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Exam 23: Master Budgets and Planning

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Question 1

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A plan that shows the predicted costs for direct materials, direct labor, and overhead to be incurred in manufacturing the units in the production budget is called the:

A) Sales budget.
B) Merchandise purchases budget.
C) Production budget.
D) Rolling budget.
E) Manufacturing budget.

F) A) and D)
G) D) and E)

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Question 2

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A cash budget is a plan that includes the expected cash receipts and cash expenditures during each of the periods that it covers.

A) True
B) False

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Question 3

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A manufacturing budget should include a list of equipment to be scrapped and additional equipment to be purchased if the proposed production budget is carried out.

Del Carpio, Inc., sells two products, Widgets and Gadgets. The sales forecast in units for the first quarter of the coming year is: Cash sales are 30% of each product's monthly sales. The remaining sales are credit sales which are collected as follows: 70% in the month of sale, 20% the next month, and 10% in the following month. Unit sale prices are $30 and $20 for Widgets and Gadgets, respectively. Determine the company's cash receipts for March from its current and past sales.

Operating budgets include all the following budgets except the:

For budgets to be effective:

A ________________________ is a continuously revised budget that adds future months or quarters to replace months or quarters that have lapsed.

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

A plan that states the number of units to be manufactured during each future period covered by the budget, based on the budgeted sales for the period and the levels of inventory needed to support future sales, is the:

Financial budgets include all the following except the:

The sales budget for Carmel shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted purchases of Product B for the year would be:

Which of the following budgets is not an operating budget?

The master budget process usually ends with:

The budget process is usually administered by a ____________________.

Which of the following factors is least likely to be considered in preparing a sales budget?

A rolling budget is a specific budget application relevant only to a merchandising company.

Berkley Co.'s sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the following month. On December 31, the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales. Assume that total sales for January and February are budgeted to be $50,000 and $100,000, respectively. What are the expected cash receipts for February from current and past sales?

Rich Company's experience shows that 20% of its sales are for cash and 80% are on credit. An analysis of credit sales shows that 50% are collected in the month following the sale, 45% are collected in the second month, and 5% prove to be uncollectible. Calculate items (1) through (10) below:

The process of planning future business actions and expressing them as a formal plan is called:

The following information is available for Hammel 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 the current-month sales. c. The Merchandise Purchases Budget indicates that $90,000 in merchandise will be purchased in March on account and ending inventory for March is predicted to be 600 units @ $35. Purchases on account are paid 100% in the month following the purchase. d. The Budgeted Income Statement shows a net income of $48,000 and $26,000 in income tax expense for the quarter ended March 31. Accrued taxes will be paid in April. e. The Balance Sheet for February shows equipment of $84,000 with accumulated depreciation of $30,000, common stock of $25,000 and ending retained earnings of $8,000. There are no changes budgeted in the equipment or common stock accounts. Prepare a budgeted balance sheet for March.