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Exam 8: Budgetary Planning

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Question 1

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Clare purchases a single product for $15 and sells it for $30.Forecasted sales for the next three months are July 4,000 units,August 6,000 units,September 7,500 units.Clare's policy is to have an ending inventory of 40% of the next month's sales needs on hand.July 1 inventory is projected to be 1,500 units.What are budgeted purchases in units for August?

A) 6,600 units
B) 10,400 units
C) 5,400 units
D) 600 units

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

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Question 2

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The selling and administrative expense budget is related to the production budget.The selling and administrative expense budget includes all the costs related to selling the product and managing the business,not the costs of producing the product.

A) True
B) False

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Question 3

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Which of the following budgets shows how many units will be produced each period?

Budgets that are tight but attainable are less likely to motivate people than budgets that are easy to achieve.Budgets that are tight but attainable are more likely to motivate people than budgets that are either too easy or too difficult to achieve.

Skylark has forecast production for the next three months as follows: July 4,900 units,August 6,600 units,September 7,500 units.Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced.What is budgeted manufacturing overhead for July?

Parker Corp expects to sell 4,000 units in October,and expects sales to increase 20% each month thereafter.Sales price is expected to stay constant at $8 per unit.What are budgeted revenues for the fourth quarter?

When calculating raw materials purchases,the starting point should be

The starting point for preparing the master budget is the

Which of the following is the forward-looking phase of the planning and control cycle?

Lea Company produces hand tools.Budgeted sales for March are 10,000 units.Beginning finished goods inventory in March is budgeted to be 1,300 units,and ending finished goods inventory is budgeted to be 1,400 units.How many units will be produced in March?

Blue has forecast sales to be $410,000 in February,$540,000 in March,$580,000 in April,and $620,000 in May.The average cost of goods sold is 60% of sales.All sales are made on credit and sales are collected 50% in the month of sale,30% the month following and the remainder two months after the sale.What are budgeted cash receipts in May?

Walnut has forecast sales for the next three months as follows: July 4,000 units,August 6,000 units,September 7,500 units.Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand.July 1 inventory is projected to be 1,500 units.Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold.What are budgeted selling and administrative expenses for July?

Preparing the sales budget includes calculating the revenues to be earned from units sold in addition to the number of units to be sold.Preparation of the sales budget requires multiplying the number of units expected to be sold by the budgeted sales price.

Budgeted cost of goods sold reflects all the costs required to manufacture and sell the product.Budgeted cost of goods sold reflects all the costs required to manufacture the product,but not sell it.

Audrey has forecast sales to be $205,000 in February,$270,000 in March,$290,000 in April,and $310,000 in May.The average cost of goods sold is 60% of sales.All sales are made on credit and sales are collected 50% in the month of sale,30% the month following and the remainder two months after the sale.What is the budgeted Accounts Receivable balance on May 31?

Marlow Company produces hand tools.A production budget for the next four months is as follows: March 10,300 units,April 13,300,May 16,500,and June 21,800.Marlow Company's ending finished goods inventory policy is 10% of the following month's sales.Meadow plans to sell 16,000 units in May.How many units will be sold in April?

Participative budgeting is more likely to motivate people to work toward the organization's goals than is a top-down approach.This is one of the main advantages of participative budgeting.

Meadow Company produces hand tools.A sales budget for the next four months is as follows: March 10,000 units,April 13,000,May 16,000 and June 21,000.Meadow Company's ending finished goods inventory policy is 10% of the following month's sales.March 1 inventory is projected to be 1,400 units.How many units will be produced in April?

Johnson Inc.produces leather handbags.Johnson Inc.estimates it will use 3,500 square meters of leather in production in August,and 3,750 square meters of leather in production in September.Johnson Inc.'s leather inventory policy is 30% of next month's production needs.What will leather purchases be in August?

Jaybird Inc.produces leather handbags.The sales budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales.Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour) .What will be the total labor cost for the month of August?