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Exam 22: Budgeting

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Question 91

Multiple Choice

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The budgeting process does not involve which of the following activities?

A) establishment of specific goals
B) periodic comparison of actual results to goals
C) execution of plans to achieve goals
D) increased marketing efforts to boost sales

E) B) and C)
F) A) and D)

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Question 92

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The budget procedure that requires managers to estimate sales, production, and other operating data as though operations were being started for the first time is called continuous budgeting.

A) True
B) False

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Question 93

Multiple Choice

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Next year's sales forecast 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 per unit, 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 Product B is 3,000 units. -Budgeted production of Product B for the year would be

As of January 1 of the current year, Gunner Company had accounts receivable of $50,000. The sales for January, February, and March were $120,000, $140,000, and $150,000, respectively. Of each month's sales, 20% are for cash. Of the remaining 80% (the credit sales) , 60% are collected in the month of sale, with the remaining 40% collected in the following month. The accounts receivable balance as of March 31 is

If Division Inc. expects to sell 200,000 units in the current year, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for the year is 202,000 units.

A company is preparing its cash budget. Its cash balance on January 1 is $290,000, and it has a minimum cash requirement of $340,000. The following data have been provided: ​ -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 are

Mandy Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below.​ Material A: 0.5 lb. per unit @ $0.60 per pound Material B: 1.0 lb. per unit @ $1.70 per pound Material C: 1.2 lbs. per unit @ $1.00 per pound -If the expected sales volume for the current period is 8,000 units, the desired ending inventory is 1,400 units, and the beginning inventory is 1,200 units, the number of units set forth in the production budget, representing total production for the current period, is

The budgeted direct materials purchases is normally computed as the sum of (1) the materials for production and (2) the desired ending inventory.

Cardinal Company has finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months are: January, 200,000 units; February, 180,000 units; March, 210,000 units; and April, 230,000 units. Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following month's sales.​ -The budgeted units of production for March would be

Supervisor salaries, maintenance, and indirect factory wages would normally appear in the selling and administrative expenses budget.

Below is budgeted production and sales information for Flushing Company for the month of December. The unit selling price for product XXX is $5 and for product ZZZ is $15.​ -Budgeted sales for the month is

Below is budgeted production and sales information for Flushing Company for the month of December. The unit selling price for product XXX is $5 and for product ZZZ is $15.​ -For February, sales revenue is $700,000, sales commissions are 5% of sales, the sales manager's salary is $96,000, advertising expenses are $90,000, shipping expenses total 2% of sales, and miscellaneous selling expenses are $2,500 plus 1/2 of 1% of sales. Total selling expenses for the month of February are

Flanders Industries collects 35% of its sales on account in the month of the sale and 65% in the month following the sale. Sales on account are budgeted to be $175,000 for May and $225,000 for June. What are the budgeted cash receipts from sales on account for June?

-Which of the following budgets provides the starting point for the preparation of the direct labor cost budget?

The cash budget summarizes future plans for the acquisition of fixed assets.

A formal written statement of management's plans for the future, expressed in financial terms, is a

What is a cash budget? How does management use a cash budget?

The capital expenditures budget is part of the planned investing activities of a company.

Tough Jeans Company produces two different styles of jeans: Working Life and Social Life. The company sales budget estimates that 400,000 of the Working Life jeans and 250,000 of the Social Life jeans will be sold during the year. The company begins with 9,000 pairs of Working Life and 18,000 pairs of Social Life. The company desires ending inventory of 7,500 of Working Life and 10,000 Social Life. Prepare a production budget for the year.

The responsibility for coordinating the preparation of the annual budget should be assigned to the CEO of a firm.