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Exam 7: Master Budgets and Performance Planning

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Question 61

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A plan showing the units of goods to be sold and the revenue to be derived from sales, that is the usual starting point in the budgeting process, is called the:

A) Operating budget
B) Business plan
C) Income statement budget
D) Merchandise purchases budget
E) Sales budget

F) C) and E)
G) A) and E)

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Question 62

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A June sales forecast projects that 6,000 units are going to be sold at a price of $10.50 per unit.The desired ending inventory of units is 15% higher than the beginning inventory of 1,000 units.Merchandise purchases for June are projected to include how many units?

A) 6,000 units
B) 6,150 units
C) 5,850 units
D) 7,150 units
E) 6,500 units

F) C) and D)
G) B) and D)

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Question 63

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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) :

In preparing a budgeted balance sheet, the amount for Accounts Receivable is primarily determined from:

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:

Airtex 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 Eastern Company expect to collect in November from all current and past credit sales?

A budget can be an effective means of communicating management's plans to the employees of a business.

The sales budget is derived from the production budget.

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:

Traditional budgeting is generally better than activity-based budgeting when attempting to reduce costs by eliminating nonvalue-added activities.

The ___________________________ is prepared by manufacturing firms and takes the place of the purchases budget prepared by merchandising firms.

Tappet Corporation is preparing its master budget for the quarter ending March 31.It sells a single product for $25 a unit.Budget sales are 40% cash and 60% on credit.All credit sales are collected in the month following the sales.Budgeted sales for the next four months follow: $\begin{array} { | l | c | c | c | c | } \hline & \text { Jaruary } & \text { February } & \text { Mardl } & \text { April } \\\hline \text { Sales in units } & 1,200 & 1,000 & 1,600 & 1,400 \\\hline\end{array}$ 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.Forty percent of the 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.If an excess of cash exists, loan repayments are made at the end of the month.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 Table of cash receipts Merchandise purchases budget Table of cash disbursements for merchandise purchases Table of cash disbursements for selling and administrative expenses Cash budget, including information on the loan balance Budgeted income statement

The __________________________ shows expected cash inflows and outflows during the budget period.

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 __________________________.

Pecan Company had March sales and purchases of $63,000 and $47,000 respectively.The company expects April sales to increase 12% above March sales and purchases to stay consistent with March amounts.Twenty percent of the company's sales are for cash.Credit sales are collected 20% in the month of the sale and 80% in the following month.All purchases are paid for in the month following the purchase.The beginning cash balance on April 1 is $42,000.What is Pecan Company's expected cash balance on April 30?

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

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

There are three major subgroups of the master budget.These are ________________________, ___________________, and _______________________.

Which of the following budgets is not an operating budget?

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, 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. -Total budgeted sales of both products for the year would be: