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Exam 7: Planning for Profit and Cost Control

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Question 51

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What is the amount of ending inventory that the company will report on its pro forma balance sheet?

A) $7,500
B) $10,500
C) $35,300
D) $60,500

E) A) and C)
F) None of the above

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Question 52

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The master budget includes several individual budgets,which are interdependent.Provide at least two examples of connections (relationships)between budgets.

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Question 53

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What is the role of top management in a participative budgeting system?

The nature of planning changes with the length of the time period being considered.Generally,the shorter the time period,the more general the plans.

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

Which of the following statements is

Select the incorrect statement about the planning process.

Select the incorrect statement regarding the human factor in the budgeting process.

Dobson Company expects to begin operating on January 1.The company's master budget contained the following operating expense budget: $\begin{array} { | l | r | r | r | } \hline & { \text { January } } & \text { February } & { \text { March } } \\\hline \text { Salary expense } & \$ 40,000 & \$ 36,000 & \$ 36,000 \\\hline \text { Sales commissions, } 5 \% \text { of sales } & 24,000 & 30,000 & 28,000 \\\hline \text { Utilities } & 2,800 & 2,800 & 2,800 \\\hline \text { Depreciation on store equipment } & 1,800 & 1,800 & 1,800 \\\hline \text { Rent } & 7,200 & 7,200 & 7,200 \\\hline \text { Miscellane ous } & 1,800 & 1,800 & 1,800 \\\hline \text { Total operating expenses } & \$ 77,600 & \$ \quad 79,600 & \$ 77,600 \\\hline\end{array}$ Sales commissions are paid in cash in the month following the month in which the expense is recognized.All other expense items requiring cash payment are paid in the month in which they are recognized.The amount of cash to be paid for operating expenses during the month of January is:

The master budget normally covers:

Four purposes or advantages for budgeting involve planning,coordination,performance measurement,and punitive action.

How much will the cash payments for purchases be in November?

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual.Which advantage of budgeting would have helped him identify this problem sooner?

Compton Company expects the following total sales: $\begin{array}{|l|c|}\hline \text { Month } & \text { Sales } \\\hline \text { March } & \$ 30,000 \\\hline \text { April } & \$ 20,000 \\\hline \text { May } & \$ 30,000 \\\hline \text { June } & \$ 25,000 \\\hline\end{array}$ The company expects 60% of its sales to be credit sales and 40% for cash.Credit sales are collected as follows: 30% in the month of sale,70% in the month following the sale.The budgeted accounts receivable balance on May 31 is:

Which of the following budgets needs to be prepared prior to preparing an inventory purchases budget?

The budgeting process that involves adding a month to the end of the budget period at the end of each month,thus maintaining a twelve-month planning horizon,is referred to as:

Oakton Furniture provided the following information relevant to its sales for December Year 1 and the first quarter of Year 2 $\begin{array}{|l|l|r|r|r|}\hline& \text { Dec. Year } 1 &\text { Jan. Year } 2 &\text { Feb. Year } 2 & \text { Mar. Year } 2 \\\hline & \text { (Actual) } & \text { (Budgeted) }& \text { (Budgeted) }& \text { (Budgeted) } \\\hline \text {Credit sales } &\$ 120,000 & \$ 280,000 & \$ 310,000 & \$ 220,000 \\\hline \text { Cash sales } &\$ 20,000 & \$ 50,000 & \$ 60,000 & \$ 24,000 \\\hline\end{array}$ Based on the company's collection history,42% of credit sales are collected in month of sale and the remainder is collected in the following month.Cash collections in January from December credit sales would be:

Which of the following accounts would appear on the sales budget and the pro forma income statement?

Benton Company's sales budget shows the following expected total sales: $\begin{array}{|l|c|}\hline {\text { Month }} & \text { Sales } \\\hline \text { January } & \$ 25,000 \\\hline \text { February } & \$ 30,000 \\\hline \text { March } & \$ 35,000 \\\hline \text { Apnil } & \$ 40,000 \\\hline\end{array}$ The company expects 80% of its sales to be on account (credit sales) .Credit sales are collected as follows: 25% in the month of sale,72% in the month following the sale with the remainder being uncollectible and written off.The total cash receipts during April would be:

The pro forma income statement gives managers an advance estimate of a company's profitability.