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Exam 7: Master Budgets and Performance Planning

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Question 61

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The merchandise purchases budget is the starting point for preparing the master budget of a merchandiser.

A) True
B) False

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Question 62

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In a company that employs continuous budgeting on a quarterly basis and has an accounting period that ends December 31 of each year, what period would the first revision and update to the January through December 2017 budget cover?

A) February 2017-January 2018
B) March 2017-February 2018
C) December 2017-November 2018
D) April 2017-March 2018
E) January 2018-December 2018

F) B) and D)
G) A) and B)

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Question 63

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A company's history indicates that 20% of its sales are for cash and the remaining 80% are on credit. Collections on credit sales are 30% in the month of the sale and 70% the following month. Projected sales for January, February, and March are $75,000, $92,000 and $60,000, respectively. The March expected cash receipts are $80,500.

The process of evaluating performance can be improved by using budgets.

Operating budgets include all the following except the:

A department store has budgeted cost of goods sold for March of $60,000 for its women's shorts. Management wants to have $12,000 of shorts in inventory at the end of the month to prepare for the summer season. Beginning inventory in March was $8,000. What dollar amount of shorts should be purchased to meet the above plans?

Which of the following budgets is not an operating budget?

A ________ is a continuously revised budget that adds future months or quarters to replace months or quarters that have lapsed.

The budgeted balance sheet and income statement are normally completed after preparation of operating and capital expenditure budgets.

Boulware Company's budgeted production calls for 5,000 units in October and 8,000 units in November. Each unit requires 8 pounds (lbs.) of raw material A. Each month's ending inventory of raw materials should equal 20% of the following month's budgeted materials requirements. The October 1 inventory for this material is 8,000 pounds. What is the budgeted materials purchases in pounds for October?

Part of the cash budget is based on information taken from the capital expenditures budget.

Match the definitions 1 through 9 with the correct term or phrase (a) through (i).

A master budget refers to a company's sales budget that includes all of its segments or departments.

Budgeting is an informal plan for future business activities.

Bioclean Co., a merchandiser, sells a biodegradable cleaning product and has predicted the following unit sales for the first four months of the current year: Ending inventory for each month should be 20% of the next month's sales, and the December 31 inventory is consistent with that policy. How many units should be purchased in February?

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

If applied correctly, budgeting may have a positive effect on employee motivation.

Bengal Co. provides the following unit sales forecast for the next three months: The company wants to end each month with ending finished goods inventory equal to 25% of the next month's sales. Finished goods inventory on June 30 is 1,250 units. The budgeted production units for August are:

All of the following are steps in the budgetary control process except:

Justin Company's budget includes the following credit sales for the current year: September, $25,000; October, $36,000; November, $30,000; December, $32,000. Credit sales are collected as follows: 15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5% is uncollectible. How much cash can Justin expect to collect in November as a result of current and past credit sales?