000
C) $67,000
D) $63,000

Question 60

During March, Led Company's budgeted accounts payable increased $10,000, budgeted inventory decreased $15,000 and budgeted cost of goods sold was $95,000. How much were Led's budgeted cash payments to suppliers for the month of March?

A) $70,000
B) $120,000
C) $90,000
D) $100,000

Question 61

During May, Rolling Company's budgeted accounts payable decreased $15,000, budgeted inventory increased $5,000 and budgeted cash payments to supplierswas $95,000 . How much was Rolling's budgeted cost of goods sold for May?

A) $85,000
B) $75,000
C) $115,000
D) $105,000

Question 62

RJ Company's budgeted operating expenses for April are $49,000 which includes depreciation expense and insurance expense. During April, RJ's budgeted insurance expense is $5,500 and RJ's prepaid insurance account is budgeted for a $2,000 decrease. How much depreciation expense was budgeted for April assuming that April's budgeted cash payments for operating expenses totaled $38,000?

A) $43,500
B) $13,000
C) $9,000
D) $11,000

Question 63

Which of the following budgets is not considered to be an operating budget?

A) Sales budget
B) Budgeted income statement
C) Operating expenses budget
D) Budgeted cash flow statement

Question 64

Stone Company's budgeted operating expenses for April are $98,000 which includes $10,000 of depreciation expense and insurance expense. During April, Stone's budgeted insurance expense is $3,500; and, Stone's prepaid insurance account is budgeted for a $1,000 increase during April. How much are Stone's budgeted cash payments for operating expenses for the month of April?

A) $88,000
B) $89,000
C) $99,000
D) $85,500

Question 65

An investment center is a responsibility center in which a manager is accountable for maximizing only operating income.

Question 66

The manager of which of the following responsibility centers is responsible primarily for controlling expenses?

A) Investment center
B) Revenue center
C) Profit center
D) Cost center

Question 67

During April, Cherry Company had actual sales of $180,000 compared to budgeted sales of $195,000. Actual cost of goods sold was $135,000, compared to a budget of $136,500. Monthly operating expenses, budgeted at $28,000, totaled $25,000. Interest revenue of $2,500 was earned during April but had not been included in the budget. The performance report for April would show a net income variance of what amount?

A) $8,000
B) $13,000
C) $(8,000)
D) $(13,000)

Question 68

During July, Neptune Company had actual sales of $144,000 compared to budgeted sales of $156,000. Actual cost of goods sold was $108,000, compared to a budget of $109,200. Monthly operating expenses, budgeted at $22,400, totaled $20,000. Interest revenue of $2,000 was earned during July but had not been included in the budget. The performance report for July would show a net income variance of what amount?

A) $6,400
B) $10,400
C) $(6,400)
D) $(10,400)

Question 69

The manager of a profit center would not be responsible for which of the following?

A) Managing the cost of inventory purchases
B) Generating revenue
C) Managing the cost of employee wages
D) Managing the cost of new building purchases

Question 70

When performing a sensitivity analysis, an increase in the budgeted direct labor hourly wage rate will
Not result in which of the following?

A) An increase in the budgeted total manufacturing cost per unit
B) An increase in budgeted cost of goods manufactured
C) An increase in budgeted gross margin
D) A decrease in budgeted retained earnings

Question 71

Responsibility accounting performance reports should not be used to:

A) evaluate division performance.
B) evaluate individual product lines.
C) compare actual results to the budget.
D) direct blame to particular individuals when variances are unfavorable.