233289982 Chapter 9 Quiz Info

Managerial Accounting, 3e (Braun/Tietz) Chapter 9 The Master Budget 1) Strategic planning involves setting short-term goals extending three to four months into the future. Answer: FALSE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 2) Budgeting is helpful to plan for cash inflows and outflows. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 3) A budget is a quantitative expression of a plan that helps managers coordinate and implement the plan. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 4) Budgets do not provide benchmarks to help managers evaluate performance. Answer: FALSE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 5) Budgets communicate financial plans throughout the company. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that 1 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall comprise the master budget 6) One of the key benefits of budgeting is that it forces managers to plan. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 7) The capital expenditures budget is not part of the operating budget. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 8) The master budget is the set of budgeted financial statements and supporting schedules for the entire organization. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 9) The master budget includes both the operating budgets and the financial budgets. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 10) Management uses budgeting to express its plans and to assess how well it's reaching its goals. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 2 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 11) Strategic planning involves setting long-term goals that extend 5-10 years into the future. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 12) A rolling budget is a budget that is continuously updated so that the next 12 months of operations are always budgeted. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 13) The financial budgets project the collection and payment of cash, as well as forecast the company's budgeted balance sheet. Answer: TRUE Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 14) Budget committees most often would include all of the following people except A) CEO B) Research and development manager C) Shareholder D) Marketing manager Answer: C Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 3 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall publishing as Prentice Hall . and then amounts are added in.15) Budgets are used for all of the following. Answer: C Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 16) Strategic planning involves A) setting long-term goals that extend 5-10 years into the future. except A) planning for the future. D) executing directives from the board of directors. B) setting short-term goals that extend one year into the future. B) controlling operations. C) setting goals for next month. Answer: B Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 4 Copyright © 2013 Pearson Education. B) is continuously updated. Inc. C) recording actual results. D) is rolled out by upper management. C) begins with zero for each expense. Answer: A Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 17) A rolling budget is a budget that A) extends 5-10 years into the future. D) directing operations. so that the next 12 months of operations are always budgeted. 18) Most companies use ________ when developing the budgets each year. D) because of all of the above. D) None of the above are true. B) to make their performance look worse. A) a top-down approach B) zero-based budgets C) slack-based budgets D) participative budgeting Answer: D Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 19) Which of the following is a potential disadvantage of participative budgeting? A) Managers are more likely to be motivated by budgets they helped to create. C) because of certainty about the future. Inc. C) Managers should have more detailed knowledge for creating realistic budgets. publishing as Prentice Hall . B) Managers may build slack into the budget. Answer: A Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 5 Copyright © 2013 Pearson Education. Answer: B Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 20) Managers may intentionally build slack into the budget A) to have the resources they need in the event of budget cuts. D) usually is made up of the Board of Directors. B) to make their performance look better. D) because of all of the above. Inc. publishing as Prentice Hall . B) usually is made up of the accounting staff. Answer: D Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 22) The budget committee A) rarely has the final say on the budget. D) removes unwarranted slack. Answer: C Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 23) All of the following are functions of the budget committee except A) reviews submitted budgets. Answer: B Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 6 Copyright © 2013 Pearson Education. C) to have the resources they need in the event of budget cuts. B) determines the bonuses awarded to those who achieve budget targets. C) approves the final budget.21) Managers may intentionally build slack into the budget A) because of uncertainty about the future. C) usually is made up of managers from all areas of the value chain. 24) Which of the following is the starting place for budgeting? A) Last year's budget B) Last year's actual amounts C) Zero D) Any of the above Answer: D Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 25) Which of the following is an advantage of zero-based budgeting? A) It is time consuming. Inc. B) It forces managers to justify every dollar put in the budget. so some expenses may be lower than they were in previous years. Answer: B Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 26) The ________ budget is part of the financial budgets. C) It is labor intensive. A) cash B) sales C) direct materials D) operating expense Answer: A Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 7 Copyright © 2013 Pearson Education. publishing as Prentice Hall . D) All of the above are advantages. 27) The ________ budget is part of the financial budgets. A) capital expenditure B) budgeted balance sheet C) production D) cash Answer: C Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 8 Copyright © 2013 Pearson Education. Inc. publishing as Prentice Hall . A) production B) budgeted income statement C) budgeted balance sheet D) sales Answer: C Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 29) The ________ budget is part of the operating budgets. A) direct labor B) capital expenditure C) budgeted income statement D) manufacturing overhead Answer: B Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 28) The ________ budget is part of the financial budgets. 3 Answer: D Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 31) Which of the following is an advantage of the budgeting process? A) Coordinates the activities of the organization B) Assures that the lowest cost materials will be obtained C) Assures the company will achieve its objectives D) Guarantees that a profit will be achieved Answer: A Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 32) Regarding the budgeting process. 1. C) The budget should be designed from the bottom up. 2 C) 3. which of the following statements is true? A) The budget should always be designed by top corporate management. Direct materials budget A) 2. Production budget 2. 1 B) 1. Sales budget 3. with input from employees at all levels. 2 D) 2. 1. publishing as Prentice Hall . Answer: C Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 9 Copyright © 2013 Pearson Education. D) All of the listed statements are true regarding the budgeting process.30) Which of the following alternatives reflects the proper order of preparing components of the master budget? 1. B) The budget should be approved by the company's external auditors. 3. Inc. 3. because they have the overall objectives of the company in mind. Operating budget 3. 1 C) 1. D) Budgets promote communication and coordination between departments. 2 B) 2. Inc. 1. 2 Answer: B Diff: 2 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 10 Copyright © 2013 Pearson Education. 3. C) Budgets help to coordinate the activities of the entire organization. Financial budget 2. Answer: B Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 35) Which of the following alternatives reflects the proper order of preparing components of the master budget? 1. B) The operating budget should be prepared by top management.33) Which of the following is a benefit of budgeting? A) Focuses management's attention on the future B) Improved decision-making processes C) Improved motivation by employees D) All of the above Answer: D Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 34) Which of the following statements about budgeting is not true? A) Budgeting is an aid to planning and control. Capital expenditures budget A) 1. 3. publishing as Prentice Hall . rather than mid-management personnel. 2. 3 D) 3. Inc.36) Which of the following budgets is a major part of the master budget and focuses on the income statement and its supporting schedules? A) cash B) operating C) capital expenditures D) financial Answer: B Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 37) Which of the following budgets is the cornerstone of the master budget? A) sales B) cash C) budgeted balance sheet D) operating expense Answer: A Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 38) "Sets the targeted revenue and expenses for the period" is best described by which of the following terms? A) Responsibility center B) Capital budget C) Operating budget D) Sensitivity analysis Answer: C Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 11 Copyright © 2013 Pearson Education. publishing as Prentice Hall . Diff: 2 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 41) When creating the sales budget. 2. Benchmarking: Budgets provide a benchmark that motivates employees and helps managers evaluate performance. It forces managers to consider relations among operations across the entire value chain. each month will always predict the same amount of budgeted sales. publishing as Prentice Hall . Planning: The budgeting process forces managers to spend time planning for the future. Inc. Answer: FALSE Diff: 1 LO: 9-2 EOC: E9-16 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 42) The first component of the operating budget is the production budget. management simply takes the sales from the year before and divides that total by 12 months. The budget provides a target that most managers will try to achieve. Thus.39) "The comprehensive budget" is best described by which term below? A) Operating budget B) Sensitivity analysis C) Responsibility center D) Master budget Answer: D Diff: 1 LO: 9-1 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 40) List and describe three reasons why a company and its managers could benefit from the use of budgeting. Coordination and Communication: The budget coordinates a company's activities. Answer: FALSE Diff: 1 LO: 9-2 EOC: E9-16 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that 12 Copyright © 2013 Pearson Education. rather than only concerning themselves with daily operations. Answer: 1. 3. especially if they participated in the budgeting process and the budget has been set at a realistic level. inventory. publishing as Prentice Hall . Answer: FALSE Diff: 1 LO: 9-2 EOC: E9-16 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 45) Budgeting includes planning for ending inventory. purchases and cost of goods sold budget. Answer: TRUE Diff: 1 LO: 9-2 EOC: E9-23 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 13 Copyright © 2013 Pearson Education. Answer: FALSE Diff: 1 LO: 9-2 EOC: E9-23 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 44) The sales budget must be prepared after every other component of the operating budget. Inc.comprise the master budget 43) The three components of the operating budget are the sales budget. and the cash budget. Answer: TRUE Diff: 1 LO: 9-2 EOC: E9-18 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 46) The sales budget is the cornerstone of the master budget. C) units to be produced .beginning inventory.beginning inventory of DM.desired end inventory .47) On the production budget. Answer: A Diff: 1 LO: 9-2 EOC: E9-18A AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 14 Copyright © 2013 Pearson Education. C) unit sales .beginning inventory. the number of units to be produced is computed as A) unit sales + desired end inventory + beginning inventory. B) quantity needed for production + indirect labor hours . publishing as Prentice Hall . the total quantity of direct labor hours needed is computed as A) units to be produced × direct labor hour per unit. D) quantity needed for production .direct labor hours.desired end inventory + beginning inventory. D) estimated direct labor hours needed × cost per hour.desired end inventory of DM + beginning inventory DM.desired end inventory of DM + beginning inventory of DM. B) unit sales + desired end inventory .beginning inventory of DM. Answer: B Diff: 1 LO: 9-2 EOC: E9-18A AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 48) On the direct labor budget. Answer: A Diff: 1 LO: 9-2 EOC: E9-18A AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 49) On the direct materials budget. C) units to be produced . Inc. D) unit sales .indirect labor hours × cost per labor hour. the total quantity of direct materials needed is computed as A) quantity needed for production + desired end inventory of DM . B) units to be produced + desired end inventory of DM . not dollars. Answer: C Diff: 1 LO: 9-2 EOC: E9-23A AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 52) The ________ budget begins with the number of units to be sold. A) manufacturing overhead B) direct materials C) production D) capital expenditures Answer: C Diff: 1 LO: 9-2 EOC: E9-16A AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 15 Copyright © 2013 Pearson Education. A) production B) sales C) direct materials D) manufacturing overhead Answer: A Diff: 1 LO: 9-2 EOC: E9-18A AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 51) The ________ budget starts with the number of units to be produced. Inc. publishing as Prentice Hall .50) The ________ budget is the only budget stated ONLY in units. A) production B) operating expense C) direct materials D) All of these choices start with the number of units to be produced. Inc. A) cash budget B) budgeted statement of cash flows C) budgeted income statement D) sales budget Answer: D Diff: 1 LO: 9-2 EOC: E9-16 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 16 Copyright © 2013 Pearson Education. publishing as Prentice Hall .53) Which of the following budgets usually shows separate sections for fixed and variable costs? A) Direct materials and manufacturing overhead budget B) Manufacturing overhead budget and production budget C) Production budget and manufacturing overhead budget D) Operating expense budget and manufacturing overhead budget Answer: D Diff: 1 LO: 9-2 EOC: E9-23A AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 54) Which of the following budgets or financial statements is part of the operating budget? A) Sales budget B) Budgeted balance sheet C) Capital expenditures budget D) Cash budget Answer: A Diff: 1 LO: 9-2 EOC: E9-16 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 55) The ________ is a plan that shows the units to be sold and the projected selling price and is also the starting point in the budgeting process. purchases and cost of goods sold budget B) Cash budget C) Sales budget D) Budgeted income statement Answer: B Diff: 1 LO: 9-2 EOC: E9-23 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 57) Which of the following is not included in the operating budget? A) Budgeted income statement B) Sales budget C) Inventory budget D) Budgeted balance sheet Answer: D Diff: 1 LO: 9-2 EOC: E9-23 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 58) In preparing the operating budget. D) purchases budget. C) budgeted income statement.56) Which of the following is not part of the operating budget? A) Inventory. Answer: B Diff: 1 LO: 9-2 EOC: E9-23 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 17 Copyright © 2013 Pearson Education. publishing as Prentice Hall . Inc. B) sales budget. the first step is preparing the A) cash budget. which of the following statements is true regarding cost of goods sold (COGS)? A) COGS will exceed cost of goods available for sale.000 beefy dog treats in January and 9.000 B) January $1.000.000. February 9000 × $ 3 = $ 27.000.59) Desired ending inventory is 20% of next month's sales.000 Diff: 1 LO: 9-2 EOC: E9-16 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 18 Copyright © 2013 Pearson Education.000. publishing as Prentice Hall . Answer: B Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 60) Desired ending inventory is 25% more than beginning inventory.667. What will be the total sales revenue reflected in the sales budget for those months? A) January $15. C) Purchases will be less than cost of goods sold. C) COGS will exceed purchases.000 Answer: A Explanation: A) January 5000 × $3 = $15.000.667 D) January $27. which of the following statements is true regarding purchases? A) Purchases will be more than cost of goods sold.000.000 in February for $3 each. B) Purchases cannot be predicted from the information given.000. February $3. February $1. If cost of goods sold is $300. Answer: B Diff: 3 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 61) Loyal Pet Company expects to sell 5. B) COGS will be less than purchases. Inc.000 C) January $3. If purchases total $160. D) Purchases will equal cost of goods sold. D) COGS will equal $55. February $27. February $15.000 and next month's sales is $900. 600 D) $23. Credit sales $ 10. February $15.000 in July should be followed by 30% increases during August and September.733.884 C) $22.600.200 B) $25.120 B) $25. February 9.000. Credit sales $ 12.200 bird perches in January and 9.326. What will be the total sales revenue reflected in the sales budget for those months? A) January $1.000 × 1. What are budgeted cash sales and budgeted credit sales for September respectively? A) $19. February $1.900 D) $18.350 and $14.500 × $ 3 = $ 28.500 C) January $3. Inc.30 % = $ 20.600 × 1. and a 22% monthly increase during August and September.500 in February for $3 each.280 Answer: D Explanation: D) Cash sales $ 15.814 and $20. Credit sales of $10.167.22% = $ 22.200 × $3 = $15.733 D) January $28.350 and $19.26% = $ 18.000 Answer: C Explanation: C) Cash sales $ 15.30% = $ 15.500 Diff: 1 LO: 9-2 EOC: E9-16 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 63) Hewitt Company expects cash sales for July of $15.900 and $15.000.22% = $ 18.600.000 × 1.26% = $ 23.600 Answer: B Explanation: B) January 5. and a 26% monthly increase during August and September.051 C) $18.30 % = $ 16.500 and $15. What are budgeted cash sales and budgeted credit sales for September respectively? A) $19.900 Diff: 2 LO: 9-2 EOC: E9-16 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 64) Piatt Company expects cash sales for July of $15.300 and $13.814.62) Mockingbird Company expects to sell 5.000 in July should be followed by 30% increases during August and September.000 × 1.900 × 1. publishing as Prentice Hall .30% = $ 13.300 × 1. Credit sales of $12.500 and $12.000 × 1. February $28.000 × 1.326 and $16.500.167 B) January $15. February $3.280 Diff: 2 LO: 9-2 EOC: E9-16 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that 19 Copyright © 2013 Pearson Education. A March sales forecast projects 22.50 and $12.000 units of Pupz are going to be sold at prices of $17. respectively.000 Diff: 1 LO: 9-2 EOC: E9-16 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 20 Copyright © 2013 Pearson Education. A March sales forecast projects 20.000 Answer: B Explanation: B) 22. How much are total March sales for Kittyz anticipated to be? A) $100. The desired ending inventory of Kittyz is 20% higher than the beginning inventory.000 Answer: C Explanation: C) 20.000 units.000 D) $110. How much are total March sales for Doggyz anticipated to be? A) $180.000 Diff: 1 LO: 9-2 EOC: E9-16 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 66) DogDayz Company has two products: Doggyz and Pupz.000 × $ 15 = $ 300. The desired ending inventory of Doggyz is 20% higher than the beginning inventory. respectively.000 B) $180.000 units of Kittyz and 15.00. Inc. which was 2.000 C) $300.000 units of Katz are going to be sold at prices of $15 and $12.000 D) $240.000 units of Doggyz and 15.000 B) $385.comprise the master budget 65) CatNap Company has two products: Kittyz and Katz. which was 2.000 C) $264. publishing as Prentice Hall .000 units.000 × $ 17.50 = $ 385. Credit sales of $6.300 × 1. Inc. What are budgeted cash sales and budgeted credit sales for September? A) $18.000 in July should be followed by 15% decreases during August and September. If the desired ending inventory is 18.000.326 and $4.000 × 1.000 Less: BI 15.335 Diff: 2 LO: 9-2 EOC: E9-16 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 68) Kotrick Company has beginning inventory of 15.000 + desired EI 18.22% = $22.335 C) $12.000 B) 56.000 units.67) Russell Company expects cash sales for July of $15.000 = Total Production 26.000 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 21 Copyright © 2013 Pearson Education. Credit $6. and a 22% monthly increase during August and September.000 × 85% = $5. publishing as Prentice Hall .100 B) $22.000 units.838 and $8. how many units should be produced? A) 20.300 and $5.22% = $ 8.000 D) 26.930 Answer: B Explanation: B) Cash $15.000 units and expected sales of 23.000 = Need to produce 8.500 C) 10.750 and $7.320 D) $10.326.100 × 85 % = $4.000 Answer: D Explanation: D) Sales 23. 650 Less: BI 850 = Need to produce 1.400 Answer: C Explanation: C) Sales 2.550 B) 2.000 B) 35.650 units.700 D) 4.000 = Total Production 31.000 units. Inc.000 units.000 D) 40. Budgeted sales for December are 2.000 units and expects to sell 33.700 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 22 Copyright © 2013 Pearson Education.000 = Need to produce 24. What are budgeted purchases in units? A) 3. publishing as Prentice Hall . McCoy Company has beginning inventory of 9. How many units should McCoy Company produce? A) 31.600 C) 2.000 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 70) Rubino Corporation desires a December 31 ending inventory of 900 units.000 Answer: A Explanation: A) Sales 33.000 Less: BI 9. The November 30 inventory was 850 units.000 C) 49.69) McCoy Company wants to have an ending inventory of 7.000 + desired EI 7.800 + desired EI 900 = Total Production 2. Inc.500 Less: EI 2.950 shovels. and the desired ending inventory is 2.770 C) 2. The beginning inventory is 2. If budgeted production is 12. How many shovels should Benson Stores purchase for December? A) 2.200 shelves. Budgeted sales for December are 1.300 × $ 25 = $ 307.770 B) 1.500 C) $317. The November 30 inventory was 320 shovels.130 Answer: D Explanation: D) Sales 1.500 Answer: B Explanation: B) Production 12.950 Less: BI 320 = Need to produce 1.500 + BI 2.450 D) 2. what is the forecasted sales revenue from the shelves? A) $417.630 + desired EI 500 = Total Production 2. publishing as Prentice Hall .000 shelves.500 D) $207.500 shelves.500 Diff: 2 LO: 9-2 EOC: E9-16 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 23 Copyright © 2013 Pearson Education.71) Bruner Stores wants to have 500 shovels in ending inventory on December 31.200 Unit Sales 12.000 Total Produced 14.500 B) $307.130 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 72) Crafty Carpentry Company produces and sells a shelf for $25 each. 500 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 74) Willard's Department Store has budgeted cost of goods sold of $42.000.100 C) $55. respectively.000 Sales = $ 125. Beginning inventory of men's shorts for March is expected to be $5.000 = Cost of Goods Sold $110.727 Answer: A Explanation: A) BI $90.900 B) $44.600 of men's shorts in inventory at the end of March to prepare for the summer season. Expected beginning inventory on December 1 and ending inventory on December 31 are $90.000 = Goods Available 230.000.182 D) $397.600 Less BI 5.100 D) $29.900 Answer: B Explanation: B) Cost of Goods Sold $ 42. If cost of goods sold averages 88% of sales.000 and $120.000 for its men's shorts in March.73) SportSupplies Corporation has budgeted purchases of inventory for December of $140. what are budgeted sales for December? A) $125.800 C) $193.000 B) $96.000 Now 88% × (Sales) = $ 110.100 Diff: 2 LO: 9-2 EOC: E9-20 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 24 Copyright © 2013 Pearson Education.600 = Goods Available 49.500 = Purchases 44. What dollar amount of men's shorts should be purchased in March? A) $39. Management also wants to have $7.000 + EI 7.500. publishing as Prentice Hall .000 Less : EI 120.000 + Purchases 140. Inc. 496 = Gross Profit $ 47.188.500 C) $57.000 of men's shorts in inventory at the end of March to prepare for the summer season.840 Answer: A Explanation: A) $ 200.124 Diff: 2 LO: 9-2 EOC: E9-16 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 25 Copyright © 2013 Pearson Education.200 × 1.620 D) $42.05% = 210.500 D) $30.000 × 1. and another 10% in June. Management also wants to have $8.75) Goddard's Department Store has budgeted cost of goods sold of $44.000 during March.500.500 Diff: 2 LO: 9-2 EOC: E9-20 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 76) Thomas Corporation recorded sales of $200.000 for its men's shorts in March.697 C) $235.500 = Purchases 46. What dollar amount of men's shorts should be purchased in March? A) $46.500 Answer: A Explanation: A) Cost of Goods Sold $ 44. Inc. publishing as Prentice Hall .10% = $ 235. Management expects sales to increase 5% in April.500 B) $41.124 B) $43.000 × 1.02% = 214.000 Less BI 5. another 2% in May.000 + EI 8.620 Now Sales × 80% = Cost of Goods Sold . Beginning inventory of men's shorts for March is expected to be $5. Cost of goods sold is expected to be 80% of sales.000 = Goods Available 52. What is the budgeted gross profit for June? A) $47. 000 units C) 75.000 units Answer: A Explanation: A) Sales $85.500 + EI 19.500 units.000 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 26 Copyright © 2013 Pearson Education.500 units during the year. How many units should Meers Corporation produce? A) 78.500 + EI 18.000 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 78) Dallas Corporation had beginning inventory of 19.000 .000 units B) 36. publishing as Prentice Hall .BI 19. Inc.000 units D) 117.000 units D) 123. Desired ending inventory is 18.000 units and expects sales of 76.500 .500 = Production 84.000 units B) 47. Desired ending inventory is 19.000 units C) 86.000 units during the year.500 Total needed 65.500 = Production 75.500 units and expects sales of 85.000 Total needed 55.000 units Answer: C Explanation: C) Sales $76.500 units.77) Meers Corporation had beginning inventory of 21.BI 21. How many units should Dallas Corporation produce? A) 84. 960 D) $9.000 Answer: A Explanation: A) 80 % x $ 300.000 C) $235.000.79) Sam's Toys budgeted sales of $300.800 Answer: C Explanation: C) Sales = 100% .000 $12.800 (CGS) × 20% = $ 1.000 + EI 55. What is the desired beginning inventory on June 1? A) $840 B) $1.000 Diff: 3 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 80) Fosnight Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $6.000 = 190.000 and ending inventory for November is estimated at $55.000 D) $135. Inc.000 = $240. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.000 for the month of November and cost of goods sold equal to 80% of sales.960 Diff: 2 LO: 9-2 EOC: E9-20A AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 27 Copyright © 2013 Pearson Education.000 = Purchases $ 245.30% Gross Profit = 70% Cost of Goods Sold (CGS) Now: June Sales $14.000 The expected gross profit rate is 30% and the inventory at the end of February was $10.000 Cost of Goods Sold Less BI 50.000. Beginning inventory for November was $50.000 $13. How much are the budgeted purchases for November? A) $245.000 B) $65.680 C) $1.000 $14.000 × 70% = 9. publishing as Prentice Hall . 960 Answer: D Explanation: D) Sales = 100% .000. What is the desired ending inventory on May 31? A) $840 B) $9.960 Diff: 2 LO: 9-2 EOC: E9-20A AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 28 Copyright © 2013 Pearson Education.680 D) $1.000 $14.800 C) $1. publishing as Prentice Hall .30% Gross Profit = 70% Cost of Goods Sold (CGS) Now: June Sales $14.000 $12.000 × 70% = 9. Inc.000 $13.000 The expected gross profit rate is 30% and the inventory at the end of February was $10.81) Fosnight Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $6. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.800 (CGS) × 20% = $ 1. 400 Answer: D Explanation: D) $ 12.000 The expected gross profit rate is 30% and the inventory at the end of February was $10. What is the budgeted cost of goods sold for May? A) $3. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.000 $14.000.400 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 29 Copyright © 2013 Pearson Education.000 $13. Inc.000 × 70% = $ 8.200 C) $2. publishing as Prentice Hall .000 $12.400 D) $8.600 B) $4.82) Fosnight Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $6. 960 Diff: 3 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 30 Copyright © 2013 Pearson Education. What are the total purchases budgeted for April? A) $8.000 $14.680 .960 D) $9.400 × 20% = $ 1.000 $12. publishing as Prentice Hall .000 × 70% = 8.BI 1.680 Beginning Inventory = $ 13.820 Now: CGS $ 9.820 = Purchases $ 8.000. Inc.100 Ending Inventory = $12.000 × 70% = $ 9.000 × 70% = 9.680 B) $10.83) Fosnight Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $6.100 × 20% = $ 1.000 The expected gross profit rate is 30% and the inventory at the end of February was $10.240 Answer: C Explanation: C) Cost of Goods Sold = $ 13.000 $13.920 C) $8. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.100 + EI 1. 680 D) $10.680May Ending Inventory = $ 14.120 B) $8.000.000 The expected gross profit rate is 30% and the inventory at the end of February was $10.960 May Cost of Goods Sold = $ 12.000 $12.000 $13.680 = $ 8.400 + 1.000 × 70% = 9.400 × 20% = $ 1. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.960 C) $8.400 Now $ 8.1.960 . What are the total purchases budgeted for May? A) $8. publishing as Prentice Hall .84) Fosnight Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $6. Inc.680 Diff: 3 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 31 Copyright © 2013 Pearson Education.000 $14.800 × 20% = $ 1.080 Answer: C Explanation: C) May Beginning Inventory = $ 12.000 × 70% = 8.000 × 70% = $ 8. 440 B) $1.40% Gross Profit = 60% Cost of Goods Sold (CGS) Now: June Sales $ 14. Inc.120 D) $8.000 The expected gross profit rate is 40% and the inventory at the end of February was $10.000 $12.000 $13.85) Sander Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $8.000 $14.400 Answer: B Explanation: B) Sales = 100% .400 (CGS) × 20% = $ 1. publishing as Prentice Hall . What is the desired beginning inventory on June 1? A) $1.680 Diff: 2 LO: 9-2 EOC: E9-20A AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 32 Copyright © 2013 Pearson Education.000.680 C) $1. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.000 × 60% = 8. 000 $14.680 Diff: 2 LO: 9-2 EOC: E9-20A AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 33 Copyright © 2013 Pearson Education.000 The expected gross profit rate is 40% and the inventory at the end of February was $10.120 B) $1.86) Sander Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $8. What is the desired ending inventory on May 31? A) $1.680 D) $8.400 (CGS) × 20% = $ 1.000 × 60% = 8.40% Gross Profit = 60% Cost of Goods Sold (CGS) Now: June Sales $14.000 $13. publishing as Prentice Hall . Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.400 Answer: C Explanation: C) Sales = 100% .000.440 C) $1. Inc.000 $12. 87) Sander Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $8. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.800 C) $2. publishing as Prentice Hall . What is the budgeted cost of goods sold for May? A) $7.200 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 34 Copyright © 2013 Pearson Education. Inc.400 Answer: A Explanation: A) $ 12.000 The expected gross profit rate is 40% and the inventory at the end of February was $10.000 $14.000 $12.000.200 B) $4.000 $13.400 D) $8.000 × 60% = $ 7. publishing as Prentice Hall .800 + EI 1.000 $12.000 $13.000.800 Ending Inventory = $ 12.560 = Purchases $ 7.440 Beginning Inventory = $ 13.000 $14.88) Sander Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $8.200 x 20% = $ 1.360 B) $7.000 The expected gross profit rate is 40% and the inventory at the end of February was $10.440 C) $7.800 × 20% = $ 1. What are the total purchases budgeted for April? A) $9.000 × 60% = $ 7.000 × 60% = 7. Inc.680 Diff: 3 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 35 Copyright © 2013 Pearson Education. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.440 .680 D) $7.920 Answer: C Explanation: C) Cost of Goods Sold = $ 13.560 Now: CGS $ 7.BI 1.000 × 60% = 7. 200 Now $ 7.000.000 × 60% = 8.000 The expected gross profit rate is 40% and the inventory at the end of February was $10. and expected to have $1.400 × 20% = $ 1.500 Answer: B Explanation: B) BI $ 1.440 Answer: D Explanation: D) May Beginning Inventory = $ 12.000 $14. The store had $1.89) Sander Enterprises prepared the following sales budget: Month March April May June Budgeted Sales $8. Inc.200 + 1.680 . What are the total purchases budgeted for May? A) $8. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.680 C) $6.960 D) $7.1.100 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that 36 Copyright © 2013 Pearson Education.000 $13.800 = Goods Available 5.200 × 20% = $ 1.440 Diff: 3 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 90) A lamp store purchased $3. publishing as Prentice Hall .300 = Cost of Goods Sold $4.440 = $ 7.800 of lamps in September.300 of lamps at the end of September to cover part of anticipated October sales.600 of lamps on hand at the beginning of September. What is the budgeted cost of goods sold for September? A) $5.700 D) $3.400 B) $4.000 $12.600 + Purchases 3.400 Less : EI 1.440 May Ending Inventory = $ 14.000 × 60% = 7.000 × 60% = $ 7.640 B) $7.680 May Cost of Goods Sold = $ 12.100 C) $6. respectively.500 in furniture is expected in July. Depreciation and insurance for July are estimated at $1. D) $15.200 . Inc. C) $22.fixed payroll . The June operating expense budget includes total payroll of $13.3.400.400 Total Payroll Diff: 3 LO: 9-2 EOC: E9-21 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 37 Copyright © 2013 Pearson Education.600 per month plus a percentage of monthly sales.000 while purchases of inventory for July are budgeted at $95.500 in equipment and $1.600 = variable payroll = $ 9. B) $13.200 with budgeted sales of $160.800 Variable Payroll + 3.600 divided by Sales = 6% (payroll as a % of Sales) Now: $ 180. publishing as Prentice Hall . Sales for July are budgeted at $180. Answer: A Explanation: A) Total Payroll $ 13. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month.600 Fixed = $ 14.300.comprise the master budget 91) Warshaw Company budgets payroll at $3.000 and $600.000.000 × 6% = $ 10.000. The purchase of $2.500.200. The July payroll should be budgeted at A) $14. 000 10% = $9. respectively.000.600 = variable payroll = $ 9.500 in furniture is expected in July. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month.fixed payroll -3.500 + Depreciation 1.400 + Office and Adm. B) $14. expense 9.400. Inc.800 + 3.000 × 6% = $ 10. Sales for July are budgeted at $180.200 .500 Diff: 3 LO: 9-2 EOC: E9-23 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 38 Copyright © 2013 Pearson Education. publishing as Prentice Hall . D) $14.400 Variable Payroll Fixed Total Payroll Finally Payroll $ 14.600 = $ 14.600 divided by Sales = 6% (payroll as a % of Sales) Now: $ 180. Depreciation and insurance for July are estimated at $1. The June operating expense budget includes total payroll of $13.900.600 per month plus a percentage of monthly sales. C) $25.500 Office and Adm.800.000. The total operating expenses budgeted for July are A) $23.92) Warshaw Company budgets payroll at $3.000 and $600.000 while purchases of inventory for July are budgeted at $95. Expense Total Payroll $13. The purchase of $2.000 + Insurance 600 = Total Operating Expense $ 25.200 with budgeted sales of $160.500 in equipment and $1.500. Answer: C Explanation: C) Inventory $ 95. Depreciation and insurance for July are estimated at $1. respectively. The June operating expense budget includes total payroll of $13.100 Diff: 3 LO: 9-2 EOC: E9-21 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 39 Copyright © 2013 Pearson Education.000 and $600.200 $ (3.100 C) $13.000 while purchases of inventory for July are budgeted at $95. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month.500 in equipment and $1.400 Answer: B Explanation: B) June expense budget total payroll Fixed payroll budget June variable payroll budget Divide by June budgeted sales Old variable payroll budget (% of month's sales) $ 13. Inc.600 per month plus a percentage of monthly sales.000 8% $ 13.000 6% Increase in variable payroll expense Add 25% 1 125% 6% Old variable payroll budget (% of month's sales) New variable payroll budget (% of month's sales) 8% July budgeted sales New variable payroll budget (% of month's sales) July variable payroll budget Fixed payroll budget July payroll $ 180.500 $ 3.500 in furniture is expected in July. The purchase of $2. publishing as Prentice Hall .025 B) $17.200 with budgeted sales of $160.600 $ 160.600) $ 9.500 D) $14. Sales for July are budgeted at $180.600 $ 17.000.93) Warshaw Company budgets payroll at $3. If the percentage of monthly sales used in budgeting payroll increases 25%. what would the total payroll budgeted for July be? A) $20.000. 850 Diff: 1 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 95) At the beginning of the year. Inc.94) At the beginning of the year.200 Production $ 5.200 BI .100 Production $ 7.840 Diff: 1 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 40 Copyright © 2013 Pearson Education.640 C) 7.450 D) 6. The company wants to have 2.500 B) 3. Lakeview Corporation has 660 life vests in inventory. How many planters must Patio Living Corporation produce during the year? A) 5.200 planters in inventory at the end of the year.850 B) 6.200 planters during the year and wants to have 1. Patio Living Corporation has 550 planters in inventory.400 BI .950 Answer: A Explanation: A) Sales $ 5.550 EI + 1.160 Answer: C Explanation: C) Sales $ 6.660 EI + 2. The company plans to sell 5.400 life vests during the year.840 D) 9. How many life vests must Lakeview Corporation produce during the year? A) 8. publishing as Prentice Hall .400 C) 3.100 vests in inventory at the end of the year and plans to sell 6. 000 BI .000 × 20% = 7.4.800 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 41 Copyright © 2013 Pearson Education.000 35.000 C) 23.000 EI Sales $ 21.000 Production $ 23.800 B) 21.200 Answer: C Explanation: C) Unit Sales 2nd Qtr 35.000 Inventory at the beginning of the year was 4.96) Totz Company produces jump ropes.000 22. publishing as Prentice Hall .000 30.800 D) 32. How many jump ropes should Totz Company produce during the first quarter? A) 16.200 jump ropes.200 EI + 7. Inc. Totz Company has the following sales projections for the upcoming year: First quarter budgeted jump rope sales in units Second quarter budgeted jump rope sales in units Third quarter budgeted jump rope sales in units Fourth quarter budgeted jump rope sales in units 21. Totz Company wants to have 20% of the next quarter's sales in units on hand at the end of each quarter. 575 C) 16.525 hula hoops. Jolly Company has the following sales projections for the upcoming year: First quarter budgeted hula hoop sales in units Second quarter budgeted hula hoop sales in units Third quarter budgeted hula hoop sales in units Fourth quarter budgeted hula hoop sales in units 22.100 BI .97) Jolly Company produces hula hoops. Inc.000 Production $ 23.000 × 25% = 7.000 EI Sales $ 22. Inventory at the beginning of the year was 5.000 22.100 28.525 EI + 7.000 Jolly Company wants to have 25% of the next quarter's sales in units on hand at the end of each quarter.575 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 42 Copyright © 2013 Pearson Education.575 D) 22. How many hula hoops should Jolly Company produce during the first quarter? A) 34.5.000 30. publishing as Prentice Hall .625 B) 23.100 Answer: B Explanation: B) Unit Sales 2nd Qtr 28. 320 C) 4.600 2. Inc.600 BI .470 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 43 Copyright © 2013 Pearson Education.470 Answer: D Explanation: D) Sales $ 2.170 D) 2. The following selected data relates to Daisy Company's budgeted sales and inventory levels of the dog collars for the upcoming quarter: October expected unit sales November expected unit sales December expected unit sales October desired ending unit finished goods inventory November desired ending unit finished goods inventory December desired ending unit finished goods inventory 2. publishing as Prentice Hall .000 2.200 850 720 520 How many dog collars should Daisy Company produce in November? A) 2.850 EI + 720 Production 2.98) Daisy Company manufactures dog collars.870 B) 3. 480 pounds of clay were in inventory.500 3.940 C) 3. Victoria Corporation has a policy that the inventory of clay at the end of each month needs to be equal to 20% of the production needs for the following month.840 Diff: 2 LO: 9-2 EOC: E9-19 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 44 Copyright © 2013 Pearson Education.000 2. How many pounds of clay would Victoria Corporation need to purchase in February? A) 2. At the beginning of January.400 × 20%) +680 Equals Purchases 2. Inc.99) Victoria Corporation manufactures quality vases.540 Plus EI (3.200 2.620 D) 2.700 Less BI (2. Each vase requires one pound of clay in its manufacture.700 3.400 1 The ending inventory for each month should be equal to 20% of the next month's production needs.840 Answer: D Explanation: D) Production Month 2 2.660 B) 2. publishing as Prentice Hall .400 2.700 × 20%) . Budgeted sales and production data for the vases are as follows: Month 1 budgeted unit sales Month 2 budgeted unit sales Month 3 budgeted unit sales Month 1 budgeted unit production Month 2 budgeted unit production Month 3 budgeted unit production Raw material required for each finished unit (in pounds) 2. 380 (BI) = 4.280 C) 2. Terrific Toys Company will begin September with 220 bearings in its beginning inventory.060 Diff: 2 LO: 9-2 EOC: E9-19 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 101) Beloved Baby Company manufactures and sells children's strollers.500 D) 2.560 Answer: B Explanation: B) Production 570 × 8 = 4. while 570 skateboards are scheduled to be produced.180 Diff: 2 LO: 9-2 EOC: E9-19 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 45 Copyright © 2013 Pearson Education.220 (BI) = 2. Beloved Baby Company will begin September with 380 screws in its beginning inventory.180 C) 4. publishing as Prentice Hall . while 570 strollers are scheduled to be produced. How many screws should Beloved Baby Company purchase for September? A) 150 B) 4. How many bearings should Terrific Toys Company purchase for September? A) 310 B) 2.560 . Terrific Toys Company has budgeted skateboard sales of 530 skateboards. Beloved Baby Company has budgeted stroller sales of 530 strollers. For September.060 Answer: D Explanation: D) Production 570 × 4 = 2. Each stroller requires eight screws. Each skateboard requires four bearings. For September.280 . Inc.100) Terrific Toys Company manufactures and sells children's skateboards.940 D) 4. 102) The Porch Cushion Company manufactures foam cushions. The number of cushions to be produced in the upcoming three months follows: Number of foam cushions to be produced in July 12,000 Number of foam cushions to be produced in August 15,000 Number of foam cushions to be produced in September 10,000 Each cushion requires 2 pounds of the foam used as stuffing. The company has a policy that the ending inventory of foam each month must be equal to 25% of the following month's expected production needs. How many pounds of foam does The Porch Cushion Company need to purchase in August? A) 27,500 B) 20,000 C) 22,500 D) 42,500 Answer: A Explanation: A) August Production 15,000 × 25% = 3,750 September Production 10,000 × 25% = 2,500 Now Production August 15,000 Less BI - 3,750 Plus EI + 2,500 Equals Purchases 13,750 × 2 pounds = 27,500 Diff: 2 LO: 9-2 EOC: E9-19 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 103) Mighty Corporation manufactures end tables. Each end table requires .50 direct labor hours in its production. Mighty Corporation has a direct labor rate of $15 per direct labor hour. The production budget shows that Mighty Corporation plans to produce 1,000 end tables in March and 1,100 end tables in April. What is the total combined direct labor cost that should be budgeted for March and April? A) 8,250 B) 7,500 C) 15,750 D) 31,500 Answer: C Explanation: C) March production 1,000 + April production 1,100 Total 2,100 × .5 = 1,050 hours × $ 15 = $ 15,750 Diff: 2 LO: 9-2 EOC: E9-21 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that 46 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall comprise the master budget 104) Forty Winks Corporation manufactures night stands. The production budget shows that Forty Winks Corporation plans to produce 1,200 night stands in March and 1,050 night stands in April. Each night stand requires .50 direct labor hours in its production. Forty Winks Corporation has a direct labor rate of $12 per direct labor hour. What is the total combined direct labor cost that should be budgeted for March and April? A) 6,300 B) 7,200 C) 27,000 D) 13,500 Answer: D Explanation: D) March production 1,200 + April production 1,050 Total 2,250 × .5 = 1,125 hours × $ 12 = $ 13,500 Diff: 2 LO: 9-2 EOC: E9-21 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 47 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 105) List the operating budgets. Describe the purpose of each of the budgets listed and the order in which they are prepared. Describe how the budgets are interrelated. Answer: The operating budgets are as follows: 1. Sales budget — shows the number of units to be sold and the total sales revenue. 2. Production budget — shows the number of units to be produced to support the sales to be made. 3. Direct materials budget — shows the amount and dollar amount of direct materials to be purchased to support the production budget. 4. Direct labor budget — shows the number of direct labor hours required to support the number of products to be purchased from the production budget. 5. Manufacturing overhead budget — shows the budgeted manufacturing overhead to be incurred to support the number of units being produced as denoted on the production budget. 6. Operating expenses budget — all research and development, design, marketing, distribution, and customer service costs will be shown on the operating expenses budget. 7. Budgeted income statement — is constructed after preparing all of the above budgets. The operating budgets are the budgets needed to run the daily operations of the company. The operating budgets culminate in a budgeted income statement. The starting point of the operating budgets is the sales budget, because it affects most other components of the master budget. After estimating sales, manufacturers prepare the production budget, which determines how many units need to be produced. Once production volume is established, managers prepare the budgets determining the amounts of direct materials, direct labor, and manufacturing overhead that will be needed to meet production. Next, managers prepare the operating expenses budget. After all of these budgets are prepared, management will be able to prepare the budgeted income statement. Diff: 2 LO: 9-2 EOC: E9-23 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 48 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall A total of 120 pounds of organic sugar are expected to be on hand on April 1. Include both the quantity of sugar to be purchased and the cost of the purchases in each month.106) Carlton Cookie Company produces a hand-processed gourmet cookie that is made with organic sugar.40 per pound. Budgeted production of the gourmet cookies for the first four months of the upcoming year is as follows: Number of batches of cookies to be produced in January Number of batches of cookies to be produced in February Number of batches of cookies to be produced in March Number of batches of cookies to be produced in April 600 750 800 700 Required: Prepare a direct materials budget for organic sugar for each of the months in the second quarter and for the second quarter in total. The organic sugar costs $2. Five (5) pounds of organic sugar are required per batch of gourmet cookies. Answer: Diff: 3 LO: 9-2 EOC: E9-21 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 49 Copyright © 2013 Pearson Education. The company needs to have 20% of the following month's production needs of organic sugar in ending inventory so it is on hand to start each month. Inc. 1. publishing as Prentice Hall . 500 20.000 (6. Frisbee Enterprises has the following sales projections for the upcoming year: First quarter budgeted frisbee sales in units Second quarter budgeted frisbee sales in units Third quarter budgeted frisbee sales in units Fourth quarter budgeted frisbee sales in units 20.107) Frisbee Enterprises produces frisbees.000 First quarter ending inventory 10.000) 24.000 35. Frisbee Enterprises wants to have 30% of the next quarter's sales in units on hand at the end of each quarter.500 First quarter ending inventory First quarter budgeted frisbee sales in units Beginning frisbee inventory in units Units to produce 10. as percent of next quarter's budgeted unit sales 30% Second quarter budgeted frisbee sales in units 35. Answer: Finished goods inventory at end of each quarter.000 22. Inc.000 30.000 Inventory at the beginning of the year was 6.000 frisbees.500 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 50 Copyright © 2013 Pearson Education. publishing as Prentice Hall . How many frisbees should Frisbee Enterprises produce during the first quarter? Show your calculations. 500 3. The following selected data relates to Birch Company's budgeted sales and inventory levels of the coffee makers for the upcoming quarter. For September.500 (800) 1. Sally Scooters has budgeted sales of 415 scooters. Sally Scooters will begin September with 220 rear view mirrors in its beginning inventory. Each scooter requires two rear view mirrors. while 450 scooters are scheduled to be produced.108) Birch Company manufactures coffee makers.000 1. October expected unit sales November expected unit sales December expected unit sales October desired ending unit finished goods inventory November desired ending unit finished goods inventory December desired ending unit finished goods inventory 1. Inc. How many coffee makers should Birch Company produce in November? Show your calculations. publishing as Prentice Hall .650 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 109) Sally Scooters manufactures and sells scooters.300 800 950 600 Answer: November desired ending unit finished goods inventory November expected unit sales October desired ending unit finished goods inventory Units to produce 950 1. How many rear view wheels should Sally Scooters purchase for September? Answer: 680 Budgeted number of scooters to be produced Rear view mirrors per scooter Mirrors to be used Number of mirrors in beginning inventory Rear view mirrors to purchase 450 2 900 (220) 680 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 51 Copyright © 2013 Pearson Education. publishing as Prentice Hall . The company has a policy that the ending inventory in any month must be 12% of the following month's expected sales. with a column for each month and for the quarter. Pristine Yards Manufacturing had 144 weed whackers in inventory. Inc. Answer: Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 52 Copyright © 2013 Pearson Education.110) Pristine Yards Manufacturing produces weed whackers. Pristine Yards Manufacturing expects to sell the following number of weed whackers in each of the next four months: Required: Prepare a production budget for the second quarter. On March 31. Flawless Lawns Manufacturing expects to sell the following number of lawn edgers in each of the next four months: Required: Prepare a production budget for the second quarter. publishing as Prentice Hall . On March 31. Flawless Lawns Manufacturing had 140 lawn edgers in inventory. with a column for each month and for the quarter. Inc. The company has a policy that the ending inventory in any month must be 10% of the following month's expected sales.111) Flawless Lawns Manufacturing produces lawn edgers. Answer: Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 53 Copyright © 2013 Pearson Education. The budgeted cost per unit is $10. equipment. and other long-term assets is part of the budgeted balance sheet.790 March 3. plant.210 Timber Run Company has decided that the number of units in its inventory at the end of each month should equal 80% of next month's sales.400 February 4. Answer: TRUE Diff: 1 LO: 9-3 EOC: E9-31 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 114) A company's plan for purchases of property. Inc.570 April 3.112) Timber Run Company has prepared the following forecasts of monthly sales: Sales (in units) January 3.400 Ending inventory (% next month's sales) 80% January unit beginning inventory 2.720 Diff: 2 LO: 9-2 EOC: E9-18 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 113) A cash collections budget is focused on the timing of cash receipts. publishing as Prentice Hall . How many units should be in January's beginning inventory? Answer: January unit sales 3. Answer: TRUE Diff: 1 LO: 9-3 EOC: E9-31 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 54 Copyright © 2013 Pearson Education. Answer: TRUE Diff: 1 LO: 9-3 EOC: E9-28 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 119) Budget committee is a what-if technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes. publishing as Prentice Hall . Inc. Answer: TRUE Diff: 1 LO: 9-3 EOC: E9-26 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 118) The cash budget helps managers determine whether or not the company will need financing in a given month. Answer: FALSE Diff: 1 LO: 9-3 EOC: E9-26 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 117) The cash budget is prepared before the budgeted balance sheet is prepared.115) The budgeted cash collections from credit customers generally only reflect sales made in the current month. Answer: FALSE Diff: 1 LO: 9-3 EOC: E9-26 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 55 Copyright © 2013 Pearson Education. Answer: FALSE Diff: 1 LO: 9-3 EOC: E9-26 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 116) The cash budget is prepared before the operating budget. D) The customer has up to 30 days to pay back the seller for the goods purchased without penalty. Answer: D Diff: 1 LO: 9-3 EOC: E9-26 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 121) Which of the following items would be shown on a cash payments budget? A) Bad debt expense B) Depreciation expense C) Cash dividends D) Gains on sales of equipment Answer: C Diff: 1 LO: 9-3 EOC: E9-26 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 122) Which of the following types of cash outlays has its own budget? A) Capital expenditures B) Dividends C) Income taxes D) All of the above Answer: A Diff: 1 LO: 9-3 EOC: E9-31 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 56 Copyright © 2013 Pearson Education. publishing as Prentice Hall . Inc." What does this mean for the company that sold the goods? A) It does not have to ship the goods for 30 days B) It cannot recognize the sales credit for 30 days C) It offers a 30% discount for customers that use credit cards.120) A company sells goods and offers credit terms of "net 30 days. publishing as Prentice Hall . plant and equipment. and other long-term assets B) A budget that projects cash inflows and outflows and the end of period budgeted balance sheet C) A budget that shows projected sales. A) include only cash collections from sales made in that month B) only list COD sales made in that month C) only list credit sales made in that month D) include cash to be collected in that month regardless of when the sale was made Answer: D Diff: 1 LO: 9-3 EOC: E9-28 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 125) "Financial budget" is best described by which of the following? A) A company's plan for purchases of property. purchases and operating expenses D) A system for evaluating the performance of each responsibility center and its manager Answer: B Diff: 1 LO: 9-3 EOC: E9-30 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 57 Copyright © 2013 Pearson Education. Inc. B) projected cash collections and cash payments.123) All of the following are shown on the combined cash budget except A) projected cash balance at the end of the month. C) projected borrowings and repayments. D) All of the above are shown on the combined cash budget Answer: D Diff: 1 LO: 9-3 EOC: E9-28 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 124) A company should ________ when projecting cash receipts for a given month. plant and equipment. and other long-term assets B) Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance C) A system for evaluating the performance of each responsibility center and its manager D) A budget that projects cash inflows and outflows and the end of period budgeted balance sheet Answer: B Diff: 1 LO: 9-3 EOC: E9-28 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 58 Copyright © 2013 Pearson Education. and other long-term assets D) A budget that projects cash inflows and outflows and the end of period budgeted balance sheet Answer: C Diff: 1 LO: 9-3 EOC: E9-33 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 127) The ________ technique asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes. A) sensitivity analysis B) ratio analysis C) risk analysis D) strategic analysis Answer: A Diff: 1 LO: 9-3 EOC: S9-2 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 128) "Cash budget" is best defined by which of the following? A) A company's plan for purchases of property. Inc.126) "Capital expenditures budget" is best described by which of the following? A) Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance B) A system for evaluating the performance of each responsibility center and its manager C) A company's plan for purchases of property. plant and equipment. publishing as Prentice Hall . Answer: C Diff: 1 LO: 9-3 EOC: E9-28 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 59 Copyright © 2013 Pearson Education. publishing as Prentice Hall . D) cash payments to suppliers.129) Which of the following budgets projects cash inflows and outflows and the budgeted balance sheet? A) Purchases budget B) Capital expenditures budget C) Financial budget D) Cash budget Answer: C Diff: 1 LO: 9-3 EOC: E9-28 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 130) Which of the following is an example of a financial budget? A) Budgeted balance sheet B) Sales budget C) Budgeted income statement D) Operating expenses budget Answer: A Diff: 1 LO: 9-3 EOC: E9-31 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 131) All of the following are considered when preparing the cash budget except A) payments for inventory. C) depreciation expense. Inc. B) cash receipts from customers. 000 Total $ 206. publishing as Prentice Hall .000 × 5% = $ 7. Budgeted sales for the upcoming four months are: April budgeted sales May budgeted sales June budgeted sales July budgeted sales $100. 55% in the month following sale.000 $230. B) $179. Inc.500 July Sales 180.000 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 60 Copyright © 2013 Pearson Education.500 June Sales 230.000 × 40% = 72. and 5% in the second month following sale.000.000 The amount of cash that will be collected in July is budgeted to be A) $72.500.000.000 $180. C) $206. Answer: C Explanation: C) May Sales $ 150.000 × 55% = 126.500.132) The final step in the preparation of the financial budget is the preparation of which of the following? A) Master budget B) Cash budget C) Operating budgets D) Budgeted balance sheet Answer: D Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 133) Distribution Corporation collects 40% of a month's sales in the month of sale. D) $195.000 $150. C) $173. publishing as Prentice Hall .000 × 10% = $ 15.000 Total $ 204.500.000 × 55% = 126.000 × 35% = 63. Answer: B Explanation: B) May Sales $ 150.500 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 61 Copyright © 2013 Pearson Education.000 The amount of cash that will be collected in July is budgeted to be A) $63.000 June Sales 230.000 $180.000. 55% in the month following sale and 35% of a month's sales in the month of sale. Inc.000.000 $150.000 $230. D) $197.000.134) Eastern Corporation collects 10% in the second month following sale.500 July Sales 180. Budgeted sales for the upcoming four months are: April budgeted sales May budgeted sales June budgeted sales July budgeted sales $100. B) $204. 500 Nov.000.500.000 × 30% = 78.000 × 10% = $28.000 $260. Sales 330.500. and 10% in the second month following sale. Budgeted sales for the upcoming four months are: August budgeted sales September budgeted sales October budgeted sales November budgeted sales $300. Sales $ 280.000 Oct.000 Total $ 287. The company has found that 5% of their sales are uncollectible.135) Natcher Corporation collects 30% of a month's sales in the month of sale. publishing as Prentice Hall . 55% in the month following sale. Inc.000 × 55% = 181. Answer: A Explanation: A) Sept.000.000 $280. B) $283.500 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 62 Copyright © 2013 Pearson Education. C) $78.000 $330. Sales 260. D) $291.000 The amount of cash that will be collected in November is budgeted to be A) $287. 000. Budgeted cash receipts are $84. C) $91. D) $26.000 $330.000.500. Inc. The excess (deficiency) of cash available over disbursements for the month would be A) $170.000 $260. Answer: D Explanation: D) Sept. Sales 260. Einstein Company wants to have an ending cash balance of $40.500 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 137) Einstein Company is preparing its cash budget for the upcoming month. The company has found that 5% of their sales are uncollectible.000 The amount of cash that will be collected in November is budgeted to be A) $286.000 Oct.000.000 Cash Receipts + 84.000 Diff: 2 LO: 9-3 EOC: E3-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 63 Copyright © 2013 Pearson Education.000 Cash Disbursements -72. Answer: D Explanation: D) Beginning Cash $ 14.000 Total $ 281. while budgeted cash disbursements are $72. publishing as Prentice Hall .000 × 15% = $42.000.000.500 Nov. D) $281.000 Cash Available $ 26. B) $(26. The beginning cash balance for the month is expected to be $14.000 $280. 45% in the month following sale and 35% of a month's sales in the month of sale. Budgeted sales for the upcoming four months are: August budgeted sales September budgeted sales October budgeted sales November budgeted sales $300.000 × 45% = 148.000).000.000.500.500. Sales 330.000 × 35% = 91. C) $112. B) $285. Sales $ 280.136) Sharon Corporation collects 15% in the second month following sale.000. 000 Cash Receipts +101.000 Cash Disbursements -123.100.000. The budgeted beginning cash balance is expected to be $40. Answer: A Explanation: A) Beginning Cash $ 12.000 B) $27.600.500.000.000 D) $63.000.600). The excess (deficiency) of cash available over disbursements for the month would be A) $27.138) Wriston Company is preparing its cash budget for the upcoming month.000. Roman Company wants to have an ending cash balance of $45.000 Borrow = 27. B) $168. while budgeted cash receipts are $86.500.500 Cash Available $ 27. D) $110.600 Diff: 2 LO: 9-3 EOC: E3-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 139) Roman Company is preparing its cash budget for the upcoming month.100 Cash Disbursements -70. How much would Roman Company need to borrow to achieve its desired ending cash balance? A) $18. Budgeted cash disbursements are $70.000.000 Desired Balance -45. C) $(27. Wriston Company wants to have an ending cash balance of $40. publishing as Prentice Hall .000 Cash Available $ 18.000 Answer: B Explanation: B) Beginning Cash $ 40. Inc.600.000 C) $23.000.000 Diff: 2 LO: 9-3 EOC: E3-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 64 Copyright © 2013 Pearson Education. while budgeted cash disbursements are $123. The beginning cash balance for the month is expected to be $12.000 Cash Receipts + 86. Budgeted cash receipts are $101. Inc.000 Desired Balance .000 C) $42. Brockman Company wants to have an ending cash balance of $48. while budgeted cash receipts are $130.48.000 D) $55. publishing as Prentice Hall .000.000.000.000 Cash Receipts + 130.000 B) $90. Budgeted cash disbursements are $123.000 Cash Available $ 42.000 Cash Disbursements . The budgeted beginning cash balance is expected to be $35.000 Diff: 2 LO: 9-3 EOC: E3-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 65 Copyright © 2013 Pearson Education.000 Answer: A Explanation: A) Beginning Cash $ 35.140) Brockman Company is preparing its cash budget for the upcoming month. How much would Brockman Company need to borrow to achieve its desired ending cash balance? A) $6.123.000 Borrow = 6.000. Purchases $110.100.000 Nov.600 Cash Disbursements .600 Oct.141) BusyBody Company expects its November sales to be 20% higher than its October sales of $180. Purchases were $110. The cash balance on November 30 will be A) $4. Purchases are paid 40% in the month of purchase and 60% in the following month. Answer: C Explanation: C) Oct.600 Total Cash Receipts 183.130.000 in November. publishing as Prentice Hall . Sales 180.100 Diff: 3 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 66 Copyright © 2013 Pearson Education.100.600. The cash balance on November 1 is $13. All sales are on credit and are collected as follows: 35% in the month of the sale and 60% in the following month. D) $40.2% = 216.000 Beginning Cash $ 13.000.000 Ending Cash $ 67.000 × 60% = 108.000 Total Cash Disbursements $ 130.000 × 35% = 75.000 in October and are expected to be $160. Purchases 160. Inc.000 Nov.500. B) $53.500 Cash Receipts + 183. C) $67.000 × 40% = 64.000 × 1.000 × 60% = 66. Sales $ 180.100. Purchases $110.000 × 40% = 56.2% = 198. Inc.800.000 Nov.975 Answer: B Explanation: B) July Cash Sales $ 6.000 × 65% = 3.122. Sales are 35% cash and 65% credit. Sales $ 165.825 D) $5.000 in October and are expected to be $140.000 Beginning Cash $ 13.000.800 Diff: 3 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 143) June sales were $5. The cash balance on November 30 will be A) $46.300 Cash Disbursements .500.142) Romona Company expects its November sales to be 20% higher than its October sales of $165.500 Cash Receipts + 168.500 × 35% = $ 2. All sales are on credit and are collected as follows: 35% in the month of the sale and 60% in the following month.250 Total Collections $ 5. Purchases were $110.500 and $7.000 Nov. publishing as Prentice Hall .000 × 35% = 69.300.525 C) $6. D) $32.000. Purchases are paid 40% in the month of purchase and 60% in the following month.000 Total Cash Disbursements $ 122.000 × 1.000 × 60% = 66.000 Ending Cash $ 59.050.300 Total Cash Receipts 168. Sales 165. Answer: B Explanation: B) Oct. C) $2.300 Oct. respectively. What are the expected collections for July? A) $7.800. The cash balance on November 1 is $13. Purchases 140.000 while projected sales for July and August were $6.525 Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that 67 Copyright © 2013 Pearson Education.000 × 60% = 99.975 B) $5. B) $59.000 in November. All credit sales are collected in the month following the sale.275 Cash Collections on account June 5. All purchases are paid 35% in the month of purchase and 65% the following month.500 Total Collections $ 6. What are the expected collections for July? A) $8.375 B) $7.000 while projected sales for July and August were $8.250 C) $86. Sales are 75% credit and 25% cash.comprise the master budget 144) June sales were $6.500 and $7.450 Answer: B Explanation: B) May $ 60.750 B) $65.000 × 65% = $ 39.000.625 Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 145) Purchases for May were $60.125 Cash Collections on account June 6. At what amount are June payments for purchases budgeted? A) $69.000 June 75.000. Inc.375 D) $6.000 × 75% = 4.250 Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 68 Copyright © 2013 Pearson Education.050 D) $97.000 and $92. respectively. respectively.875 C) $7.500 × 25% = $ 2.625 Answer: D Explanation: D) July Cash Sales $ 8.000 × 35% = 26. publishing as Prentice Hall . All credit sales are collected in the month following the sale.000.250 Total $ 65. while expected purchases for June and July are $75. 000 C) $86. Experience has shown that payment for the credit sales is received as follows: 20% in the month of sale.000 and $92.146) Expected purchases for June and July are $80.600 D) $110.300 B) $19. publishing as Prentice Hall .000 × 55% = $ 33. 55% in the first month after sale.400 Answer: A Explanation: A) May $ 60.000 B) $71. respectively.500 C) $16. $24.200 Total $19.000 × 20% = 4. 20% in the second month after sale.000. Inc. October. $22.000 June 80.000 × 20% = $ 3. 22.000.000 Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 147) McEwen Company has budgeted the following credit sales during the last four months of the year: September. $16.100 Nov.000 × 45% = 36.000 Total $ 69.000.300 D) $19.750 Answer: B Explanation: B) Sept.000 × 55% = 12. 21. All purchases are paid 45% in the month of purchase and 55% the following month. Purchases for May were $60.200 Oct.000.500 Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 69 Copyright © 2013 Pearson Education. $ 16.000.000. How much cash can McEwen Company expect to collect in November as a result of credit sales? A) $15. and 5% uncollectible. December. At what amount are June payments for purchases budgeted? A) $69. November $21. 000 × 80% = $67. Monthly sales are 70% credit and 30% cash.000 and $150.800 Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 149) Kennedy Enterprises has budgeted sales for the months of September and October at $120. respectively.000 × 10% = 2.200 Total $21. What are the October cash collections from customers? A) $133. $24. November $22. Dubinsky Company has budgeted the following credit sales during the last four months of the year: September. How much cash can Dubinsky Company expect to collect in November as a result of credit sales? A) $17. $28.000 × 20% = 21.000.000 × 70% = 105.000 × 20% = $ 4.000 × 65% = 15.000.200 B) $66.000. publishing as Prentice Hall . December.000 Answer: C Explanation: C) Sept.000 Total collections on account Cash sales $ 150. 20% are collected in the month of sale and 80% are collected in the following month.000 × 30% = 45. and 5% uncollectible.800 D) $22.000 D) $88.000. 20% in the second month after sale. Sales 150. $ 20. 65% in the first month after sale.600 C) $21. Of the credit sales.148) For Dubinsky Company.000 C) $189. October. $20. Inc. Sales $ 120.000 Oct.000 Total Cash collected $ 133.200 Oct.200 Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 70 Copyright © 2013 Pearson Education.200 Answer: A Explanation: A) Sept.600 Nov.800 B) $19.000 × 70% = 84. experience has shown that payment for the credit sales is received as follows: 10% in the month of sale. 24.000. 22. 850 Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 151) Cave Hardware's forecasted sales for April.500 B) $7. 65% in the following month. What are the cash collections budgeted for June? A) $150.500 × 100% = $ 80.000 × 10% $ 1. and August are $15.000. 24. May. publishing as Prentice Hall .500 June 190. $19. $190.000. Inc.150) Hammond's Cookie Toppings makes payments on its inventory purchases as follows: 25% in the month of purchase.000 plus 10% of the following month's cost of goods sold.000 × 65 % 12.800 D) $19.500 D) $204. At what amount are cash payments for inventory in August budgeted? A) $18.000 Total $ 19.500 Total Cash Collected 204.500 × 00 = 00000 Cash Sales June $190.350 Aug.500 July 19.000. June.000.000 × 25% 6.500 B) $193. Cost of goods sold is 75% of sales and ending inventory is maintained at $60.500 C) $123. July.000 Diff: 3 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 71 Copyright © 2013 Pearson Education.850 Answer: D Explanation: D) June $ 15. respectively.000 and $24. and July are $200. Sales are 65% cash and 35% credit with all accounts receivables collected in the month following the sale. and $240. All inventory purchases are paid 22% in the month of purchase and 78% in the following month.000 × 35% = 66.000 Answer: D Explanation: D) May Sales $230.850 C) $5.000.000.000 × 35% = 80.000 × 65% 123. and 10% in the second month following purchase. $230. Budgeted inventory purchases for June. respectively. and $240.500) = 74.000 × 75% = 142.750 C) $164. respectively. What are the budgeted cash payments in June for inventory purchases? A) $495. Sales are 65% cash and 35% credit with all accounts receivables collected in the month following the sale. May. and July are $200. Cost of goods sold is 75% of sales and ending inventory is maintained at $60.000) = 78.250 78.500 June 190.000.175 = $ 164.500 July 240.000 -Beginning Inventory 77.250 74.000 + (10% × 180.415 Answer: C Explanation: C) Ending Inventory April $60.000 B) $315.250 =Purchases 169.000 May June Cost of Goods sold $ 172. June.210 + 32.000.000.000 × 75% = 180.500 146.500 +Ending Inventory 74.500) = $77.250 May 60.250 × 78% × 22% Cash Payments 132.500 142. publishing as Prentice Hall .000 + (10% × 172.385 D) $167.000 × 75% = 172.000. All inventory purchases are paid 22% in the month of purchase and 78% in the following month.000 Cost of Goods Sold May $230.152) Cave Hardware's forecasted sales for April.000 plus 10% of the following month's cost of goods sold. $190.385 Diff: 3 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 72 Copyright © 2013 Pearson Education.250 June 60. Inc. $230.000 + (10% × 142. 153) Cave Hardware's forecasted sales for April. $230.000 plus 10% of the following month's cost of goods sold.000 $ 74. respectively.500 $ 78.250 78% $ 114.250) $ 146. publishing as Prentice Hall . $190.000 $ 60. and $240.075 10% $ 14. Inc.225 C) $146. May.075 Answer: D Explanation: D) June sales 190.000 73 Copyright © 2013 Pearson Education.250 June purchases Inventory payments month after purchase Accounts payable balance at the end of June $ 146. and July are $200. Sales are 65% cash and 35% credit with all accounts receivables collected in the month following the sale.000.250 $ 60.000 June cost of goods sold Additional ending inventory (% of next month's cost of goods sold) Additional ending inventory Minimum ending inventory June beginning inventory/May ending inventory $ 142.000.000.500 July cost of goods sold Additional ending inventory (% of next month's cost of goods sold) Additional ending inventory Minimum ending inventory July beginning inventory/June ending inventory $ 180.500 July sales Cost of goods sold (% of sales) July cost of goods sold $ 240.000 June cost of goods sold July beginning inventory/June ending inventory June beginning inventory/May ending inventory June purchases $ 142. June.250 10% $ 18.000 75% $ 180.000 $ (74.250 D) $114.175 B) $108. All inventory purchases are paid 22% in the month of purchase and 78% in the following month.000 Cost of goods sold (% of sales) 75% June cost of goods sold $ 142.000 $ 78.000. Cost of goods sold is 75% of sales and ending inventory is maintained at $60. What is the balance of accounts payable on the June 30 budgeted balance sheet? A) $32. 000 Credit Sales $10.000 $36.000 D) $76.600 May Sales 40. What are the total cash collections in May? A) $62.000 $48.600 B) $20.000 $42.600 Plus May Cash Sales 42.100 Answer: A Explanation: A) March Sales $ 10.000 Total $ 62.000 $54.000 × 25% = 10.000 $40.000 Credit collections are 25% in the month of sale. publishing as Prentice Hall .Diff: 3 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 154) Two Brothers Moving prepared the following sales budget: Month March April May June Cash Sales $20. Inc. The remaining 5% is expected to be uncollectible.600 C) $65.600 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 74 Copyright © 2013 Pearson Education.000 × 60% = 9. and 10% two months following the sale.000 Total $ 20.000 April Sales 16.000 $16.000 × 10% = $1. 60% in the month following the sale. 800 C) $91.000 25% $ 12. publishing as Prentice Hall . The remaining 5% is expected to be uncollectible.155) Two Brothers Moving prepared the following sales budget: Month March April May June Cash Sales $20.000 Credit Sales $10. and 10% two months following the sale. What are the total cash collections in June? A) $37.000 $36.000 $ 1. Inc.000 $42.000 $40.000 $ 12.600 D) $96.000 60% $ 24.000 $54.000 May credit sales Credit collections month after sale Collections from May credit sales $ 40.600 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 75 Copyright © 2013 Pearson Education.600 $ 91.000 Credit collections are 25% in the month of sale.000 April credit sales Credit collections 2 months after sale Collections from April credit sales $ 16.000 $ 24.000 10% $ 1.600 B) $86.000 $48.300 Answer: C Explanation: C) June credit sales Credit collections month of sale Collections from June credit sales $ 48.600 June cash sales Collections from June credit sales Collections from May credit sales Collections from April credit sales Total June cash collections $ 54.000 $16. 60% in the month following the sale. 000 Credit Sales $10. What is the total cash received in April from April sales? A) $40.000 $54.000 $ 40. publishing as Prentice Hall .500 Answer: A Explanation: A) April credit sales Credit collections month of sale Collections from April credit sales $ 16.500 D) $2.000 $ 4.000 $42.000 $36.000 C) $38. The remaining 5% is expected to be uncollectible. and 10% two months following the sale. Inc.000 Credit collections are 25% in the month of sale.000 B) $4.000 25% $ 4.000 April cash sales Collections from April credit sales Total cash received from April sales $ 36.000 $48.000 $16.000 $40.000 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 76 Copyright © 2013 Pearson Education.156) Two Brothers Moving prepared the following sales budget: Month March April May June Cash Sales $20. 60% in the month following the sale. 000 × 30% = 12.500 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 77 Copyright © 2013 Pearson Education.000 Credit collections are 15% two months following the sale.000 × 50% = 8.000 $16.500 C) $65.000 $36. Inc.900 D) $75. 50% in the month following the sale and 30% in the month of sale.000 $42.000 Total $ 63.000 Total $ 21.000 Credit Sales $10.000 × 15% = $1.000 May Sales 40.600 Answer: B Explanation: B) March Sales $ 10. publishing as Prentice Hall .500 Plus May Cash Sales 42.500 B) $63.000 $54. What are the total cash collections in May? A) $21.000 $40.500 April Sales 16. The remaining 5% is expected to be uncollectible.000 $48.157) Feeney Furniture prepared the following sales budget: Month March April May June Cash Sales $20. 000 $48. publishing as Prentice Hall .000 $16.800 C) $86.000 $54.800 B) $90.158) Feeney Furniture prepared the following sales budget: Month March April May June Cash Sales $20.000 $42.000 30% $ 14.400 June cash sales Collections from June credit sales Collections from May credit sales Collections from April credit sales Total June cash collections $ 54.400 $ 90.000 Credit collections are 15% two months following the sale.400 May credit sales Credit collections month after sale Collections from May credit sales $ 40.000 $36. 50% in the month following the sale.600 Answer: B Explanation: B) June credit sales Credit collections month of sale Collections from June credit sales $ 48.000 $40.000 D) $96. The remaining 5% is expected to be uncollectible. What are the total cash collections in June? A) $36.000 Credit Sales $10.000 15% $ 2.400 $ 20.800 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 78 Copyright © 2013 Pearson Education.000 $ 2.000 50% $ 20. Inc.000 April credit sales Credit collections 2 months after sale Collections from April credit sales $ 16.000 $ 14. and 30% in the month of sale. 000 D) $40. publishing as Prentice Hall .800 Answer: D Explanation: D) April credit sales Credit collections month of sale Collections from April credit sales $ 16.800 April cash sales Collections from April credit sales Total cash received from April sales $ 36.800 Diff: 2 LO: 9-3 EOC: E9-26 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 79 Copyright © 2013 Pearson Education.159) Feeney Furniture prepared the following sales budget: Month March April May June Cash Sales $20.000 $54.000 $40. 50% in the month following the sale.000 $16.000 $48.000 30% $ 4.000 C) $3.000 Credit Sales $10.000 $42.000 $ 4. What is the total cash received in April from April sales? A) $4.800 $ 40. and 30% in the month of sale. Inc.000 $36. The remaining 5% is expected to be uncollectible.000 Credit collections are 15% two months following the sale.800 B) $39. What are the cash disbursements in August for June purchases? A) $10. publishing as Prentice Hall .160) Goliath Company prepared the following purchases budget: Month June July August September October Budgeted Purchases $35.900 Answer: D Explanation: D) $ 35.900 Diff: 1 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 80 Copyright © 2013 Pearson Education.020 D) $8. and 25% two months after purchase.600 $42.500 $39.680 B) $20.600 × 25% = $ 8. Inc.600 $45.800 $49.400 All purchases are paid for as follows: 30% in the month of purchase. 45% in the following month.610 C) $16. 600 $42.900 D) $152. publishing as Prentice Hall .610 Diff: 1 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 81 Copyright © 2013 Pearson Education. and 25% two months after purchase.600 $45.161) Goliath Company prepared the following purchases budget: Month June July August September October Budgeted Purchases $35.400 All purchases are paid for as follows: 30% in the month of purchase.450 C) $8.800 × 45% = $ 20.800 $49.667 Answer: A Explanation: A) $45. Inc. 45% in the following month.610 B) $11. What are the cash disbursements in October for September purchases? A) $20.500 $39. 880 Answer: C Explanation: C) August purchases Payment month of purchase Disbursements from August purchases $ 39. Inc.330 B) $31.005 C) $39.600 25% $ 8.600 $42.125 June purchases Payment 2 months after purchase Disbursements from June purchases $ 35.400 All purchases are paid for as follows: 30% in the month of purchase.500 $39.500 45% $ 19.905 Diff: 2 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 82 Copyright © 2013 Pearson Education. What are the total cash disbursements in August for the purchase of merchandise? A) $45.600 30% $ 11.800 $49.880 July purchases Payment month after purchase Disbursements from July purchases $ 42.900 $ 39. 45% in the following month. and 25% two months after purchase.162) Goliath Company prepared the following purchases budget: Month June July August September October Budgeted Purchases $35.905 D) $11.600 $45.880 $ 19.900 Disbursements from August purchases Disbursements from July purchases Disbursements from June purchases Total August cash disbursements $ 11. publishing as Prentice Hall .125 $ 8. 330 Diff: 2 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 83 Copyright © 2013 Pearson Education.163) Goliath Company prepared the following purchases budget: Month June July August September October Budgeted Purchases $35.400 × 30% = 14.500 $39.900 Sept.800 $49.820 Total $ 45.400 All purchases are paid for as follows: 30% in the month of purchase. 45% in the following month. What are the total cash disbursements in October for the purchase of merchandise? A) $45. Inc.600 $45.430 Answer: A Explanation: A) Aug.800 × 45% = 20. 45.330 B) $39.610 Oct.600 $42.820 D) $35. publishing as Prentice Hall .600 × 25% = $ 9.905 C) $14. and 25% two months after purchase. 49. Purchases $ 39. 100 All purchases are paid for as follows: 20% two months after purchase.300 C) $22.164) Lough Company prepared the following purchases budget: Month June July August September October Budgeted Purchases $40.000 $43. publishing as Prentice Hall .000 D) $10.000 $49.000 × 20% = $ 8.600 $46.000 Answer: A Explanation: A) $ 40. and 25% in the month of purchase.000 B) $25.000 $39. 55% in the following month. What are the cash disbursements in August for June purchases? A) $8.000 Diff: 1 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 84 Copyright © 2013 Pearson Education. Inc. 000 D) $184. publishing as Prentice Hall .000 $49. Inc.000 Answer: B Explanation: B) $ 46.000 $39.600 $46.300 Diff: 1 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 85 Copyright © 2013 Pearson Education.165) Lough Company prepared the following purchases budget: Month June July August September October Budgeted Purchases $40. What are the cash disbursements in October for September purchases? A) $9. 55% in the following month.000 $43. and 25% in the month of purchase.000 × 55% = $ 25.200 B) $25.300 C) $8.100 All purchases are paid for as follows: 20% two months after purchase. 900 $ 23. 55% in the following month.550 B) $45.000 55% $ 23. Inc. and 25% in the month of purchase.100 All purchases are paid for as follows: 20% two months after purchase.000 20% $ 8.000 $39.000 $49.550 D) $9.000 Disbursements from August purchases Disbursements from July purchases Disbursements from June purchases Total August cash disbursements $ 9.000 $43.000 $ 41.650 $ 8.550 Diff: 2 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 86 Copyright © 2013 Pearson Education.900 July purchases Payment month after purchase Disbursements from July purchases $ 43.600 $46.166) Lough Company prepared the following purchases budget: Month June July August September October Budgeted Purchases $40. publishing as Prentice Hall . What are the total cash disbursements in August for the purchase of merchandise? A) $41.600 25% $ 9.495 C) $33.900 Answer: A Explanation: A) August purchases Payment month of purchase Disbursements from August purchases $ 39.650 June purchases Payment 2 months after purchase Disbursements from June purchases $40. 575 C) $41. publishing as Prentice Hall .000 Answer: C Explanation: C) July 480.100 × 25% = 12.000 $39.000 × 55% = 25. Purchases $ 39. of which 40% is collected in the month of sale and 60% is collected in the following month.000 B) $288. 55% in the following month. What is the accounts receivable balance on July 31? A) $189.000 D) $360. What are the total cash disbursements in October for the purchase of merchandise? A) $12.000 × 60% = $ 216.000 $43.495 Answer: D Explanation: D) Aug.000 Diff: 1 LO: 9-3 EOC: E9-30 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 87 Copyright © 2013 Pearson Education. and 25% in the month of purchase. 46.167) Lough Company prepared the following purchases budget: Month June July August September October Budgeted Purchases $40. Inc.600 $46.000 × 75% = 360.000 $49.495 Diff: 2 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 168) Lakewood Jet Skis has budgeted sales for June and July at $420. respectively.000 and $480.600 × 20% = $ 7. Sales are 75% credit.550 D) $45.300 Oct.920 Sept.100 All purchases are paid for as follows: 20% two months after purchase. 49.000.275 Total $ 45.000 C) $216.275 B) $37. management will be able to prepare the budgeted income statement. direct materials budget 4. The cash budget projects the cash that will be available to run the company's operations and determines whether the company will have extra funds to invest or whether the company will need to borrow cash. budgeted balance sheet The financial budgets project the collection and payment of cash. Finally. and manufacturing overhead that will be needed to meet production. because it affects most other components of the master budget. capital expenditures budget 2. production budget 3. publishing as Prentice Hall . After estimating sales. manufacturers prepare the production budget. After all of these budgets are prepared. List the specific budgets which are financial budgets. operating expenses budget 7. sales budget 2. Diff: 3 LO: 9-3 EOC: S9-2 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 88 Copyright © 2013 Pearson Education. Inc. cash budgets 3. direct labor budget 5. budgeted income statement The operating budgets are the budgets needed to run the daily operations of the company. The operating budgets culminate in a budgeted income statement. the budgeted balance sheet forecasts the company's position at the end of the budget period. direct labor. Financial budgets: 1. and equipment.169) Define operating budgets and financial budgets. Answer: Operating budgets: 1. managers prepare the operating expenses budget. as well as forecast the company's budgeted balance sheet. The starting point of the operating budgets is the sales budget. Once production volume is established. Next. plant. The capital expenditure budget shows the company's plan for purchasing property. which determines how many units need to be produced. manufacturing overhead budget 6. managers prepare the budgets determining the amounts of direct materials. List the specific budgets which are operating budgets. February.170) Beyerly Corporation anticipates the following sales revenue over a five month period: Byerly Corporation's sales are 40% cash and 60% credit. The Beyerly Corporation's collection history indicates that credit sales are collected as follows: Month of sale Month after sale Two months after sale Uncollectible 20% 50% 25% 5% Required: Prepare a cash collections budget for each month in the quarter (January. Inc. and March) and for the quarter in total. publishing as Prentice Hall . Answer: Diff: 3 LO: 9-3 EOC: E9-27 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 89 Copyright © 2013 Pearson Education. 000 next month. Required: Prepare a cash payments budget for the month.000. This monthly estimate includes $8. b.171) PotatoState Manufacturing is preparing its cash payments budget for the coming month.500 of depreciation on office equipment and $2. e.000 and will be paid at the end of the upcoming month.000 of bad debt expense. Inc. These monthly operating expenses are paid during the month in which they are incurred. Direct labor for the upcoming month is budgeted to be $25. while FirstState Manufacturing anticipates $45. PotatoState Manufacturing pays for 70% of its direct materials purchases in the month of purchase and the remainder the following month. which includes $1. publishing as Prentice Hall . The following information pertains to the cash payments: a.000 of direct material purchases this coming month. Overhead is estimated to be 150% of direct labor cost each month and is paid in the month in which it is incurred. c. Answer: Diff: 2 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 90 Copyright © 2013 Pearson Education. Monthly operating expenses for next month are expected to be $27.000 of depreciation on the plant and equipment. Last month's direct material purchases were $40. d.500. PotatoState Manufacturing will be making an estimated tax payment of $6. 500 $37. publishing as Prentice Hall . On June 30. The Outdoor Leisure Store sells the inflatable pools for $100 each. June 30 Number of pools budgeted to be sold in July Number of pools budgeted to be sold in August Number of pools budgeted to be sold in September Number of pools budgeted to be sold in October $12. and accounts receivable had a balance of $12.400 $11.000 350 420 370 300 The company has a policy that the ending inventory of inflatable pools should be equal to 30% of the number of pools to be sold in the following month. August. July August September October Merchandise Purchases Budget Budgeted unit sales 350 420 370 300 Desired ending inventory (30% of next month's sales) 126 111 90 Total needs 476 531 460 Less beginning inventory 105 126 111 Required purchases 371 405 349 PART b.00 $35. Answer: Part a.00 $100. Inc.600 $29.00 $100. June 30 July sales August sales September sales Total cash collections July August September 350 420 370 $100.000 $37.100 $40. while the remainder is collected in the following month. there were 105 pools in ending inventory.500 $24.000 $12.100 $22. Sales of inflatable pools (in units) have been budgeted at the following levels for the upcoming months: Accounts receivable.000 $42. Prepare a merchandise purchases budget showing how many pools should be purchased in each of the months including July. Prepare a cash collections budget for each of the months including July.500 $12.172) The Alec Corporation sells inflatable pools. August. and September. b. Required: a. Cash Collections Budget Budgeted unit sales Selling price per unit Budgeted sales Accounts receivable.500 Diff: 3 LO: 9-3 EOC: E9-28 AACSB: Analytical Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 91 Copyright © 2013 Pearson Education. The company's collection history shows that 30% of the sales in a month are paid for by customers in the month of sale.000.000 $10. and September. Answer: FALSE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that 92 Copyright © 2013 Pearson Education. Answer: FALSE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 174) The master budget of a service company has fewer individual budget components than does the master budget of a manufacturing company. Answer: TRUE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 177) The financial budgets prepared for manufacturers are different than those for merchandising and service companies. and purchases" budget to calculate the amount of merchandise to purchase. Answer: TRUE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 175) The operating budgets of retailers and manufacturers are virtually identical.173) A merchandising company will have a production budget. Answer: FALSE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 176) Merchandisers use a "cost of goods sold. publishing as Prentice Hall . Inc. inventory. Answer: TRUE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 179) Merchandising companies do not prepare a direct materials budget. Answer: FALSE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 181) Which of the following types of companies use a direct materials budget? A) Manufacturing B) Merchandising C) Service D) All of the above Answer: A Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 93 Copyright © 2013 Pearson Education. and service companies prepare operating expense budgets.comprise the master budget 178) Manufacturing. merchandising. Inc. publishing as Prentice Hall . Answer: TRUE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 180) Service companies do not prepare a cash budget. 182) Which of the following types of companies would combine cost of goods sold, inventory, and purchases into one budget? A) Manufacturing B) Merchandising C) Service D) All of the above Answer: B Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 183) Which of the following types of companies use a sales budget? A) Manufacturing B) Merchandising C) Service D) All of the above Answer: D Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 184) Which of the following types of companies use an operating expense budget? A) Manufacturing B) Merchandising C) Service D) All of the above Answer: D Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 94 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 185) Which of the following types of companies use a "cost of goods sold, inventory, and purchases" budget? A) Merchandising B) Manufacturing C) Service D) All of the above Answer: A Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 186) Which of the following types of companies use a capital expenditures budget? A) Manufacturing B) Merchandising C) Service D) All of the above Answer: D Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 187) The format of the "cost of goods sold, inventory, and purchases" budget is as follows: A) desired ending inventory + beginning inventory - cost of goods sold. B) cost of goods sold + desired ending inventory - beginning inventory. C) cost of goods sold - desired ending inventory + beginning inventory. D) desired ending inventory - beginning inventory - cost of goods sold. Answer: B Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 95 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall 188) Merchandising companies prepare which of the following budgets? A) Sales B) Cash C) Operating expense D) All of the above Answer: D Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 189) All of the following budgets are prepared by service companies except A) cost of goods sold, inventory and purchases. B) cash. C) operating expense. D) sales. Answer: A Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 190) All of the following budgets are prepared by merchandising companies except A) sales. B) operating expense. C) direct materials. D) cost of goods sold, inventory and purchases. Answer: C Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 96 Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall B) capital expenditures. D) cash. Answer: A Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 192) Merchandising companies prepare sales. Answer: FALSE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 195) Merchandising companies prepare a manufacturing overhead budget. and operating expense budgets. Answer: TRUE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 193) Service companies do not prepare a cost of goods sold.191) All of the following budgets are prepared by merchandising companies except A) manufacturing overhead. C) budgeted income statement. Answer: TRUE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget 194) Merchandising companies prepare a direct materials budget. and purchases budget. Answer: FALSE Diff: 1 LO: 9-5 EOC: E3-34 AACSB: Reflective Thinking Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that 97 Copyright © 2013 Pearson Education. publishing as Prentice Hall . inventory. cash. Inc. comprise the master budget 98 Copyright © 2013 Pearson Education. Inc. publishing as Prentice Hall .