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Exam 22: Budgetary Planning

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Question 81

Multiple Choice

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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.

E) C) and D)
F) A) and D)

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Question 82

Multiple Choice

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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.

E) C) and D)
F) B) and C)

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Question 83

Multiple Choice

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The direct materials and direct labor budgets provide information for preparing the

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 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: The cash inflow in the month of March is expected to be

The beginning cash balance is $15,000. Sales are forecasted at $800,000 of which 80% will be on credit. 70% of credit sales are expected to be collected in the year of sale. Cash expenditures for the year are forecasted at $475,000. Accounts Receivable from previous accounting periods totaling $9,000 will be collected in the current year. The company is required to make a $15,000 loan payment and an annual interest payment on the last day of every year. The loan balance as of the beginning of the year is $90,000, and the annual interest rate is 10%. Instructions Compute the excess of cash receipts over cash disbursements.

Ashley Finn is a new production manager. After a great deal of effort, including considerable market research, she completes her budget and submits it to her boss, Keith Payne. Without even looking at it, he asks her what her "fudge factor" was, and which items contained the most slack. Ashley, very surprised, responds that she doesn't use any "fudge factor," and that all her figures are honest. Mr. Payne counters by asking her how she would respond if she had to cut about 20% from her budget, as it is. He tells her that most budgets are trimmed in committee, and she had better be ready. He returns the budget to her, and tells her to come back with something reasonable. Required: 1. Is it ethical to build slack into a budget? Explain. 2. Was it ethical for Mr. Payne to refuse to accept a budget without slack? Briefly explain.

A major difference between the annual budget and long-range planning is the ____________________ over which the data pertain.

A budget is most likely to be effective if

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, 2016 to June 30, 2017: 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 2016-2017 fiscal year, how many kilos of materials will the company need to purchase for its production during the year?

The direct materials budget details 1) the quantity of direct materials to be purchased. 2) the cost of direct materials to be purchased.

A critical factor in budgeting for a service firm is to determine the amount of products to purchase.

In September 2016, the budget committee of Jason Company assembles the following data: 1. Expected Sales 2. Cost of goods sold is expected to be 60% of sales. 3. Desired ending merchandise inventory is 20% of the next month's cost of goods sold. 4. The beginning inventory at October 1 will be the desired amount. Instructions Prepare the budgeted income statement for October through gross profit on sales, including a cost of goods sold schedule.

The single most important output in preparing financial budgets is the

Hyde Corp.'s cash budget showed total available cash less cash disbursements. What does this amount equal?

Which of the following statements is incorrect?

A budget can be used as a basis for evaluating performance.

Smoke, Inc. makes and sells buckets. Each bucket uses 1/2 pound of plastic. Budgeted production of buckets in units for the next three months is as follows: The company wants to maintain monthly ending inventories of plastic equal to 25% of the following month's budgeted production needs. The cost of plastic is $2.20 per pound. Instructions Prepare a direct materials purchases budget for the month of May.

Which of the following items does not follow from the adoption of a budget?

The financial budgets include the