A306 Chapter 8 SB

S&P Enterprises has scheduled direct material purchases of $100,000 in January, $130,000 in February and $150,000 in March. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of February.

$122,500 Reason: February purchases ($130,000 x 75%) $97,500 + January purchases ($100,000 x 25%) $25,000 = $122,500.

Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ______ units.

13,000 Reason: 10,000 + 5,000 - 2,000 = 13,000

A budget is a detailed plan for the future that is usually expressed in formal qualitative terms. (T/F)

False

The amounts under the Year column in the cash budget always equal the sum of the amounts for the months or quarters of the budget.

False

If a cash budget is prepared by quarter, the beginning cash balance for the year is the same as the beginning cash balance for the ______ quarter and the ending cash balance for the year is the same as the ending cash for the ___________ quarter.

First Fourth

In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget?

Production

Both the production and selling and administrative expense budgets are prepared using information directly from the _________ budget

Sales

What is usually the major source of receipts in the receipts section of the cash budget?

Sales

Which of the following is needed to prepare a sales budget?

The budgeted number of units to be sold

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted __________ __________.

income statement

The cash budget __________.

is prepared near the end of the master budget process

Using budgeting assumptions when preparing the master budget,

makes it easier to answer "what-if" questions

All costs of production other than direct materials and direct labor are shown on the _______ ________ budget

manufacturing overhead

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the ________ budget.

master

Budgets are used for two distinct purposes:

planning; control

The first line of the direct labor budget consists of the budgeted units expected to be Blank______ during the period.

produced

In a manufacturing company, the ______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

In a manufacturing company, the ________ budget is prepared right after the sales budget.

production

In a manufacturing company, the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget are all based on the _________ budget.

production

The budgeted income statement does NOT rely on information from the

production budget

The first step in the budgeting process is preparing the __________ budget

sales

To calculate total sales on the sales budget, multiply budgeted sales in units by

sales price per unit

Budgeted expenses for areas other than manufacturing are shown on the _______budget

selling and administrative

In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the Blank______ budget.

selling and administrative

A company can consider making investments or repay outstanding principal and interest when

the cash excess is greater than the minimum required cash balance

Many of the schedules in a master budget are based on a variety of management estimates and assumptions. (T/F)

True

To prepare a budgeted balance sheet as of December 31, 2023, data is needed from the ______ December 31, 2022.

balance sheet as of

A budgeted balance sheet is developed using data from the Blank______ of the budget period and data contained in the various schedules.

beginning

The final schedule of the master budget is the

budgeted balance sheet

Budgets __________

communicate management's plan throughout the organization

The receipts, disbursements, excess or deficiency, and financing section are all parts of the Blank______budget.

cash

The receipts, disbursements, excess or deficiency, and financing section are all parts of the ______ Budget

cash

In a manufacturing company, the _________ _________ budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.

direct materials

The cost of unsold units is computed on the ______ budget.

ending finished goods inventory

All costs of production other than direct materials and direct labor are shown on the Blank______ budget.

manufacturing overhead

The calculation of unit product cost requires information from the _____ budget

manufacturing overhead

An integrated business plan that formally lays out the company's goals is called the ______ budget.

master

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the

master, static, planning

Facing labor shortages or having to hire or lay off workers at awkward times are consequences of

neglecting to budget the amount of labor time that will be needed

Developing goals and preparing various budgets to achieve those goals is part of

planning

Because all other parts of the budget depend on it, if the Blank______ budget is inaccurate, the rest of the budget will be inaccurate.

sales

S&P Enterprises has scheduled direct material purchases of $120,000 in April, $140,000 in May and $160,000 in June. The company pays for 75% of its purchases in the month of purchase and 25% the month after the purchase. Calculate the expected cash disbursements for the month of May.

$135,000 Reason: May purchases ($140,000 x 75%) $105,000 + April purchases ($120,000 x 25%) $30,000 = $135,000

Which of the following is needed to calculate raw materials to be purchased on the direct materials budget?

- Beginning inventory of raw materials - Raw materials required per unit

Master budget schedules....

- are based on estimates and assumptions - answer several key questions for a company

Risks of not knowing in advance how much labor time will be needed throughout the budget period includes

- erratic layoffs - low employee morale - labor shortages

ABC, Inc.'s expected sales for the first six months of the year are: January Expected Unit Sales: 12,000 February Expected Unit Sales: 15,000 March Expected Unit Sales: 16,000 April Expected Unit Sales: 20,000 May Expected Unit Sales: 22,000 June Expected Unit Sales: 25,000 If desired ending inventory is 25% of next month's sales, the number of units to be produced in March is

17,000 Reason: March sales 16,000 + End. inv. (25% of April sales) 5,000-Beg. inv. (25% of March sales) 4,000 = 17,000 units

A detailed plan for the future that is usually expressed in formal quantitative terms is

a budget

Required borrowings on a cash budget is calculated by

adding the desired ending cash balance to the amount of the cash deficiency

The receipts section of the cash budget lists

all cash inflows, except from financing

Because it is needed for the schedule of expected cash collections, the annual master budget file includes the _______ ________ from last year

balance sheet

The annual master budget file includes the Blank______ from last year because it is needed for the schedule of expected cash collections.

balance sheet

When creating an Excel budget and performing what-if analysis, it is generally easiest to

create the budget with a budgeting assumption tab

The number of working hours required to satisfy the production budget is shown on the ______ _______ budget

direct labor

Working hours required to satisfy the production budget are shown on the _______ budget

direct labor

Budgets ________

- coordinate the activities of the entire organization by integrating the plans of its various parts - and the budgeting process can uncover potential bottlenecks before they occur - force managers to think about and plan for the future define goals and objectives that can serve as benchmarks for evaluating subsequent performance

Which of the following budgets are directly based on information from the sales budget?

- production budget - selling and administrative

Which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?

Budgeted income statement

On the cash budget, what is subtracted from total cash available to find the cash excess or deficiency?

Cash disbursements

Which of the following budgets are needed to calculate unit product costs?

Direct labor Direct materials Manufacturing overhead

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget?

Production

The direct labor budget is based directly on the Blank______ budget.

Production

What number does the direct materials budget take directly from the production budget?

Required production

The ending finished goods inventory budget computes the cost of _______ units

Unsold