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Exam 5: Planning and Forecasting in a Manufacturing Setting

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Question 101

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Pro-forma financial statements are prepared using the information developed in the budget process.These statements reflect the results of operations and the financial position of the organization as if all actions planned in the budget had occurred.Many of the master budget components provide direct input to the pro-forma financial statements. Required: For each of the following components of the financial statements, indicate which pro-forma financial statement will show the item (Income Statement or Balance Sheet) and the budget(s) within the master budget where the item originated.Number 1 provides an example.

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Question 102

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A company is preparing its cash budget for the first quarter of the year.It has $8,000 in cash at the beginning of the period.Cash sales for the quarter are budgeted at $180,000.Selling and administrative expenses are budgeted at $58,000, which includes $12,000 depreciation.Cash expenses are paid in the month incurred.Cash payment for inventory purchases are budgeted at $135,000.The desired cash balance on March 31 is $10,000.How much financing will the company need during the quarter?

A) $0
B) $3,000
C) $5,000
D) $7,000

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

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Question 103

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Custom Design manufactures baby blankets by turning a client's photograph of a new baby into a design printed on the blanket.This is a popular item, selling for $30, for new parents and grandparents.The following information has been provided by various units within Custom Design's departments.The company purchases fleece blankets in bundles of 100 at a price of $500 per bundle.Custom Design has to pay shipping charges of $10 per bundle.The process of transferring a picture onto a blanket costs $1.50.Each blanket is boxed in a cardboard box that costs $0.25 each.It takes one worker 15 minutes to prepare a blanket and transfer the picture onto the blanket and another worker 5 minutes to check the blanket for flaws in the printing and package the blanket.Workers are paid $15 per hour.Custom Design applies overhead at a rate of 120% of direct labor cost. Required Compute the standard cost of producing one blanket.

Which of the following is the most popular way to begin the budgeting process?

Which of the following is not a criticism of ideal standards?

Greenland, Inc.is a manufacturing company specializing in eco-friendly products.The company has recently developed a new water filter.Because the product is new to the market, Greenland does not have a prior history of sales to help develop its budget for the coming quarter.Greenland has agreements from several retail outlets to promote and stock the filters.Based on customers' request and Greenland's sales staff, managers have estimated January sales to be 200 units and estimate that sales will double each month for the next six months.Units are priced at $120 each. Required: Prepare a sales budget for the first quarter.

Assume you have just been hired by a large manufacturing company and have been assigned to a team that has the responsibility of gathering the data for completing the company's master budget.Your first assignment is to make a presentation to a meeting of all department managers concerning preparation of the master budget and the importance of each department manager providing realistic estimates to the team.You and the other team members have had a brain storming session to determine what you should cover.The team has come up with some questions you should answer during your presentation. Required: Answer the following questions. a.What is a master budget? b.What are the component parts of the master budget? c.How are the components related?

Which of the following is not a component of the master budget?

A budget is an operating plan that may be expressed in either financial or non-financial terms.

Cooper Company, a retailer of camping supplies has budgeted activity for January using the following data: Required: What is Cooper's budgeted cash receipts for January?

Most organizations have a plan for success.The plan may be formal or informal, but leaders should be able to identify what they want their organizations to achieve.One type of tactical planning is the budgeting process. Required: Describe the budget development process and explain how it fits into management's planning process.

The plan that helps manage cash flow is the

Grantham Manufacturing Company makes oak rocking chairs.Budgeted sales are 20,000 for July, 25,000 for August, 28,000 for September and 30,000 for October.Grantham maintains an ending inventory equal to 10% of the current month's sales.Ending inventory at June 30th was 3,000. Required: Prepare a production budget for the 3rd quarter ending September 30.

Which of the following is one of the major reasons that small businesses fail?

Barry Co.manufactures leather briefcases and carryalls.Barry's production manager has provided the following production budget.Each briefcase or carryall requires 1.2 yards of leather fabric and Barry maintains an ending inventory of leather fabric equal to 25% of the next month's production needs. If each yard of leather fabric costs $6.40, how much should Barry budget for purchases of fabric in February?