Ch 23 example #73242

Why are budgets useful in the planning process? a. They provide management with information about the company's past performance. b. They help communicate goals and provide a basis for evaluation. c. They guarantee the company will be profitable if it meets its objectives. d. They enable the budget committee to earn their paycheck.

A budget a. is a substitute for management. b. is an aid to management. c. can operate or enforce itself. d. is the responsibility of the accounting department.

Accounting generally has the responsibility for a. setting company goals. b. expressing the budget in financial terms. c. enforcing the budget. d. administration of the budget.

Which one of the following is not a benefit of budgeting? a. It facilitates the coordination of activities. b. It provides definite objectives for evaluating performance. c. It provides assurance that the company will achieve its objectives. d. It requires all levels of management to plan ahead on a recurring basis.

Budgeting is usually most closely associated with which management function? a. Planning b. Directing c. Motivating d. Controlling

Which of the following items does not follow from the adoption of a budget? a. Promote efficiency b. Deterrent to waste c. Basis for performance evaluation d. Guarantee of accomplishing the profit objective

Which is true of budgets? a. They are voted on and approved by stockholders. b. They are used in the planning, but not in the control, process. c. There is a standard form and structure for budgets. d. They are used in performance evaluation.

A common starting point in the budgeting process is a. expected future net income. b. past performance. c. to motivate the sales force. d. a clean slate, with no expectations.

If budgets are to be effective, all of the following must be present except a. acceptance at all levels of management. b. research and analysis in setting realistic goals. c. stockholders' approval of the budget. d. sound organizational structure.

If budgets are to be effective, there must be a. a history of successful operations. b. independent verification of budget goals. c. an organizational structure with clearly defined lines of authority and responsibility. d. excess plant capacity.

It is important that budgets be accepted by a. division managers. b. department heads. c. supervisors. d. All of these.

Which of the following statements about budget acceptance in an organization is true? a. The most widely accepted budget by the organization is the one prepared by top management. b. The most widely accepted budget by the organization is the one prepared by the department heads. c. Budgets are hardly ever accepted by anyone except top management. d. Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process.

Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable? a. Department managers should be held accountable for all variances from budgets for their departments. b. Department managers should only be held accountable for controllable variances for their departments. c. Department managers should be credited for favorable variances even if they are beyond their control. d. Department managers' performances should not be evaluated based on actual results to budgeted results.

An unrealistic budget is more likely to result when it a. has been developed in a top down fashion. b. has been developed in a bottom up fashion. c. has been developed by all levels of management. d. is developed with performance appraisal usages in mind.

A budget is most likely to be effective if a. it is used to assess blame when things do not occur according to plans. b. it is not used to evaluate a manager's performance. c. employees and managers at the lower levels do not get involved in the budgeting process. d. it has top management support.

In many companies, responsibility for coordinating the preparation of the budget is assigned to a. the company's independent certified public accountants. b. the company's internal auditors. c. the company's board of directors. d. a budget committee.

A budget period should be a. monthly. b. for a year or more. c. long-term. d. long enough to provide an obtainable goal under normal business conditions.

If a company has adopted continuous budgeting, the budget will show plans for a. every day. b. a full year ahead. c. the current year and the next year. d. at least five years.

The most common budget period is a. one month. b. three months. c. six months. d. one year.

Budget development for the coming year usually starts a. a year in advance. b. the first month of the year to be budgeted. c. several months before the end of the current year. d. the last month of the previous year.

The budget committee would not normally include the a. research director. b. treasurer. c. sales manager. d. external auditor.

The budget committee in a company is often headed by the a. president. b. controller. c. treasurer. d. budget director.

Long-range planning a. generally presents more detailed information than an annual budget. b. generally encompasses a longer period of time than an annual budget. c. is usually more accurate than an annual budget. d. is prepared on a quarterly basis if the budget is prepared on a quarterly basis.

Long-range planning usually encompasses a period of at least a. six months. b. 1 year. c. 5 years. d. 10 years.

Which of the following is not a proper match-up? a. Long range planning <-> Strategies b. Budgeting <-> Short-term goals c. Long-range planning <-> 5 years d. Budgeting <-> Long-term goals

Which is the last step in developing the master budget? a. Preparing the budgeted balance sheet b. Preparing the cost of goods manufactured budget c. Preparing the budgeted income statement d. Preparing the cash budget

If there were 60,000 pounds of raw materials on hand on January 1, 120,000 pounds are desired for inventory at January 31, and 410,000 pounds are required for January production, how many pounds of raw materials should be purchased in January? a. 350,000 pounds b. 530,000 pounds c. 290,000 pounds d. 470,000 pounds

The total direct labor hours required in preparing a direct labor budget are calculated using the a. sales forecast. b. production budget. c. direct materials budget. d. sales budget.

The direct materials and direct labor budgets provide information for preparing the a. sales budget. b. production budget. c. manufacturing overhead budget. d. cash budget.

A sales forecast a. shows a forecast for the firm only. b. shows a forecast for the industry only. c. shows forecasts for the industry and for the firm. d. plays a minor role in the development of the master budget.

Which of the following is not an operating budget? a. Direct labor budget b. Sales budget c. Production budget d. Cash budget

Which of the following is not a financial budget? a. Capital expenditure budget b. Cash budget c. Manufacturing overhead budget d. Budgeted balance sheet

Which of the following is done to improve the reliability of the sales forecast? a. Employ financial planning models b. Lengthen the planning horizon to more than a year c. Rely solely on outside consultants d. Use the sales forecasts from the previous year

The financial budgets include the a. cash budget and the selling and administrative expense budget. b. cash budget and the budgeted balance sheet. c. budgeted balance sheet and the budgeted income statement. d. cash budget and the production budget.

The culmination of preparing operating budgets is the a. budgeted balance sheet. b. production budget. c. cash budget. d. budgeted income statement.

The following information is taken from the production budget for the first quarter: Beginning inventory in units 1,200 Sales budgeted for the quarter 426,000 Capacity in units of production facility 472,000 How many finished goods units should be produced during the quarter if the company desires 3,200 units available to start the next quarter? a. 428,000 b. 424,000 c. 474,000 d. 429,200

An overly optimistic sales budget may result in a. increases in selling prices late in the year. b. insufficient inventories. c. increased sales during the year. d. excessive inventories.

In a production budget, total required production units are the budgeted sales units plus a. beginning finished goods units. b. desired ending finished goods units. c. desired ending finished goods units plus beginning finished goods units. d. desired ending finished goods units minus beginning finished goods units.

The direct materials budget details 1. the quantity of direct materials to be purchased. 2. the cost of direct materials to be purchased. a. 1 b. 2 c. both 1 and 2 d. neither 1 nor 2

The production budget shows expected unit sales of 32,000. Beginning finished goods units are 3,600. Required production units are 33,600. What are the desired ending finished goods units? a. 2,000 b. 3,600 c. 6,400 d. 5,200

The production budget shows expected unit sales are 100,000. The required production units are 104,000. What are the beginning and desired ending finished goods units, respectively? Beginning Units Ending Units a. 10,000 6,000 b. 6,000 10,000 c. 4,000 10,000 d. 10,000 4,000

The production budget shows that expected unit sales are 48,000. The total required units are 54,000. What are the required production units? a. 6,000 b. 9,000 c. 12,000 d. Cannot be determined from the data provided.

The direct materials budget shows: Units to be produced 3,000 Total pounds needed for production 9,000 Total materials required 9,900 What are the direct materials per unit? a. .33 pounds b. 3.0 pounds c. 3.3 pounds d. Cannot be determined from the data provided.

The direct materials budget shows: Desired ending direct materials 48,000 pounds Total materials required 69,000 pounds Direct materials purchases 63,200 pounds The total direct materials needed for production is a. 21,000 pounds. b. 5,800 pounds. c. 15,200 pounds. d. 132,200 pounds.

If the required direct materials purchases are 24,000 pounds, the direct materials required for production is three times the direct materials purchases, and the beginning direct materials are three and a half times the direct materials purchases, what are the desired ending direct materials in pounds? a. 60,000 b. 12,000 c. 36,000 d. 24,000

Dart, Inc. makes and sells umbrellas. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: Variable Cost Per Unit Sold Monthly Fixed Cost Sales commissions $0.60 $ 6,000 Shipping 1.20 Advertising 0.30 Executive salaries 40,000 Depreciation on office equipment 8,000 Other 0.35 28,000 Expenses are paid in the month incurred. If the company has budgeted to sell 8,000 umbrellas in October, how much is the total budgeted variable selling and administrative expenses for October? a. $16,800 b. $18,400 c. $101,600 d. $19,600

Which of the following expenses would not appear on a selling and administrative expense budget? a. Sales commissions b. Depreciation c. Property taxes d. Indirect labor

Which of the following would not appear as a fixed expense on a selling and administrative expense budget? a. Freight-out b. Office salaries c. Property taxes d. Depreciation

A master budget consists of a. an interrelated long-term plan and operating budgets. b. financial budgets and a long-term plan. c. interrelated financial budgets and operating budgets. d. all the accounting journals and ledgers used by a company.

The starting point in preparing a master budget is the preparation of the a. production budget. b. sales budget. c. purchasing budget. d. personnel budget.

Which one of the following is not needed in preparing a production budget? a. Budgeted unit sales b. Budgeted raw materials c. Beginning finished goods units d. Ending finished goods units

A company budgeted unit sales of 204,000 units for January, 2013 and 240,000 units for February 2013. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 61,200 units of inventory on hand on December 31, 2012, how many units should be produced in January, 2013 in order for the company to meet its goals? a. 214,800 units b. 204,000 units c. 193,200 units d. 276,000 units

At January 1, 2013, Deer Corp. has beginning inventory of 2,000 surfboards. Deer estimates it will sell 10,000 units during the first quarter of 2013 with a 12% increase in sales each quarter. Deer's policy is to maintain an ending inventory equal to 25% of the next quarter's sales. Each surfboard costs $100 and is sold for $150. How much is budgeted sales revenue for the third quarter of 2013? a. $450,000 b. $1,950,000 c. $1,881,600 d. $12,544

Doe Manufacturing plans to sell 6,000 purple lawn chairs during May, 5,700 in June, and 6,000 during July. The company keeps 15% of the next month's sales as ending inventory. How many units should Doe produce during June? a. 5,745 b. 6,600 c. 5,655 d. Not enough information to determine.

Strand Company is planning to sell 400 buckets and produce 380 buckets during March. Each bucket requires 500 grams of plastic and one-half hour of direct labor. Plastic costs $10 per 500 grams and employees of the company are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Strand has 300 kilos of plastic in beginning inventory and wants to have 200 kilos in ending inventory. How much is the total amount of budgeted direct labor for March? a. $3,000 b. $6,000 c. $2,850 d. $5,7000

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory. What is the total amount to be budgeted for manufacturing overhead for the month? a. $2,871 b. $2,970 c. $11,484 d. $11,880

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory. What is the total amount to be budgeted for direct labor for the month? a. $2,610 b. $10,440 c. $2,700 d. $41,760

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory. What is the total amount to be budgeted in pounds for direct materials to be purchased for the month? a. 38,280 b. 37,680 c. 38,880 d. 40,200

Lorie Nursery plans to sell 320 potted plants during April and 240 units in May. Lorie Nursery keeps 15% of the next month's sales as ending inventory. How many units should Lorie Nursery produce during April? a. 308 b. 332 c. 320 d. 356

Comma Co. makes and sells widgets. The company is in the process of preparing its selling and administrative expense budget for the month. The following budget data are available: Item Variable Cost Per Unit Sold Monthly Fixed Cost Sales commissions $1 $10,000 Shipping $3 Advertising $4 Executive salaries $120,000 Depreciation on office equipment $4,000 Other $2 $6,000 Expenses are paid in the month incurred. If the company has budgeted to sell 80,000 widgets in October, how much is the total budgeted selling and administrative expenses for October? a. $940,000 b. $140,000 c. $930,000 d. $800,000

Comma Manufacturing budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels are planned for the fiscal year of July 1, 2012 to June 30, 2013: June 30, 2013 June 30, 2012 Raw Materials 3,000 kilos 2,000 kilos Three kilos of raw materials are needed to produce each unit of finished product. If Comma Manufacturing plans to produce 560,000 units during the 2012-2013 fiscal year, how many kilos of materials will the company need to purchase for its production during the year? a. 1,681,000 b. 1,686,000 c. 1,680,000 d. 1,678,000

The following information is taken from the production budget for the first quarter: Beginning inventory in units 1,200 Sales budgeted for the quarter 456,000 Production capacity in units 472,000 How many finished goods units should be produced during the quarter if the company desires 3,200 units available to start the next quarter? a. 458,000 b. 454,000 c. 474,000 d. 459,200

Off-Line Co. has 9,000 units in beginning finished goods. The sales budget shows expected sales to be 36,000 units. If the production budget shows that 42,000 units are required for production, what was the desired ending finished goods? a. 3,000. b. 9,000. c. 15,000. d. 27,000.

Lion Industries required production for June is 132,000 units. To make one unit of finished product, three pounds of direct material Z are required. Actual beginning and desired ending inventories of direct material Z are 300,000 and 330,000 pounds, respectively. How many pounds of direct material Z must be purchased? a. 378,000. b. 396,000. c. 408,000. d. 426,000.

Haft Construction Company determines that 54,000 pounds of direct materials are needed for production in Jdfuly. There are 3,200 pounds of direct materials on hand at July 1 and the desired ending inventory is 2,800 pounds. If the cost per unit of direct materials is $3, what is the budgeted total cost of direct materials purchases? a. 158,400. b. 160,800. c. 163,200. d. 165,600.

Pell Manufacturing is preparing its direct labor budget for May. Projections for the month are that 33,400 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $12, what is the total budgeted direct labor cost for May? a. 1,159,200. b. 1,180,800. c. 1,202,400. d. 1,296,000.

Dolce Co. estimates its sales at 180,000 units in the first quarter and that sales will increase by 18,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Production in units for the third quarter should be budgeted at a. 220,500. b. 207,000. c. 274,500. d. 216,000.

Dolce Co. estimates its sales at 180,000 units in the first quarter and that sales will increase by 18,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Cash collections for the third quarter are budgeted at a. $3,051,000. b. $4,428,000. c. $5,319,000. d. $6,156,000.

Bear, Inc. estimates its sales at 200,000 units in the first quarter and that sales will increase by 20,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Production in units for the third quarter should be budgeted at a. 245,000. b. 230,000. c. 305,000. d. 240,000.

Bear, Inc. estimates its sales at 200,000 units in the first quarter and that sales will increase by 20,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale. Cash collections for the third quarter are budgeted at a. $4,746,000. b. $6,888,000. c. $8,274,000. d. $9,576,000.

A company determined that the budgeted cost of producing a product is $30 per unit. On June 1, there were 80,000 units on hand, the sales department budgeted sales of 300,000 units in June, and the company desires to have 120,000 units on hand on June 30. The budgeted cost of goods manufactured for June would be a. $7,800,000. b. $11,400,000. c. $9,000,000. d. $10,200,000.

Of the following items, which one is not obtained from an individual operating budget? a. Selling and administrative expenses b. Accounts receivable c. Cost of goods sold d. Sales

Which of the following statements about a budgeted income statement is not true? a. The budgeted income statement is prepared after the financial budgets are prepared. b. The budgeted income statement is prepared on the accrual basis of accounting. c. The budgeted income statement can be prepared in a multiple-step format. d. The budgeted income statement is prepared using the individual operating budgets.

A company has budgeted direct materials purchases of $300,000 in July and $480,000 in August. Past experience indicates that the company pays for 70% of its purchases in the month of purchase and the remaining 30% in the next month. During August, the following items were budgeted: Wages Expense $150,000 Purchase of office equipment 72,000 Selling and Administrative Expenses 48,000 Depreciation Expense 36,000 The budgeted cash disbursements for August are a. $648,000. b. $426,000. c. $696,000. d. $732,000.

Astor Manufacturing has the following budgeted sales: January $120,000, February $180,000, and March $150,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during March are: a. $168,000. b. $159,000. c. $157,500. d. $150,000.

Garnett Co. expects to purchase $180,000 of materials in July and $210,000 of materials in August. Three-fourths of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase. How much will August's cash disbursements for materials purchases be? a. $135,000 b. $157,500 c. $202,500 d. $210,000

The single most important output in preparing financial budgets is the a. sales forecast. b. determination of the unit cost of the product. c. cash budget. d. budgeted income statement.

Which of the following does not appear as a separate section on the cash budget? a. Cash receipts b. Cash disbursements c. Capital expenditures d. Financing

The financing section of a cash budget is needed if there is a cash deficiency or if the ending cash balance is less than a. the prior years. b. management's minimum required balance. c. the amount needed to avoid a service charge at the bank. d. the industry average.

Beginning cash balance plus total receipts a. equals ending cash balance. b. must equal total disbursements. c. equals total available cash. d. is the excess of available cash over disbursements.

The projection of financial position at the end of the budget period is found on the a. budgeted income statement. b. cash budget. c. budgeted balance sheet. d. sales budget.

What is the proper preparation sequencing of the following budgets? 1. Budgeted Balance Sheet 2. Sales Budget 3. Selling and Administrative Budget 4. Budgeted Income Statement a. 1, 2, 3, 4 b. 2, 3, 1, 4 c. 2, 3, 4, 1 d. 2, 4, 1, 3

Kam Department Store reported the following information for 2013: October November December Budgeted sales $1,240,000 $1,160,000 $1,440,000 • All sales are on credit. • Customer amounts on account are collected 50% in the month of sale and 50% in the following month. How much cash will Kam receive in November? a. $580,000 b. $1,300,000 c. $1,200,000 d. $1,160,000

The following information was taken from Southgate Industry's cash budget for the month of July: Beginning cash balance $480,000 Cash receipts 304,000 Cash disbursements 544,000 If the company has a policy of maintaining a minimum end of the month cash balance of $400,000, the amount the company would have to borrow is a. $160,000. b. $80,000. c. $240,000. d. $96,000.

The cash budget reflects a. all revenues and all expenses for a period. b. expected cash receipts and cash disbursements from all sources. c. all the items that appear on a budgeted income statement. d. all the items that appear on a budgeted balance sheet.

The following credit sales are budgeted by Terra Co.: January $204,000 February 300,000 March 420,000 April 360,000 The company's past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of April is a. $370,320. b. $336,000. c. $360,000. d. $352,800.

Hyde Corp.'s cash budget showed total available cash less cash disbursements. What does this amount equal? a. Ending cash balance b. Total cash receipts c. The excess of available cash over cash disbursements d. The amount of financing required

Which one of the following sections would not appear on a cash budget? a. Cash receipts b. Financing c. Investing d. Cash disbursements

A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected. Budgeted credit sales were: January $360,000 February 216,000 March 540,000 The cash inflow in the month of March is expected to be a. $406,800. b. $307,800. c. $324,000. d. $388,800.

Which one of the following items would never appear on a cash budget? a. Office salaries expense b. Interest expense c. Depreciation expense d. Travel expense

Correy Inc. reported the following information for 2013: October November December Budgeted sales $460,000 $440,000 $540,000 Budgeted purchases $240,000 $256,000 $288,000 • All sales are on credit. • Customer amounts on account are collected 50% in the month of sale and 50% in the following month. • Cost of goods sold is 35% of sales. • Correy purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month. • Accounts payable is used only for inventory acquisitions. How much cash will Correy receive during November? a. $220,000 b. $490,000 c. $450,000 d. $440,000

Correy Company reported the following information for 2013: October November December Budgeted sales $460,000 $440,000 $540,000 Budgeted purchases $240,000 $256,000 $288,000 • Cost of goods sold is 35% of sales. • Correy purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month. • Accounts payable is used only for inventory acquisitions. How much is the budgeted balance for Accounts Payable at October 31, 2013? a. $96,000 b. $144,000 c. $204,000 d. $102,400

Petal Co. reported the following information for 2013: October November December Budgeted sales $930,000 $870,000 $1,080,000 • All sales are on credit. • Customer amounts on account are collected 50% in the month of sale and 50% in the following month. How much is the November 30, 2013 budgeted Accounts Receivable? a. $900,000 b. $540,000 c. $465,000 d. $435,000

Bean Manufacturing reported the following information for 2013: October November December Budgeted purchases $240,000 $256,000 $288,000 • Operating expenses are: Salaries, $100,000; Depreciation, $40,000; Rent, $20,000; Utilities, $28,000 • Operating expenses are paid during the month incurred. • Accounts payable is used only for inventory acquisitions. How much is the budgeted amount of cash to be paid for operating expenses in November? a. $404,000 b. $148,000 c. $188,000 d. $444,000

During September, the capital expenditure budget indicates a $420,000 purchase of equipment. The ending September cash balance from operations is budgeted to be $60,000. The company wants to maintain a minimum cash balance of $30,000. What is the minimum cash loan that must be planned to be borrowed from the bank during September? a. $330,000 b. $360,000 c. $450,000 d. $390,000

Young Co. has budgeted its activity for December according to the following information: 1. Sales at $600,000, all for cash. 2. Budgeted depreciation for December is $15,000. 4. The cash balance at December 1 was $15,000. 5. Selling and administrative expenses are budgeted at $60,000 for December and are paid for in cash. 6. The planned merchandise inventory on December 31 and December 1 is $18,000. 7. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid in cash. How much are the budgeted cash disbursements for December? a. $345,000 b. $510,000 c. $525,000 d. $492,000

Dex Industries expects to purchase $120,000 of materials in March and $140,000 of materials in April. Three-fourths of all purchases are paid for in the month of purchase, and the other one-fourth are paid for in the month following the month of purchase. In addition, a 2% discount is received for payments made in the month of purchase. How much will April's cash disbursements for materials purchases be? a. $88,200 b. $108,200 c. $132,900 d. $120,000

On January 1, Witt Company has a beginning cash balance of $126,000. During the year, the company expects cash disbursements of $1,020,000 and cash receipts of $870,000. If Witt requires an ending cash balance of $120,000, Witt Company must borrow a. $96,000. b. $120,000. c. $144,000. d. $276,000.

Mapleview, Inc. has the following budgeted sales: July $200,000, August $300,000, and September $250,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during September are a. $280,000. b. $265,000. c. $262,500. d. $250,000.

Burr, Inc.'s direct materials budget shows total cost of direct materials purchases for April $400,000, May $480,000 and June $560,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for June are a. $528,000. b. $512,000. c. $480,000. d. $416,000.

Which one of the following budgets would be prepared for a manufacturer but not for a merchandiser? a. Direct labor budget b. Cash budget c. Sales budget d. Budgeted income statement

The formula for determining budgeted merchandise purchases is budgeted a. production + desired ending inventory - beginning inventory. b. sales + beginning inventory - desired ending inventory. c. cost of goods sold + desired ending inventory - beginning inventory. d. cost of goods sold + beginning inventory - desired ending inventory.

Which one of the following is a problem resulting from a service company being overstaffed? a. Labor costs will be disproportionately low. b. Profits will be higher because of the additional salaries. c. Staff turnover may increase. d. Revenue may be lost.

The master budget for a service enterprise a. will have the same types of budgets as a merchandiser. b. may include a sales budget for sales revenue. c. will not include a budgeted income statement. d. includes a service revenue budget based on expected client billings.

Budgeting in not-for-profit organizations a. is not important because they are not profit-oriented. b. usually starts with budgeting expenditures, rather than receipts. c. is necessary only if some product is produced and sold. d. consists entirely of budgeted contributions.

For a merchandiser, the starting point in the development of the master budget is the a. cash budget. b. sales budget. c. selling and administrative expenses budget. d. budgeted income statement.

Instead of a production budget, a merchandiser will prepare a a. pseudo-production budget. b. merchandise purchases budget. c. master time sheet. d. sales forecast.

Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities will prepare? a. Orange Co. will prepare a production budget, and Pineapple Company will prepare a merchandise purchases budget. b. Orange Co. will prepare a sales forecast, and Pineapple Company will prepare a sales budget. c. Pineapple Company will prepare a production budget, and Orange Co. will prepare a merchandise purchases budget. d. Both companies will prepare the same types of budgets.

An appropriate activity index for a college or university for budgeting faculty positions would be the a. faculty hours worked. b. number of administrators. c. credit hours taught by a department. d. number of days in the school term.

A critical factor in budgeting for a service firm is to a. hire professional staff to perform the budgeting work. b. coordinate professional staff needs with anticipated services. c. classify all personnel as either variable or fixed. d. budget expenditures before anticipated receipts.

The primary benefits of budgeting include all of the following except it a. requires only top management to plan ahead and formalize their future goals. b. provides definite objectives for evaluating performance. c. creates an early warning system for potential problems. d. motivates personnel throughout the organization.

The responsibility for expressing management's budgeting goals in financial terms is performed by the a. accounting department. b. top management. c. lower level of management. d. budget committee.

Coordinating the preparation of the budget is the responsibility of the a. treasurer. b. president. c. chief accountant. d. budget committee.

For better management acceptance, the flow of input data for budgeting should begin with the a. accounting department. b. top management. c. lower levels of management. d. budget committee.

In the direct materials budget, the quantity of direct materials to be purchased is computed by adding direct materials required for production to a. desired ending direct materials. b. beginning direct materials. c. desired ending direct materials less beginning direct materials. d. beginning direct materials less desired ending direct materials.

Grey Company has 24,000 units in beginning finished goods. If sales are expected to be 120,000 units for the year and Grey desires ending finished goods of 30,000 units, how many units must the company produce? a. 114,000 b. 120,000 c. 126,000 d. 150,000

The important end-product of the operating budgets is the a. budgeted income statement. b. cash budget. c. production budget. d. budgeted balance sheet.

On January 1, Kale Company has a beginning cash balance of $42,000. During the year, the company expects cash disbursements of $340,000 and cash receipts of $290,000. If Kale requires an ending cash balance of $40,000, the company must borrow a. $32,000. b. $40,000. c. $48,000. d. $92,000.

The budget that is often considered to be the most important financial budget is the a. cash budget. b. capital expenditure budget. c. budgeted income statement. d. budgeted balance sheet.

Lark Corp.'s direct materials budget shows total cost of direct materials purchases for January $250,000, February $300,000 and March $350,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for March are a. $330,000. b. $320,000. c. $300,000. d. $260,000.

A purchases budget is used instead of a production budget by a. merchandising companies. b. service enterprises. c. not-for-profit organizations. d. manufacturing companies.

Which of the following statements is incorrect? a. A continuous twelve-month budget results from dropping the month just ended and adding a future month. b. The production budget is derived from the direct materials and direct labor budgets. c. The cash budget shows anticipated cash flows. d. In the budget process for not-for-profit organizations, the emphasis is on cash flow rather than on revenue and expenses.