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Exam 22: Master Budgets and Planning

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Question 21

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Traditional budgeting is generally better than activity-based budgeting when attempting to reduce costs by eliminating non-value-added activities.

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Question 22

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Presented below are terms or phrases preceded by letters a through j and followed by a list of definitions 1 through 10.Match the correct definitions with the terms or phrases by placing the letter of the term or phrase in the answer space provided at the beginning of the definition.

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Responses

A plan that lists the types and amounts of selling expenses expected during the budget period.

Manufacturing budget

A plan that shows the predicted costs for direct materials,direct labor,and overhead costs to be incurred in manufacturing the units in the production budget.

Selling expense budget

An accounting report that presents predicted amounts of the company's assets, liabilities,and equity as of the end of the budget period.

Budgeted balance sheet

A plan that shows the expected cash inflows and outflows during the budget period,including receipts from loans needed to maintain a minimum cash balance and repayments of such loans.

Rolling budgets

A new set of budgets added to replace the ones that have lapsed as each budget period goes by.

Production budget

The practice of preparing budgets for a selected number of several periods and revising those budgets as each period is completed.

Cash budget

A plan showing the units of goods to be sold and the sales to be derived; usually the starting point in the budgeting process.

Capital expenditure budget

A formal statement of future plans,usually expressed in monetary terms.

Continuous budgeting

A plan that lists dollar amounts to be both received from disposing of plant assets and spent on purchasing additional plant assets to carry out the budgeted business activities.

Budget

A plan showing the number of units to be produced each month.

Sales budget

Premises

A plan that lists the types and amounts of selling expenses expected during the budget period.

A plan that shows the predicted costs for direct materials,direct labor,and overhead costs to be incurred in manufacturing the units in the production budget.

An accounting report that presents predicted amounts of the company's assets, liabilities,and equity as of the end of the budget period.

A plan that shows the expected cash inflows and outflows during the budget period,including receipts from loans needed to maintain a minimum cash balance and repayments of such loans.

A new set of budgets added to replace the ones that have lapsed as each budget period goes by.

The practice of preparing budgets for a selected number of several periods and revising those budgets as each period is completed.

A plan showing the units of goods to be sold and the sales to be derived; usually the starting point in the budgeting process.

A formal statement of future plans,usually expressed in monetary terms.

A plan that lists dollar amounts to be both received from disposing of plant assets and spent on purchasing additional plant assets to carry out the budgeted business activities.

A plan showing the number of units to be produced each month.

Responses

Manufacturing budget

Selling expense budget

Budgeted balance sheet

Rolling budgets

Production budget

Cash budget

Capital expenditure budget

Continuous budgeting

Budget

Sales budget

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Correct Answer

Premises

Responses

A plan that lists the types and amounts of selling expenses expected during the budget period.

A plan that shows the predicted costs for direct materials,direct labor,and overhead costs to be incurred in manufacturing the units in the production budget.

An accounting report that presents predicted amounts of the company's assets, liabilities,and equity as of the end of the budget period.

A plan that shows the expected cash inflows and outflows during the budget period,including receipts from loans needed to maintain a minimum cash balance and repayments of such loans.

A new set of budgets added to replace the ones that have lapsed as each budget period goes by.

The practice of preparing budgets for a selected number of several periods and revising those budgets as each period is completed.

A plan showing the units of goods to be sold and the sales to be derived; usually the starting point in the budgeting process.

A formal statement of future plans,usually expressed in monetary terms.

A plan that lists dollar amounts to be both received from disposing of plant assets and spent on purchasing additional plant assets to carry out the budgeted business activities.

A plan showing the number of units to be produced each month.

Premises

A plan that lists the types and amounts of selling expenses expected during the budget period.

A plan that shows the predicted costs for direct materials,direct labor,and overhead costs to be incurred in manufacturing the units in the production budget.

An accounting report that presents predicted amounts of the company's assets, liabilities,and equity as of the end of the budget period.

A plan that shows the expected cash inflows and outflows during the budget period,including receipts from loans needed to maintain a minimum cash balance and repayments of such loans.

A new set of budgets added to replace the ones that have lapsed as each budget period goes by.

The practice of preparing budgets for a selected number of several periods and revising those budgets as each period is completed.

A plan showing the units of goods to be sold and the sales to be derived; usually the starting point in the budgeting process.

A formal statement of future plans,usually expressed in monetary terms.

A plan that lists dollar amounts to be both received from disposing of plant assets and spent on purchasing additional plant assets to carry out the budgeted business activities.

A plan showing the number of units to be produced each month.

Responses

Question 23

Multiple Choice

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A plan that shows the predicted costs for direct materials,direct labor,and overhead to be incurred in manufacturing the units in the production budget is called the:

Nano,Inc.is preparing its budget for the second quarter.The following sales data have been forecasted: How many units should be purchased in April,May,and June? How many units should be purchased in the second quarter in total?

The merchandise purchases budget is the starting point for preparing the master budget.

Grafton sells a product for $700.Unit sales for May were 400 and a 3% growth in unit sales is forecasted for each month.Grafton pays a sales manager a monthly salary of $3,000 and a commission of 2% of sales in dollars.Assume 30% of Grafton's sales are for cash.The remaining 70% are credit sales; these customers pay in the month following the sale.Compute the budgeted cash receipts for June.

Northern Company is preparing a cash budget for June.The company has $12,000 cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during June.Northern Company has an agreement with its bank to maintain a cash balance of at least $10,000.As of May 31,the company owes $15,000 to the bank.To maintain the $10,000 required balance,during June the company must:

What is a merchandise purchases budget? How is the merchandise purchases budget constructed?

Kent 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 not collected.Compute the amount of cash received from total sales for June.

What is a production budget?

A department store has budgeted cost of goods sold for August of $60,000 for its women's coats.Management wants to have $12,000 of coats in inventory at the end of the month to prepare for the winter season.Beginning inventory in August was $8,000.What dollar amount of coats should be purchased to meet the above plans?

One of the major benefits of formal budgeting is the positive effect it can have on employee attitudes if applied correctly.

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

The overall coordinating activity of the budget process is the responsibility of the:

The Lamb Company budgeted sales for January,February,and March of $96,000,$88,000,and $72,000,respectively.Seventy percent of sales are on credit.The company collects 60% of its credit sales in the month following sale,35% in the second month following sale,and 5% is not collected.What are Lamb's expected cash receipts for March related to all current and past sales?

Stritch Company is trying to decide how many units of merchandise to order each month.The company's policy is to have 20% of the next month's sales in inventory at the end of each month.Projected sales for August,September,and October are 30,000 units,20,000 units,and 40,000 units,respectively.How many units must be purchased in September?

Match the definitions 1 through 9 with the correct term or phrase a through i.

A formal statement of future plans,usually expressed in monetary terms,is a:

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.