Ch 8

The budgeting process begins with the preparation of the ______ budget.

sales

A company determines that the number of units sold is the cost driver for its variable selling and administrative expense budget. The product of its variable selling and administrative rate and budgeted unit sales will be ________.

total budgeted variable selling and administrative expenses

The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the ________.

unit product cost

Which of the following is a major factor that should be taken into consideration while planning the desired level of inventories?

Costs of carrying inventory.

Pro Clean Company, a manufacturer of hand sanitizers, intends to produce 40,000 units in the third quarter and 35,000 units in the fourth quarter. Each unit requires 0.50 direct labor-hours (DLHs) and the cost of direct labor per hour is $18. What would be the total direct labor cost for the fourth quarter?

$315,000

Film Studio, Inc. has beginning retained earnings of $80,000 and expects to earn net income of $70,000 during the budget period. What would be the budgeted ending balance in retained earnings if the company declares and pays dividends of $50,000?

$100,000

Striker Company estimates its expected cash receipts for the period to be $80,000 and its expected cash disbursements to be $70,000. The beginning cash balance for the period was $5,000. The management wants to maintain a minimum cash balance of $40,000. How much cash will the company need to borrow?

$25,000

The following is a schedule of the projected unit sales of Western Company, which manufactures casual wear. Each unit sells for $25. The company began the period with a beginning accounts receivable balance of $10,000. Choose the correct answer from the options provided. Quarter FirstSecondThirdFourth Year Budgeted unit sales1,5001,3001,4001,300 5,500 Percentage of sales collected in the quarter of the sale75%Percentage of sales collected in the quarter after the sale25% Knowledge Check 01 What is the amount of budgeted sales revenue for the fourth quarter? What is the amount of cash that is expected to be collected during the second quarter as a result of sales made during the first quarter? What is the total amount of expected cash collections for the third quarter?

$32,500 $9,375 $34,375

Perry, Inc. desires to maintain the ending inventory of raw materials at 40 percent of the next quarter's raw material needs. What is the cost of raw materials to be purchased in the first quarter?

$320,000

For the budget period ending December 31 of the current year, Aaron Corporation estimates its ending balances for cash as $4,000, accounts receivable as $16,000, finished goods inventory as $12,000, and raw materials inventory as $8,000. Invoices relating to raw materials in the amount of $14,000 are expected to be unpaid as of December 31. What is the amount of total current assets that will be reported on the budgeted balance sheet?

$40,000

Precision Company estimates its machine-hour requirements for the four quarters to be 35,000 hours, 20,000 hours, 15,000 hours, and 30,000 hours respectively. The variable manufacturing overhead rate is $4 per machine-hour. The fixed manufacturing overhead is $50,000 per quarter, which includes $20,000 of depreciation expense. What is the budgeted variable manufacturing overhead for the year? What is the predetermined overhead rate for the year?

$400,000 $6 per machine hour

Smarton Company is in the process of preparing its budgeted income statement. It has determined its estimated gross margin to be $90,000. The company also expects to incur selling and administrative expenses of $30,000 and interest expense of $12,000. What is Smarton's budgeted net income?

$48,000

William Corporation has a contract with the labor union which guarantees its workers pay for at least 40,000 hours every quarter. Based on its direct labor budget for the current year, the company estimated it will need 39,000 direct labor-hours during the fourth quarter to produce 13,000 units of finished goods. Each unit requires 3 direct labor-hours (DLHs) and the cost of direct labor per hour is $12 per hour. What is the total direct labor cost for the fourth quarter?

$480,000

Vineyard Corporation, a manufacturer of fine wines, began the year with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of the current year to be 200,000 bottles, 150,000 bottles, 250,000 bottles, and 400,000 bottles, respectively. The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate. What are the production needs for the first quarter?

195,000 bottles

Vineyard Corporation, a manufacturer of fine wines, began the year with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of the current year to be 200,000 bottles, 150,000 bottles, 250,000 bottles, and 400,000 bottles, respectively. The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate. What is the desired ending inventory for the second quarter?

25,000 bottles

Which of the following is not one of the reasons that organizations use budgets?

Budgets evaluate and reward employees.

Which of the following explains why operating budgets generally span a period of one year?

Companies choose a span of one year to correspond to their fiscal years.

Which of the following is deducted from the total selling and administrative expense budget to determine the cash disbursements for selling and administrative expense budget?

Depreciation expense

Which of the following is not a benefit of self-imposed budgets?

Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations.

Companies prepare direct labor budgets to ________.

avoid labor shortages

For a production budget, the ______ is the beginning inventory for the year.

beginning inventory for the first quarter

In a budgeted income statement, _________ is subtracted from sales to arrive at gross margin.

cost of goods sold

In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ________.

desired ending raw materials inventory for the last period

The purpose of preparing a direct materials budget is to ________.

estimate the quantity of raw materials to be purchased