Braun3 09 Tif

Managerial Accounting, 3e (Braun/Tietz)

Chapter 9 The Master Budget

1) Strategic planning involves setting short-term goals extending three to four months into the future.

Answer: FALSE

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LO: 9-1

EOC: S9-2

AACSB: Reflective Thinking

Learning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

2) Budgeting is helpful to plan for cash inflows and outflows.

Answer: TRUE

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EOC: S9-2



3) A budget is a quantitative expression of a plan that helps managers coordinate and implement the plan.

Answer: TRUE

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4) Budgets do not provide benchmarks to help managers evaluate performance.

Answer: FALSE

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5) Budgets communicate financial plans throughout the company.

Answer: TRUE

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6) One of the key benefits of budgeting is that it forces managers to plan.

Answer: TRUE

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7) The capital expenditures budget is not part of the operating budget.

Answer: TRUE

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8) The master budget is the set of budgeted financial statements and supporting schedules for the entire organization.

Answer: TRUE

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9) The master budget includes both the operating budgets and the financial budgets.

Answer: TRUE

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10) Management uses budgeting to express its plans and to assess how well it's reaching its goals.

Answer: TRUE

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11) Strategic planning involves setting long-term goals that extend 5-10 years into the future.

Answer: TRUE

Diff: 1

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12) A rolling budget is a budget that is continuously updated so that the next 12 months of operations are always budgeted.

Answer: TRUE

Diff: 1

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EOC: S9-2



13) The financial budgets project the collection and payment of cash, as well as forecast the company's budgeted balance sheet.

Answer: TRUE

Diff: 1

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EOC: S9-2



14) Budget committees most often would include all of the following people except

A) CEO

B) Research and development manager

C) Shareholder

D) Marketing manager

Answer: C

Diff: 1

LO: 9-1

EOC: S9-2



15) Budgets are used for all of the following, except

A) planning for the future.

B) controlling operations.

C) recording actual results.

D) directing operations.

Answer: C

Diff: 1

LO: 9-1

EOC: S9-2



16) Strategic planning involves

A) setting long-term goals that extend 5-10 years into the future.

B) setting short-term goals that extend one year into the future.

C) setting goals for next month.

D) executing directives from the board of directors.

Answer: A

Diff: 1

LO: 9-1

EOC: S9-2



17) A rolling budget is a budget that

A) extends 5-10 years into the future.

B) is continuously updated, so that the next 12 months of operations are always budgeted.

C) begins with zero for each expense, and then amounts are added in.

D) is rolled out by upper management.

Answer: B

Diff: 1

LO: 9-1

EOC: S9-2



18) Most companies use ________ when developing the budgets each year.

A) a top-down approach

B) zero-based budgets

C) slack-based budgets

D) participative budgeting

Answer: D

Diff: 1

LO: 9-1

EOC: S9-2



19) Which of the following is a potential disadvantage of participative budgeting?

A) Managers are more likely to be motivated by budgets they helped to create.

B) Managers may build slack into the budget.

C) Managers should have more detailed knowledge for creating realistic budgets.

D) None of the above are true.

Answer: B

Diff: 1

LO: 9-1

EOC: S9-2



20) Managers may intentionally build slack into the budget

A) to have the resources they need in the event of budget cuts.

B) to make their performance look worse.

C) because of certainty about the future.

D) because of all of the above.

Answer: A

Diff: 1

LO: 9-1

EOC: S9-2



21) Managers may intentionally build slack into the budget

A) because of uncertainty about the future.

B) to make their performance look better.

C) to have the resources they need in the event of budget cuts.

D) because of all of the above.

Answer: D

Diff: 1

LO: 9-1

EOC: S9-2



22) The budget committee

A) rarely has the final say on the budget.

B) usually is made up of the accounting staff.

C) usually is made up of managers from all areas of the value chain.

D) usually is made up of the Board of Directors.

Answer: C

Diff: 1

LO: 9-1

EOC: S9-2



23) All of the following are functions of the budget committee except

A) reviews submitted budgets.

B) determines the bonuses awarded to those who achieve budget targets.

C) approves the final budget.

D) removes unwarranted slack.

Answer: B

Diff: 1

LO: 9-1

EOC: S9-2



24) Which of the following is the starting place for budgeting?

A) Last year's budget

B) Last year's actual amounts

C) Zero

D) Any of the above

Answer: D

Diff: 1

LO: 9-1

EOC: S9-2



25) Which of the following is an advantage of zero-based budgeting?

A) It is time consuming.

B) It forces managers to justify every dollar put in the budget, so some expenses may be lower than they were in previous years.

C) It is labor intensive.

D) All of the above are advantages.

Answer: B

Diff: 1

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26) The ________ budget is part of the financial budgets.

A) cash

B) sales

C) direct materials

D) operating expense

Answer: A

Diff: 1

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A) direct labor

B) capital expenditure

C) budgeted income statement

D) manufacturing overhead

Answer: B

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A) production

B) budgeted income statement

C) budgeted balance sheet

D) sales

Answer: C

Diff: 1

LO: 9-1

EOC: S9-2



29) The ________ budget is part of the operating budgets.

A) capital expenditure

B) budgeted balance sheet

C) production

D) cash

Answer: C

Diff: 1

LO: 9-1

EOC: S9-2



30) Which of the following alternatives reflects the proper order of preparing components of the master budget?

1. Production budget

2. Sales budget

3. Direct materials budget

A) 2, 3, 1

B) 1, 3, 2

C) 3, 1, 2

D) 2, 1, 3

Answer: D

Diff: 1

LO: 9-1

EOC: S9-2



31) Which of the following is an advantage of the budgeting process?

A) Coordinates the activities of the organization

B) Assures that the lowest cost materials will be obtained

C) Assures the company will achieve its objectives

D) Guarantees that a profit will be achieved

Answer: A

Diff: 1

LO: 9-1

EOC: S9-2



32) Regarding the budgeting process, which of the following statements is true?

A) The budget should always be designed by top corporate management.

B) The budget should be approved by the company's external auditors.

C) The budget should be designed from the bottom up, with input from employees at all levels.

D) All of the listed statements are true regarding the budgeting process.

Answer: C

Diff: 1

LO: 9-1

EOC: S9-2

AACSB: Analytical Thinking


33) Which of the following is a benefit of budgeting?

A) Focuses management's attention on the future

B) Improved decision-making processes

C) Improved motivation by employees

D) All of the above

Answer: D

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LO: 9-1

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34) Which of the following statements about budgeting is not true?

A) Budgeting is an aid to planning and control.

B) The operating budget should be prepared by top management, rather than mid-management personnel, because they have the overall objectives of the company in mind.

C) Budgets help to coordinate the activities of the entire organization.

D) Budgets promote communication and coordination between departments.

Answer: B

Diff: 1

LO: 9-1

EOC: S9-2



35) Which of the following alternatives reflects the proper order of preparing components of the master budget?

1. Financial budget

2. Operating budget

3. Capital expenditures budget

A) 1, 3, 2

B) 2, 3, 1

C) 1, 2, 3

D) 3, 1, 2

Answer: B

Diff: 2

LO: 9-1

EOC: S9-2



36) Which of the following budgets is a major part of the master budget and focuses on the income statement and its supporting schedules?

A) cash

B) operating

C) capital expenditures

D) financial

Answer: B

Diff: 1

LO: 9-1

EOC: S9-2



37) Which of the following budgets is the cornerstone of the master budget?

A) sales

B) cash

C) budgeted balance sheet

D) operating expense

Answer: A

Diff: 1

LO: 9-1

EOC: S9-2



38) "Sets the targeted revenue and expenses for the period" is best described by which of the following terms?

A) Responsibility center

B) Capital budget

C) Operating budget

D) Sensitivity analysis

Answer: C

Diff: 1

LO: 9-1

EOC: S9-2



39) "The comprehensive budget" is best described by which term below?

A) Operating budget

B) Sensitivity analysis

C) Responsibility center

D) Master budget

Answer: D

Diff: 1

LO: 9-1

EOC: S9-2



40) List and describe three reasons why a company and its managers could benefit from the use of budgeting.

Answer:

1. Planning: The budgeting process forces managers to spend time planning for the future, rather than only concerning themselves with daily operations.

2. Coordination and Communication: The budget coordinates a company's activities. It forces managers to consider relations among operations across the entire value chain.

3. Benchmarking: Budgets provide a benchmark that motivates employees and helps managers evaluate performance. The budget provides a target that most managers will try to achieve, especially if they participated in the budgeting process and the budget has been set at a realistic level.

Diff: 2

LO: 9-1

EOC: S9-2



41) When creating the sales budget, management simply takes the sales from the year before and divides that total by 12 months. Thus, each month will always predict the same amount of budgeted sales.

Answer: FALSE

Diff: 1

LO: 9-2

EOC: E9-16



42) The first component of the operating budget is the production budget.

Answer: FALSE

Diff: 1

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EOC: E9-16



43) The three components of the operating budget are the sales budget; inventory, purchases and cost of goods sold budget; and the cash budget.

Answer: FALSE

Diff: 1

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EOC: E9-23



44) The sales budget must be prepared after every other component of the operating budget.

Answer: FALSE

Diff: 1

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45) Budgeting includes planning for ending inventory.

Answer: TRUE

Diff: 1

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46) The sales budget is the cornerstone of the master budget.

Answer: TRUE

Diff: 1

LO: 9-2

EOC: E9-23



47) On the production budget, the number of units to be produced is computed as

A) unit sales + desired end inventory + beginning inventory.

B) unit sales + desired end inventory - beginning inventory.

C) unit sales - desired end inventory - beginning inventory.

D) unit sales - desired end inventory + beginning inventory.

Answer: B

Diff: 1

LO: 9-2

EOC: E9-18A



48) On the direct labor budget, the total quantity of direct labor hours needed is computed as

A) units to be produced direct labor hour per unit.

B) quantity needed for production + indirect labor hours - direct labor hours.

C) units to be produced - indirect labor hours cost per labor hour.

D) estimated direct labor hours needed cost per hour.

Answer: A

Diff: 1

LO: 9-2

EOC: E9-18A



49) On the direct materials budget, the total quantity of direct materials needed is computed as

A) quantity needed for production + desired end inventory of DM - beginning inventory of DM.

B) units to be produced + desired end inventory of DM - beginning inventory of DM.

C) units to be produced - desired end inventory of DM + beginning inventory of DM.

D) quantity needed for production - desired end inventory of DM + beginning inventory DM.

Answer: A

Diff: 1

LO: 9-2

EOC: E9-18A



50) The ________ budget is the only budget stated ONLY in units, not dollars.

A) production

B) sales

C) direct materials

D) manufacturing overhead

Answer: A

Diff: 1

LO: 9-2

EOC: E9-18A



51) The ________ budget starts with the number of units to be produced.

A) production

B) operating expense

C) direct materials

D) All of these choices start with the number of units to be produced.

Answer: C

Diff: 1

LO: 9-2

EOC: E9-23A



52) The ________ budget begins with the number of units to be sold.

A) manufacturing overhead

B) direct materials

C) production

D) capital expenditures

Answer: C

Diff: 1

LO: 9-2

EOC: E9-16A



53) Which of the following budgets usually shows separate sections for fixed and variable costs?

A) Direct materials and manufacturing overhead budget

B) Manufacturing overhead budget and production budget

C) Production budget and manufacturing overhead budget

D) Operating expense budget and manufacturing overhead budget

Answer: D

Diff: 1

LO: 9-2

EOC: E9-23A



54) Which of the following budgets or financial statements is part of the operating budget?

A) Sales budget

B) Budgeted balance sheet

C) Capital expenditures budget

D) Cash budget

Answer: A

Diff: 1

LO: 9-2

EOC: E9-16



55) The ________ is a plan that shows the units to be sold and the projected selling price and is also the starting point in the budgeting process.

A) cash budget

B) budgeted statement of cash flows

C) budgeted income statement

D) sales budget

Answer: D

Diff: 1

LO: 9-2

EOC: E9-16



56) Which of the following is not part of the operating budget?

A) Inventory, purchases and cost of goods sold budget

B) Cash budget

C) Sales budget

D) Budgeted income statement

Answer: B

Diff: 1

LO: 9-2

EOC: E9-23



57) Which of the following is not included in the operating budget?

A) Budgeted income statement

B) Sales budget

C) Inventory budget

D) Budgeted balance sheet

Answer: D

Diff: 1

LO: 9-2

EOC: E9-23



58) In preparing the operating budget, the first step is preparing the

A) cash budget.

B) sales budget.

C) budgeted income statement.

D) purchases budget.

Answer: B

Diff: 1

LO: 9-2

EOC: E9-23



59) Desired ending inventory is 20% of next month's sales. If cost of goods sold is $300,000 and next month's sales is $900,000, which of the following statements is true regarding purchases?

A) Purchases will be more than cost of goods sold.

B) Purchases cannot be predicted from the information given.

C) Purchases will be less than cost of goods sold.

D) Purchases will equal cost of goods sold.

Answer: B

Diff: 2

LO: 9-2

EOC: E9-18



60) Desired ending inventory is 25% more than beginning inventory. If purchases total $160,000, which of the following statements is true regarding cost of goods sold (COGS)?

A) COGS will exceed cost of goods available for sale.

B) COGS will be less than purchases.

C) COGS will exceed purchases.

D) COGS will equal $55,000.

Answer: B

Diff: 3

LO: 9-2

EOC: E9-18



61) Loyal Pet Company expects to sell 5,000 beefy dog treats in January and 9,000 in February for $3 each. What will be the total sales revenue reflected in the sales budget for those months?

A) January $15,000; February $27,000

B) January $1,667; February $3,000

C) January $3,000; February $1,667

D) January $27,000; February $15,000

Answer: A

Explanation: A) January 5000 $3 = $15,000; February 9000 $ 3 = $ 27,000

Diff: 1

LO: 9-2

EOC: E9-16



62) Mockingbird Company expects to sell 5,200 bird perches in January and 9,500 in February for $3 each. What will be the total sales revenue reflected in the sales budget for those months?

A) January $1,733; February $3,167

B) January $15,600; February $28,500

C) January $3,167; February $1,733

D) January $28,500; February $15,600

Answer: B

Explanation: B) January 5,200 $3 = $15,600; February 9,500 $ 3 = $ 28,500

Diff: 1

LO: 9-2

EOC: E9-16



63) Hewitt Company expects cash sales for July of $15,000, and a 22% monthly increase during August and September. Credit sales of $10,000 in July should be followed by 30% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?

A) $19,500 and $12,200

B) $25,350 and $14,884

C) $22,326 and $16,900

D) $18,300 and $13,000

Answer: C

Explanation: C) Cash sales $ 15,000 1.22% = $ 18,300 1.22% = $ 22,326;

Credit sales $ 10,000 1.30% = $ 13,000 1.30 % = $ 16,900

Diff: 2

LO: 9-2

EOC: E9-16



64) Piatt Company expects cash sales for July of $15,000, and a 26% monthly increase during August and September. Credit sales of $12,000 in July should be followed by 30% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?

A) $19,500 and $15,120

B) $25,350 and $19,051

C) $18,900 and $15,600

D) $23,814 and $20,280

Answer: D

Explanation: D) Cash sales $ 15,000 1.26% = $ 18,900 1.26% = $ 23,814;

Credit sales $ 12,000 1.30% = $ 15,600 1.30 % = $ 20,280

Diff: 2

LO: 9-2

EOC: E9-16



65) CatNap Company has two products: Kittyz and Katz. A March sales forecast projects 20,000 units of Kittyz and 15,000 units of Katz are going to be sold at prices of $15 and $12, respectively. The desired ending inventory of Kittyz is 20% higher than the beginning inventory, which was 2,000 units. How much are total March sales for Kittyz anticipated to be?

A) $100,000

B) $180,000

C) $300,000

D) $240,000

Answer: C

Explanation: C) 20,000 $ 15 = $ 300,000

Diff: 1

LO: 9-2

EOC: E9-16



66) DogDayz Company has two products: Doggyz and Pupz. A March sales forecast projects 22,000 units of Doggyz and 15,000 units of Pupz are going to be sold at prices of $17.50 and $12.00, respectively. The desired ending inventory of Doggyz is 20% higher than the beginning inventory, which was 2,000 units. How much are total March sales for Doggyz anticipated to be?

A) $180,000

B) $385,000

C) $264,000

D) $110,000

Answer: B

Explanation: B) 22,000 $ 17.50 = $ 385,000

Diff: 1

LO: 9-2

EOC: E9-16



67) Russell Company expects cash sales for July of $15,000, and a 22% monthly increase during August and September. Credit sales of $6,000 in July should be followed by 15% decreases during August and September. What are budgeted cash sales and budgeted credit sales for September?

A) $18,300 and $5,100

B) $22,326 and $4,335

C) $12,750 and $7,320

D) $10,838 and $8,930

Answer: B

Explanation: B) Cash $15,000 1.22% = $ 8,300 1.22% = $22,326;

Credit $6,000 85% = $5,100 85 % = $4,335

Diff: 2

LO: 9-2

EOC: E9-16



68) Kotrick Company has beginning inventory of 15,000 units and expected sales of 23,000 units. If the desired ending inventory is 18,000 units, how many units should be produced?

A) 20,000

B) 56,500

C) 10,000

D) 26,000

Answer: D

Explanation: D)

Sales23,000

Less: BI15,000

= Need to produce8,000

+ desired EI18,000

= Total Production26,000

Diff: 2

LO: 9-2

EOC: E9-18



69) McCoy Company wants to have an ending inventory of 7,000 units. McCoy Company has beginning inventory of 9,000 units and expects to sell 33,000 units. How many units should McCoy Company produce?

A) 31,000

B) 35,000

C) 49,000

D) 40,000

Answer: A

Explanation: A)

Sales33,000

Less: BI9,000


+ desired EI7,000= Total Production31,000

Diff: 2

LO: 9-2

EOC: E9-18



70) Rubino Corporation desires a December 31 ending inventory of 900 units. Budgeted sales for December are 2,650 units. The November 30 inventory was 850 units. What are budgeted purchases in units?

A) 3,550

B) 2,600

C) 2,700

D) 4,400

Answer: C

Explanation: C)

Sales2,650

Less: BI850= Need to produce1,800

+ desired EI900


Diff: 2

LO: 9-2

EOC: E9-18



71) Bruner Stores wants to have 500 shovels in ending inventory on December 31. Budgeted sales for December are 1,950 shovels. The November 30 inventory was 320 shovels. How many shovels should Benson Stores purchase for December?

A) 2,770

B) 1,770

C) 2,450

D) 2,130

Answer: D

Explanation: D)

Sales1,950

Less: BI320


+ desired EI500


Diff: 2

LO: 9-2

EOC: E9-18



72) Crafty Carpentry Company produces and sells a shelf for $25 each. The beginning inventory is 2,000 shelves, and the desired ending inventory is 2,200 shelves. If budgeted production is 12,500 shelves, what is the forecasted sales revenue from the shelves?

A) $417,500

B) $307,500

C) $317,500

D) $207,500

Answer: B

Explanation: B)

Production12,500

+ BI2,000

Total Produced14,500

Less: EI2,200Unit Sales12,300 $ 25 = $ 307,500

Diff: 2

LO: 9-2

EOC: E9-16



73) SportSupplies Corporation has budgeted purchases of inventory for December of $140,000. Expected beginning inventory on December 1 and ending inventory on December 31 are $90,000 and $120,000, respectively. If cost of goods sold averages 88% of sales, what are budgeted sales for December?

A) $125,000

B) $96,800

C) $193,182

D) $397,727

Answer: A

Explanation: A)

BI$90,000

+ Purchases140,000

= Goods Available230,000

Less : EI120,000= Cost of Goods Sold$110,000

Now 88% (Sales) =$ 110,000

Sales =$ 125,500

Diff: 2

LO: 9-2

EOC: E9-18



74) Willard's Department Store has budgeted cost of goods sold of $42,000 for its men's shorts in March. Management also wants to have $7,600 of men's shorts in inventory at the end of March to prepare for the summer season. Beginning inventory of men's shorts for March is expected to be $5,500. What dollar amount of men's shorts should be purchased in March?

A) $39,900

B) $44,100

C) $55,100

D) $29,900

Answer: B

Explanation: B)

Cost of Goods Sold$ 42,000

+ EI7,600= Goods Available49,600

Less BI5,500

= Purchases44,100

Diff: 2

LO: 9-2

EOC: E9-20



75) Goddard's Department Store has budgeted cost of goods sold of $44,000 for its men's shorts in March. Management also wants to have $8,000 of men's shorts in inventory at the end of March to prepare for the summer season. Beginning inventory of men's shorts for March is expected to be $5,500. What dollar amount of men's shorts should be purchased in March?

A) $46,500

B) $41,500

C) $57,500

D) $30,500

Answer: A

Explanation: A)

Cost of Goods Sold$ 44,000

+ EI8,000= Goods Available52,000

Less BI5,500

= Purchases46,500

Diff: 2

LO: 9-2

EOC: E9-20



76) Thomas Corporation recorded sales of $200,000 during March. Management expects sales to increase 5% in April, another 2% in May, and another 10% in June. Cost of goods sold is expected to be 80% of sales. What is the budgeted gross profit for June?

A) $47,124

B) $43,697

C) $235,620

D) $42,840

Answer: A

Explanation: A)

$ 200,000 1.05% = 210,000 1.02% = 214,200 1.10% = $ 235,620

Now Sales 80% = Cost of Goods Sold - 188,496 = Gross Profit $ 47,124

Diff: 2

LO: 9-2

EOC: E9-16



77) Meers Corporation had beginning inventory of 21,000 units and expects sales of 76,500 units during the year. Desired ending inventory is 19,500 units. How many units should Meers Corporation produce?

A) 78,000 units

B) 36,000 units

C) 75,000 units

D) 117,000 units

Answer: C

Explanation: C)

Sales$76,500

- BI21,000

Total needed55,500

+ EI19,500= Production75,000

Diff: 2

LO: 9-2

EOC: E9-18



78) Dallas Corporation had beginning inventory of 19,500 units and expects sales of 85,000 units during the year. Desired ending inventory is 18,500 units. How many units should Dallas Corporation produce?

A) 84,000 units

B) 47,000 units

C) 86,000 units

D) 123,000 units

Answer: A

Explanation: A)

Sales$85,000

- BI19,500

Total needed65,500

+ EI18,500= Production84,000

Diff: 2

LO: 9-2

EOC: E9-18



79) Sam's Toys budgeted sales of $300,000 for the month of November and cost of goods sold equal to 80% of sales. Beginning inventory for November was $50,000 and ending inventory for November is estimated at $55,000. How much are the budgeted purchases for November?

A) $245,000

B) $65,000

C) $235,000

D) $135,000

Answer: A

Explanation: A)

80 % x $ 300,000 =$240,000 Cost of Goods Sold

Less BI50,000=190,000

+ EI55,000= Purchases$ 245,000

Diff: 3

LO: 9-2

EOC: E9-18



80) Fosnight Enterprises prepared the following sales budget:

MonthBudgeted Sales

March$6,000

April$13,000

May$12,000

June$14,000

The expected gross profit rate is 30% and the inventory at the end of February was $10,000. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.

What is the desired beginning inventory on June 1?

A) $840

B) $1,680

C) $1,960

D) $9,800

Answer: C

Explanation: C)

Sales = 100% - 30% Gross Profit = 70% Cost of Goods Sold (CGS)

Now: June Sales $14,000 70% = 9,800 (CGS) 20% = $ 1,960

Diff: 2

LO: 9-2

EOC: E9-20A




MonthBudgeted Sales

March$6,000

April$13,000

May$12,000

June$14,000


What is the desired ending inventory on May 31?

A) $840

B) $9,800

C) $1,680

D) $1,960

Answer: D

Explanation: D)



Diff: 2

LO: 9-2

EOC: E9-20A




MonthBudgeted Sales

March$6,000

April$13,000

May$12,000

June$14,000


What is the budgeted cost of goods sold for May?

A) $3,600

B) $4,200

C) $2,400

D) $8,400

Answer: D

Explanation: D) $ 12.000 70% = $ 8,400

Diff: 2

LO: 9-2

EOC: E9-18




MonthBudgeted Sales

March$6,000

April$13,000

May$12,000

June$14,000


What are the total purchases budgeted for April?

A) $8,680

B) $10,920

C) $8,960

D) $9,240

Answer: C

Explanation: C)

Cost of Goods Sold = $ 13,000 70% = $ 9,100

Ending Inventory = $12,000 70% = 8,400 20% = $ 1,680

Beginning Inventory = $ 13,000 70% = 9,100 20% = $ 1,820

Now: CGS $ 9,100 + EI 1,680 - BI 1,820 = Purchases $ 8,960

Diff: 3

LO: 9-2

EOC: E9-18




MonthBudgeted Sales

March$6,000

April$13,000

May$12,000

June$14,000


What are the total purchases budgeted for May?

A) $8,120

B) $8,960

C) $8,680

D) $10,080

Answer: C

Explanation: C)

May Beginning Inventory = $ 12,000 70% = 8,400 20% = $ 1,680May Ending Inventory = $ 14,000 70% = 9,800 20% = $ 1,960

May Cost of Goods Sold = $ 12,000 70% = $ 8,400

Now $ 8,400 + 1,960 - 1,680 = $ 8,680

Diff: 3

LO: 9-2

EOC: E9-18



85) Sander Enterprises prepared the following sales budget:

MonthBudgeted Sales

March$8,000

April$13,000

May$12,000

June$14,000


What is the desired beginning inventory on June 1?

A) $1,440

B) $1,680

C) $1,120

D) $8,400

Answer: B

Explanation: B)


Now: June Sales $ 14,000 60% = 8,400 (CGS) 20% = $ 1,680

Diff: 2

LO: 9-2

EOC: E9-20A




MonthBudgeted Sales

March$8,000

April$13,000

May$12,000

June$14,000


What is the desired ending inventory on May 31?

A) $1,120

B) $1,440

C) $1,680

D) $8,400

Answer: C

Explanation: C)



Diff: 2

LO: 9-2

EOC: E9-20A




MonthBudgeted Sales

March$8,000

April$13,000

May$12,000

June$14,000


What is the budgeted cost of goods sold for May?

A) $7,200

B) $4,800

C) $2,400

D) $8,400

Answer: A

Explanation: A) $ 12,000 60% = $ 7,200

Diff: 2

LO: 9-2

EOC: E9-18




MonthBudgeted Sales

March $8,000

April$13,000

May$12,000

June$14,000


What are the total purchases budgeted for April?

A) $9,360

B) $7,440

C) $7,680

D) $7,920

Answer: C

Explanation: C)

Cost of Goods Sold = $ 13,000 60% = $ 7,800

Ending Inventory = $ 12,000 60% = 7,200 x 20% = $ 1,440

Beginning Inventory = $ 13,000 60% = 7,800 20% = $ 1,560

Now: CGS $ 7,800 + EI 1,440 - BI 1,560 = Purchases $ 7,680

Diff: 3

LO: 9-2

EOC: E9-18




MonthBudgeted Sales

March$8,000

April$13,000

May$12,000

June$14,000


What are the total purchases budgeted for May?

A) $8,640

B) $7,680

C) $6,960

D) $7,440

Answer: D

Explanation: D)

May Beginning Inventory = $ 12,000 60% = 7,200 20% = $ 1,440

May Ending Inventory = $ 14,000 60% = 8,400 20% = $ 1,680

May Cost of Goods Sold = $ 12,000 60% = $ 7,200

Now $ 7,200 + 1,680 - 1,440 = $ 7,440

Diff: 3

LO: 9-2

EOC: E9-18



90) A lamp store purchased $3,800 of lamps in September. The store had $1,600 of lamps on hand at the beginning of September, and expected to have $1,300 of lamps at the end of September to cover part of anticipated October sales. What is the budgeted cost of goods sold for September?

A) $5,400

B) $4,100

C) $6,700

D) $3,500

Answer: B

Explanation: B) BI$ 1,600

+ Purchases3,800

= Goods Available5,400

Less : EI1,300

= Cost of Goods Sold$4,100

Diff: 2

LO: 9-2

EOC: E9-18



91) Warshaw Company budgets payroll at $3,600 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $13,200 with budgeted sales of $160,000. Sales for July are budgeted at $180,000 while purchases of inventory for July are budgeted at $95,000. Depreciation and insurance for July are estimated at $1,000 and $600, respectively. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month. The purchase of $2,500 in equipment and $1,500 in furniture is expected in July.

The July payroll should be budgeted at

A) $14,400.

B) $13,200.

C) $22,500.

D) $15,300.

Answer: A

Explanation: A)

Total Payroll$ 13,200

- fixed payroll- 3,600= variable payroll =$ 9,600 divided by Sales = 6% (payroll as a % of Sales)

Now: $ 180,000 6% = $ 10,800 Variable Payroll

+ 3,600 Fixed

= $ 14,400 Total Payroll

Diff: 3

LO: 9-2

EOC: E9-21




The total operating expenses budgeted for July are

A) $23,900.

B) $14,800.

C) $25,500.

D) $14,400.

Answer: C

Explanation: C)

Inventory $ 95,000 10% = $9,500 Office and Adm. Expense

Total Payroll$13,200

- fixed payroll -3,600= variable payroll = $ 9,600 divided by Sales = 6% (payroll as a % of Sales)

Now: $ 180,000 6% = $ 10,800Variable Payroll

+ 3,600Fixed

= $ 14,400Total Payroll

Finally Payroll

$ 14,400

+ Office and Adm. expense9,500

+ Depreciation

1,000

+ Insurance

600

= Total Operating Expense$ 25,500

Diff: 3

LO: 9-2

EOC: E9-23




If the percentage of monthly sales used in budgeting payroll increases 25%, what would the total payroll budgeted for July be?

A) $20,025

B) $17,100

C) $13,500

D) $14,400

Answer: B

Explanation: B)

June expense budget total payroll$ 13,200

Fixed payroll budget$ (3,600)

June variable payroll budget$ 9,600

Divide by

June budgeted sales$ 160,000

Old variable payroll budget (% of month's sales)6%

Increase in variable payroll expense25%

Add1

125%

Old variable payroll budget (% of month's sales)6%

New variable payroll budget (% of month's sales)8%

July budgeted sales$ 180,000

New variable payroll budget (% of month's sales)8%

July variable payroll budget$ 13,500

Fixed payroll budget$ 3,600

July payroll$ 17,100

Diff: 3

LO: 9-2

EOC: E9-21



94) At the beginning of the year, Patio Living Corporation has 550 planters in inventory. The company plans to sell 5,200 planters during the year and wants to have 1,200 planters in inventory at the end of the year. How many planters must Patio Living Corporation produce during the year?

A) 5,850

B) 6,400

C) 3,450

D) 6,950

Answer: A

Explanation: A)

Sales$ 5,200

BI- 550

EI+ 1,200Production$ 5,850

Diff: 1

LO: 9-2

EOC: E9-18



95) At the beginning of the year, Lakeview Corporation has 660 life vests in inventory. The company wants to have 2,100 vests in inventory at the end of the year and plans to sell 6,400 life vests during the year. How many life vests must Lakeview Corporation produce during the year?

A) 8,500

B) 3,640

C) 7,840

D) 9,160

Answer: C

Explanation: C)

Sales$ 6,400

BI- 660


Diff: 1

LO: 9-2

EOC: E9-18



96) Totz Company produces jump ropes. Totz Company has the following sales projections for the upcoming year:

First quarter budgeted jump rope sales in units21,000

Second quarter budgeted jump rope sales in units35,000

Third quarter budgeted jump rope sales in units22,000

Fourth quarter budgeted jump rope sales in units30,000

Inventory at the beginning of the year was 4,200 jump ropes. Totz Company wants to have 20% of the next quarter's sales in units on hand at the end of each quarter. How many jump ropes should Totz Company produce during the first quarter?

A) 16,800

B) 21,000

C) 23,800

D) 32,200

Answer: C

Explanation: C) Unit Sales 2nd Qtr 35,000 20% = 7,000 EI

Sales$ 21,000

BI- 4,200


Diff: 2

LO: 9-2

EOC: E9-18



97) Jolly Company produces hula hoops. Jolly Company has the following sales projections for the upcoming year:

First quarter budgeted hula hoop sales in units22,100

Second quarter budgeted hula hoop sales in units28,000

Third quarter budgeted hula hoop sales in units22,000

Fourth quarter budgeted hula hoop sales in units30,000

Jolly Company wants to have 25% of the next quarter's sales in units on hand at the end of each quarter. Inventory at the beginning of the year was 5,525 hula hoops. How many hula hoops should Jolly Company produce during the first quarter?

A) 34,625

B) 23,575

C) 16,575

D) 22,100

Answer: B

Explanation: B) Unit Sales 2nd Qtr 28,000 25% = 7,000 EI

Sales$ 22,100

BI- 5,525


Diff: 2

LO: 9-2

EOC: E9-18



98) Daisy Company manufactures dog collars. The following selected data relates to Daisy Company's budgeted sales and inventory levels of the dog collars for the upcoming quarter:

October expected unit sales2,000

November expected unit sales2,600

December expected unit sales2,200

October desired ending unit finished goods inventory850

November desired ending unit finished goods inventory720

December desired ending unit finished goods inventory520

How many dog collars should Daisy Company produce in November?

A) 2,870

B) 3,320

C) 4,170

D) 2,470

Answer: D

Explanation: D) Sales$ 2,600

BI- 850

EI+ 720Production2,470

Diff: 2

LO: 9-2

EOC: E9-18



99) Victoria Corporation manufactures quality vases. Budgeted sales and production data for the vases are as follows:

Month 1 budgeted unit sales2,000



Month 1 budgeted unit production2,400



Raw material required for each finished unit (in pounds)1

The ending inventory for each month should be equal to 20% of the next month's production needs. Each vase requires one pound of clay in its manufacture. Victoria Corporation has a policy that the inventory of clay at the end of each month needs to be equal to 20% of the production needs for the following month. At the beginning of January, 480 pounds of clay were in inventory. How many pounds of clay would Victoria Corporation need to purchase in February?

A) 2,660

B) 2,940

C) 3,620

D) 2,840

Answer: D

Explanation: D) Production Month 22,700

Less BI (2,700 20%)- 540

Plus EI (3,400 20%)+680Equals Purchases2,840

Diff: 2

LO: 9-2

EOC: E9-19



100) Terrific Toys Company manufactures and sells children's skateboards. Each skateboard requires four bearings. For September, Terrific Toys Company has budgeted skateboard sales of 530 skateboards, while 570 skateboards are scheduled to be produced. Terrific Toys Company will begin September with 220 bearings in its beginning inventory. How many bearings should Terrific Toys Company purchase for September?

A) 310

B) 2,280

C) 2,500

D) 2,060

Answer: D

Explanation: D) Production 570 4 = 2,280 - 220 (BI) = 2,060

Diff: 2

LO: 9-2

EOC: E9-19



101) Beloved Baby Company manufactures and sells children's strollers. Each stroller requires eight screws. For September, Beloved Baby Company will begin September with 380 screws in its beginning inventory. Beloved Baby Company has budgeted stroller sales of 530 strollers, while 570 strollers are scheduled to be produced. How many screws should Beloved Baby Company purchase for September?

A) 150

B) 4,180

C) 4,940

D) 4,560

Answer: B

Explanation: B) Production 570 8 = 4,560 - 380 (BI) = 4,180

Diff: 2

LO: 9-2

EOC: E9-19



102) The Porch Cushion Company manufactures foam cushions. The number of cushions to be produced in the upcoming three months follows:

Number of foam cushions to be produced in July12,000

Number of foam cushions to be produced in August15,000

Number of foam cushions to be produced in September10,000

Each cushion requires 2 pounds of the foam used as stuffing. The company has a policy that the ending inventory of foam each month must be equal to 25% of the following month's expected production needs. How many pounds of foam does The Porch Cushion Company need to purchase in August?

A) 27,500

B) 20,000

C) 22,500

D) 42,500

Answer: A

Explanation: A)

August Production15,000 25% = 3,750

September Production 10,000 25% = 2,500

Now Production August15,000

Less BI- 3,750

Plus EI+ 2,500

Equals Purchases13,750 2 pounds = 27,500

Diff: 2

LO: 9-2

EOC: E9-19



103) Mighty Corporation manufactures end tables. Each end table requires .50 direct labor hours in its production. Mighty Corporation has a direct labor rate of $15 per direct labor hour. The production budget shows that Mighty Corporation plans to produce 1,000 end tables in March and 1,100 end tables in April. What is the total combined direct labor cost that should be budgeted for March and April?

A) 8,250

B) 7,500

C) 15,750

D) 31,500

Answer: C

Explanation: C) March production1,000

+ April production1,100

Total2,100 .5 = 1,050 hours $ 15 = $ 15,750

Diff: 2

LO: 9-2

EOC: E9-21



104) Forty Winks Corporation manufactures night stands. The production budget shows that Forty Winks Corporation plans to produce 1,200 night stands in March and 1,050 night stands in April. Each night stand requires .50 direct labor hours in its production. Forty Winks Corporation has a direct labor rate of $12 per direct labor hour. What is the total combined direct labor cost that should be budgeted for March and April?

A) 6,300

B) 7,200

C) 27,000

D) 13,500

Answer: D

Explanation: D) March production1,200

+ April production1,050

Total2,250 .5 = 1,125 hours $ 12 = $ 13,500

Diff: 2

LO: 9-2

EOC: E9-21



105) List the operating budgets. Describe the purpose of each of the budgets listed and the order in which they are prepared. Describe how the budgets are interrelated.

Answer: The operating budgets are as follows:

1. Sales budget shows the number of units to be sold and the total sales revenue.

2. Production budget shows the number of units to be produced to support the sales to be made.

3. Direct materials budget shows the amount and dollar amount of direct materials to be purchased to support the production budget.

4. Direct labor budget shows the number of direct labor hours required to support the number of products to be purchased from the production budget.

5. Manufacturing overhead budget shows the budgeted manufacturing overhead to be incurred to support the number of units being produced as denoted on the production budget.

6. Operating expenses budget all research and development, design, marketing, distribution, and customer service costs will be shown on the operating expenses budget.

7. Budgeted income statement is constructed after preparing all of the above budgets.

The operating budgets are the budgets needed to run the daily operations of the company. The operating budgets culminate in a budgeted income statement. The starting point of the operating budgets is the sales budget, because it affects most other components of the master budget. After estimating sales, manufacturers prepare the production budget, which determines how many units need to be produced. Once production volume is established, managers prepare the budgets determining the amounts of direct materials, direct labor, and manufacturing overhead that will be needed to meet production. Next, managers prepare the operating expenses budget. After all of these budgets are prepared, management will be able to prepare the budgeted income statement.

Diff: 2

LO: 9-2

EOC: E9-23



106) Carlton Cookie Company produces a hand-processed gourmet cookie that is made with organic sugar. Five (5) pounds of organic sugar are required per batch of gourmet cookies. The organic sugar costs $2.40 per pound. The company needs to have 20% of the following month's production needs of organic sugar in ending inventory so it is on hand to start each month. A total of 120 pounds of organic sugar are expected to be on hand on April 1.

1. Budgeted production of the gourmet cookies for the first four months of the upcoming year is as follows:

Number of batches of cookies to be produced in January600

Number of batches of cookies to be produced in February750

Number of batches of cookies to be produced in March800

Number of batches of cookies to be produced in April700

Required:

Prepare a direct materials budget for organic sugar for each of the months in the second quarter and for the second quarter in total. Include both the quantity of sugar to be purchased and the cost of the purchases in each month.

Answer:

Diff: 3

LO: 9-2

EOC: E9-21



107) Frisbee Enterprises produces frisbees. Frisbee Enterprises has the following sales projections for the upcoming year:

First quarter budgeted frisbee sales in units20,000

Second quarter budgeted frisbee sales in units35,000

Third quarter budgeted frisbee sales in units22,000

Fourth quarter budgeted frisbee sales in units30,000

Inventory at the beginning of the year was 6,000 frisbees. Frisbee Enterprises wants to have 30% of the next quarter's sales in units on hand at the end of each quarter. How many frisbees should Frisbee Enterprises produce during the first quarter? Show your calculations.

Answer:

Finished goods inventory at end of each quarter, as percent of next quarter's budgeted unit sales30%

Second quarter budgeted frisbee sales in units35,000

First quarter ending inventory10,500

First quarter ending inventory10,500

First quarter budgeted frisbee sales in units20,000

Beginning frisbee inventory in units(6,000)

Units to produce24,500

Diff: 2

LO: 9-2

EOC: E9-18



108) Birch Company manufactures coffee makers. The following selected data relates to Birch Company's budgeted sales and inventory levels of the coffee makers for the upcoming quarter. How many coffee makers should Birch Company produce in November? Show your calculations.

October expected unit sales1,000


December expected unit sales3,300

October desired ending unit finished goods inventory800


December desired ending unit finished goods inventory600

Answer:



October desired ending unit finished goods inventory(800)

Units to produce1,650

Diff: 2

LO: 9-2

EOC: E9-18



109) Sally Scooters manufactures and sells scooters. Each scooter requires two rear view mirrors. For September, Sally Scooters has budgeted sales of 415 scooters, while 450 scooters are scheduled to be produced. Sally Scooters will begin September with 220 rear view mirrors in its beginning inventory. How many rear view wheels should Sally Scooters purchase for September?

Answer: 680

Budgeted number of scooters to be produced450

Rear view mirrors per scooter2

Mirrors to be used900

Number of mirrors in beginning inventory(220)

Rear view mirrors to purchase680

Diff: 2

LO: 9-2

EOC: E9-18



110) Pristine Yards Manufacturing produces weed whackers. On March 31, Pristine Yards Manufacturing had 144 weed whackers in inventory. The company has a policy that the ending inventory in any month must be 12% of the following month's expected sales. Pristine Yards Manufacturing expects to sell the following number of weed whackers in each of the next four months:

Required:

Prepare a production budget for the second quarter, with a column for each month and for the quarter.

Answer:

Diff: 2

LO: 9-2

EOC: E9-18



111) Flawless Lawns Manufacturing produces lawn edgers. The company has a policy that the ending inventory in any month must be 10% of the following month's expected sales. On March 31, Flawless Lawns Manufacturing had 140 lawn edgers in inventory. Flawless Lawns Manufacturing expects to sell the following number of lawn edgers in each of the next four months:

Required:

Prepare a production budget for the second quarter, with a column for each month and for the quarter.

Answer:

Diff: 2

LO: 9-2

EOC: E9-18



112) Timber Run Company has prepared the following forecasts of monthly sales:

JanuaryFebruaryMarchApril

Sales (in units)3,4004,7903,5703,210

Timber Run Company has decided that the number of units in its inventory at the end of each month should equal 80% of next month's sales. The budgeted cost per unit is $10.

How many units should be in January's beginning inventory?

Answer:

January unit sales3,400

Ending inventory (% next month's sales)80%

January unit beginning inventory2,720

Diff: 2

LO: 9-2

EOC: E9-18



113) A cash collections budget is focused on the timing of cash receipts.

Answer: TRUE

Diff: 1

LO: 9-3

EOC: E9-31



114) A company's plan for purchases of property, plant, equipment, and other long-term assets is part of the budgeted balance sheet.

Answer: TRUE

Diff: 1

LO: 9-3

EOC: E9-31



115) The budgeted cash collections from credit customers generally only reflect sales made in the current month.

Answer: FALSE

Diff: 1

LO: 9-3

EOC: E9-26



116) The cash budget is prepared before the operating budget.

Answer: FALSE

Diff: 1

LO: 9-3

EOC: E9-26



117) The cash budget is prepared before the budgeted balance sheet is prepared.

Answer: TRUE

Diff: 1

LO: 9-3

EOC: E9-26



118) The cash budget helps managers determine whether or not the company will need financing in a given month.

Answer: TRUE

Diff: 1

LO: 9-3

EOC: E9-28



119) Budget committee is a what-if technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes.

Answer: FALSE

Diff: 1

LO: 9-3

EOC: E9-26



120) A company sells goods and offers credit terms of "net 30 days." What does this mean for the company that sold the goods?

A) It does not have to ship the goods for 30 days

B) It cannot recognize the sales credit for 30 days

C) It offers a 30% discount for customers that use credit cards.

D) The customer has up to 30 days to pay back the seller for the goods purchased without penalty.

Answer: D

Diff: 1

LO: 9-3

EOC: E9-26



121) Which of the following items would be shown on a cash payments budget?

A) Bad debt expense

B) Depreciation expense

C) Cash dividends

D) Gains on sales of equipment

Answer: C

Diff: 1

LO: 9-3

EOC: E9-26



122) Which of the following types of cash outlays has its own budget?

A) Capital expenditures

B) Dividends

C) Income taxes

D) All of the above

Answer: A

Diff: 1

LO: 9-3

EOC: E9-31



123) All of the following are shown on the combined cash budget except

A) projected cash balance at the end of the month.

B) projected cash collections and cash payments.

C) projected borrowings and repayments.

D) All of the above are shown on the combined cash budget

Answer: D

Diff: 1

LO: 9-3

EOC: E9-28



124) A company should ________ when projecting cash receipts for a given month.

A) include only cash collections from sales made in that month

B) only list COD sales made in that month

C) only list credit sales made in that month

D) include cash to be collected in that month regardless of when the sale was made

Answer: D

Diff: 1

LO: 9-3

EOC: E9-28



125) "Financial budget" is best described by which of the following?

A) A company's plan for purchases of property, plant and equipment, and other long-term assets

B) A budget that projects cash inflows and outflows and the end of period budgeted balance sheet

C) A budget that shows projected sales, purchases and operating expenses

D) A system for evaluating the performance of each responsibility center and its manager

Answer: B

Diff: 1

LO: 9-3

EOC: E9-30



126) "Capital expenditures budget" is best described by which of the following?

A) Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance

B) A system for evaluating the performance of each responsibility center and its manager

C) A company's plan for purchases of property, plant and equipment, and other long-term assets

D) A budget that projects cash inflows and outflows and the end of period budgeted balance sheet

Answer: C

Diff: 1

LO: 9-3

EOC: E9-33



127) The ________ technique asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes.

A) sensitivity analysis

B) ratio analysis

C) risk analysis

D) strategic analysis

Answer: A

Diff: 1

LO: 9-3

EOC: S9-2



128) "Cash budget" is best defined by which of the following?

A) A company's plan for purchases of property, plant and equipment, and other long-term assets

B) Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance

C) A system for evaluating the performance of each responsibility center and its manager

D) A budget that projects cash inflows and outflows and the end of period budgeted balance sheet

Answer: B

Diff: 1

LO: 9-3

EOC: E9-28



129) Which of the following budgets projects cash inflows and outflows and the budgeted balance sheet?

A) Purchases budget

B) Capital expenditures budget

C) Financial budget

D) Cash budget

Answer: C

Diff: 1

LO: 9-3

EOC: E9-28



130) Which of the following is an example of a financial budget?

A) Budgeted balance sheet

B) Sales budget

C) Budgeted income statement

D) Operating expenses budget

Answer: A

Diff: 1

LO: 9-3

EOC: E9-31



131) All of the following are considered when preparing the cash budget except

A) payments for inventory.

B) cash receipts from customers.

C) depreciation expense.

D) cash payments to suppliers.

Answer: C

Diff: 1

LO: 9-3

EOC: E9-28



132) The final step in the preparation of the financial budget is the preparation of which of the following?

A) Master budget

B) Cash budget

C) Operating budgets

D) Budgeted balance sheet

Answer: D

Diff: 2

LO: 9-3

EOC: E9-28



133) Distribution Corporation collects 40% of a month's sales in the month of sale, 55% in the month following sale, and 5% in the second month following sale. Budgeted sales for the upcoming four months are:

April budgeted sales$100,000

May budgeted sales$150,000

June budgeted sales$230,000

July budgeted sales$180,000

The amount of cash that will be collected in July is budgeted to be

A) $72,000.

B) $179,500.

C) $206,000.

D) $195,500.

Answer: C

Explanation: C) May Sales$ 150,000 5% = $ 7,500

June Sales230,000 55% = 126,500

July Sales180,000 40% = 72,000

Total $ 206,000

Diff: 2

LO: 9-3

EOC: E9-26



134) Eastern Corporation collects 10% in the second month following sale, 55% in the month following sale and 35% of a month's sales in the month of sale. Budgeted sales for the upcoming four months are:

April budgeted sales$100,000

May budgeted sales$150,000

June budgeted sales$230,000

July budgeted sales$180,000

The amount of cash that will be collected in July is budgeted to be

A) $63,000.

B) $204,500.

C) $173,000.

D) $197,000.

Answer: B

Explanation: B) May Sales$ 150,000 10% = $ 15,000

June Sales230,000 55% = 126,500

July Sales180,000 35% = 63,000

Total $ 204,500

Diff: 2

LO: 9-3

EOC: E9-26



135) Natcher Corporation collects 30% of a month's sales in the month of sale, 55% in the month following sale, and 10% in the second month following sale. The company has found that 5% of their sales are uncollectible. Budgeted sales for the upcoming four months are:

August budgeted sales$300,000

September budgeted sales$280,000

October budgeted sales$330,000

November budgeted sales$260,000

The amount of cash that will be collected in November is budgeted to be

A) $287,500.

B) $283,000.

C) $78,000.

D) $291,500.

Answer: A

Explanation: A) Sept. Sales$ 280,000 10% =$28,000

Oct. Sales330,000 55% =181,500

Nov. Sales260,000 30% =78,000

Total $ 287,500

Diff: 2

LO: 9-3

EOC: E9-26



136) Sharon Corporation collects 15% in the second month following sale, 45% in the month following sale and 35% of a month's sales in the month of sale. The company has found that 5% of their sales are uncollectible. Budgeted sales for the upcoming four months are:

August budgeted sales$300,000

September budgeted sales$280,000

October budgeted sales$330,000

November budgeted sales$260,000

The amount of cash that will be collected in November is budgeted to be

A) $286,500.

B) $285,500.

C) $91,000.

D) $281,500.

Answer: D

Explanation: D) Sept. Sales$ 280,000 15% =$42,000

Oct. Sales330,000 45% =148,500

Nov. Sales260,000 35% =91,000

Total$ 281,500

Diff: 2

LO: 9-3

EOC: E9-26



137) Einstein Company is preparing its cash budget for the upcoming month. The beginning cash balance for the month is expected to be $14,000. Budgeted cash receipts are $84,000, while budgeted cash disbursements are $72,000. Einstein Company wants to have an ending cash balance of $40,000. The excess (deficiency) of cash available over disbursements for the month would be

A) $170,000.

B) $(26,000).

C) $112,000.

D) $26,000.

Answer: D

Explanation: D) Beginning Cash$ 14,000

Cash Receipts+ 84,000

Cash Disbursements-72,000Cash Available$ 26,000

Diff: 2

LO: 9-3

EOC: E3-28



138) Wriston Company is preparing its cash budget for the upcoming month. The beginning cash balance for the month is expected to be $12,000. Budgeted cash disbursements are $70,500, while budgeted cash receipts are $86,100. Wriston Company wants to have an ending cash balance of $40,000. The excess (deficiency) of cash available over disbursements for the month would be

A) $27,600.

B) $168,600.

C) $(27,600).

D) $110,500.

Answer: A

Explanation: A) Beginning Cash$ 12,000


Cash Disbursements-70,500Cash Available$ 27,600

Diff: 2

LO: 9-3

EOC: E3-28



139) Roman Company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $40,000. Budgeted cash receipts are $101,000, while budgeted cash disbursements are $123,000. Roman Company wants to have an ending cash balance of $45,000. How much would Roman Company need to borrow to achieve its desired ending cash balance?

A) $18,000

B) $27,000

C) $23,000

D) $63,000

Answer: B

Explanation: B) Beginning Cash$ 40,000

Cash Receipts+101,000

Cash Disbursements-123,000

Cash Available$ 18,000

Desired Balance-45,000Borrow= 27,000

Diff: 2

LO: 9-3

EOC: E3-28



140) Brockman Company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $35,000. Budgeted cash disbursements are $123,000, while budgeted cash receipts are $130,000. Brockman Company wants to have an ending cash balance of $48,000. How much would Brockman Company need to borrow to achieve its desired ending cash balance?

A) $6,000

B) $90,000

C) $42,000

D) $55,000

Answer: A

Explanation: A) Beginning Cash$ 35,000


Cash Disbursements- 123,000

Cash Available$ 42,000

Desired Balance- 48,000Borrow= 6,000

Diff: 2

LO: 9-3

EOC: E3-28



141) BusyBody Company expects its November sales to be 20% higher than its October sales of $180,000. Purchases were $110,000 in October and are expected to be $160,000 in November. All sales are on credit and are collected as follows: 35% in the month of the sale and 60% in the following month. Purchases are paid 40% in the month of purchase and 60% in the following month. The cash balance on November 1 is $13,500. The cash balance on November 30 will be

A) $4,100.

B) $53,600.

C) $67,100.

D) $40,100.

Answer: C

Explanation: C) Oct. Sales $ 180,000 60%= 108,000

Nov. Sales 180,000 1.2% = 216,000 35%= 75,600Total Cash Receipts183,600

Oct. Purchases $110,000 60%= 66,000

Nov. Purchases 160,000 40%= 64,000 Total Cash Disbursements$ 130,000

Beginning Cash$ 13,500


Cash Disbursements- 130,000

Ending Cash$ 67,100

Diff: 3

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