Deck 9: Budgeting

Question 1

Modesto Company produces and sells Product AlphaB.To guard against stockouts,the company requires that 20% of the next month's sales be on hand at the end of each month.Budgeted sales of Product AlphaB over the next four months are: What would be the budgeted production for August?

A) 50,000 units.
B) 58,000 units.
C) 62,000 units.
D) 70,000 units.

Answer 1

B

Question 2

There are various budgets within the master budget.One of these budgets is the production budget.Which of the following best describes the production budget?

A) It details the required direct labour hours.
B) It details the required raw materials purchases.
C) It is calculated based on the sales budget and the desired ending inventory.
D) It summarizes the costs of producing units for the budget period.

Answer 2

C

Question 3

The PDQ Company makes collections on credit sales according to the following schedule: 25% in month of sale
70% in month following sale
4% in second month following sale
1% uncollectible
The following sales have been budgeted:
What would be the cash collections in June?

A) $110,000.
B) $111,500.
C) $113,400.
D) $115,500.

Answer 3

D

Question 4

What is the budget or schedule that provides necessary input data for the direct labour budget?

A) Raw materials purchases budget.
B) Production budget.
C) Schedule of cash collections.
D) Cash budget.

Question 5

Fairmont Inc.uses an accounting system that charges costs to the manager who has been delegated the authority to make decisions concerning the costs.For example,if the sales manager accepts a rush order that will result in higher than normal manufacturing costs,these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager.What best describes this type of an accounting system?

A) Responsibility accounting.
B) Contribution accounting.
C) Absorption accounting.
D) Operational budgeting.

Question 6

Parlee Company's sales are 30% in cash and 70% on credit.Sixty percent of the credit sales are collected in the month of sale,25% in the month following sale,and 12% in the second month following sale.The remainder is uncollectible.The following are budgeted sales data: What would be the budgeted total cash receipts in April?

A) $27,230.
B) $36,230.
C) $38,900.
D) $47,900.

Question 7

The cash budget must be prepared before you can complete which of the following?

A) Production budget.
B) Budgeted balance sheet.
C) Raw materials purchases budget.
D) Schedule of cash disbursements.

Question 8

Walsh Company expects sales of Product W to be 60,000 units in April,75,000 units in May,and 70,000 units in June.The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales.Due to excessive production during March,there were 25,000 units of Product W in the ending inventory on March 31.Given this information,what should be Walsh Company's production of Product W for the month of April?

A) 60,000 units.
B) 65,000 units.
C) 66,000 units.
D) 75,000 units.

Question 9

Superior Industries' sales budget shows quarterly sales for the next year as follows: Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales.What should be the budgeted production for the second quarter?

A) 7,200 units.
B) 8,000 units.
C) 8,400 units.
D) 8,800 units.

Question 10

Pardee Company plans to sell 12,000 units during the month of August.If the company has 2,500 units on hand at the start of the month,and plans to have 2,000 units on hand at the end of the month,how many units must be produced during the month?

A) 11,500 units.
B) 12,000 units.
C) 12,500 units.
D) 14,000 units.

Question 11

What is a continuous (or perpetual)budget?

A) It is prepared for a range of activity so that the budget can be adjusted for changes in activity.
B) It is a plan that is updated monthly or quarterly,dropping one period and adding another.
C) It is a strategic plan that does not change.
D) It is used in companies that experience no change in sales.

Question 12

Budgeted sales in Allen Company over the next four months are given below: Twenty-five percent of the company's sales are for cash,and 75% are on account.Collections for sales on account follow a stable pattern as follows: 50% of a month's sales are collected in the month of sale,30% are collected in the month following sale,and 15% are collected in the second month following sale.The remainder is uncollectible.Given these data,what should be cash collections for December?

A) $133,500.
B) $120,000.
C) $138,000.
D) $153,000.

Question 13

The master budget process usually begins with which of the following?

A) Production budget.
B) Operating budget.
C) Sales budget.
D) Cash budget.

Question 14

Which of the following is NOT a benefit of budgeting?

A) It uncovers potential bottlenecks before they occur.
B) It coordinates the activities of the entire organization by integrating the plans and objectives of the various parts.
C) It ensures that accounting records comply with generally accepted accounting principles.
D) It provides benchmarks for evaluating subsequent performance.

Question 15

Which of the following best describes a typical participative budget?

A) It is NOT subject to review by higher levels of management since to do so would contradict the participative aspect of the budgeting processing.
B) It is NOT subject to review by higher levels of management except in specific cases where the input of higher management is required.
C) It is subject to review by higher levels of management in order to prevent the budgets from becoming too loose.
D) It is NOT critical to the success of a budgeting program.

Question 16

Which of the following variances in a comprehensive performance report using the flexible budget concept is the most appropriate for measuring efficiency of operations?

A) Sales volume variance.
B) Contribution margin variance.
C) Flexible budget variance.
D) Total static budget variance.

Question 17

Which of the following best describes the direct materials purchase budget?

A) It is the beginning point in the budget process.
B) It must provide for the desired ending inventory as well as for production.
C) It is accompanied by a schedule of cash collections.
D) It is completed after the cash budget.

Question 18

Orion Corporation is preparing a cash budget for the six months beginning January 1.Shown below are the company's expected collection pattern and the budgeted sales for the period: Expected collection pattern:
65% collected in the month of sale
20% collected in the month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
What would be the estimated total cash collections during April from sales and accounts receivables?

A) $155,900.
B) $167,000.
C) $171,666.
D) $173,400.

Question 19

Which of the following best describes a method of budgeting in which the cost of each program must be justified every year?

A) Operational budgeting.
B) Zero-based budgeting.
C) Continuous budgeting.
D) Responsibility accounting.

Question 20

Friden Company has budgeted sales and production over the next quarter as follows: On April 1,the company has 20,000 units of product on hand.A minimum of 20% of the next month's sales needs (in units)must be on hand at the end of each month.July sales are expected to be 140,000 units.What would be the budgeted sales for June (in units)?

A) 128,000 units.
B) 160,000 units.
C) 184,000 units.
D) 188,000 units.

Question 21

In a budget of cash disbursements for March,what would be the total cash disbursements?

A) $11,200.
B) $13,900.
C) $16,900.
D) $22,300.

Question 22

In a budget of cash receipts for March,what would be the total cash receipts?

A) $8,200.
B) $16,000.
C) $17,800.
D) $20,200.

Question 23

ABC Company has a cash balance of $9,000 on April 1.The company must maintain a minimum cash balance of $6,000.During April,expected cash receipts are $45,000.Expected cash disbursements during the month total $52,000.What amount will the company need to borrow during April?

A) $2,000.
B) $4,000.
C) $6,000.
D) $8,000.

Question 24

What would be the expected cash balance on April 30?

A) $19,700.
B) $28,700.
C) $54,700.
D) $62,700.

Question 25

Avril Company makes collections on sales according to the following schedule: 30% in the month of sale
60% in the month following sale
8% in the second month following sale
The following sales are expected:
What should be the budgeted cash collections in March?

A) $105,000.
B) $110,000.
C) $110,800.
D) $113,000.

Question 26

What would be the accounts receivable balance that would appear in the March 31 budgeted balance sheet?

A) $8,800.
B) $12,400.
C) $15,000.
D) $16,000.

Question 27

What are the budgeted cash receipts for October?

A) $188,000.
B) $226,000.
C) $248,000.
D) $278,000.

Question 28

In a budgeted balance sheet,what would be the merchandise inventory on February 28?

A) $3,200.
B) $4,800.
C) $7,500.
D) $9,600.

Question 29

In a budgeted income statement for the month of February,what would be the net income?

A) $0.
B) $1,800.
C) $4,200.
D) $9,000.

Question 30

What is the budgeted accounts receivable balance on September 30?

A) $126,000.
B) $148,000.
C) $166,000.
D) $190,000.

Question 31

Marple Company's budgeted production in units and budgeted raw materials purchases over the next three months are given below: Two kilograms of raw materials are required to produce one unit of product.The company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs.The company is expected to have 36,000 kilograms of raw materials on hand on January 1.What should be the budgeted production for February?

A) 75,000 units.
B) 82,500 units.
C) 105,000 units.
D) 150,000 units.

Question 32

What would be the expected cash disbursements during April for inventory purchases?

A) $87,300.
B) $90,000.
C) $97,000.
D) $100,000.

Question 33

The Willsey Merchandise Company has budgeted $40,000 in sales for the month of December.The company's cost of goods sold is 30% of sales.If the company has budgeted to purchase $18,000 in merchandise during December,what is the budgeted change in inventory levels over the month of December?

A) $6,000 increase.
B) $10,000 decrease.
C) $15,000 increase.
D) $22,000 decrease.

Question 34

The Tobler Company has budgeted production for next year as follows: Four kilograms of raw materials are required for each unit produced.At the start of the year,raw materials on hand total 4,000 kilograms.The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs.What would be the budgeted purchases of raw materials in the third quarter?

A) 50,400 kilograms.
B) 56,800 kilograms.
C) 62,400 kilograms.
D) 63,200 kilograms.

Question 35

What would be the expected cash collections from customers during April?

A) $117,600.
B) $137,000.
C) $139,000.
D) $150,000.

Question 36

What should be the amount of cash collected during the month of June?

A) $32,000.
B) $40,000.
C) $40,400.
D) $41,000.

Question 37

The Waverly Company has budgeted sales for next year as follows: The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units.The finished goods inventory at the start of the year is 3,000 units.What should be the scheduled production for the third quarter?

A) 13,500 units.
B) 17,500 units.
C) 18,500 units.
D) 22,000 units.

Question 38

What should be the cash disbursements during the month of June for goods purchased for resale and for operating expenses?

A) $40,000.
B) $41,000.
C) $42,500.
D) $43,500.

Question 39

The Stacy Company makes and sells a single product: Product R.Budgeted sales for April are $300,000.Gross margin is budgeted at 30% of sales dollars.If the net income for April is budgeted at $40,000,what are the budgeted selling and administrative expenses?

A) $50,000.
B) $78,000.
C) $102,000.
D) $133,333.

Question 40

What would be the expected cash disbursements during April for operating expenses?

A) $15,000.
B) $23,000.
C) $30,000.
D) $38,000.

Question 41

What is the total number of units to be produced in February?

A) 5,220 units.
B) 5,400 units.
C) 5,580 units.
D) 6,120 units.

Question 42

If 500,000 finished units were to be manufactured during July,what would be the units of raw material needed to be purchased?

A) 900,000 units.
B) 1,000,000 units.
C) 1,010,000 units.
D) 1,020,000 units.

Question 43

What is the desired ending inventory for December?

A) 690 units.
B) 780 units.
C) 870 units.
D) 960 units.

Question 44

If the budgeted cash disbursements for selling and administrative expenses for November total $123,250,then how much was the total selling and administrative budget for November?

A) $123,250.
B) $134,250.
C) $168,250.
D) $187,250.

Question 45

What would be the total cash collected by LaGrange Company during January?

A) $261,500.
B) $331,500.
C) $344,000.
D) $274,000.

Question 46

If the budgeted production for August is 5,000 units,what is the total budgeted factory overhead per unit?

A) $15.
B) $18.
C) $20.
D) $22.

Question 47

What is the opening inventory in units for September?

A) 370 units.
B) 530 units.
C) 670 units.
D) 6,700 units.

Question 48

The company has budgeted to produce 25,000 units of Product T in June.The finished goods inventories on June 1 and June 30 were budgeted at 500 and 700 units,respectively.What would be the budgeted direct labour costs incurred in June?

A) $227,500.
B) $293,384.
C) $295,750.
D) $304,031.

Question 49

What is the desired ending inventory for August?

A) 370 units.
B) 530 units.
C) 670 units.
D) 710 units.

Question 50

What would be the budgeted direct labour cost per unit of Product T?

A) $7.00.
B) $9.10.
C) $10.40.
D) $11.83.

Question 51

If the company has budgeted to sell 20,000 units of Product SW in October,what will be the total budgeted variable selling and administrative expenses for October?

A) $40,000.
B) $45,000.
C) $56,250.
D) $78,000.

Question 52

If the company has budgeted to sell 24,000 units of Product SW in September,what would be the total budgeted fixed selling and administrative expenses for September?

A) $48,000.
B) $54,000.
C) $67,000.
D) $78,000.

Question 53

If the company has budgeted to sell 25,000 units of Product SW in July,what will be the total budgeted selling and administrative expenses for July?

A) $56,250.
B) $78,000.
C) $123,250.
D) $134,250.

Question 54

What is the budgeted accounts receivable balance on June 1 of the current year?

A) $56,000.
B) $64,000.
C) $76,000.
D) $132,000.

Question 55

What are the total units to be produced in October?

A) 4,530 units.
B) 5,070 units.
C) 5,670 units.
D) 5,890 units.

Question 56

What is the total number of units to be produced in July?

A) 6,920 units.
B) 7,100 units.
C) 7,280 units.
D) 7,630 units.

Question 57

If Pardise Company plans to sell 480,000 units during July,what would be the number of units it would have to manufacture during July?

A) 440,000 units.
B) 450,000 units.
C) 480,000 units.
D) 510,000 units.

Question 58

If the budgeted production for July is 6,000 units,what is the total budgeted factory overhead for July?

A) $18,000.
B) $75,000.
C) $93,000.
D) $109,000.

Question 59

What is the opening inventory in units for April?

A) 380 units.
B) 460 units.
C) 720 units.
D) 4,600 units.

Question 60

What is the desired ending inventory for March?

A) 380 units.
B) 460 units.
C) 540 units.
D) 720 units.

Question 61

What are the total disbursements during the third quarter (item f),in thousands of dollars?

A) $59.
B) $78.
C) $82.
D) $84.

Question 62

What should be the total fixed overhead cost at an activity level of 9,600 patient-visits per month?

A) $133,630.
B) $154,560.
C) $235,720.
D) $272,640.

Question 63

At an activity level of 180,000 direct labour hours,what amount would the flexible budget estimate for indirect labour cost?

A) $108,000.
B) $144,000.
C) $162,000.
D) $180,000.

Question 64

Which of the following is a major weakness of flexible budgets?

A) They are geared only to a single level of activity.
B) They give subordinates too much flexibility.
C) They force the manager to compare actual costs at one level of activity to budgeted costs at a different level of activity.
D) Their construction requires the use of one activity base common to all the different cost items.

Question 65

What is the borrowing required during the first quarter to meet the minimum cash balance (item b),in thousands of dollars?

A) $0.
B) $3.
C) $7.
D) $10.

Question 66

What is the budgeted net income for December?

A) $42,500.
B) $77,500.
C) $107,500.
D) $137,500.

Question 67

What is the expected total fixed overhead cost at an activity level of 5,500 guest-days per month?

A) $139,700
B) $190,920
C) $244,200
D) $109,220

Question 68

If all cash expenses are paid for in the month incurred what is the budgeted cash disbursements for manufacturing overhead if 5,500 units are produced?

A) $16,500.
B) $75,500.
C) $91,500.
D) $99,000.

Question 69

What are the collections from customers during the first quarter (item a),in thousands of dollars?

A) $50.
B) $57.
C) $60.
D) $73.

Question 70

What are the budgeted cash receipts for December?

A) $137,500.
B) $412,500.
C) $550,000.
D) $585,000.

Question 71

What should be the total overhead cost at an activity level of 9,400 patient-visits per month?

A) $235,720
B) $249,250
C) $266,960
D) $250,640

Question 72

What is the repayment (including interest)of financing during the second quarter (item d),in thousands of dollars?

A) $0.
B) $4.
C) $7.
D) $17.

Question 73

What should be the total variable overhead cost at an activity level of 9,300 patient-visits per month?

A) $114,390.
B) $149,730.
C) $102,090.
D) $133,630.

Question 74

At an activity level of 160,000 direct labour hours,what amount would the flexible budget estimate for the utilities?

A) $80,000.
B) $100,000.
C) $120,000.
D) $160,000.

Question 75

At an activity level of 180,000 direct labour hours,what amount would the flexible budget estimate for total budgeted fixed costs?

A) $100,000.
B) $144,000.
C) $150,000.
D) $160,000.

Question 76

What amount would the flexible budget estimate for total variable overhead cost per direct labour hour?

A) $0.60.
B) $0.90.
C) $1.50.
D) $1.80.

Question 77

What is the cash disbursed for purchases during the second quarter (item c),in thousands of dollars?

A) $9.
B) $13.
C) $21.
D) $55.

Question 78

What is the cash balance at the beginning of the second quarter (item e),in thousands of dollars?

A) $0.
B) $7.
C) $10.
D) $14.

Question 79

What is the expected total variable overhead cost at an activity level of 5,000 guest-days per month?

A) $127,000
B) $109,220
C) $95,000
D) $81,700

Question 80

What are the budgeted cash disbursements for December?

A) $382,500.
B) $442,500.
C) $472,500.
D) $477,500.