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Exam 20: Master Budgets and Performance Planning

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Question 1

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The master budget consists of three major groups of budget components: the operating budgets, the capital expenditures budgets, and the financial budgets.

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Question 2

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Clic, Inc. provides the following data for the next four months: Desired Ending Inventory: Raw Materials = 30% of next month's production needs Finished Goods = 20% of next month's sales Pounds of raw material required for each finished Unit = 5 lbs. Direct labor hours per unit = 0.5 hrs Direct labor rate = $12/hour Required: (a) Calculate the budgeted production for April and May. (b) Calculate the amount of purchases of raw materials in pounds for April and May. (c) Calculate the cost of direct labor for May.

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

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

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

Northern Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during June. Northern Company has an agreement with its bank to maintain a cash balance of at least $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:

Lara Company has budgeted the following credit sales during the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received 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 Lara Company expect to collect in November as a result of current and past credit sales?

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

What are rolling budgets? Why are rolling budgets prepared?

A company's data is presented below. Desired ending inventory is a consistent percentage of the next quarter's sales and the previous year's 4^th quarter ending inventory of 560 units meets this requirement. Compute the expected production in the 3^rd Quarter of the current year. $\begin{array} { l l l l l } \text { Quarter } & 1 & 2 & 3 & 4 \\\text { Expected Sales Units } & 7,000 & 5,000 & 8,000 & 6,000 \\\text { Units Produced } & 6,840 & ? & ? & ?\end{array}$

Slim Corp. requires a minimum $8,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Loans are repaid at month's end from any excess cash. The cash balance on July 1 is $8,400. 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.

A company expects its September sales to be 15% higher than its August sales of $140,000. Purchases were $75,000 in August and are expected to be $85,000 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 $71,500. The ending cash balance on September 30 would be:

Which of the following is not a benefit derived from budgeting?

Lingstat Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 15% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 5,000 units, 6,000 units, and 4,000 units, respectively. How many units must be purchased in September?

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

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. Total June sales are anticipated to be:

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

What is a merchandise purchases budget? How is the merchandise purchases budget constructed?

There are at least five benefits from budgeting. Identify two of these benefits: (1) _______________________________________ (2) _______________________________________

Preparing a master budget is usually the responsibility of: