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Exam 22: Master Budgets and Planning

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Question 41

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A rolling budget is a specific budget application relevant only to a merchandising company.

A) True
B) False

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Question 42

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A cash budget shows the expected cash receipts and cash expenditures during the budget period.

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B) False

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Question 43

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Cahuilla Corporation predicts the following sales in units for the coming four months: Sales in Units $\begin{array} { c c c c } \text { April } & \text { May } & \text { June } & \text { July } \\240 & 280 & 300 & 240\end{array}$ Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 finished goods inventory is 96 units. A finished unit requires five pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 200 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. -The budgeted production for May is:

Which of the following statements about budgeting is false?

The budget that lists the dollar amounts to be both received from plant asset disposals and spent to purchase additional plant assets to carry out the budgeted business activities is the ________.

The merchandise purchases budget depends on information provided by the sales budget.

The process of evaluating performance can be improved by using budgets.

A sporting equipment store expects to purchase $8,000 of ski boots in October. The store had $2,000 of ski boots in merchandise inventory at the beginning of October, and expects to have $3,000 of ski boots in merchandise inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?

Describe at least five benefits of budgeting.

Which of the following accounts would appear on a budgeted balance sheet?

Zhang Industries is preparing a cash budget for June. The company has $25,000 cash at the beginning of June and anticipates $95,000 in cash receipts and $111,290 in cash disbursements during June. The company has no loans outstanding on June 1. Compute the amount the company must borrow, if any, to maintain a $20,000 cash balance.

Widmer Corp. requires a minimum $10,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). If the ending cash balance exceeds the minimum, the excess will be applied to repaying any outstanding loan balance. The cash balance on July 1 is $10,400. 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.

If a merchandiser's budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and cost of goods sold is expected to be $10,260, then budgeted purchases should be $11,360.

On its December 31, 2017, balance sheet, Calgary Industries reports equipment of $370,000 and accumulated depreciation of $74,000. During 2018, the company plans to purchase additional equipment costing $80,000 and expects depreciation expense of $30,000. Additionally, it plans to dispose of equipment that originally cost $42,000 and had accumulated depreciation of $5,600. The balances for equipment and accumulated depreciation, respectively, on the December 31, 2018 budgeted balance sheet are:

What is a cash budget? How can management use a cash budget?

To develop the sales budget, companies must estimate both unit sales and the production cost per unit.

Memphis Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are collected in the second month. - Compute the amount of accounts receivable reported on the company's budgeted balance sheet for June 30.

________ is a budget system based on expected activities and their levels that enables management to plan for resources required to perform the activities.

The ________ shows expected cash inflows and outflows during the budget period.

Wichita Industries' sales are 10% cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 50% in the next month, and 20% in the following month. On December 31, the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales. Assume that total sales for January are budgeted to be $50,000. What are the expected cash receipts for January from the current and past sales?