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Exam 21: Budgeting

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Question 31

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The sales budget is derived from the production budget.

A) True
B) False

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Question 32

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Which of the following would not be used in preparing a cash budget for October?

A) beginning cash balance on October 1
B) budgeted salaries expense for October
C) estimated depreciation expense for October
D) budgeted sales and collections for October

E) A) and B)
F) B) and D)

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Question 33

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Planning for capital expenditures is necessary for all of the following reasons except

Budgeted production of Product B for the year would be

The treasurer of Calico Dreams Company has accumulated the following budget information for the first two months of the coming fiscal year: ​​ The company expects to sell about 35% of its merchandise for cash.Of sales on account,80% are collected in full in the month of the sale,and the remainder in the month following the sale.One-fourth of the manufacturing costs are paid in the month in which they are incurred,and the other three-fourths in the following month.Depreciation,insurance,and property taxes represent $6,400 of the monthly selling and administrative expenses.Insurance is paid in February,and property taxes are paid yearly in September.A $40,000 installment on income taxes is to be paid in April.Of the remainder of the selling and administrative expenses,one-half are to be paid in the month in which they are incurred and the balance in the following month.Capital additions of $250,000 are paid in March. Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000.Current liabilities as of March 1 are accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for operating expenses).Management desires to maintain a minimum cash balance of $25,000. Prepare a monthly cash budget for March and April.

The budgeted volume of production is based on the sum of (1)the expected sales volume and (2)the desired ending inventory,less (3)the estimated beginning inventory.

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

A formal written statement of management's plans for the future,expressed in financial terms,is called a budget.

A budget procedure that provides for the maintenance at all times of a twelve-month projection into the future is called continuous budgeting.

Big Wheel,Inc.collects 25% of its sales on account in the month of the sale and 75% in the month following the sale.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?

A capital expenditures budget is prepared before the operating budgets.

The cash collections expected in October are

Principal components of a master budget include

Chelsa 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 $23,000.At 8,000 units of production,a flexible budget would show

The dollar amount of Material B used in production during the year is

Detailed supplemental schedules based on department responsibility are often prepared for major items in the operating expenses budget.

Budgeting supports the planning process by encouraging all of the following activities except

The master budget of a small manufacturer would normally include all necessary component budgets except the budgeted balance sheet.

The first budget to be prepared is usually the cash budget.

For February,sales revenue is $700,000; sales commissions are 5% of sales; the sales manager's salary is $96,000; advertising expenses are $90,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are $2,500 plus 1 / 2 of 1% of sales.Total selling expenses for the month of February are