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Exam 20: Master Budgets and Performance Planning

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Question 31

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Financial budgets are normally completed after preparation of operating and capital expenditure budgets.

A) True
B) False

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Question 32

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A department store has budgeted sales of 12,000 men's suits in September. Management wants to have 6,000 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 suits. What is the dollar amount of purchase of suits? Each suit has a cost of $75.

A) $750,000
B) $900,000
C) $1,050,000
D) $1,200,000
E) $1,350,000

F) B) and D)
G) B) and C)

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Question 33

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The budget process is a continuous activity of planning, revising, and evaluating business activities.

One of the major benefits of formal budgeting is the positive effect it can have on employee attitudes.

What is a capital expenditures budget?

A sporting goods store purchased $7,000 of ski boots in October. The store had $3,000 of ski boots in inventory at the beginning of October, and expects to have $2,000 of ski boots in inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?

Which of the following is a financial budget?

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

Harold's expects its September sales to be 20% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $7,500. The ending cash balance on September 30 would be:

Kabuki Company's policy is to have 16% of the next month's sales as desired ending inventory. Estimated sales are shown in the table below. Given this data, what is Kabuki's estimated purchases for March?

Budgeting is an informal plan for future business activities.

The process of planning future business actions and expressing them as a formal plan is called:

Which of the following budgets is not an operating budget?

A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise or materials to be purchased, the expense to be incurred, the long-term assets to be purchased, and the amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet, is called a:

___________________________ is a budget system based on expected activities and their levels that enables management to plan for resources required to perform the activities.

Del Carpio, Inc. sells two products, Widgets and Gadgets. The sales forecast in units for the first quarter of the coming year is: Cash sales are 30% of each product's monthly sales. The remaining sales are credit sales which are collected as follows: 70% in the month of sale, 20% the next month, and 10% in the following month. Unit sale prices are $30 and $20 for Widgets and Gadgets, respectively. Determine the company's cash receipts for March from its current and past sales.

A plan that reports the units or costs of merchandise to be purchased by a merchandising company during the budget period is called a:

Blaircraft Company manufactures a product which requires five pounds of raw material for each unit produced. For the next year, beginning inventory of raw materials is 8,000 pounds. The raw materials inventory at the end of each quarter should be 15% of the next quarter's raw materials needed for production. Given the projected production in units below, what is the quantity of raw materials which need to be purchased for the third quarter? $\begin{array} { l l l l l } \text { Quarter } & 1 & 2 & 3 & 4 \\\text { Expected Production Units } & 7,000 & 5,000 & 8,000 & 6,000\end{array}$

A plan that lists the types and amounts of general and administrative expenses expected during the budget period is referred to as a:

Past performance is the best overall basis for evaluating current performance and assessing the need for corrective action.