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Exam 7: The Master Budget

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Question 1

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Financial planning models:

A) focus on the budgeted balance sheet
B) are extremely accurate, thus lessening the need for management judgment
C) allow managers to assess the predicted impacts of various alternatives before final decisions are selected
D) attempt to answer "How come?" questions

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Question 2

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Explain the benefits of a good budgeting plan.

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Budgets compel managers to think ahead, ...

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Question 3

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is a major part of the master budget that focuses on the income statement and its supporting schedules.

Includes decisions to add or delete a product line or acquire buildings or equipment

A prediction of sales under a given set of conditions

The following sales budget has been prepared: $\begin{array} { l l l } \text { Month } & \text { Cash Sales } & \text { Credit Sales } \\\text { September } & \$ 167,000 & \$ 123,000 \\\text { October } & 225,000 & 180,000 \\\text { November } & 330,000 & 210,000 \\\text { December } & 135,000 & 190,000\end{array}$ Collections are 50% in the month of sale, 40% in the month following the sale, and 10% two months following the sale. No uncollectible accounts are anticipated. is the estimated cash collection in December.

A sales forecast is:

The master budget quantifies targets for all of the following except:

Lyle Corporation has the following information: $\begin{array}{ll}\text { Month } & \begin{array}{l}\text { Budgeted } \\\text { Purchases }\end{array} \\\text { January } & \$ 230,000 \\\text { February } & 190,000 \\\text { M arch } & 200,000 \\\text { April } & 220,000 \\\text { M ay } & 210,000\end{array}$ Purchases are paid for in the following manner: 10% in the month of purchase 80% in the month after purchase 10% two months after purchase Required: Prepare a schedule of cash disbursements for purchases for March through May.

The result of decisions to create the conditions that will generate a desired level of sales

Participative budgeting is the active participation of all affected employees in the formulation of the budgets.

Bronze Corporation has the following information: $\begin{array}{ll}\text { Month } & \text { Budgeted Sales } \\\text { May } & \$ 46,000 \\\text { June } & 50,000 \\\text { July } & 52,000 \\\text { August } & 48,000\end{array}$ The cost of goods sold percentage is 65% and the desired inventory level is 25% of next month's sales is the expected total purchases budgeted for June.

A good budget process communicates from the top down, but not from the bottom up.

Is budgeting used primarily for scorekeeping, attention directing, or problem solving?

Angle Company's expected sales for April are $27,600. Information about other budgeted expenses is presented below. $\begin{array}{ll}\text { Budgeted } & \text { Expenses per Month } \\\text { Wages } & \$ 2,000 \\\text { Advertising } & 1,680 \\\text { Depreciation } & 1,440 \\\text { Rent } & 2,560 \\\text { Other } & 5 \% \text { of sales }\end{array}$ is a noncash expense.

A budget that details the planned expenditures for facilities, equipment, new products, and other long- term investments

is generally prepared as the first step in preparing the operating budgets.

The beginning available cash balance equals the beginning cash balance + the minimum cash balance desired.

Washington Company has prepared the following sales budget: $\begin{array}{lll}\text { Month } & \text { Cash S ales } & \text { Credit Sales } \\\text { February } & \$ 14,000 & \$ 28,000 \\\text { March } & 12,800 & 29,200 \\\text { April } & 10,800 & 26,400\end{array}$ Collections are 40% in the month of sale, 50% in the month following the sale, and 10% two months following the sale. No uncollectible accounts are anticipated. Required: Prepare a schedule of cash collections for April.

Collections of cash from customers would appear on the .