Test Bank | Chapter 22 Master Budgets and Planning – 24e

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Fundamental Accounting Principles, 24e (Wild)

Chapter 22 Master Budgets and Planning

1) Employees who will have performance evaluated according to the budget standards should not be involved in preparing the budget.

2) A budget can be an effective means of communicating management's plans to employees.

3) Budgets are normally more effective when all levels of management are involved in the budgeting process.

4) Managers must ensure that activities of employees and departments contribute to meeting the company's overall goals.

5) If applied correctly, budgeting may have a positive effect on employee motivation.

6) Budgeting is an informal plan for future business activities.

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

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

9) The process of evaluating performance can be improved by using budgets.

10) Continuous budgeting is the practice of revising the budgets as time passes.

11) Budget preparation is best done in a top-down managerial approach.

12) Preparing a budget should be the sole task of the most important department in an organization.

13) The responsibility for coordinating the preparation of a master budget should be assigned to the Chief Executive Officer.

14) Larger, more complex organizations usually require a longer time to prepare their budgets than smaller organizations because of the considerable effort to coordinate the different units within the business.

15) A rolling budget is relevant only to merchandising companies.

16) The sequence of the budgets within the master budget begins with the capital expenditures budget.

17) The number and types of budgets included in a master budget depend on the company's size and complexity.

18) The capital expenditures budget summarizes the effects of financing activities on cash.

19) The capital expenditures budget summarizes the effects of investing activities on cash.

20) The merchandise purchases budget depends on information from the sales budget.

21) The production budget cannot be prepared until the direct materials and direct labor budgets are prepared.

22) The merchandise purchases budget is the starting point for preparing the master budget of a merchandiser.

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

24) Part of the budgeting process is summarizing the financial statement effects on the budgeted income statement and the budgeted balance sheet.

25) The budget process rarely coincides with the accounting period.

26) A master budget refers to a company's sales budget that includes all of its segments or departments.

27) Activity-based budgeting is a budget system based on expected activities and their levels for the budget period, which helps management plan for the resources required.

28) Traditional budgeting is generally better than activity-based budgeting when attempting to reduce costs by eliminating non-value-added activities.

29) The sales budget is derived from the production budget.

30) The production budget is derived from the sales budget and the company's desired inventory levels.

31) A capital expenditures budget is prepared before the operating budgets.

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

33) The sales budget comes from a careful analysis of forecasted economic and market conditions, business capacity, and advertising plans.

34) To develop the sales budget, companies must estimate both unit sales and the production cost per unit.

35) A manufacturing budget shows dollar amounts estimated to be spent to purchase additional plant assets and amounts expected to be received from plant asset disposals.

36) A capital expenditures budget shows dollar amounts estimated to be spent to purchase additional plant assets and amounts expected to be received from plant asset disposals.

37) If a merchandiser's budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and cost of goods sold is expected to be $10,260, then budgeted purchases should be $11,360.

38) Part of the cash budget is based on information taken from the capital expenditures budget.

39) A cash budget shows the expected cash receipts and cash payments during the budget period.

40) The budgeted balance sheet is prepared primarily from data contained in the previously prepared components of the master budget.

41) The budgeted balance sheet and income statement are normally completed after preparation of operating and capital expenditure budgets.

42) The financial statement effects of the budgeting process are summarized on the cash budget and the capital expenditures budget.

43) A company's history indicates that 20% of its sales are for cash and the remaining 80% are on credit. Collections on credit sales are 30% in the month of the sale and 70% the following month. Projected sales for January, February, and March are $75,000, $92,000 and $60,000, respectively. The March expected cash receipts are $80,500.

44) A company's history indicates that 20% of its sales are for cash and the remaining 80% are on credit. Collections on credit sales are 30% in the month of the sale and 70% the following month. Projected sales for January, February, and March are $75,000, $92,000 and $60,000, respectively. The March expected cash receipts are $77,920.

45) Production budgets always show both budgeted units of product and total costs for the budgeted units.

46) The manufacturing budgets include the sales budget and the budgeted income statement.

47) A formal statement of future plans, usually expressed in monetary terms, is a:

A) Variance report.

B) Position statement.

C) Budget.

D) Prospectus.

E) Variance analysis.

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

A) Budgeting.

B) Cost accounting.

C) Managerial accounting.

D) Variance analysis.

E) Standard cost analysis.

49) All of the following are necessary for budgets to be effective except:

A) Goals should be challenging and attainable.

B) Employees affected by a budget should be consulted when it is prepared.

C) Evaluations should be made carefully with opportunities to explain differences between actual and budgeted amounts.

D) Managers must be aware of potential negative outcomes of budgeting, such as budgetary slack.

E) All budgeted amounts must be spent to ensure that budgets aren't reduced for the next period.

50) Which of the following is not a result of following a well-designed budgeting process?

A) Improved decision-making processes.

B) Improved performance evaluations.

C) Improved coordination of business activities.

D) Assurance of future profits.

E) Improved communication of management's action plans.

51) Which of the following is a benefit derived from budgeting?

A) Budgeting focuses management's attention on past performance.

B) Budgeting avoids needing industry and economic factors in decision making.

C) Budgeting provides a basis for evaluating performance.

D) Budgeting avoids the need for incentives to improve employee performance.

E) Budgeting eliminates the need for coordination across departments.

52) Which of the following statements about budgeting is false?

A) Budgeting is an aid to planning and control.

B) Budgets create standards for performance evaluation.

C) Budgets help coordinate the activities of the entire organization.

D) Budgeting forces managers to think ahead and formalize future objectives.

E) The master budget should only be prepared by top management.

53) A budget is best described as:

A) A formal statement of a company's future plans usually expressed in monetary terms.

B) A master control device.

C) An informal statement of company's future plans usually expressed in monetary terms.

D) The most crucial component of a company's evaluation process.

E) The minimum acceptable performance level.

54) All of the following are steps in the budgetary control process except:

A) Develop the budget from planned objectives.

B) Compare actual results to budgeted amounts and analyze differences.

C) Take corrective and strategic actions.

D) Communicate differences to supervisors to facilitate promotion decisions.

E) Establish new objectives and a new budget.

55) Budgets that are periodically revised and have new periods added to replace those that have lapsed are called:

A) Production budgets.

B) Sales budgets.

C) Cash budgets.

D) Rolling budgets.

E) Capital expenditures budgets.

56) In a company that employs continuous budgeting on a quarterly basis and has an accounting period that ends December 31 of each year, what period would the first revision and update to the January through December 2017 budget cover?

A) February 2017-January 2018

B) March 2017-February 2018

C) December 2017-November 2018

D) April 2017-March 2018

E) January 2018-December 2018

57) The most useful budget figures are developed:

A) From the "top-down".

B) From the "bottom-up" following a participatory process.

C) By the budget committee.

D) By the CEO.

E) After the accounting period has begun.

58) The practice of preparing budgets for each of several future periods and revising those budgets as each period is completed, adding a new budget each period so that the budgets always cover the same number of future periods, is called:

A) Participatory budgeting.

B) Capital budgeting.

C) Balanced budgeting.

D) Continuous budgeting.

E) Primary budgeting.

59) The usual budget period for most companies is:

A) An annual period of 250 working days.

B) A monthly period separated into daily budgets.

C) A quarterly period separated into weekly budgets.

D) An annual period separated into weekly budgets.

E) An annual period separated into quarterly and monthly budgets.

60) Assuming a bottom-up process of budget development, which of the following should be initially responsible for developing sales estimates?

A) The budget committee.

B) The accounting department.

C) The sales department.

D) Top management.

E) The marketing department.

61) The master budgeting process typically begins with the sales budget and ends with a cash budget and:

A) Budgeted financial statements.

B) Forecast budget.

C) Capital expenditures budget.

D) Rolling budget.

E) Production budget.

62) Operating budgets include all the following budgets except the:

A) Sales budget.

B) Selling expense budget.

C) Cash budget.

D) Production budget.

E) General and administrative expense budget.

63) Operating budgets include all the following except the:

A) Sales budget.

B) Budgeted balance sheet.

C) Production budget.

D) Selling expense budget.

E) General and administrative expense budget.

64) The master budget of a merchandising company includes a:

A) Production budget.

B) Direct materials budget.

C) Factory overhead budget.

D) Direct labor budget.

E) Purchases budget.

65) The usual starting point for preparing a master budget is forecasting or estimating:

A) Expenditures.

B) Sales.

C) Production.

D) Income.

E) Cash payments.

66) The master budget process usually ends with:

A) The production budget.

B) The sales budget.

C) The selling expense budget.

D) The budgeted balance sheet.

E) The overhead budget.

67) Which of the following budgets is not an operating budget?

A) Sales budget.

B) Cash budget.

C) General and administrative expense budget.

D) Selling expenses budget.

E) Production budget.

68) A budget system based on expected activities and their levels that enables management to plan for resources required to perform the activities is:

A) Traditional budgeting.

B) Management budgeting.

C) Master budgeting.

D) Activity-based budgeting.

E) Cash budgeting.

69) A budget that plans the types and amounts of operating expenses expected that are not included in the selling expenses or manufacturing budget is a:

A) General and administrative expense budget.

B) Sales budget.

C) Cash payments budget.

D) Overhead budget.

E) Selling expense budget.

70) 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 dollar amount of electric stapler sales budgeted for February should be:

A) $187,177

B) $166,400

C) $179,978

D) $173,056

E) $160,000

71) 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 units of electric stapler sales budgeted for March should be:

A) 10,000

B) 11,249

C) 10,400

D) 10,816

E) 11,000

72) 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 units of electric stapler sales budgeted for February should be:

A) 10,000

B) 11,249

C) 10,400

D) 10,816

E) 11,000

73) A July sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit. Management forecasts 2% growth in sales each month. Total July sales are anticipated to be:

A) $63,000.

B) $67,500.

C) $61,250.

D) $64,260.

E) $60,000.

74) A July sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit. Management forecasts 2% growth in sales each month. Total August sales are anticipated to be:

A) $63,000.

B) $67,500.

C) $61,250.

D) $64,260.

E) $60,000.

75) Bengal Co. provides the following unit sales forecast for the next three months:

The company wants to end each month with ending finished goods inventory equal to 25% of the next month's sales. Finished goods inventory on June 30 is 1,250 units. The budgeted production units for July are:

A) 6,250 units.

B) 3,750 units.

C) 6,425 units.

D) 2,500 units.

E) 5,175 units.

76) Bengal Co. provides the following unit sales forecast for the next three months:

The company wants to end each month with ending finished goods inventory equal to 25% of the next month's sales. Finished goods inventory on June 30 is 1,250 units. The budgeted production units for August are:

A) 6,950 units.

B) 4,310 units.

C) 7,090 units.

D) 5,665 units.

E) 4,135 units.

77) Ruiz Co. provides the following unit sales forecast for the next three months:

The company wants to end each month with ending finished goods inventory equal to 10% of the next month's sales. Finished goods inventory on December 31 is 300 units. The budgeted production units for January are:

A) 3,000 units.

B) 3,420 units.

C) 3,720 units.

D) 3,120 units.

E) 2,880 units.

78) Ruiz Co. provides the following unit sales forecast for the next three months:

The company wants to end each month with ending finished goods inventory equal to 10% of the next month's sales. Finished goods inventory on December 31 is 300 units. The budgeted production units for February are:

A) 5,000 units.

B) 4,200 units.

C) 4,700 units.

D) 4,120 units.

E) 4,280 units.

79) A plan that lists dollar amounts to be received from disposing of plant assets and dollar amounts to be spent on purchasing additional plant assets is called a:

A) Cash budget.

B) Capital expenditures budget.

C) Rolling budget.

D) Sales budget.

E) Production budget.

80) A merchandiser, provides the following information for its December budgeting process:

The November 30 inventory was 1,800 units.

Budgeted sales for December are 4,000 units.

Desired December 31 inventory is 2,840 units.

Budgeted purchases are:

A) 5,040 units.

B) 1,240 units.

C) 6,840 units.

D) 4,000 units.

E) 5,800 units.

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

A) Selling expenses budget.

B) Merchandise purchases budget.

C) Sales budget.

D) Cash budget.

E) Capital expenditures budget.

82) The usual starting point in the budgeting process is a plan showing the planned sales units and the revenue expected from these sales.  This plan is called the:

A) Operating budget.

B) Business plan.

C) Income statement budget.

D) Merchandise purchases budget.

E) Sales budget.

83) A plan that lists the types and amounts of selling expenses expected during the budget period is called a(n):

A) Sales budget.

B) General and administrative budget.

C) Capital expenditures budget.

D) Selling expense budget.

E) Purchases budget.

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

A) Business capacity.

B) Forecasted economic and market conditions.

C) Prediction of unit sales.

D) The capital expenditures budget.

E) Proposed selling expenses, such as advertising.

85) A department store has budgeted sales of 12,000 men's coats in September. Management wants to have 6,000 coats in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 coats. What is the dollar amount of the purchase of suits if each coat has a cost of $75?

A) $750,000.

B) $900,000.

C) $1,050,000.

D) $1,200,000.

E) $1,350,000.

86) A sporting equipment store expects to purchase $8,000 of ski boots in October. The store had $2,000 of ski boots in merchandise inventory at the beginning of October, and expects to have $3,000 of ski boots in merchandise inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?

A) $5,000.

B) $7,000.

C) $8,000.

D) $9,000.

E) $10,000.

87) Masterson Company's budgeted production calls for 56,000 units in April and 52,000 units in May of a key raw material that costs $1.85 per unit. Each month's ending raw materials inventory should equal 30% of the following month's budgeted materials. The April 1 inventory for this material is 16,800 unit. What is the budgeted materials needed in units for April?

A) 71,600 units.

B) 39,200 units.

C) 57,600 units.

D) 56,000 units.

E) 54,800 units.

88) A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter and 30,000 pairs in the second quarter of the upcoming year. Each pair of boots requires 2 kilograms (kg) of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 18,000 kg and the cost per kg is $8. What is the budgeted materials needed in kg. in the first quarter?

A) 90,000 kg.

B) 84,000 kg.

C) 108,000 kg.

D) 102,000 kg.

E) 120,000 kg.

89) A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter and 30,000 pairs in the second quarter of the upcoming year. Each pair of boots requires 2 kilograms (kg) of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 20% of the following quarter's material needs. Beginning inventory for this material is 18,000 kg and the cost per kg is $8. What is the budgeted materials purchases cost for the first quarter?

A) $720,000.

B) $672,000.

C) $576,000.

D) $729,600.

E) $864,000.

90) A quantity of inventory that provides protection against lost sales caused by unfulfilled demands from customers is called:

A) Just-in-time inventory.

B) Budgeted stock.

C) Continuous inventory.

D) Capital stock.

E) Safety stock.

91) Alliance Company budgets production of 24,000 units in January and 28,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each month's ending raw materials inventory should equal 40% of the following month's budgeted materials. The January 1 inventory for this material is 38,400 pounds. What is the budgeted materials needed in pounds for January?

A) 102,400 pounds.

B) 96,000 pounds.

C) 57,600 pounds.

D) 140,800 pounds.

E) 83,200 pounds.

92) Alliance Company budgets production of 24,000 units in January and 28,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each month's ending raw materials inventory should equal 40% of the following month's budgeted materials. The January 1 inventory for this material is 38,400 pounds. What is the budgeted materials cost for January?

A) $240,000.

B) $352,000.

C) $256,000.

D) $144,000.

E) $208,000.

93) Schrank Company is trying to decide how many units of merchandise to order each month. Company policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?

A) 14,000.

B) 20,000.

C) 22,000.

D) 24,000.

E) 28,000.

94) Masterson Company's budgeted production calls for 56,000 units in April and 52,000 units in May of a key raw material that costs $1.85 per unit. Each month's ending raw materials inventory should equal 30% of the following month's budgeted materials. The April 1 inventory for this material is 16,800 units. What is the budgeted materials purchases for April?

A) $106,560.

B) $101,380.

C) $103,600.

D) $72,520.

E) $132,460.

95) Boulware Company's budgeted production calls for 5,000 units in October and 8,000 units in November. Each unit requires 8 pounds (lbs.) of raw material A. Each month's ending inventory of raw materials should equal 20% of the following month's budgeted materials requirements. The October 1 inventory for this material is 8,000 pounds. What is the budgeted materials purchases in pounds for October?

A) 40,000 lbs.

B) 44,800 lbs.

C) 52,800 lbs.

D) 60,800 lbs.

E) 35,200 lbs.

96) When preparing the cash budget, all of the following should be considered except:

A) Cash receipts from customers.

B) Cash payments for merchandise.

C) Depreciation expense.

D) Cash payments for income taxes.

E) Cash payments for capital expenditures.

97) Bioclean Co., a merchandiser, sells a biodegradable cleaning product and has predicted the following unit sales for the first four months of the current year:

Ending inventory for each month should be 20% of the next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?

A) 2,000.

B) 2,420.

C) 2,020.

D) 1,600.

E) 2,820.

98) Garcia Corporation's April sales forecast projects that 5,000 units will sell at a price of $10.50 per unit. The desired ending inventory is 30% higher than the beginning inventory of 1,000 units. Budgeted purchases in April would be:

A) 5,000 units.

B) 6,000 units.

C) 5,300 units.

D) 6,300 units.

E) None of the choices are correct.

99) The sales budget for Modesto Corp. 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 Product B is 3,000 units. Budgeted purchases of Product A for the year would be:

A) 22,400 units.

B) 20,400 units.

C) 20,000 units.

D) 19,500 units.

E) 12,200 units.

100) The sales budget for Modesto Corp. 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 Product B is 3,000 units. Budgeted purchases of Product B for the year would be:

A) 24,500 units.

B) 22,500 units.

C) 16,500 units.

D) 26,500 units.

E) 20,500 units.

101) The sales budget for Modesto Corp. 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 Product B is 3,000 units. Total budgeted sales of both products for the year would be:

A) $42,000.

B) $200,000.

C) $264,000.

D) $464,000.

E) $500,000.

102) If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and budgeted cost of goods sold is $10,260, budgeted purchases should be:

A) $860

B) $1,100

C) $1,960

D) $9,160

E) $11,360

103) Coomb's Fashions forecasts sales of $125,000 for the quarter ended December 31. Its gross profit rate is 20% of sales, and its September 30 inventory is $32,500. If the December 31 inventory is targeted at $41,500, budgeted purchases for this quarter should be:

A) $134,000.

B) $109,000.

C) $91,500.

D) $25,000.

E) $91,000.

104) A plan that shows the expected cash inflows and cash outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is called a(n):

A) Capital expenditures budget.

B) Operating budget.

C) Rolling budget.

D) Cash budget.

E) Income statement.

105) 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.

106) Which of the following budgets is not completed before a cash budget is prepared?

A) Capital expenditures budget.

B) Sales budget.

C) Merchandise purchases budget.

D) General and administrative expense budget.

E) Budgeted income statement.

107) Which of the following would not be used in preparing a cash budget for October?

A) Beginning cash balance on October 1.

B) Budgeted sales and collections for October.

C) Estimated depreciation expense for October.

D) Budgeted salaries expense for October.

E) Budgeted capital equipment purchases for October.

108) Western Company is preparing a cash budget for June. The company has $12,000 in cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash payments during June. Western Company has an agreement with its bank to maintain a minimum cash balance of $10,000. As of May 31, the company has no loans outstanding. To maintain the $10,000 required balance, during June the company must:

A) Borrow $4,500.

B) Borrow $2,500.

C) Borrow $10,000.

D) Repay $7,500.

E) Repay $2,500.

109) A managerial accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is called a(n):

A) Rolling balance sheet.

B) Continuous balance sheet.

C) Budgeted balance sheet.

D) Cash balance sheet.

E) Operating balance sheet.

110) 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 payments 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) $13,300.

B) $137,800.

C) ($13,700).

D) $3,300.

E) $27,000.

111) 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 payments during August. Southland Company wants to maintain a minimum cash balance of $10,000. To maintain the minimum cash balance of $10,000, the company must borrow:

A) $0.

B) $10,000.

C) $6,700.

D) $7,000.

E) $27,700.

112) Chocolate Co. reports the following information from its sales budget:

Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:

A) $30,000.

B) $78,000.

C) $108,000.

D) $120,000.

E) $130,500.

113) Junior Snacks reports the following information from its sales budget:

All sales are on credit and are expected to be collected 40% in the month of sale and 60% in the month following sale. The total amount of cash expected to be received from customers in November is:

A) $146,200.

B) $85,800.

C) $151,000.

D) $236,800.

E) $60,400.

114) A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a:

A) Budgeted income statement.

B) Budgeted balance sheet.

C) Master plan.

D) Rolling income statement.

E) Continuous profit statement.

115) Justin Company's budget includes the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Credit sales are collected as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Justin expect to collect in November as a result of current and past credit sales?

A) $19,700.

B) $28,500.

C) $30,000.

D) $31,100.

E) $33,900.

116) Ruiz Co.'s budget includes the following credit sales for the current year: September, $145,000; October, $136,000; November, $120,000; December, $157,000. Credit sales are collected as follows: 15% in the month of sale, 50% in the first month after sale, and 35% in the second month after sale. How much cash can the company expect to collect in December as a result of current and past credit sales?

A) $23,550.

B) $107,600.

C) $83,550.

D) $157,000.

E) $131,150.

117) In preparing a budgeted balance sheet, the dollar amount of Accounts Receivable can be derived from:

A) The purchases budget and schedule of cash payments.

B) The sales budget and the schedule of cash receipts.

C) The capital expenditures budget and purchases budget.

D) The budgeted income statement and budgeted balance sheet.

E) The selling expenses budget and the schedule of cash receipts.

118) Long-term liability balances for the budgeted balance sheet are obtained from:

A) The cash budget and capital expenditures budget.

B) The cash budget and sales budget.

C) The cash budget and budgeted income statement.

D) The sales budget and production budget.

E) The asset budget and debt budget.

119) In preparing financial budgets:

A) The budgeted balance sheet is usually prepared last.

B) The cash budget is usually not prepared.

C) The budgeted income statement is usually not prepared.

D) The capital expenditures budget is usually prepared last.

E) The budgeted income statement is usually prepared last.

120) 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 current and prior credit sales is:

A) $57,000

B) $61,200

C) $66,400

D) $80,750

E) $90,250

121) A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 30% in the month of the sale, 50% in the next month, and 15% the following month. Projected sales for January, February, and March are $60,000, $85,000 and $95,000, respectively. The March expected cash receipts from current and prior credit sales is:

A) $57,000

B) $63,080

C) $64,000

D) $80,750

E) $90,250

122) Walter Enterprises expects its September sales to be 20% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $7,500. The ending cash balance on September 30 would be:

A) $31,500.

B) $67,500.

C) $54,000.

D) $61,500.

E) $136,500.

123) Ballentine Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month following sale, 45% in the second month following sale, and 5% are not collected. What are the company's expected cash receipts for August from its current and past sales?

A) $29,160.

B) $46,760.

C) $61,160.

D) $66,200.

E) $78,800.

124) Gardner Company expects sales for October of $248,000. Experience suggests that 45% of sales are for cash and 55% are on credit. The company collects 50% of its credit sales in the month of sale and 50% in the month following sale. Budgeted Accounts Receivable on September 30 is $67,000. What is the amount of cash expected to be collected in October?

A) $124,000.

B) $178,600.

C) $179,800.

D) $111,600.

E) $246,800.

125) Gardner Company expects sales for October of $248,000. Experience suggests that 45% of sales are for cash and 55% are on credit. The company collects 50% of its credit sales in the month of sale and 50% in the month following sale. Budgeted Accounts Receivable on September 30 is $67,000. What is the amount of Accounts Receivable on the October 31 budgeted balance sheet?

A) $111,600.

B) $124,000.

C) $67,000.

D) $68,200.

E) $136,400.

126) Wichita Industries' sales are 10% 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 second 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 are budgeted to be $50,000. What are the expected cash receipts for January from the current and past sales?

A) $18,500.

B) $51,500.

C) $51,900.

D) $55,500.

E) $60,500.

127) Wichita Industries' 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 second following month. Wichita Industries' had $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?

A) $80,500.

B) $71,500.

C) $34,500.

D) $61,500.

E) $59,500.

128) Which of the following must be prepared before the direct labor budget?

A) Budgeted income statement.

B) Merchandise purchases budget.

C) Capital expenditures budget.

D) Selling expense budget.

E) Production budget.

129) To determine the production budget for an accounting period, consideration is given to all of the following except:

A) Budgeted ending inventory.

B) Budgeted beginning inventory.

C) Budgeted sales.

D) Budgeted overhead.

E) Safety stock.

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

A) Sales budget.

B) Direct materials budget.

C) Production budget.

D) Merchandise purchases budget.

E) Cash budget.

131) A plan that states the number of units to be produced in a future period, based on the projected unit sales and inventory considerations, is the:

A) Sales budget.

B) Merchandise purchases budget.

C) Production budget.

D) Cash budget.

E) Manufacturing budget.

132) Cahuilla Corporation predicts the following sales in units for the coming four months:

Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 finished goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted production for May is:

A) 232 units.

B) 168 units.

C) 400 units.

D) 280 units.

E) 288 units.

133) Cahuilla Corporation predicts the following sales in units for the coming four months:

Each month's ending Finished Goods Inventory in units should be 40% of the next month's sales. March 31 Finished Goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of direct material B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted purchases of pounds of direct material B during May should be:

A) 1,422 lbs.

B) 288 lbs.

C) 1,854 lbs.

D) 276 lbs.

E) 1,008 lbs.

134) Cahuilla Corporation predicts the following sales in units for the coming four months:

Each month's ending Finished Goods Inventory in units should be 40% of the next month's sales March 31 Finished Goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of direct material B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted cost of direct material B during May should be:

A) $576.

B) $3,708.

C) $552.

D) $2,016.

E) $2,844.

135) Charm Enterprises' production budget shows the following units to be produced for the coming three months:

A finished unit requires four ounces of a key direct material. The March 31 Raw Materials Inventory has 4,032 ounces (oz.) of the material. Each month's ending Raw Materials Inventory should be 35% of the following month's production needs. Materials purchases in May should be?

A) 11,352 oz.

B) 11,520 oz.

C) 7,448 oz.

D) 15,384 oz.

E) 7,616 oz.

136) Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months:

Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $6,500. The budgeted cash payments for materials in January are:

A) $6,500.

B) $9,270.

C) $12,520.

D) $13,095.

E) $18,540.

137) Memphis Company's May sales budget calls for sales of $900,000. The store expects to begin May with $50,000 of inventory and to end the month with $55,000 of inventory. Gross margin is typically 45% of sales. Compute the budgeted cost of merchandise purchases for May.

A) $550,000.

B) $500,000.

C) $495,000.

D) $460,000.

E) $490,000.

138) Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months:

Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $6,500. The expected January 31 Accounts Payable balance is:

A) $6,500.

B) $7,075.

C) $12,040.

D) $6,020.

E) $9,270.

139) Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales during the month of May.

A) $561,500.

B) $652,500.

C) $817,500.

D) $592,500.

E) $890,000.

140) Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from total sales during the month of May.

A) $561,500.

B) $652,500.

C) $817,500.

D) $592,500.

E) $890,000.

141) Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales during the month of June.

A) $561,500.

B) $652,500.

C) $817,500.

D) $592,500.

E) $890,000.

142) Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from total sales during the month of June.

A) $561,500.

B) $652,500.

C) $817,500.

D) $592,500.

E) $890,000.

143) Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are collected in the second month. Compute the amount of accounts receivable reported on the company's budgeted balance sheet for June 30.

A) $617,500.

B) $561,500.

C) $712,500.

D) $463,125.

E) $532,500.

144) Ratchet Manufacturing's August sales budget calls for sales of 8,000 units. Each month's unit sales are expected to grow by 5%. The product selling price is $25 per unit. The expected total sales dollars for September's sales budget are:

A) $200,000.

B) $190,000.

C) $210,000.

D) $220,000.

E) $8,400.

145) Ratchet Manufacturing anticipates total sales for August, September, and October of $200,000, $210,000, and $220,500 respectively. Cash sales are normally 25% of total sales and the remaining sales are on credit. All credit sales are collected in the first month after the sale. Compute the amount of cash received for September.

A) $150,000.

B) $202,500.

C) $157,500.

D) $102,500.

E) $307,500.

146) Ratchet Manufacturing anticipates total sales for August, September, and October of $200,000, $210,000, and $220,500 respectively. Cash sales are normally 25% of total sales and the remaining sales are on credit. All credit sales are collected in the first month after the sale. Compute the amount of accounts receivable to be reported on the company's budgeted balance sheet for August.

A) $150,000.

B) $50,000.

C) $157,500.

D) $52,500.

E) $200,000.

147) Use the following information to determine the ending cash balance to be reported on the month ended June 30 cash budget.

• Beginning cash balance on June 1, $73,000.
• Cash receipts from sales, $413,000.
• Budgeted cash payments for purchases, $268,000.
• Budgeted cash payments for salaries, $35,000.
• Other budgeted cash expenses, $57,000.
• Cash repayment of bank loan, $32,000.
• Budgeted depreciation expense, $34,000.

A) $94,000.

B) $60,000.

C) $126,000.

D) $149,000.

E) $21,000.

148) Trago Company manufactures a single product and has a JIT policy that ending inventory must equal 5% of the next month's sales. It estimates that May's ending inventory will consist of 14,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively. Compute the number of units to be produced in June.

A) 290,000.

B) 294,500.

C) 280,500.

D) 280,000.

E) 266,000.

149) Trago Company manufactures a single product and has a JIT policy that ending inventory must equal 5% of the next month's sales. It estimates that May's ending inventory will consist of 14,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively. Trago assigns variable overhead at a rate of $1.80 per unit of production. Fixed overhead equals $400,000 per month. Compute the total budgeted overhead for June.

A) $920,200.

B) $904,900.

C) $930,100.

D) $922,000.

E) $878,800.

150) Glaston Company manufactures a single product using a JIT inventory system. The production budget indicates that the number of units expected to be produced are 193,000 in October, 201,500 in November, and 198,000 in December. Glaston assigns variable overhead at a rate of $0.75 per unit of production. Fixed overhead equals $150,000 per month. Compute the total budgeted overhead for October.

A) $343,000.

B) $150,000.

C) $144,750.

D) $301,125.

E) $294,750.

151) Zhang Industries sells a product for $700. Unit sales for May were 400 and each month's sales are expected to exceed the prior month's results by 3%. Compute the total budgeted sales dollars for the month ended June 30.

A) $280,000.

B) $297,000.

C) $271,600.

D) $288,400.

E) $364,000.

152) Zhang Industries sells a product for $700 per unit. Unit sales for May were 400, and each month's unit sales are expected to grow by 3%. Zhang pays a sales manager a monthly salary of $3,000 and a commission of 2% of sales. Compute the budgeted selling expense for the manager for the month ended June 30.

A) $8,600.

B) $11,652.

C) $8,652.

D) $5,768.

E) $8,768.

153) Zhang Industries sells a product for $700. Unit sales for May were 400 and each month's sales are expected to grow by 3%. Zhang pays a sales manager a monthly salary of $3,000 and a commission of 2% of sales in dollars. Assume 30% of Zhang's sales are for cash. The remaining 70% are credit sales; these customers pay in the month following the sale. Compute the budgeted cash receipts for June.

A) $282,520.

B) $196,000.

C) $201,880.

D) $280,000.

E) $285,880.

154) Zhang Industries budgets production of 300 units in June and 310 units in July. Each finished unit requires 4 pounds (lbs.) of raw material K, which costs $5 per pound. Each month's ending inventory of raw materials should be 30% of the following month's budgeted production. The June 1 raw materials inventory has 360 pounds of raw material K. Compute the budgeted purchases for raw material K in pounds for June.

A) 1,200 lbs.

B) 1,240 lbs.

C) 1,212 lbs.

D) 1,220 lbs.

E) 880 lbs.

155) Zhang Industries budgets production of 300 units in June and 310 units in July. Each finished unit requires 4 pounds of raw material K, which costs $5 per pound. Each month's ending inventory of raw materials should be 30% of the following month's budgeted production. The June 1 raw materials inventory has 360 pounds of raw material K. Compute the budgeted cost of purchases for raw material K for June.

A) $4,400.

B) $6,000.

C) $6,200.

D) $6,060.

E) $6,100.

156) 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 is $14 per hour. The indirect labor rate is $21 per hour. Compute the budgeted direct labor cost for July.

A) $6,300.

B) $6,510.

C) $9,450.

D) $9,765.

E) $16,275.

157) Zhang Industries is preparing a cash budget for June. The company has $25,000 cash at the beginning of June and anticipates $95,000 in cash receipts and $111,290 in cash payments during June. The company has no loans outstanding on June 1. Compute the amount the company must borrow, if any, to maintain a $20,000 cash balance.

A) $28,710.

B) $12,290.

C) $16,290.

D) $11,290.

E) $6,290.

158) 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 budgeted selling expenses for February.

A) $19,500.

B) $6,400.

C) $23,900.

D) $25,900.

E) $21,500.

159) Webster Corporation is preparing a master budget for the first quarter. The company budgets production of 2,680 units in January, 2,600 units in February and 2,740 units in March. Each unit requires 0.6 hours of direct labor. The direct labor rate is $12 per hour. Compute the budgeted direct labor cost for the first quarter budget.

A) $56,160.

B) $57,744.

C) $96,240.

D) $93,600.

E) $48,120.

160) Webster Corporation's monthly projected general and administrative expenses include $5,000 administrative salaries, $2,400 of other cash administrative expenses, $1,350 of depreciation expense on the administrative equipment, and 0.5% monthly interest on an outstanding bank loan of $10,000. Compute the total budgeted general and administrative expenses budget per month.

A) $17,400.

B) $7,400.

C) $8,750.

D) $5,050.

E) $8,800.

161) Webster Corporation is preparing its cash budget for April. The March 31 cash balance is $36,400. Cash receipts are expected to be $641,000 and cash payments for purchases are expected to be $608,500. Other cash expenses expected are $27,000 selling and $33,500 general and administrative. The company desires a minimum cash balance at the end of each month of $30,000. If necessary, the company borrows enough cash to meet the minimum using a short-term note. Webster's preliminary cash balance before loan activity for April is expected to be:

A) $8,400.

B) $21,600.

C) $30,000.

D) ($28,000).

E) $68,900.

162) Webster Corporation is preparing its cash budget for April. The March 31 cash balance is $36,400. Cash receipts are expected to be $641,000 and cash payments for purchases are expected to be $608,500. Other cash expenses expected are $27,000 selling and $33,500 general and administrative. The company desires a minimum cash balance at the end of each month of $30,000. If necessary, the company borrows enough cash to meet the minimum using a short-term note. The amount Webster must borrow during April is:

A) $0.

B) $21,600.

C) $8,400.

D) $98,900.

E) $58,000.

163) Flagstaff Company has budgeted July production of 7,900 units. Variable factory overhead is $1.20 per unit. Budgeted fixed factory overhead is $19,000, which includes $3,000 of factory equipment depreciation. Compute the total budgeted overhead for July.

A) $25,480.

B) $19,000.

C) $23,900.

D) $28,480.

E) $9,480.

164) Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct materials requirement per unit is 2 ounces (oz.). The company requires to have safety stock of direct materials on hand at the end of each month to complete 20% of the units of budgeted production in the following month. There was 3,160 ounces of direct material in inventory at the start of July. The total ounces of direct materials to be purchased in July is:

A) 15,800 oz.

B) 16,200 oz.

C) 19,040 oz.

D) 15,880 oz.

E) 15,720 oz.

165) Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct materials requirement per unit is 2 ounces (oz.). The company has determined that it wants to have safety stock of direct materials on hand at the end of each month to complete 20% of the units of budgeted production in the following month. There was 3,160 ounces of direct material in inventory at the start of July. The total cost of direct materials purchases for the July direct materials budget, assuming the materials cost $1.15 per ounce, is:

A) $18,262.

B) $21,896.

C) $14,536.

D) $18,078.

E) $18,170.

166) Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct labor requirement per unit is 0.50 hours. Labor is paid at the rate of $21 per hour. The total cost of direct labor budgeted for the month of August is:

A) $82,950.

B) $4,050.

C) $85,050.

D) $3,950.

E) $168,000.

167) On its December 31, 2017, balance sheet, Calgary Industries reports equipment of $370,000 and accumulated depreciation of $74,000. During 2018, the company plans to purchase additional equipment costing $80,000 and expects depreciation expense of $30,000. Additionally, it plans to dispose of equipment that originally cost $42,000 and had accumulated depreciation of $5,600. The balances for equipment and accumulated depreciation, respectively, on the December 31, 2018 budgeted balance sheet are:

A) $328,000; $74,000.

B) $450,000; $98,400.

C) $450,000; $104,000.

D) $408,000; $104,000.

E) $408,000; $98,400.

168) Calgary Industries is preparing a budgeted income statement for 2018. Predicted sales for the year are $730,000 and cost of goods sold is 40% of sales. The expected selling expenses are $81,000 and the expected general and administrative expenses are $90,000, which includes $23,000 of depreciation. The company's income tax rate is 30%. The budgeted net income for 2018 is:

A) $438,000.

B) $186,900.

C) $267,000.

D) $84,700.

E) $80,100.

169) Grason Corporation is preparing a budgeted balance sheet for 2018. The retained earnings balance at December 31, 2017 was $533,500. The 2018 budgeted income statement shows expected net income of $112,000. The company expects to declare dividends during 2018 amounting to $40,000. The expected balance in retained earnings on the 2018 budgeted balance sheet is:

A) $533,500.

B) $605,500.

C) $645,500.

D) $493,500.

E) $685,500.

170) Match the definitions 1 through 9 with the correct term or phrase (a) through (i).

(a) Master budget

(b) General and administrative expense budget

(c) Budget

(d) Safety stock

(e) Budgeted income statement

(f) Budgeted balance sheet

(g) Sales budget

(h) Cash budget

(i) Merchandise purchases budget

______(1) A plan that shows the units and dollars of merchandise to be purchased during the budget period.

______(2) A managerial accounting report that shows predicted amounts of the company's assets, liabilities, and balances as of the end of the budget period.

______(3) A plan that shows the expected sales units and the dollars from these sales.

______(4) A managerial accounting report that shows predicted amounts of sales and expenses for the budget period.

______(5) A quantity of inventory that provides protection against lost sales caused by unfulfilled demand from customers or delays in shipments from suppliers.

______(6) A formal, comprehensive plan for a company's future that includes several individual budgets that are linked with each other to form a coordinated plan.

______(7) A formal statement of a company's future plans, usually expressed in monetary terms.

______(8) A plan that plans the predicted operating expenses not included in the selling expenses or manufacturing budgets.

______(9) A plan that shows the expected cash inflows and cash outflows during the budget period.

171) Presented below are terms or phrases preceded by letters (a) through (j) and followed by a list of definitions 1 through 10. Match the correct definitions with the terms or phrases by placing the letter of the term or phrase in the answer space provided at the beginning of the definition.

(a) Budget

(b) Capital expenditures budget

(c) Activity-based budgeting

(d) Sales budget

(e) Production budget

(f) Cash budget

(g) Budgeted balance sheet

(h) Continuous budgeting

(i) Selling expense budget

(j) Rolling budgets

_____ (1) A plan that lists the types and amounts of selling expenses expected during the budget period.

_____ (2) A plan that shows expected activities and their levels for the budget period used to estimate resources required to perform the activities.

_____ (3) A managerial accounting report that presents predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period.

_____ (4) A formal statement of future plans, usually expressed in monetary terms.

_____ (5) A plan showing the expected sales units and dollars from the sales; the starting point in the budgeting process.

_____ (6) A plan that lists dollar amounts estimated to be received from disposing of plant assets and spent on purchasing additional plant assets to carry out the budgeted business activities.

______(7) The practice of revising budgets as time passes.

______(8) A plan showing the number of units to be produced each period, based on the units projected in the sales budget, along with inventory considerations.

______ 9) A plan that shows the expected cash inflows and outflows during the budget period, including receipts from loans needed to maintain a minimum cash balance and repayments of such loans.

______(10) Additional monthly or quarterly budgets to replace the ones that have lapsed as each budget period goes by.

172) Describe at least five benefits of budgeting.

173) List the three important guidelines that should be followed in the budgeting process.

174) What are rolling budgets? Why are rolling budgets prepared?

175) Briefly describe the process by which budgets are developed and administered.

176) Briefly describe a master budget and the sequence in which the individual budgets within the master budget are prepared.

177) What is activity-based budgeting?

178) Why is the sales budget usually prepared first?

179) What is a sales budget? How is the sales budget prepared?

180) What is a merchandise purchases budget? How is the merchandise purchases budget prepared?

181) What is a capital expenditures budget?

182) What is a cash budget? How can management use a cash budget?

183) What is a production budget?

184) A department store has budgeted cost of goods sold for March of $60,000 for its women's shorts. Management wants to have $12,000 of shorts in inventory at the end of the month to prepare for the summer season. Beginning inventory in March was $8,000. What dollar amount of shorts should be purchased to meet the above plans?

185) A sporting goods store budgeted August purchases of ski jackets at $140,000. The store had ski jackets costing $12,000 in its inventory at the beginning of August; and to cover part of anticipated September sales, they expect to have $25,000 of ski jackets in inventory at the end of the month of August. What is the budgeted cost of goods sold for August?

186) In preparing a budget for the last three months of the current year, 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?

187) Dado, Inc. is preparing its budget for the second quarter. The following unit sales are forecasted:

April May June July August

Unit sales……………………… 640 720 780 620 660

Additional information follows:

Inventory on March 31: 192 Units

Desired ending inventory each month: 30% of next month's sales

Prepare a merchandise purchases budget for the total units to be purchased in each of the months of April, May, and June, as well as the total unit purchases for the entire quarter.

188) Greco Company has prepared the following forecasts of monthly unit sales:

July August September October

Sales (in units)………………… 4,500 5,300 4,000 3,700

Greco wants the number of units in its inventory at the end of each month to equal 25% of the next month's sales. The budgeted cost per unit is $30.

(1) How many units should be in July's beginning inventory?

(2) What amount should be budgeted for the cost of merchandise purchases in July?

189) Hammerly Corporation is preparing its master budget for the quarter ending March 31. It sells a single product for $25 a unit. Budgeted sales are 40% cash and 60% on credit. All credit sales are collected in the month following the sales. Budgeted unit sales for the next four months follow:

At December 31, the balance in accounts receivable is $10,000, which represents the uncollected portion of December sales. The company desires merchandise inventory equal to 30% of the next month's sales in units. The December 31 balance of merchandise inventory is 340 units, and inventory cost is $10 per unit. 40% of purchases are paid in the month of purchase and 60% are paid in the following month. At December 31, the balance of Accounts Payable is $8,000, which represents the unpaid portion of December's purchases.

Operating expenses are paid in the month incurred and consist of:

· Sales commissions (10% of sales)

· Freight (2% of sales)

· Office salaries ($2,400 per month)

· Rent ($4,800 per month)

Depreciation expense is $4,000 per month. The income tax rate is 40%, and income taxes will be paid on April 1. A minimum cash balance of $10,000 is required, and the cash balance at December 31 is $10,200. Loans are obtained at the end of a month in which a cash shortage occurs. Interest is 1% per month, based on the beginning of the month loan balance, and must be paid each month (The interest payment is rounded to the nearest whole dollar). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At December 31, the loan balance is $0.

Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of January, February, and March that includes the:

· Sales budget

· Schedule of cash receipts

· Merchandise purchases budget

· Schedule of cash payments for merchandise purchases

· Schedule of cash payments for selling and administrative expenses (combined)

· Cash budget, including information on the loan balance

· Budgeted income statement for the quarter

190) Oxford, Inc., is preparing its master budget for the quarter ended June 30. It sells a single product for $40 each. Sales are 60% cash and 40% on credit. All credit sales are collected in the month following the sale. At March 31, the balance in accounts receivable is $12,000, which represents the uncollected balance on March sales. Budgeted unit sales for the next four months follows:

The product cost is $20 per unit, and desired ending inventory is 60% of the following month's sales in units. Inventory at March 31 is 480 units. Purchases are paid 50% in the month of purchase and 50% in the following month. At March 31, the balance in accounts payable is $11,000, which represents the unpaid purchases from March. Operating expenses are paid in the month incurred and consist of:

· Commissions (10% of sales)

· Shipping (3% of sales)

· Office salaries ($3,000 per month)

· Rent ($5,000 per month)

Depreciation is $2,000 per month. Income taxes are 40%, and will be paid on July 1. There are no taxes payable at March 31. A minimum cash balance of $12,000 is required, and the beginning cash balance is $12,000. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning of the month loan balance and is paid at each month end. If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. At March 31, the loan balance is $2,000. Prepare a master budget (round all dollar amounts to the nearest whole dollar) for each of the months of April, May, and June that includes the:

· Sales budget

· Schedule of cash receipts

· Merchandise purchases budget

· Schedule of cash payments for purchases of merchandise

· Schedule of cash payments for selling and administrative expenses (combined)

· Cash budget, including information on the loan balance

· Budgeted income statement for the quarter

191) Stanley Company is preparing a cash budget for February. The company has $30,000 cash at the beginning of February and anticipates $75,000 in cash receipts and $96,250 in cash payments during February. Stanley Company has an agreement with its bank to maintain a cash balance of $10,000. What amount, if any, must the company borrow at the end of February to maintain a $10,000 cash balance?

192) Groundworks Company budgeted the following credit sales during the current year: September, $90,000; October, $123,000; November, $105,000; December, $111,000. Experience has shown that cash from credit sales is received as follows: 10% in the month of sale, 50% in the first month after sale, 35% in the second month after sale, and 5% is uncollectible. How much cash should Groundworks Company expect to collect in November from its current and past credit sales?

193) Ewing Company budgeted sales for January, February, and March of $96,000, $88,000, and $72,000, respectively. Seventy percent of sales are on credit. The company collects 60% of its credit sales in the month following sale, and 40% in the second month following sale. What are Ewing's expected cash receipts for March related to its current and past sales?

194) Lafayette 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 the following items (1) through (10).

October November

Receipts from cash sales (1) (6)

Collections from August credit sales (2) (7)

Collections from September credit sales (3) (8)

Collections from October credit sales (4) (9)

Total cash collections during the month (5) (10)

195) Use the following data to determine the company's cash payments for August and September:

196) Widmer Corp. requires a minimum $10,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. The cash balance on July 1 is $10,400. Cash receipts other than for loans received for July, August, and September are forecasted as $24,000, $32,000, and $40,000, respectively. Payments other than for loan or interest payments for the same period are planned at $28,000, $30,000, and $32,000, respectively at July 1, there are no outstanding loans.

Required:

Prepare a cash budget for July, August, and September.

197) The following information is available for Jergenson 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 March sales.

c. The Merchandise Purchases Budget indicates that $90,000 in merchandise will be purchased in March on account. Ending inventory for March is predicted to be 600 units at a cost of $35 per unit. Purchases on account are paid 100% in the month following the purchase.

d. The Budgeted Income Statement shows depreciation expense of $4,000, net income of $44,000 and $21,000 in income tax expense for the quarter ended March 31. Accrued taxes will be paid in April.

e. The Balance Sheet for February 28 shows equipment of $77,000 with accumulated depreciation of $28,000, common stock of $25,000 and retained earnings of $8,000. There are no changes budgeted in the equipment or common stock accounts for March

Prepare a budgeted balance sheet as of March 31.

198) Diego, Inc., sells two products, Baubles and Charms. 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 Baubles and Charms, respectively.

Determine the company's cash receipts for March from its current and past sales.

199) Todd Enterprises is preparing a cash budget for the second quarter of the coming year. The following data have been forecasted:

Additional data:

(1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000.

(2) Purchases are all on credit, with 40% paid in the month of purchase and 60% paid in the following month.

(3) Operating expenses are paid in the month they are incurred.

(4) A minimum cash balance of $25,000 is required at the end of each month.

(5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made at the end of the month if the cash balance exceeds $25,000.

Prepare the company's cash budget for May. Show the ending loan balance at May 31.

200) Argenta, Inc. is preparing its master budget for the first quarter ending March 31. The following forecasted data relate to the first quarter:

Prepare a budgeted income statement for the first quarter.

201) The production budget for Greski Company shows the following production volume for the months of July-September. Each unit produced requires 2.5 hours of direct labor. The direct labor rate is predicted to be $16 per hour in all months. Prepare a direct labor budget for Greski Company for July-September.

202) Addams, Inc., is preparing its master budget for the second quarter. The following sales and production data have been forecasted:

Finished goods inventory on March 31: 120 units

Raw materials inventory on March 31: 450 pounds

Desired ending inventory each month:

Finished goods: 30% of next month's sales

Raw materials: 25% of next month's production needs

Number of pounds of raw material required per finished unit: 4 lbs.

How many pounds of raw materials should be purchased in April?

203) Snap, Inc., provides the following data for the next three months:

Desired ending inventory:

Raw Materials = 30% of next month's production needs

Pounds of raw material required for each finished Unit = 5 lbs.

Calculate the amount of purchases of raw materials in pounds for April and May.

204) Use the following information to prepare the June cash budget for Springer Company. It should show expected cash receipts and cash payments for the month and the cash balance expected on June 30.

a. Beginning cash balance on June 1 is $52,000.

b. Cash receipts from sales are expected to be $1,625,000.

c. Cash payments for direct materials and direct labor are expected to be $246,500 and $573,100, respectively.

d. Budgeted cash payments for variable overhead is $340,000.

e. Budgeted depreciation, the only fixed overhead estimated for June: $24,000.

f. Cash selling and administrative expenses budgeted for June are $282,000.

g. Bank loan interest due in June: $8,000.

i. Loan payment of $50,000 should be made if the preliminary cash balance is greater than $200,000.

205) Use the following information to prepare a budgeted income statement for Stellar Company for the month of June.

a. Beginning cash balance on June 1 is $52,000.

b. Sales amounts are: April (actual), $1,450,000, May (actual), $1,600,000, and June (budgeted), $1,700,000.

c. Cost of goods sold is 53% of sales.

d. Budgeted cash payments for salaries in June: $260,000. Salaries payable on May 31 are $60,000 and are expected to be $50,000 on June 30.

e. Budgeted depreciation expense for June: $24,000.

f. Other cash expenses budgeted for June: $282,000.

g. Accrued income taxes due in June: $48,000.

h. Bank loan interest due in June: $8,000 which represents the 1% monthly expense on a bank loan of $800,000.

i. The income tax rate applicable to the company is 30%.

206) Use the following information to prepare a budgeted balance sheet for Grover Company for the month of June.

a. The budgeted net income for the month of June is $236,000.

b. The beginning cash balance is $62,000; total budgeted cash receipts are $1,660,000; total budgeted cash payments are $1,580,000.

c. Budgeted sales for June are $1,700,000. Collections are 40% in the month of sale and 60% in the month following.

d. The projected inventory balance is 10% of the following month's sales. Sales for July are projected to be $1,750,000.

e. Budgeted purchases for June are $900,000 to be paid 80% in the month of purchase and 20% in the month following.

f. The equipment account balance is $1,400,000 on May 31. No equipment purchases or disposals will be made during June. On May 31, the accumulated depreciation is $276,000. Depreciation expense for June is estimated to be $24,000.

g. An outstanding loan balance of $800,000 is expected at the end of June.

h. Accrued income taxes payable for June 30 are expected to be $71,000. Salaries payable for June 30 are expected to be $50,000.

i. The only other balance sheet accounts are: Common Stock, with a balance of $800,000 on May 31, and Retained Earnings with a balance of $300,000 on May 31. No additional common stock will be issued and no dividends will be paid during June.

207) There are at least five benefits from budgeting. Identify two of these benefits:

(1) ________

(2) ________

208) ________ is a budgeting guideline that recognizes employees affected by a budget should be involved in preparing it.

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

210) The master budget process usually begins with the preparation of the ________ and usually finishes with the preparation of the ________, the ________, and the ________.

211) ________ is a budget system based on expected activities and their levels that enables management to plan for resources required to perform the activities.

212) The budget that lists the dollar amounts to be both received from plant asset disposals and spent to purchase additional plant assets to carry out the budgeted business activities is the ________.

213) The ________ shows expected cash inflows and outflows during the budget period.

214) The ________ , prepared by manufacturing firms, shows the number of units to be produced in a period based on the unit sales projected in the sales budget, along with inventory considerations.

215) The ________ shows the budgeted costs for factory overhead that will be needed to complete the estimated production for the period, often separated into variable and fixed costs.