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Exam 7: Planning for Profit and Cost Control

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Question 31

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Which of the following is generally included in a sales budget?

A) Schedule of cash receipts for the projected sales
B) Desired ending inventory
C) Budgeted cost of goods sold
D) Schedule of cash payments for inventory purchases

E) B) and D)
F) C) and D)

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Question 32

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Which of the following is a

A) Pro forma financial statements are based on the company's budgets.
B) Companies prepare pro forma financial statements to show how their performance for the period will "look" if actual results match the budget.
C) Companies usually prepare a pro forma income statement,pro forma balance sheet,and pro forma statement of cash flows.
D) All of the answers are correct.

E) A) and C)
F) C) and D)

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Question 33

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The budget director of Mandy's Kitchen Shop has prepared the following sales budget.The company had $50,000 of accounts receivable at January 1.The company normally collects 100 percent of its accounts receivable in the month following the sale. Required: (a)Complete the schedule of cash receipts by filling in the missing amounts.What are the total budgeted cash receipts for the first quarter. (b)Determine the amount of accounts receivable that Mandy's should report on the first quarter pro forma balance sheet.

The three major components of the master budget are the financial budgets,the capital budgets,and the pro forma financial statements.

How might a company develop sales estimates to be used in preparing a sales budget?

Select the correct statement about budgeting and human behavior.

Planning concerned with long-range decisions such as defining the scope of the business is referred to as:

A management accountant was working on a cash budget for Oklahoma Company when he accidentally spilled his coffee.Some of the liquid splattered on his working papers rendering a few of the amounts illegible.The budget with missing amounts indicated is provided below : CHANGE NEEDS TO BE MADE TO TABLE Remove the ",2014" from the heading The company desires a cash cushion of $7,500 to start each month.In any month in which there is cash shortage the company's bank will extend it a loan equal to the shortage amount.The loan is assumed to have been made on the last day of the month.Any time the company has a cash surplus it must repay as much of any outstanding loans as possible.The bank charges monthly interest of 1% on any outstanding loan balance. Required: Compute the missing amounts and enter them in the following table: $\begin{array}{|l|l|l|l|}\hline(\mathrm{a}) & \quad\quad \quad & (\mathrm{i}) & \quad\quad\quad \\\hline \text { (b) } && (j) & \\\hline \text { (c) } & & (\mathrm{k}) & \\\hline \text { (d) } & & (\mathrm{l}) & \\\hline \text { (e) } & & (\mathrm{m}) & \\\hline \text { (f) } & & (\mathrm{n}) & \\\hline(\mathrm{g}) && (\mathrm{o}) & \\\hline(\mathrm{h}) & & (\mathrm{p}) & \\\hline\end{array}$

Valley Farm Supply started the period with $80,000 cash.Cash receipts for January expected to total $350,000.Cash disbursements for January were expected to be $290,000.What is the expected cash balance at the end of January?

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: $\begin{array}{|l|l|r|r|r|}\hline& \text { Dec. Year } 1 &\text { Jan. Year } 2 &\text { Feb. Year } 2 & \text { Mar. Year } 2 \\\hline & \text { (Actual) } & \text { (Budgeted) }& \text { (Budgeted) }& \text { (Budgeted) } \\\hline \text {Cost of goods sold } &\$ 80,000 & \$ 140,000 & \$ 180,000 & \$ 120,000 \\\hline\end{array}$ Desired ending inventory levels are 25% of the following month's projected cost of goods sold.Budgeted purchases of inventory in February Year 2 would be:

How much will the cash payments for purchases be in December?

Bantam Industries has budgeted the following information for March: $\begin{array}{|l|r|}\hline \text { Cash receipts }& \$ \quad 271,000\\\hline \text { Beginning cash balance } & 5,000 \\\hline \text { Cash payments } & 280,000 \\\hline \text { Desire dending cash balance } & 25,000\\\hline\end{array}$ If there is a cash shortage,the company borrows money from the bank.All cash is borrowed at the beginning of the month in $1,000 increments and interest is paid monthly at 1% on the first day of the following month.The company had no debt before March 1^st.How much cash will the company need to borrowed in March?

Which of the following cash budget equations is incorrect?

The master budget details:

Which of the following is not considered a pro forma financial statement?

The responsibility for the coordination of a company's budgeting activities normally rests with the Chief Financial Officer (CFO).

Budgeted depreciation expense would not appear on a:

One company's practice is to provide bonuses to salespeople who exceed their sales targets.Which of the following advantages of budgeting enables the company to establish its recognition program?

Although only 20 units are on hand at the beginning of the year,World Company plans to sell 100 units during Year 2.Assuming the company desires an ending inventory of 10 units,it should plan to purchase 110 units.

What would be the required purchases (on account) for December?