ACCT-Master Budget
A ___ is a formal statement of a company's plans in dollars.
Budget
T/F: A production budget is unique in that it does not show costs; it is always expressed in units of product.
True
A manufacturing company's sales budget indicates the following sales: January: $30,000, February: $20,000, March: $15,000. The company expects 80% of the sales to be on account. Credit sales are collected 30% in the month of the sale and 70% in the month following the sale. The total cash receipts collected during march will be $___.
$17,800 Cash receipts: For march: sales: $15,000 cash receipts: cash sales (15,000*30%)=4,800
Direct materials are $15 per unit; direct labor is $7 per unit and variable overhead costs are $2 per unit. If total product costs are $27, what are fixed costs per unit?
$3 total product costs= DM + DL+ VOH+ FOH
The formula to determine the materials to be purchased is:
(Units to produce times materials required for each unit) plus desired ending materials inventory minus beginning Materials inventory
The formula to determine the materials to be purchased is
(Units to produce times materials required per unit) plus desired ending materials inventory minus beginning materials inventory
Budgeting guidelines that help insure budgeting is a positive motivating force include:
- attainable goals - participatory budgeting - the opportunity to explain the differences between actual and budgeted amounts
Characteristics of budgets include:
- expressed in dollars - typically cover a month, quarter or one year - formal statement of a company's plans
Budgeted performance considers all of the following in relation to a benchmark.
- industry factors - company factors - economic factors
Which of the following items would be included on the capital expenditure budget?
- plant asset purchases - sale of plant assets **because cash receipts and cash payments related to the sale and purchase of plant assets are included in the capital expenditures budgeted
A manufacturing company has a budgeted direct labor hours of 600 at a variable overhead rate per direct labor of $20. The budgeted fixed cost is $500 per month. The total budgeted overhead cost for the month will be $____.
12,500
A company expects to sell 400 units of Product X in January and expects sales to increase by 10% per month. If Product X sells $10 each, the total sales for the first quarter of the year will be $___.
13,240
A manufacturing company has budgeted production of 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of materials on hand. The company desires an ending materials inventory of 60% of the next month's materials requirements. The total cost of direct materials purchases for May will be $___.
201,700 Production: (5,000*3)= 15,000 Ending inventory: (4,400*3)*60%= 7,920 beg. Inventory: (2,750) total product units: 20,170 total cost of production: 20,170*$10= $201,700
A merchandising company's sales budget indicates the following sales: January: $25,000, February: $30,000, March: $35,000. Sales personnel are paid a salary plus commission. Salaries are expected to be $5,000 per month and the commission is 10% of sales. Additionally, advertising is expected to be $600 per month. The total selling expenses for the quarter will be $____.
25,800
A company's sales budget indicates the following sales: January: 25,000; February: 30,000, March: 35,000. Beginning inventory is 12,000 units and the company desires ending inventory of 45% of the next month's sales. Units to be produced in January will be ___.
26,500
A manufacturing company has units to produce of 940 units for the month. Each unit requires 3.5 hours of labor to produce. The cost of direct labor is $15 per hour. The total cost of direct labor for the month will be $___.
49,350
A company expects to sell 500 units during the second quarter and 550 units in the third quarter. Currently, during the second quarter, they have 46 units in beginning inventory. If they desire ending inventory of 10% of the next quarter's sales, ___ units will need to be produced in the second quarter.
509 units to produce= budgeted sales unit + desired ending finished goods inventory units - beginning finished goods inventory 500 + 55 (550 * 10%) - 46
Most companies prepare a(n) ___ budget that is separated into ___ budgets.
Annual; quarterly or monthly
HN Company had a beginning cash balance of $50,000; cash payments of $15,000 and a loan balance with the bank of $7,000. If HN has an agreement with the bank that they will maintain a minimum cash balance of $30,000, their ending cash balance is $___.
Beg cash balance + cash receipts - cash payments = preliminary cash budget 50,000 - cash payments: $15,000 = 35,000 - loan balance: $7,000 = end cash balance: 28,000 30,000
LA Company has a beginning cash balance of $6,000, cash receipts of $12,000, cash payments of $7,200 and an outstanding loan balance of $1,500. Their preliminary cash balance is $___.
Beginning cash budget + budgeted cash receipts - budgeted cash payments = preliminary cash balance 6,000 + 12,000 - 7,200= 10,800
The budget which shows predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is the:
Budgeted balance sheet
A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries:$1,250; Sales commissions: 5% of sales; Advertising: $10,000; Salary for sales managers: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be $___.
Budgeted sales: $400,000 * sales commission (5%)= sales commission 20,000 + salary for sales manager: 30,000 + advertising: $10,000 total selling expense: $60,000 60,000
A merchandising company's budget includes the following data for January: Sales; $400,000; COGS: $270,000; Administrative salaries: $1,250; sales commissions: 5% of sales: advertising: $10,000, salary for sales manager: $30,000; Miscellaneous administrative expenses: $5,000. The total selling expenses on the January selling expense budget will be $___.
Budgeted sales: 400,000 * sales commission: 5% = sales commission: $20,000 +salary for sales manger: $30,000 + advertising $10,000 total selling expenses: $60,000
A manufacturing company would typically prepare all of the following budgets except:
Budgets prepared: - factory OH budget - production budget - cash budget EXCEPT: - merchandise inventory budget
The reporting of expected cash receipts and cash payments related to the sale and purchase of plant asses is reported on the ___ expenditures budget.
Capital
Bank loan payable
Cash budget
The ___ function requires that management evaluate operations against some norm.
Control
If direct materials per unit are $20, direct labor per unit is $10, variable overhead per unit is $2, and fixed overhead per unit is $1, the total product cost per unit is $___.
DM + DL + VOH + FOH = total product cost per unit 20 + 10 + 2 + 1= $33
A manufacturing company has budgeted direct labor hours of 940 at a budgeted direct labor hour rate of $15. The budgeted fixed costs is $950 per month. The total budgeted overhead cost for this month will be $___.
Direct labor hours needed (budgeted) + VOH rate per direct labor hour = budgeted variable overhead 940 * 15= 14,100 budgeted variable overhead + budgeted fixed overhead = budgeted total factory overhead 14,100 + 950 = $ 15,050
The primary purpose of using short-term budgets is to:
Evaluate performance and talk necessary corrective action
Income tax payable
Income statement budget
A company budgets the following direct materials purchases: April: $70,000; May: $90,000: June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase, 50% in the month after the purchase, and the remaining balance in the second month after the purchase. Cash payments for June for direct materials is $___.
June: Materials purchases: $60,000 cash payments: current period purchases (25%): 60,000*25%= 15,000 previous period purchase (50%): 90,000*50%= 45,000 pre-previous period purchase (25%): 70,000* 25%= 17,500 total cash payments: $77,500
A manufacturing company's sales budget indicates the following sales: January: $25,000, February: $30,000, March: $35,000. The company expects 70% of the sales to be on account and the remainder to be cash sales. Credit sales are collected in the month following the sale. The total cash collected during March will be $___.
March: Sales: 35,000 cash receipts from: cash sales (30%): 35,000*30%= 10,500 cash collected of previous period (70%): 30,000*70%= 21,000 total cash collected: (10,500+21,000)= 31,500
A company budgets the following direct materials purchases: April: $70,000, May: $90,000, June: $60,000. All purchase are on account and the company pays 25% of purchases in the month of the purchase and the remaining amount in the following month. Cash payments for June for direct materials is $___.
Materials purchases for June: 60,000 Cash payments for : current period purchases (25%): 60,000*25%= 15,000 prior period (75%): 90,000*75%= 67,500 total cash payments: 15,000+67,500= 82,500 $82,500
All of the following are guidelines that should be followed for budgets to be a positive motivating force except:
Positive motivating force factors: - goals reflected in a budget should be challenging but attainable - employees affected by a budget should help prepare it (participatory budgeting) - evaluations offer opportunities to explain differences between actual and budgeted amounts EXCEPT: - budgets should be prepared using a top-down approach
A manufacturer will prepare a ___ budget which shows the number of untis to be produced during a period.
Production
A manufacturing company has budgeted production of 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of material on hand. The company desires an ending materials inventory of 50% of the next month's materials requirements. The total cost of direct materials purchases for May will be $____.
Production: (5,000 * 3)= 15,000 add: ending inventory: (4,400*3)*50%= 6,600 less: beg. Inventory: (2,750) total: 18,850 total cost: 18,850 * 10= $188, 500 $188,500
Accounts receivable
Sales budget
The first step in preparing the master budget is planning the ___ budget
Sales budget
A company has the following budget information: Sales: $118,800, COGS: $48,500, Depreciation expense: $1,500: interest expense: $250; other expenses: $41,880. If the company budgets 40% for income tax expense, the budgeted net income will be:
Sales: 118,800 COGS: 48,500 Gross profit= (118,800-48,500)= 70,300 expenses: dep. expense= 1,500 interest expense= 250 Other expenses= 41,880 Total expenses= 43,630 income tax before income taxes: 26,670 income tax expense= (70,300-43,630)*40%= 17,452 net income= (26,670-17,452)= 16,002
A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; other expenses: $41,880. If the company budgets 40% for income tax expense, the amount of budgeted income tax expense will be $___.
Sales: 118,800 COGS: 48,500 gross profit = 118,800-48,500= 70,300 selling general and administrative expenses: Depreciation expense: 1,500 Interest expense: 250 other expenses: 41,880 total expenses: 43,630 income tax expense: (70,300 - 43,630) * 40% = 10,668
A merchandising company's budget includes the following data for January: Sales: $400,000, COGS: $207,000, Administrative salaries: $1,250, Sales commissions: 5% of sales, Advertising: $10,000; depreciation on store equipment: $25,000, Rent on administrative building: $30,000; miscellaneous administrative expenses: $5,000. The total general and administrative expenses on the January general and administrative expense budget will be $___.
Total general and administrative expense budget: Administrative salaries: $1,250 depreciation on store equipment: 25,000 rent on administrative building: 30,000 miscellaneous administrative expenses: 5,000 = $61, 250 ***because this budget includes: general and administrative expenses: property taxes, office expenses, and insurance and depreciation on non-manufacturing assets***
T/F: Depreciation on non-manufacturing assets and property taxes are considered general and administrative expenses and, therefore, are included on the general and administrative expense budget.
True
The formula to compute the budgeted direct labor cost is:
Units to produce times direct labor required per unit times direct labor cost per hour
List the individual budgets of the master budget in the order in why they are prepared:
1. Sales budget 2. Production budget 3. Direct materials, direct labor, and factory overhead budgets 4. Cash budgets