ACCT 2122 Chapter 8

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

$100,000

Striker Company determines its expected receipts for the period to be $80,000 and expected disbursements to be $70,000. The beginning cash balance for the period was $5,000. The management wants to maintain a minimum balance of $40,000. What is the required borrowing?

$25,000

Striker Company determines its expected receipts for the period to be $80,000 and expected disbursements to be $70,000. The beginning cash balance for the period was $5,000. The management wants to maintain a minimum balance of $40,000. What is the required borrowing assuming that the bank lends only in multiples of $10,000?

$30,000

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 to produce, and the cost of direct labor per hour is $18. What would be the total direct labor cost for the fourth quarter?

$315,000

For the budget period ending December 31, 2015, 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. Raw materials worth $14,000 will be unpaid. Determine the amount of total current assets that will be reported on the budgeted balance sheet.

$40,000

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 would be Smarton's budgeted net income?

$48,000

Vineyard Corporation, a manufacturer of fine wines, began the year 2012 with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of 2012 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 2012 with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of 2012 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 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 a major factor that should be taken into consideration while planning the desired level of inventories?

Costs of carrying inventory

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 true of a self-imposed budget?

Managers at all levels participate in preparing the budget.

Identify the major sections of the cash budget from the following.

The cash excess or deficiency section The disbursements section The financing section The receipts section

Which of the following is a reason that companies prepare direct labor budgets?

To avoid labor shortages

What is the purpose of preparing a direct materials budget?

To estimate the quantity of raw materials to be purchased

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 variable selling and administrative expense budget

Continuous budgets ensure that managers do not become too narrowly focused on short-term results and keep them focused for at least one year ahead.

True

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 net operating income to arrive at net income.

interest expense

In a direct materials budget, the beginning raw materials inventory for the year is the same as:

the beginning raw materials inventory for the first period

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

In a production budget, the production needs for the year equals ______.

the sum of production needs for the four quarters

For the budget period ending December 31, 2015, 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. Raw materials worth $14,000 will be unpaid. What would be the amount of accounts payable reported on the budgeted balance sheet?

$14,000

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

False, it begins with the Sales Budget.

The schedule of expected cash disbursements for raw materials helps in the preparation of:

the cash budget