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Exam 22: Master Budgets and Planning

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Question 111

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Flagstaff Company has budgeted production units of 7,900 for July and 8,100 for August. The direct labor requirement per unit is 0.50 hours. Labor is paid at the rate of $21 per hour. The total cost of direct labor for the month of August is:

A) $168,000.
B) $85,050.
C) $82,950.
D) $3,950.
E) $4,050.

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Question 112

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The capital expenditures budget summarizes the effects of financing activities on cash.

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Question 113

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Southland Company is preparing a cash budget for August. The company has $17,000 cash at the beginning of August and anticipates $120,800 in cash receipts and $134,500 in cash disbursements during August. Southland Company wants to maintain a minimum cash balance of $10,000. - To maintain the minimum cash balance of $10,000, the company must borrow:

The number and types of budgets included in a master budget depend on the company's size and complexity.

Match the following definitions with the appropriate term

Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months: Material purchases $\begin{array} { l l c } \text { January } & \text { February } & \text { March } \\\$ 12,040 & \$ 14,150 & \$ 10.970\end{array}$ Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $6,500. The expected January 31 Accounts Payable balance is:

Diego, Inc., sells two products, Baubles and Charms. The sales forecast in units for the first quarter of the coming year is: $\begin{array} { l | l | l } & { \text { Baubles } } & \text { Charms } \\\hline \text { January } \ldots . . & 20,000 & 36,000 \\\hline \text { February } \ldots & 28,000 & 60,000 \\\hline \text { March ..... } & 36,000 & 64,000\end{array}$ Cash sales are 30% of each product's monthly sales. The remaining sales are credit sales which are collected as follows: 70% in the month of sale, 20% the next month, and 10% in the following month. Unit sale prices are $30 and $20 for Baubles and Charms, respectively. Determine the company's cash receipts for March from its current and past sales.

Which of the following budgets is not completed before a cash budget is prepared?

Frankie's Chocolate Co. reports the following information from its sales budget: Expected Sales: $\begin{array} { l r r } \text { July } & \$ 90,000 \\\text { August } & 104,000 \\\text { September } & 120,000\end{array}$ Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:

Which of the following must be prepared before the direct labor budget?

A plan that reports the units or costs of merchandise to be purchased by a merchandising company during the budget period is called a:

Cameroon Corp. manufactures and sells electric staplers for $16 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the number of electric stapler sales budgeted for March should be:

The master budget process usually ends with:

A sporting goods store budgeted August purchases of ski jackets at $140,000. The store had ski jackets costing $12,000 in its inventory at the beginning of August; and to cover part of anticipated September sales, they expect to have $25,000 of ski jackets in inventory at the end of the month of August. What is the budgeted cost of goods sold for August?

Todd Enterprises is preparing a cash budget for the second quarter of the coming year. The following data have been forecasted: Additional data: (1) Sales are 40% cash and 60% credit. The collection pattern for credit sales is 50% in the month following the sale and 50% in the month thereafter. Total sales in March were $125,000. (2) Purchases are all on credit, with 40% paid in the month of purchase and the balance paid in the following month. (3) Operating expenses are paid in the month they are incurred. (4) A minimum cash balance of $25,000 is required at the end of each month. (5) Loans are used to maintain the minimum cash balance. At the end of each month, interest of 1% per month is paid on the outstanding loan balance as of the beginning of the month. Repayments are made whenever excess cash is available. Prepare the company's cash budget for May. Show the ending loan balance at May 31.

The usual starting point for preparing a master budget is forecasting or estimating: