Deck 13: Planning and Budgeting

Question 1

Denton Company wants to have 10,000 units on hand at the end of the year after marketing 100,000 units during the year.If the beginning inventory is 5,000 units,Denton needs to produce 105,000 units during the year.

Answer 1

True

Question 2

Both variable and fixed manufacturing overhead costs are included in the manufacturing overhead budget.

Answer 2

True

Question 3

Participative budgeting streamlines the budgeting process by reducing budget development time.

Answer 3

False

Question 4

Estimates for direct labor costs are obtained from the engineering and production management,as well as from the Personnel Department.

Question 5

A master budget consists of (a)organizational goals, (b)strategic long-range profit plan,and (c)tactical short-range profit plan.

Question 6

The Delphi technique uses highly sophisticated computerized time series analysis to reduce the subjectivity surrounding the sales forecast.

Question 7

Ethical conflicts can occur in the budgeting process because managers supply information for the budgets that are then used to evaluate their performance.

Question 8

Denton Company has 10,000 units on hand at the beginning of the year and plans to sell 100,000 units during the year.If the ending inventory needs to be twice the beginning inventory,Denton will need to produce 90,000 units during the year.

Question 9

A budget is the plan,stated in financial terms,of how an organization expects to carry out its activities and meet its goals.

Question 10

The sales budget drives the rest of the budgeting process for both manufacturers and merchandisers.

Question 11

The production budget must be prepared before the direct materials,direct labor,and overhead budgets can be prepared.

Question 12

An organization's sales staff is more likely to provide a lower sales forecast than a forecast provided by market researchers.

Question 13

When assembling the master budget,the budgeted balance sheet is the last budget prepared in the process.

Question 14

Sales projections are often the most difficult part of the budgeting process because it involves a considerable amount of subjectivity.

Question 15

The cash budget is normally prepared before the budgeted income statement.

Question 16

A production budget is not needed for a service organization

Question 17

Bottlenecks in the production process can be discovered by the budgeting process before they occur.The budget will expose capacity problems before they occur.

Question 18

The production budget allows management to plan for the resources needed to meet the current sales demand and ensure that inventory levels are sufficient for future sales.

Question 19

Individual managers' beliefs and expectations are incorporated into the budgeting process using grass roots budgeting procedures.

Question 20

In effect,the cash budget simply restates the budgeted income statement to the cash basis.

Question 21

The statistical method of forecasting that relies heavily on regression models is called:

A) econometric models.
B) Delphi technique.
C) scattergraph method.
D) participative budgeting.

Question 22

A master budget:

A) drops the current month or quarter and adds a future month or quarter as the current month or quarter is completed.
B) presents a statement of expectations for a period of time but does not present a firm commitment.
C) presents the plan for only one level of activity and does not adjust to changes in the level of activity.
D) presents the plan for a range of activity so that the plan can be adjusted for changes in activity levels.

Question 23

Adair Credit,Inc.has $35.0 million in consumer loans with an average interest rate of 12.0%.The bank also has $30.0 million in home equity loans with an average interest rate of 8.0%.Finally,the bank owns $5.0 million in corporate securities with an average interest rate of 6%.Next year,consumer loans will increase to $40.0 million because of a rate decrease to 10.0%,while home equity loans will increase to $32.0 million at an average interest rate of 6.5%.Unfortunately,the investment in corporate securities will decrease by 20% and the average interest rate will be only 9.0%.What is Adair's estimated change in revenues next year?

A) $460,000 decrease.
B) $460,000 increase.
C) $700,000 increase.
D) $700,000 decrease.

Question 24

Which of the following statements is not correct?

A) The sales budget is the starting point in preparing the master budget.
B) The sales budget is constructed by multiplying the expected sales in units by the sales price.
C) The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period.
D) The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current perioD.
The sales budget is always completed first.

Question 25

Acutron is a large securities dealer.Last year,the company made 120,000 trades with an average commission of $120.Because of the general economic climate,Acutron expects trade volume to decline by 20%.Fortunately,the average commission per trade is likely to increase by 10% because trades are expected to be large in the coming year.What are the estimated commission's revenues for Acutron in the coming year?

A) $11,520,000.
B) $12,672,000.
C) $15,552,000.
D) $15,840,000.

Question 26

The Variable Speed Company manufactures a line of high quality tools.The company sold 1,000,000 hammers at a price of $4 per unit last year.The company estimates that this volume represents a 20% share of the current hammers market.The market is expected to increase by 5%.Marketing specialists have determined that,as a result of a new advertising campaign and packaging,the company will increase its share of this larger market to 24%.Due to changes in prices,the new price for the hammer will be $4.30 per unit.This new price is expected to be in line with the competition and have no effect on the volume estimates.What are the estimated sales revenues in the coming year?

A) $5,040,000.
B) $5,160,000.
C) $5,418,000.
D) $5,689,000.

Question 27

Which of the following statements is(are)true regarding the benefits associated with participative budgeting?
(A)Goal congruence by divisions means top management need not be concerned with overall profitability.
(B)Budget assumptions and estimates are prepared by those closest to the budgeted activity.

A) Only A is true.
B) Only B is true.
C) Both A and B are true.
D) Neither A nor B is true.

Question 28

In developing a master budget for a manufacturing company,which one of the following items should be done first?

A) Development of a sales budget.
B) Development of the capital budget.
C) Determination of manufacturing capacity.
D) Determination of the advertising budget.

Question 29

Long-range planning as a management function is more important:

A) at top management levels.
B) at lower management levels.
C) at middle management levels.
D) for staff functions than line functions.

Question 30

The major objectives of any budget system are to: (CIA adapted)

A) define responsibility centers,provide a framework for performance evaluation,and promote communication and coordination among organization segments.
B) define responsibility centers,facilitate the fixing of blame for missed budget predictions,and ensure goal congruence between superiors and subordinates.
C) foster the planning of operations,provide a framework for performance evaluation,and promote communication and coordination among organization segments.
D) foster the planning of operations,facilitate the fixing of blame for missed budget predictions,and ensure goal congruence between superiors and subordinates.

Question 31

The use of sensitivity analysis techniques allows managers to ask "what-if" questions regarding budget assumptions and estimates.

Question 32

Which of the following terms is not an alternative for a master budget?

A) Budget plan.
B) Static budget.
C) Profit plan.
D) Planning budget.

Question 33

A continuous (rolling)budget:

A) presents the plan for a range of activity so that the plan can be adjusted for changes in activity levels.
B) presents a statement of expectations for a period of time but does not present a firm commitment.
C) presents the plan for only one level of activity and does not adjust to changes in the level of activity.
D) drops the current month or quarter and adds a future month or quarter as the current month or quarter is completeD.
A continuous budget has a constant time horizon and always looks ahead the same number of periods.

Question 34

Oklahoma Telephone Company has been forced by competition to put much more emphasis on planning and controlling its costs.Accordingly,the company's controller has suggested initiating a formal budgeting process.Which of the following steps will not help the company gain maximum acceptance by employees of the proposed budgeting system? (CMA adapted)

A) Implementing the change quickly.
B) Including in departmental responsibility reports only those items that are under the department manager's control.
C) Demonstrating top management support for the budgeting program.
D) Ensuring that favorable deviations of actual results from the budget,as well as unfavorable deviations,are discussed with the responsible managers.

Question 35

Which of the following statements is(are)true regarding the master budget?
(A)A master budget consists of (a)organizational goals, (b)strategic long-range profit plan,and (c)tactical short-range profit plan.
(B)A master budget consists of only a budgeted (a)income statement, (b)balance sheet,and (c)stockholders' equity statement.

A) Only A is true.
B) Only B is true.
C) Both A and B are true.
D) Neither A nor B is true.

Question 36

In general,the first budget prepared is the:

A) production budget.
B) direct labor budget.
C) sales budget.
D) overhead budget.

Question 37

The forecasting method in which individual forecasts of group members are submitted anonymously and evaluated by the group as a whole is called:

A) trend analysis.
B) econometric models.
C) Delphi technique.
D) regression analysis.

Question 38

Which of the following is not a benefit of budgeting?

A) It reduces the need for tracking actual cost activity.
B) It sets benchmarks for evaluation performance.
C) It uncovers potential bottlenecks.
D) It formalizes a manager's planning efforts.

Question 39

Sensitivity analysis is more likely to be used for sales forecasts than for fixed overhead costs.

Question 40

The master budget process usually begins with the: (CMA adapted)

A) production budget.
B) operating budget.
C) financial budget.
D) sales budget.

Question 41

Rerun Manufacturing Company is in the process of preparing its 2016 budget and is anticipating the following changes: 30% increase in the number of units sold.20% increase in the direct material unit cost.15% increase in the direct labor cost per unit.10% increase in the manufacturing overhead cost per unit.14% increase in the marketing price.7% increase in the administrative expenses.Rerun does not keep any units in inventory.The composition of the cost of finished products during 2016 for materials,direct labor,and factory overhead,respectively,was in the ratio of 3:2:1.The condensed income statement for 2016 is as follows: $$\begin{array} { | l | r | r | } \hline \text { Sales } ( 30,000 \text { units } ) & \$ 460,000 & \\\hline \text { Less sales returns } & \underline{13,500 }& \\\hline \text { Net sales } & 436,500 & \\\hline \text { Cost of Goods Sold } &\underline{ 306,000} & \\\hline \text { Gross Profit } & & \$ 130,500 \\\hline \text { Selling Expenses } & \$ 60,000 & \\\hline \text { Admin. Expenses } & 30,000 & 90,000 \\\hline \text { Net Income } & & \underline{\$ 40,500 }\\\hline\end{array}$$
What are estimated net sales for 2016,assuming the sales return/gross sales relationship remains constant?

A) $646,893.
B) $585,000.
C) $571,500.
D) $567,450.

Question 42

Vermicelli Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month.The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales.There are 150,000 finished units in inventory on June 30.Vermicelli Company's production requirement in units of finished product for the three-month period ending September 30 is: (CMA adapted)

A) 712,025 units.
B) 630,500 units.
C) 664,000 units.
D) 665,720 units.

Question 43

Bentonville Inc.bases its marketing and administrative expense budget on budgeted unit sales.The sales budget shows 3,200 units are planned to be sold in December.The variable marketing and administrative expense is $3.10 per unit.The budgeted fixed marketing and administrative expense is $60,800 per month,which includes depreciation of $6,720 per month.The remainder of the fixed marketing and administrative expense represents current cash flows.The cash disbursements for marketing and administrative expenses on the December marketing and administrative expense budget should be:

A) $70,720.
B) $54,080.
C) $64,000.
D) $9,920.

Question 44

The Molson Company had budgeted production for the year as follows:
$\begin{array}{|l|c|c|c|c|}\hline \text { Quarter } & \mathbf{1} & \mathbf{2} & \mathbf{3} & \mathbf{4} \\\hline \text { Production in units } & 10,000 & 12,000 & 16,000 & 14,000 \\\hline\end{array}$ Four pounds of raw materials are required for each unit produced.Raw materials on hand at the start of the year total 4,000 lbs.The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in materials.Budgeted purchases of raw materials in the second quarter would be (in lbs. ):

A) 48,000 lbs.
B) 46,400 lbs.
C) 49,600 lbs.
D) 54,400 lbs.

Question 45

The Colson Company has budgeted sales for the year as follows:
$$\begin{array} { | l | c | c | c | c | } \hline \text { Quarter } & \mathbf { 1 } & \mathbf { 2 } & \mathbf { 3 } & \mathbf { 4 } \\\hline \text { Sales in units } & 12,000 & 14,000 & 18,000 & 16,000 \\\hline\end{array}$$ 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.Scheduled production for the second quarter is (in units):

A) 17,500 units.
B) 16,500 units.
C) 15,000 units.
D) 13,000 units.

Question 46

Vargas Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.77 direct labor-hours.The direct labor rate is $11.20 per direct labor-hour.The production budget calls for producing 7,100 units in October and 6,900 units in November.The company guarantees its direct labor workers a 40-hour paid work week.With the number of workers currently employed,that means that the company is committed to paying its direct labor work force for at least 5,480 hours in total each month even if there is not enough work to keep them busy.What would be the total combined direct labor cost for the two months?

A) $122,752.00.
B) $120,736.00.
C) $120,881.60.
D) $122,606.40.

Question 47

The Tori Company had budgeted production for the year as follows:
$\begin{array}{|l|c|c|c|c|}\hline \text { Quarter } & \mathbf{1} & \mathbf{2} & \mathbf{3} & \mathbf{4} \\\hline \text { Production in units } & 10,000 & 12,000 & 16,000 & 14,000 \\\hline\end{array}$ Four pounds of raw materials are required for each unit produced.Raw materials on hand at the start of the year total 4,000 lbs.The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in materials.Budgeted purchases of raw materials in the third quarter would be (in lbs. ):

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

Question 48

The marketing and administrative expense budget of Frazier Corporation is based on budgeted unit sales,which are 5,500 units for June.The variable marketing and administrative expense is $1.00 per unit.The budgeted fixed marketing and administrative expense is $101,200 per month,which includes depreciation of $6,050 per month.The remainder of the fixed marketing and administrative expense represents current cash flows.The cash disbursements for marketing and administrative expenses on the June marketing and administrative expense budget should be:

A) $100,650.
B) $106,700.
C) $5,500.
D) $95,150.

Question 49

Pouch Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.84 direct labor-hours.The direct labor rate is $9.40 per direct labor-hour.The production budget calls for producing 2,100 units in June and 1,900 units in July.If the direct labor work force is fully adjusted to the total direct labor-hours needed each month,what would be the total combined direct labor cost for the two months?

A) $15,792.00.
B) $15,002.40.
C) $16,581.60.
D) $31,584.00.

Question 50

Krier Industries has just completed its sales forecasts and its marketing department estimates that the company will sell 36,000 units during the upcoming year.In the past,management has maintained inventories of finished goods at approximately three months' sales.However,the estimated inventory at the start of the year of the budget period is only 6,000 units.Sales occur evenly throughout the year.What is the estimated production level (units)for the first month of the upcoming budget year?

A) 12,000.
B) 9,000.
C) 6,000.
D) 3,000.

Question 51

The Pizza 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,then the budgeted change in inventory levels over the month of December is:

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

Question 52

A company has the following annual budget data:
$$\begin{array} { | l | l | } \hline \text { Beginning finished goods inventory } & 40,000 \text { units } \\\hline \text { Sales } & 70,000 \text { units } \\\hline \text { Ending finished goods inventory } & 30,000 \text { units } \\\hline \text { Direct materials } & \$ 10 \text { per unit } \\\hline \text { Direct labor } & \$ 20 \text { per unit } \\\hline \text { Variable factory ou erhead } & \$ 5 \text { per unit } \\\hline \text { Selling costs } & \$ 2 \text { per unit } \\\hline \text { Fixed factory overhead } & \$ 80,000 \\\hline\end{array}$$ What are total budgeted production costs for the year? (CIA adapted)

A) $2,100,000.
B) $2,180,000.
C) $2,240,000.
D) $2,320,000.

Question 53

The Ralston Company manufactures a special line of graphic tubing items.The company estimates it will sell 75,000 units of this item in 2016.The beginning finished goods inventory contains 20,000 units.The target for each year's ending inventory is 10,000 units.Each unit requires five feet of plastic tubing.The tubing inventory currently includes 70,000 feet of the required tubing.Materials on hand are targeted to equal three months' production.Any shortage in materials will be made up by the immediate purchase of materials.Sales take place evenly throughout the year.What is the production budget (in units)for 2016?

A) 60,000.
B) 65,000.
C) 75,000.
D) 85,000.

Question 54

The Colson Company has budgeted sales for the year as follows:
$$\begin{array} { | l | c | c | c | c | } \hline \text { Quarter } & \mathbf { 1 } & \mathbf { 2 } & \mathbf { 3 } & \mathbf { 4 } \\\hline \text { Sales in units } & 12,000 & 14,000 & 18,000 & 16,000 \\\hline\end{array}$$ 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.Scheduled production for the third quarter is (in units)

A) 17,500 units.
B) 18,500 units.
C) 18,000 units.
D) 16,500 units.

Question 55

Trevor 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,on March 31 there were 25,000 units of Product W in the ending inventory.Given this information,Trevor Company's production of Product W for the month of April should be:

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

Question 56

Trini Inc.bases its manufacturing overhead budget on budgeted direct labor-hours.The direct labor budget indicates that 8,100 direct labor-hours will be required in May.The variable overhead rate is $1.40 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $100,440 per month,which includes depreciation of $8,910.All other fixed manufacturing overhead costs represent current cash flows.The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A) $102,870.
B) $11,340.
C) $91,530.
D) $111,780.

Question 57

Rack Inc.bases its manufacturing overhead budget on budgeted direct labor-hours.The direct labor budget indicates that 3,700 direct labor-hours will be required in September.The variable overhead rate is $5.70 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $48,100 per month,which includes depreciation of $5,550.All other fixed manufacturing overhead costs represent current cash flows.The company recomputes its predetermined overhead rate every month.The predetermined overhead rate for September should be:

A) $5.70.
B) $13.00.
C) $18.70.
D) $17.20.

Question 58

The manufacturing overhead budget at Levetron Corporation is based on budgeted direct labor-hours.The direct labor budget indicates that 7,100 direct labor-hours will be required in August.The variable overhead rate is $8.60 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $132,770 per month,which includes depreciation of $24,850.All other fixed manufacturing overhead costs represent current cash flows.The company recomputes its predetermined overhead rate every month.The predetermined overhead rate for August should be:

A) $8.60.
B) $27.30.
C) $23.80.
D) $18.70.

Question 59

Rerun Manufacturing Company is in the process of preparing its 2016 budget and is anticipating the following changes: 30% increase in the number of units sold.20% increase in the direct material unit cost.15% increase in the direct labor cost per unit.10% increase in the manufacturing overhead cost per unit.14% increase in the marketing price.7% increase in the administrative expenses.Rerun does not keep any units in inventory.The composition of the cost of finished products during 2016 for materials,direct labor,and factory overhead,respectively,was in the ratio of 3:2:1.The condensed income statement for 2016 is as follows:

$$\begin{array} { | l | r | r | } \hline \text { Sales } ( 30,000 \text { units } ) & \$ 460,000 & \\\hline \text { Less sales returns } & \underline{13,500 }& \\\hline \text { Net sales } & 436,500 & \\\hline \text { Cost of Goods Sold } &\underline{ 306,000} & \\\hline \text { Gross Profit } & & \$ 130,500 \\\hline \text { Selling Expenses } & \$ 60,000 & \\\hline \text { Admin. Expenses } & 30,000 & 90,000 \\\hline \text { Net Income } & & \underline{\$ 40,500 }\\\hline\end{array}$$ What is the estimated cost of goods sold for 2016 assuming the number of units sold does not change?

A) $464,100
B) $402,900
C) $397,800
D) $357,000

Question 60

The manufacturing overhead budget at Rost Corporation is based on budgeted direct labor-hours.The direct labor budget indicates that 2,800 direct labor-hours will be required in September.The variable overhead rate is $7.00 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $43,120 per month,which includes depreciation of $3,640.All other fixed manufacturing overhead costs represent current cash flows.The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A) $59,080.
B) $62,720.
C) $19,600.
D) $39,480.

Question 61

The following budgeted information is provided:
$$\begin{array} { | l | c | c | c | } \hline \text { Month } & \mathbf { 1 } & \mathbf { 2 } & \mathbf { 3 } \\\hline \text { Sales in units } & 15,000 & 20,000 & 18,000 \\\hline \text { Production in units } & 16,000 & 22,000 & 15,000 \\\hline\end{array}$$ One pound of material is required for each finished unit.The inventory of materials at the end of each month should equal 20% of the following month's production needs.At the beginning of Month 1,there was 3,200 lbs.of materials on hand.Purchases of raw materials for Month 1 would be (in pounds):

A) 25,000.
B) 23,400.
C) 17,200.
D) 22,000.

Question 62

The Arkansas Company makes and sells a product called Product K.Each unit of Product K sells for $24 dollars and has a unit variable cost of $18.The company has budgeted the following data for November: • Sales of $1,152,000,all in cash.• A cash balance on November 1 of $48,000.• Cash disbursements (other than interest)during November of $1,160,000.• A minimum cash balance on November 30 of $60,000.If necessary,the company will borrow cash from a bank.The borrowing will be in multiples of $1,000 and will bear interest at 2% per month.All borrowing will take place at the beginning of the month.The November interest will be paid in cash during November.The amount of cash needed to be borrowed on November 1 to cover all cash disbursements and to obtain the desired November 30 cash balance is:

A) $20,000.
B) $21,000.
C) $37,000.
D) $38,000.

Question 63

Which of the following budgets does not require the production budget?

A) Direct materials.
B) Direct labor.
C) Manufacturing overhead.
D) Marketing and administrative expenses.

Question 64

Merriweather Corporation is a manufacturer of tables sold to schools,restaurants,hotels,and other institutions.The table tops are manufactured by Merriweather,but the table legs are purchased from an outside supplier.The Assembly Department takes a manufactured table top and attaches the four purchased table legs.It takes 20 minutes of labor to assemble a table.The company follows a policy of producing enough tables to insure that 40% of next month's sales are in the finished goods inventory.Merriweather also purchases sufficient raw materials (legs)to insure that raw materials (legs)inventory is 60% of the following month's scheduled production needs.Merriweather's sales budget in units for the next quarter is as follows: (CMA adapted)
$$\begin{array} { | l | r | } \hline \text { July } & 2,300 \\\hline \text { August } & 2,500 \\\hline \text { September } & 2,100 \\\hline\end{array}$$ Merriweather's ending inventories in units for June 30 are:
$$\begin{array} { | l | r | } \hline \text { Finished goods } & 1,900 \\\hline \text { Raw materials (legs) } & 4,000 \\\hline\end{array}$$ Disregarding your response to the previous question,assume the required production for August and September is 1,600 and 1,800 units,respectively,and the July 31 raw materials (legs)inventory is 4,200 units.The number of table legs to be purchased in August is:

A) 6,520 legs.
B) 9,400 legs.
C) 6,280 legs.
D) 6,400 legs.

Question 65

Cash disbursements would not include payments for:

A) dividends.
B) income taxes.
C) accounts receivable.
D) capital budget expenditures.

Question 66

Which one of the following budgets would be the last one prepared in the master budget preparation process?

A) Manufacturing overhead budget.
B) Cost of goods sold budget.
C) Marketing cost budget.
D) Cash budget.

Question 67

Ari,Inc.is working on its cash budget for December.The budgeted beginning cash balance is $14,000.Budgeted cash receipts total $127,000 and budgeted cash disbursements total $126,000.The desired ending cash balance is $40,000.To attain its desired ending cash balance for December,the company needs to borrow:

A) $25,000.
B) $0.
C) $55,000.
D) $40,000.

Question 68

Which of the following types of accounts would not be included on a budgeted balance sheet?

A) Cash.
B) Assets.
C) Liabilities.
D) Revenues.

Question 69

Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared?

A) Sales budget,cash budget,direct materials budget,direct labor budget.
B) Production budget,sales budget,direct materials budget,direct labor budget.
C) Sales budget,cash budget,production budget,direct materials budget.
D) Marketing and administrative expense budget,budgeted income statement,cash budget,budgeted balance sheet.

Question 70

Which of the following is not correct regarding the manufacturing overhead budget?

A) Total budgeted cash disbursements for manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead.
B) Manufacturing overhead costs should be broken down by cost behavior.
C) The manufacturing overhead budget should provide a schedule of all costs of production other than direct materials and direct labor.
D) A schedule showing budgeted cash disbursements for manufacturing overhead should be prepared for use in developing the cash budget.

Question 71

Riff,Inc.is working on its cash budget for June.The budgeted beginning cash balance is $16,000.Budgeted cash receipts total $188,000 and budgeted cash disbursements total $187,000.The desired ending cash balance is $40,000.The excess (deficiency)of cash available over disbursements for June will be:

A) $15,000.
B) $1,000.
C) $17,000.
D) $204,000.

Question 72

Center Company makes collections on sales according to the following schedule:
$\begin{array}{|llcc|}\hline \text { \(30 \%\) in the month of sale}\\\hline \text { \(60 \%\) in the month following sale}\\\hline \text { \(8 \%\) in the second month following sale}\\\hline\end{array}$
The following sales are expected:
$$\begin{array} { | l | r | } \hline & \text { Expected Sales } \\\hline \text { January } & \$ 100,000 \\\hline \text { February } & \$ 120,000 \\\hline \text { March } & \$ 110,000 \\\hline\end{array}$$ Cash collections in March should be budgeted to be:

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

Question 73

Merriweather Corporation is a manufacturer of tables sold to schools,restaurants,hotels,and other institutions.The table tops are manufactured by Merriweather,but the table legs are purchased from an outside supplier.The Assembly Department takes a manufactured table top and attaches the four purchased table legs.It takes 20 minutes of labor to assemble a table.The company follows a policy of producing enough tables to insure that 40% of next month's sales are in the finished goods inventory.Merriweather also purchases sufficient raw materials (legs)to insure that raw materials (legs)inventory is 60% of the following month's scheduled production needs.Merriweather's sales budget in units for the next quarter is as follows: (CMA adapted) Merriweather's ending inventories in units for June 30 are:
$$\begin{array} { | l | r | } \hline \text { July } & 2,300 \\\hline \text { August } & 2,500 \\\hline \text { September } & 2,100 \\\hline\end{array}$$ The number of tables to be produced during August is:
$$\begin{array} { | l | r | } \hline \text { Finished goods } & 1,900 \\\hline \text { Raw materials (legs) } & 4,000 \\\hline\end{array}$$

A) 1,400 tables.
B) 2,340 tables.
C) 1,440 tables.
D) 1,900 tables.

Question 74

Which of the following statements does not reflect a difficulty in preparing the marketing and administrative budget?

A) Managers have discretion about how much money is spent.
B) Managers have discretion about the timing of when money is spent.
C) Marketing and administrative expenses are made up of fixed and variable items.
D) Marketing and administrative expenses normally have a one year time horizon.

Question 75

The manufacturing overhead budget requires that costs be separated into their fixed and variable components.Another budget that has this requirement is the:

A) direct labor.
B) direct materials.
C) cost of goods sold.
D) marketing and administrative expenses.

Question 76

The Ralston Company manufactures a special line of graphic tubing items.The company estimates it will sell 75,000 units of this item in 2016.The beginning finished goods inventory contains 20,000 units.The target for each year's ending inventory is 10,000 units.Each unit requires five feet of plastic tubing.The tubing inventory currently includes 70,000 feet of the required tubing.Materials on hand are targeted to equal three months' production.Any shortage in materials will be made up by the immediate purchase of materials.Sales take place evenly throughout the year.What are the materials requirements (in feet)for 2016?

A) 313,750.
B) 336,250.
C) 363,750.
D) 386,250.

Question 77

Budgeted production needs are determined by:

A) adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.
B) adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total.
C) adding budgeted sales in units to the desired ending inventory in units.
D) deducting the beginning inventory in units from budgeted sales in units.

Question 78

The amount of materials to be purchased during the budget period is equal to budgeted:

A) total production needs plus units in the beginning materials inventory minus the units in the ending materials inventory.
B) total production needs plus units in the ending materials inventory minus the units in the beginning materials inventory.
C) units to be produced plus units in the beginning materials inventory minus the units in the ending materials inventory.
D) units to be produced plus units in the ending materials inventory minus the units in the beginning materials inventory.

Question 79

The number of units required for production is equal to:

A) budgeted sales plus units in the beginning inventory minus the units in the ending inventory.
B) budgeted sales plus units in the ending inventory minus the units in the beginning inventory.
C) budgeted sales plus the units in the ending inventory.
D) budgeted sales minus the units in the beginning inventory.

Question 80

The starting point in preparing a comprehensive budget for a manufacturing company limited by its ability to produce and not by its ability to sell is

A) a sales forecast.
B) an estimate of productive capacity.
C) an estimate of cash receipts and disbursements.
D) a projection of fixed asset acquisitions.