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Exam 20: Master Budgets and Performance Planning

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Question 81

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Rich Company's experience shows that 20% of its sales are for cash and 80% are on credit.An analysis of credit sales shows that 50% are collected in the month following the sale,45% are collected in the second month,and 5% prove to be uncollectible.Calculate items (1)through (10)below: $\begin{array}{llr} &\text { August}&\text { September }&\text {October }&\text {November }\\\text { Sales }& \$ 500,000 &\$ 525,000 &\$ 535,000 & \$ 560,000 \end{array}$ $\begin{array}{lll}&\text { October } & \text { November }\\ \text { Receipts from cash sales } & \text { (1) } \underline{\quad\quad} & \text { (6) } \underline{\quad\quad}\\\text { Collections from August credit sales } & \text { (2) }\underline{\quad\quad} & \text { (7) }\underline{\quad\quad} \\\text { Collections from September credit } & \text { (3) } \underline{\quad\quad}& \text { (8) } \underline{\quad\quad}\\\text { sales } & \\\text { Collections from October credit sales } & \text { (4) } \underline{\quad\quad}& \text { (9) }\underline{\quad\quad} \\\text { Total cash collections during the } & \text { (5) }\underline{\quad\quad}& \text { (10) } \underline{\quad\quad} \end{array}$

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(1) 20% x $535,000 = $107,000
(2) 45% x ...

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Question 82

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In preparing a budget for the last three months of the current year,Urban Company is planning the units of merchandise it must order each month.The company's policy is to have 15% of the next month's sales in its inventory at the end of each month.Projected sales for October,November,and December are 27,000 units,29,500 units,and 32,500 units,respectively.How many units must be ordered in November?

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None...

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Question 83

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A company reports the following information from its sales account and sales budget: $\begin{array}{llr}\text { Sales } & \text { May } & \$ 52,000 \\& \text { June } & 47,000 \\& & \\\text { Expected } & \text { July } & \$ 45,000 \\\text { Sales: } & & \\& \text { August } & 55,000 \\& \text { September } & 60,000\end{array}$ Cash sales are normally 30% of total sales and all credit sales are expected to be collected in the month following the date of sale.The total amount of cash expected to be received from customers in September is:

A manufacturing budget should include a list of equipment to be scrapped and additional equipment to be purchased if the proposed production budget is carried out.

Airtex Company budgeted the following credit sales during the current year: September,$90,000; October,$123,000; November,$105,000; December,$111,000.Experience has shown that cash from credit sales is received as follows: 10% in the month of sale,50% in the first month after sale,35% in the second month after sale,and 5% is uncollectible.How much cash should Eastern Company expect to collect in November from all current and past credit sales?

Long-term liability data for the budgeted balance sheet is derived from:

What is a sales budget? How is the sales budget prepared?

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

Reference: 20_04 Kyoto, Inc. predicts the following sales in units for the coming four months: $\begin{array}{llr}&\text { April}&\text { May}&\text { June}&\text { July }\\\text { Sales in units } &240&280&300&240\\\end{array}$ Although each month's ending inventory of finished units should be 60% of the next month's sales, the March 31 finished goods inventory is only 100 units. A finished unit requires five pounds of raw material B. The March 31 raw materials inventory has 200 pounds of B. Each month's ending inventory of raw materials should be 30% of the following month's production needs. -The budgeted purchases of pounds of raw material B during May should be:

A company's data is presented below.Desired ending inventory is a consistent percentage of the next quarter's sales and the previous year's fourth quarter ending inventory of 560 units meets this requirement.Compute the expected production in the third quarter of the current year. $\begin{array} { l l l l l } \text { Quarter } & 1 & 2 & 3 & 4 \\\text { Expected sales units } & 7,000 & 5,000 & 8,000 & 6,000 \\\text { Units produced } & 6,840 & ? & ? & ?\end{array}$

Budgets are normally more effective when all levels of management are involved in the budgeting process.

Big Company manufactures keyboards.Management wishes to develop budgets for the upcoming quarter based on the following data: $\begin{array}{ll}\text { Sales in units } & 800 \text { units } \\\text { Selling price per unit } & \$ 60 \\\text { Inventory at beginning of the quarter }(F G) & 80 \text { units } \\\text { Desired ending inventory }(F G) & 130 \text { units } \\\text { Direct materials per unit: } & 4 \text { ounces plastic } \\\text { Plastic inventory at beginning of quarter } & 136 \text { ounces } \\\text { Desired ending inventory of plastic } & 84 \text { ounces } \\\text { Plastic cost } & \$ .18 \text { per ounce }\end{array}$ Compute the budgeted quantity of plastic that needs to be purchased for the next quarter.

Continuous budgeting is the practice of preparing a new budget for a selected number of future periods and revising those budgets as each period is completed.

The set of periodic budgets that are prepared and periodically revised in the practice of continuous budgeting is called:

The master budget process nearly always begins with the preparation of the ___________________ and usually finishes with the preparation of the ______________________,the ________________,and the ______________________.

A plan that reports the units or costs of merchandise to be purchased by a merchandising company during the budget period is called a:

Match the definitions 1 through 9 with the term or phrase (a)through (i). (a) Master budget (b) General and administrative expense budget (c) Budget (d) Safety stock (e) Budgeted income statement (f) Budgeted balance sheet (g) Sales budget (h) Cash budget (i) Merchandise purchases budget ______(1) A plan that shows the units or costs of merchandise to be purchased by a merchandising company during the budget period. ______(2) An accounting report that presents predicted amounts of the company's assets,liabilities,and equity balances at the end of the budget period. ______(3) A plan showing the units of goods to be sold and the sales to be derived; the usual starting point in the budgeting process. ______(4) An accounting report that presents predicted amounts of the company's revenues and expenses for the budgeting period. ______(5) A quantity of inventory or materials over the minimum to reduce the risk of running short. ______(6) A comprehensive business plan that includes specific plans for expected sales,the units of product to be produced,the merchandise or materials to be purchased,the expenses to be incurred,the long-term assets to be purchased,and the amounts of cash to be borrowed or loans to be repaid,as well as a budgeted income statement and balance sheet. ______(7) A formal statement of a company's future plans,usually expressed in monetary terms. ______(8) A plan that shows predicted operating expenses not included in the selling expenses budget. ______(9) A plan that shows the expected cash inflows and cash outflows during the budget period,including receipts from any loans needed to maintain a minimum cash balance and repayments of such loans.

Describe at least five benefits of budgeting.

A plan that lists dollar amounts to be received from disposing of plant assets and dollar amounts to be spent on purchasing additional plant assets is called a:

Lara Company has budgeted the following credit sales during 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: 20% in the month of sale,60% in the first month after sale,and 20% in the second month after sale.What will be the balance in Accounts Receivable at the end of November assuming the payment patterns have been as described?