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Exam 10: Strategy and the Master Budget

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Question 1

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Budgets can serve as the standard against which actual performance is measured.When compensation is based on this comparison,the organization is said to use:

A) Fixed performance contracts.
B) Rolling financial forecasts.
C) Continuous-improvement budgets.
D) Variable compensation contracts.
E) A linear compensation plan.

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Question 2

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A business develops a budget for many reasons beyond wanting to know what future profits will be.Comment on the role of a firm's strategic goals in both the master budget and the capital budget.

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Feedback: Strategic goals can be either...

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Question 3

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Brownsville Novelty Store prepared the following budget information for the month of May: - Sales are budgeted at $360,000.All sales are on account and a provision for bad debts is made Monthly at three percent of sales. - Inventory was $84,000 on April 30 and an increase of $12,000 is planned for May 31. - All inventory is marked to sell at cost plus fifty percent. - Estimated cash disbursements for selling and administrative expenses for the month are $48,000. -Depreciation for May is projected at $6,000. Budgeted Gross Profit in May is:

One of the behavioral considerations in implementing a budgeting system has to do with the issue of budgetary slack.What are the positive and negative aspects of building slack into budgets from: (1)top management's point of view,and (2)the employee's point of view (i.e. ,the individual responsible for building slack into the budget)?

Wild West Fashion expects the total costs of goods sold to be $30,000 in November and $60,000 in December for one of its young adult suits.Management also wants to have on hand at the end of each month 10 percent of the expected total cost of sales for the following month.What dollar amount of suits should be purchased in November?

Financial budgets include the:

Which of the following best describes the process of sales forecasting?

Information pertaining to Yekstop Corp.'s sales revenue is presented below. Management estimates that 4 percent of credit sales are eventually uncollectible.Of the collectible credit sales,65 percent are likely to be collected in the month of sale and the remainder in the month following the sale.The company desires to begin each month with an inventory equal to 75 percent of the sales projected for the month.All purchases of inventory are on open account;30 percent will be paid in the month of purchase,and the remainder paid in the month following the month of purchase.The purchase costs are approximately 60 percent of the selling prices. Total budgeted cash collections in December are:

Willard Company anticipates that its fixed manufacturing overhead costs will be $50,000 during the next period.Its variable manufacturing overhead is expected to be $8 per unit produced. Required: (a)What amount of overhead should be budgeted if the production budget shows that 40,000 units are to be produced? (b)What amount of overhead should be budgeted if the production budget shows that 50,000 units are to be produced? (c)Compute the total overhead cost per unit for requirements 1 and 2.

A plan that states the units or costs of merchandise to be purchased by a retailer or wholesaler during the budget period is called a:

Lovely Pet Store has budgeted cost of goods sold for May of $6,000 for flea collars.Management also wants to have $300 in inventory at the end of the month to prepare for the summer season.Beginning inventory in May was $200. Required: What dollar amount of flea collars should be purchased to meet the above objectives?

The budgeted income statement and budgeted balance sheet benefit a business primarily in their ability to:

Fresplanade Co.had the following historical pattern for its credit sales: 75% collected in the month of sale 12% collected in the first month after sale 8% collected in the second month after sale 3% collected in the third month after sale 2% uncollectible The sales on open account (credit sales) have been budgeted for the last six months of the year as shown below: July $72,000 August $84,000 September $96,000 October $108,000 November $120,000 December $102,000 The estimated total cash collections during December from accounts receivable is:

The authorization function of budgets is especially important for government and not-for-profit (NFP) entities,where budgeted amounts often serve both as approvals of planned activities (or programs) and as:

Tony's Fashions forecasts sales of $300,000 for the quarter ended December 31.Its gross profit rate is 20% of sales,and its September 30 inventory is $100,000.If the December 31 inventory is targeted at $40,000,budgeted purchases for the quarter should be:

Which of the following budgets is not a financial budget?

Which of the following is not an alternative approach to traditional budgeting practices?

Which of the following is not a potential benefit of having a sound budgeting process?

Brownsville Novelty Store prepared the following budget information for the month of May: - Sales are budgeted at $360,000.All sales are on account and a provision for bad debts is made Monthly at three percent of sales. -Inventory was $84,000 on April 30 and an increase of $12,000 is planned for May 31. - All inventory is marked to sell at cost plus fifty percent. -Estimated cash disbursements for selling and administrative expenses for the month are $48,000. - Depreciation for May is projected at $6,000. Budgeted Net Income for May is:

The common factors in successful budgets are all the following except: