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Exam 22: Master Budgets and Planning

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Question 91

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Webster Corporation's budgeted sales for February are $325,000.Webster pays sales representatives a commission of 6% of sales dollars.The company pays a sales manager a monthly salary of $4,400 and expects advertising expense of $2,000 per month.Compute the total selling expenses to be reported on the selling expense budget for the month of February.

A) $19,500.
B) $6,400.
C) $23,900.
D) $25,900.
E) $21,500.

F) A) and B)
G) B) and E)

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Question 92

Multiple Choice

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Which of the following accounts would appear on a budgeted balance sheet?

A) Income tax expense.
B) Accounts receivable.
C) Sales commissions.
D) Depreciation expense.
E) All of the choices are correct.

F) C) and D)
G) A) and D)

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Question 93

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The selling expenses budget is normally prepared before the sales budget because selling expenses affect the amount of sales.

In preparing a budget for the last three months of the current year,Country Cozy Company is planning the units of merchandise it must order each month.The company's policy is to have 15% of the next month's sales in its inventory at the end of each month.Projected sales for October,November,and December are 27,000 units,29,500 units,and 31,000 units,respectively.How many units must be ordered in November?

Southland Company is preparing a cash budget for August.The company has $17,000 cash at the beginning of August and anticipates $120,800 in cash receipts and $134,500 in cash disbursements during August.Southland Company wants to maintain a minimum cash balance of $10,000.The preliminary cash balance at the end of August before any loan activity is:

A budget is a formal statement of future plans,usually expressed in monetary terms.

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

A plan that reports the units or costs of merchandise to be purchased by a merchandising company during the budget period is called a:

The master budget includes individual budgets for sales,production or purchases,various expenses,capital expenditures,and cash.

A budget is best described as:

Zhang Industries budgets production of 300 units in June and 310 units in July.Each unit requires 1.5 hours of direct labor.The direct labor rate if $14 per hour.The indirect labor rate is $21.00 per hour.Compute the budgeted direct labor cost for July.

Personnel who will have performance evaluated according to the budget standards should not be consulted and involved in preparing the budget.

Which of the following budgets is not a budget that a manufacturer would include in its master budget?

A company's history indicates that 20% of its sales are for cash and the rest are on credit.Collections on credit sales are 20% in the month of the sale,50% in the next month,25% the following month,and 5% is uncollectible.Projected sales for December,January,and February are $60,000,$85,000 and $95,000,respectively.The February expected cash receipts from all current and prior credit sales is:

Budgeting is an informal plan for future business activities.

The sales budget is derived from the production budget.

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