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Exam 6: Budgeting

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Question 1

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Describe at least five benefits of budgeting.

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Student s should include the following b...

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Question 2

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A process whereby the effect of fluctuations in the level of activity is built into the budgeting system is referred to as flexible budgeting.

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Question 3

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Below is budgeted production and sales information for Bluebird Company for the month of December: The unit selling price for product XXX is $5 and for product ZZZ is $14. Budgeted production for product XXX during the month is:

Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. If sales on account are budgeted to be $225,000 for March and $250,000 for April, what are the budgeted cash receipts from sales on account for April?

Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $260,000, $375,000, and $400,000, respectively, for September, October, and November. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale. The cash collections in September from accounts receivable are:

Budgetary slack can be avoided if lower and mid-level managers are requested to support all of their spending requirements with specific operational plans.

When preparing the cash budget, all the following should be considered except:

When management seeks to achieve personal departmental objectives that may work to the detriment of the entire company, the manager is experiencing:

Truliant co. sells a product called Withall and has predicted the following sales for the first four months of the current year: Ending inventory for each month should be 20% of next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?

The budgetary unit of an organization which is led by a manager who has both the authority over and responsibility for the unit's performance is known as a:

Cameron Manufacturing Co.'s static budget at 5,000 units of production includes $40,000 for direct labor and $5,000 for variable electric power. Total fixed costs are $20,000. At 8,000 units of production, a flexible budget would show:

Past performance is the best overall basis for evaluating current performance and assessing the need for corrective action.

Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. If sales on account are budgeted to be $150,000 for March and receipts from sales on account total $162,500 in April, what are budgeted sales on account for April?

Tara Company's budget includes the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Tara Company expect to collect in November as a result of current and past credit sales?

The budget procedure that requires all levels of management to start from zero in estimating sales, production, and other operating data is called continuous budgeting.

The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales. What would be the budgeted production for February?

The master budget is an integrated set of budgets that tie together a company's operating, financing and investing activities into an integrated plan for the coming year.

Part of the cash budget is based on information drawn from the capital expenditures budget.

Production and sales estimates for May for the Robin Co. are as follows: The number of units expected to be sold in May is:

Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12 per unit, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted purchases of Product A for the year would be: