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Exam 8: Budgeting and Planning

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Question 1

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Spencer Company has budgeted sales for the upcoming months as follows: Seventy percent of the sales are credit sales, the remainder are made in cash. Credit sales are collected 40% in the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. a. Compute Spencer's cash receipts for April. b. Compute Spencer's cash receipts for May. c. Compute the accounts receivable balance for May 31.

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a. $631,350 = ($645,000 × .30) + ($645,0...

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Question 2

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Which of the following is not a benefit of budgeting?

A) It forces managers to look to the future.
B) It plays an important role in communication within the organization.
C) It serves an important role in motivating and rewarding employees.
D) It builds organizational slack.

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

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Question 3

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Harney, Inc. has prepared the following budgets for March. In March, budgeted production equals budgeted sales, and raw materials inventory will stay constant. What is budgeted cost of goods sold for March?

Pacific has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Pacific'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. Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for August?

When calculating the direct labor budget, the starting point should be:

An advantage of budgeting is that it provides a benchmark for evaluating performance

Rapid Corp. sells its product for $200. Forecasted sales are 1,500 units in January, 1,800 in February, and 1,600 in March. Variable costs are based on sales, and consist of commissions (6% of sales), cooperative advertising (2%) and shipping (6%). Monthly fixed costs are $7,000 sales salaries, $6,500 office salaries, $2,500 depreciation, $1,800 office rent, $900 insurance and $1,200 utilities. a. Prepare Rapid's selling and administrative expense budget for the period January through March. Present monthly totals as well as a 3-month total.

Budgeted cost of goods sold should include which of the following?

Budgeted cash collections are based on the sales budget

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour) . How many unskilled labor hours will be budgeted for August?

____________ are the specific actions managers use to achieve their goals.

A component of the financial budget is the:

The selling and administrative expense budget is based on the production budget

A top-down approach to budgeting is one that is:

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) . How much is total labor cost during the three months July through September?

Which of the following statements about employee motivation is true?

Willow Products expects the following sales of its single product: Willow Products desires an ending finished goods inventory to be equal to 30% of the next month's sales needs. Actual March 1 inventory is projected to be 1,300 units. Required: Prepare a production budget for Willow Products for as many months as is possible.

Preparing the sales budget includes calculating the revenues to be earned from units sold in addition to the number of units to be sold

Budgeted direct labor hours are calculated as:

Carmen is a retailer of scrapbooking products. The sales forecast for the coming months is: Carmen's sales are 70% cash and 30% store credit. The credit sales are collected 60% in the month of sale, the remainder the following month. Accounts receivable on April 1 are $32,000. Carmen's cost of sales averages 65% of revenues. The inventory policy is to carry 40% of next month's sales needs. April 1 inventory will be as expected under the policy. Carmen pays for purchases 30% in the month of purchase and 70% the following month. Accounts payable on April 1 is $125,000. a. Prepare a purchases budget for as many months as is possible. b. Prepare a cash payments budget for April through July. c. Prepare a cash receipts budget for April through July.