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Exam 22: Master Budgets

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Question 51

Multiple Choice

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Carol's Chocolate Company has prepared its third quarter budget and provided the following data: $\begin{array} { | l | r | r | r | } \hline &{ \text { Jul } } & { \text { Aug } } & { \text { Sep } } \\\hline \text { Cash collections } & \$ 49,000 & \$ 40,000 & \$ 46,500 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of direct materials } & 29,000 & 21,200 & 17,500 \\\hline \text { Operating expenses } & 12,400 & 8100 & 11,000 \\\hline \text { Capital expenditures } & 13,100 & 24,800 & 0 \\\hline\end{array}$ The cash balance on June 30 is projected to be $4300. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 4%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash. Calculate the ending projected cash balance before financing for August.

A) $9667
B) $5,000
C) $48,800
D) $(5333)

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Question 52

Multiple Choice

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Which of the following is NOT a benefit of benchmarking?

A) It helps companies determine where they can improve.
B) It does not help management highlight company problems.
C) It can be used to compare a company's budgets to other leading companies through the use of industry averages.
D) It helps companies develop budgets to assist in meeting performance goals.

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Question 53

True/False

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Budgeted financial statements are financial statements based on budgeted amounts rather than actual amounts.

Components of the master budget are the operating budget, the capital expenditures budget, and the financial budget.

The capital expenditures budget is completed before the preparation of the cash budget.

List the budgets that are affected by the budgeted number of units to be produced.

Developing a budget reduces coordination and communication at different levels in an organization.

The budgeting process ________.

For a manufacturer, the budgeted multi-step income statement shows operating income and net income.

Roberts Supply, Inc. provides the following data taken from its third quarter budget: $\begin{array} { | l | r | r | r | } \hline &{ \text { Jul } } & { \text { Aug } } & { \text { Sep } } \\\hline \text { Cash collections } & \$ 82,000 & \$ 65,000 & \$ 60,000 \\\hline \text { Cash payments: } & & & \\\hline \text { Purchases of direct materials } & 48,000 & 29,000 & 50,000 \\\hline \text { Operating expenses } & 9000 & 16,000 & 20,000 \\\hline \text { Capital expenditures } & 0 & 32,000 & 6000 \\\hline\end{array}$ The cash balance on June 30 is projected to be $11,000. Based on the above data, calculate the cash balance the company is projected to have at the end of September.

Which of the following would NOT appear on a multiple-step budgeted income statement for a manufacturer?

A budget is a financial plan that managers use to coordinate a business's activities.

Purchases of direct material for May were $115,000, while expected purchases for June and July are $121,000 and $136,000, respectively. All purchases are paid 25% in the month of purchase and 75% the following month. Calculate the budgeted payments for the month of June.

When preparing the cost of goods sold budget, ________.

Which of the following is an example of the coordination and communication function of the budgeting process?

For a merchandising company, the budgeted total sales equals the expected number of units sold multiplied by the budgeted selling price per unit.

Beridze Manufacturing expects to produce 2400 units in January and 3700 units in February. Beridze budgets $45 per unit for direct materials. The amount of indirect materials needed for production has been determined to be insignificant and will therefore not be considered in the calculation. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is $37,250. Beridze desires the ending balance in Raw Materials Inventory to be 70% of the next month's direct materials needed for production. Desired ending balance for February is $51,800. What is the cost of budgeted purchases of direct materials needed for January?

A manufacturing company has prepared the operating budget and the cash budget and is now preparing the budgeted balance sheet. While doing so, the Cash balance can be taken from the ________.

Which of the following statements is true of the capital expenditures budget?

Stratosphere, Inc. has the following budgeted sales for the next quarter. $\begin{array} { | l | r | r | r | } \hline \text { Month: } & \mathbf { 1 } & \mathbf { 2 } & \mathbf { 3 } \\\hline \text { Units } & 10,000 & 11,000 & 12,000 \\\hline\end{array}$ Inventory of finished goods on hand at the beginning of the quarter is 4,000 units. The company desires to maintain ending inventory equal to beginning inventory plus 1,000 units every month. Calculate the quantity to be produced during the quarter.