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Exam 9: How Are Operating Budgets Created

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Question 21

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Freeman Company plans to sell 65,000 units in June and 72,500 units in July.Freeman's policy is to keep 30% of the next month's sales in ending inventory.If the ending inventory in May was consistent with this policy,how many units should be produced in June?

A) 86,750 units
B) 106,250 units
C) 67,250 units
D) 62,750 units
E) None of the answer choices is correct.

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Question 22

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All of the following appear on the direct labor budget except:

A) units to be produced.
B) labor rate per hour.
C) direct labor hours per unit.
D) indirect labor hours per unit.
E) None of the answer choices is correct.

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Question 23

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Which of the following best describes a production budget?

All of the following appear on the manufacturing overhead budget except:

Exhibit 9-1 Sporting Inc.is a distributor which sells one product for $100 per unit.Sporting pays $60 to buy the product.In addition,fixed costs total $60,000 per month.Sporting wishes to maintain an inventory at the end of each month equal to 30% of the next month's projected sales.Purchases are paid in the month after purchase. Sporting makes all sales on credit and collects 40% in the month of sale and 60% in the month after sale.Budgeted monthly sales in units for the first five months of 2013 are as follows: -Refer to Exhibit 9-1.What dollar amount of merchandise inventory will be purchased in April?

Cathy's Cookies produces cookies for resale at local grocery stores.The company is currently in the process of establishing a master budget on a quarterly basis for this coming fiscal year,which ends December 31.Prior year quarterly sales were as follows (1 unit = 1 batch): Unit sales are expected to increase 20 percent,and each unit is expected to sell for $5.Management prefers to maintain ending finished goods inventory equal to 15 percent of next quarter's sales.Assume finished goods inventory at the end of the fourth quarter budget period is estimated to be 2,000 units. (1)Prepare a sales budget for Cathy's Cookies. (2)Prepare a production budget for Cathy's Cookies.

The units to be produced in the production budget is typically the same as the expected sales in units in the sales budget.

Muraki Company has one product and sold 10,000 units in the first quarter of 2012.The company expects to sell 15% more units in the first quarter of 2013,at a price of $50 per unit.Based on this information,what is the amount of sales revenue that will appear in the budgeted income statement for the first quarter of 2013?

Garibaldi Inc.collects 40% of its sales in the month of sale and the other 60% in the following month.The following shows budgeted sales for October through December. What is the amount of cash receipts budgeted for November?

Exhibit 9-1 Sporting Inc.is a distributor which sells one product for $100 per unit.Sporting pays $60 to buy the product.In addition,fixed costs total $60,000 per month.Sporting wishes to maintain an inventory at the end of each month equal to 30% of the next month's projected sales.Purchases are paid in the month after purchase. Sporting makes all sales on credit and collects 40% in the month of sale and 60% in the month after sale.Budgeted monthly sales in units for the first five months of 2013 are as follows: -Refer to Exhibit 9-1.What will cash collections be in April?

Victoria Company's policy is to keep 20% of the next month's sales in ending inventory.If Victoria meets this policy for its ending inventory in May,and sales are expected to be 14,000 units in June and 20,000 units in July,how many units need to be produced in June?

In general,the budgeted income statement is probably the most carefully scrutinized component of the master budget.

In the budgeting process,the dollar amount for goods sold during the month but not collected is called:

All of the following appear on the direct materials purchases budget except:

Which of the following best describes the selling and administrative budget?

A budget committee is primarily responsible for overseeing the budget process and approving the master budget.

In the direct materials purchases budget,the key equation used to determine direct materials to be purchased is:

Fireside Inc.had sales as follows during 2012: Fireside expects sales in each quarter of 2013 to be 15% more than the respective quarters for 2012.If each unit sells for $40,what amounts will appear as sales revenue in the quarterly sales budgets for 2013?

Companies generally obtain sales forecasts from many different sources.

Budgeted manufacturing overhead costs include all of the following except: