Deck 7: Budgeting

Question 1

The Willsey Merchandise Company has budgeted $40,000 in sales for the month o? December. The company's cost of goods sold is 30% of sales. If the company has budgeted to purchase $18,000 in merchandise during December, then the budgeted change in inventory levels over the month of December is:

A)$6,000 increase.
B)$22,000 increase.
C)$10,000 decrease.
D)$15,000 decrease.

Answer 1

A

Question 2

Reference: 07-03
Information on the actual sales and inventory purchases of the Law Company for the first quarter follows: $$\begin{array} { | l | l | l | } \hline & \text { Sales } & \begin{array} { l } \text { Inventory } \\\text { Purchases }\end{array} \\\hline \text { January } & \$ 120,000 & \$ 60,000 \\\hline \text { February } & \$ 100,000 & \$ 78,000 \\\hline \text { March } & \$ 130,000 & \$ 90,000 \\\hline\end{array}$$ Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollectible. Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month.
The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be $38,000, of which $15,000 is salaries and $8,000 is depreciation. The remaining operating expenses are variable with respect to the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March
1 was $43,000, and on April 1 was $35,000.

-The expected cash collections from customers during April would be:

A)$117,600.
B)$150,000.
C)$139,000.
D)$137,000.

Answer 2

$137,000.

Question 3

Reference: 07-14
A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question
mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands.
Carney Company
Cash Budget $\begin{array}{|l|l|l|l|l|}\hline &{\text { Quarters }} \\\hline &1 & 2 & 3 & 4\\\hline \text { Cash balance, beginning } & \$ 16 & \$ \mathrm{e} & \$ 13 & \$ 10 \\\hline \text { Add collections from customers } & \text { a } & 70 & 67 & 80 \\\hline \text { Total cash available } & ? & ? & 80 & 90 \\\hline \text { Less disbursements: } & & & & \\\hline \text { Purchase of inventory } & 31 & \mathrm{c} & 40 & 35 \\\hline \text { Operating expenses } & 35 & 22 & ? & 15 \\\hline \text { Equipment purchases } & 10 & 14 & 19 & 0 \\\hline \text { Dividends } & 0 & 6 & 0 & 5 \\\hline \text { Total disbursements } & 66 & ? & \mathrm{f} & 55 \\\hline \text { Excess (deficiency) of cash available } & & & & \\\hline \text { over disbursements } & 7 & 17 & (2) & 35 \\\hline \text { Financing: } & & & & \\\hline \text { Borrowings } & \mathrm{b} & - & 12 & - \\\hline \text { Repayments (including interest) } & - & \mathrm{d} & - & (21) \\\hline \text { Total financing } & ? & ? & 12 & (21) \\\hline \text { Cash balance, ending } & \underline{\$ 10} & ? & \$ 10 & \$ 14 \\\hline\end{array}$

-The cash disbursed for purchases during the second quarter (item c in thousands)is:

A)$9.
B)$55.
C)$21.
D)$13.

Answer 3

$21.

Question 4

Reference: 07-01
KAB Inc., a small retail store, had the following results for May. The budgets for June and July are also given. $$\begin{array} { | l | l | l | l | } \hline & \text { May (actual) } & \text { June (budget) } & \text { July (budget) } \\\hline \text { Sales } & \$ 42,000 & \$ 40,000 & \$ 45,000 \\\hline \text { Cost of sales } & 21,000 & 20,000 & 22,500 \\\hline \text { Gross margin } & 21,000 & 20,000 & 22,500 \\\hline \text { Operating expenses } & 20,000 & 20,000 & 20,000 \\\hline \text { Operating income } & \$ 1,000 & \$ \quad 0 & \$ 2,500 \\\hline\end{array}$$ Sales are collected 80% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to sale. Suppliers of the goods are paid in the month following the sale. The "operating expenses" are paid in the month of the sale.

-The cash disbursements during the month of June for goods purchased for resale and for operating expenses should be:

A)$41,000.
B)$43,500.
C)$40,000.
D)$42,500.

Question 5

Reference: 07-09
Noel Enterprises has budgeted sales in units for the next five months as follows: $$\begin{array} { | l | l | } \hline \text { January } & 6,800 \text { units } \\\hline \text { February } & 5,400 \text { units } \\\hline \text { March } & 7,200 \text { units } \\\hline \text { April } & 4,600 \text { units } \\\hline \text { May } & 3,800 \text { units } \\\hline\end{array}$$ Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.

-The desired ending inventory in units for March is:

A)380.
B)540.
C)720.
D)460.

Question 6

Which of the following is not a benefit of budgeting

A)It coordinates the activities of the entire organization by integrating the plans and objectives of the various parts.
B)It provides benchmarks for evaluating subsequent performance.
C)It ensures that accounting records comply with generally accepted accounting principles.
D)It uncovers potential bottlenecks before they occur.

Question 7

The direct materials budget:

A)is accompanied by a schedule of cash collections.
B)is completed after the cash budget.
C)is the beginning point in the budget process.
D)must provide for desired ending inventory as well as for production.

Question 8

In completing the Ending Finished Goods Inventory Budget, the managers of Jimbob Co. have determined that there should be 5,000 units of finished goods inventory on hand at the end of the budgeted period. In preparing other budgets they have used the following estimates of quantities and costs required to complete one unit: $$\begin{array} { | l | l | l | } \hline & \text { Quantity } & \text { Cost } \\\hline & & \\\hline \text { Direct materials } & 10.0 \text { kilograms } & \$ 1.00 \text { per kilogram } \\\hline \text { Direct labour } & .50 \text { hours } & \$ 20.00 \text { per hour } \\\hline\end{array}$$ Manufacturing overhead is allocated at the rate of $5.00 per direct labour hour. Using the above data, the ending finished goods inventory should be:

A)$200,000.
B)$150,000.
C)$112,500.
D)$100,000.

Question 9

Reference: 07-02
Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. $$\begin{array} { | l | l | } \hline & \text { Expected Sales } \\\hline \text { January } & \$ 10,000 \\\hline \text { February } & 24,000 \\\hline \text { March } & 16,000 \\\hline \text { April } & 25,000 \\\hline\end{array}$$ The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the
next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of
the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable operating expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable operating expenses are made during the month the expenses are incurred.

-In a budget of cash disbursements for March, the total cash disbursements would be:

A)$16,900.
B)$22,300.
C)$13,900.
D)$11,200.

Question 10

Reference: 07-10
The LFM Company makes and sells a single product, Product T. Each unit of Product T requires 1.3 hours of labour at a labour rate of $9.10 per hour. LFM Company needs to prepare a Direct Labour Budget for the second quarter of next year.
The company has budgeted to produce 25,000 units of Product T in June. goods inventories on June 1 and June 30 were budgeted at 500 and 700 units, respectively. Budgeted direct labour costs incurred in June would be:

A)$295,750.
B)$304,031.
C)$227,500.
D)$293,384.

Question 11

Marple Company's budgeted production in units and budgeted raw materials purchase? over the next three months are given below: $$\begin{array} { | c | l | l | l | } \hline & \text { January } & \text { February } & \text { March } \\\hline \text { Budgeted production (in units) } & 60,000 & ? & 100,000 \\\hline \text { Budgeted raw materials } & & & \\\hline \text { purchases (in kilograms) } & 129,000 & 165,000 & 188,000 \\\hline\end{array}$$ Two kilograms of raw materials are required to produce one unit of product. The company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs. The company is expected to have 36,000 kilograms of raw materials on hand on January 1. Budgeted production in units for February will be?

A)82,500.
B)150,000.
C)105,000.
D)75,000.

Question 12

Reference: 07-09
Noel Enterprises has budgeted sales in units for the next five months as follows: $$\begin{array} { | l | l | } \hline \text { January } & 6,800 \text { units } \\\hline \text { February } & 5,400 \text { units } \\\hline \text { March } & 7,200 \text { units } \\\hline \text { April } & 4,600 \text { units } \\\hline \text { May } & 3,800 \text { units } \\\hline\end{array}$$ Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.

-The total number of units to be produced in February is:

A)6,120.
B)5,400.
C)5,580.
D)5,220.

Question 13

Which of the following statements is not true about the Direct Labour Budget

A)It is developed after the Production Budget.
B)Output from this budget is used to determine the cost of goods manufactured.
C)If properly used it would assist in reducing inefficiency on the part of employees.
D)Output from this budget is used in the Selling and Administrative Expense Budget.

Question 14

Which of the following is not one of the positive attributes of responsibility accounting

A)Senior management can more easily identify employees to blame.
B)Managers should understand the source of significant variances to budget and should be prepared to explain the reasons for discrepancies to senior management.
C)Managers should take the initiative to correct unfavourable discrepancies.
D)By assigning responsibilities for each cost, better cost control should result.

Question 15

Fairmont Inc. uses an accounting system that charges costs to the manager who has been delegated the authority to make decisions concerning the costs. For example, if the sales manager accepts a rush order that will result in higher than normal manufacturing costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as:

A)operational budgeting.
B)absorption accounting.
C)contribution accounting.
D)responsibility accounting.

Question 16

Reference: 07-14
A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question
mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands.
Carney Company
Cash Budget $\begin{array}{|l|l|l|l|l|}\hline &{\text { Quarters }} \\\hline &1 & 2 & 3 & 4\\\hline \text { Cash balance, beginning } & \$ 16 & \$ \mathrm{e} & \$ 13 & \$ 10 \\\hline \text { Add collections from customers } & \text { a } & 70 & 67 & 80 \\\hline \text { Total cash available } & ? & ? & 80 & 90 \\\hline \text { Less disbursements: } & & & & \\\hline \text { Purchase of inventory } & 31 & \mathrm{c} & 40 & 35 \\\hline \text { Operating expenses } & 35 & 22 & ? & 15 \\\hline \text { Equipment purchases } & 10 & 14 & 19 & 0 \\\hline \text { Dividends } & 0 & 6 & 0 & 5 \\\hline \text { Total disbursements } & 66 & ? & \mathrm{f} & 55 \\\hline \text { Excess (deficiency) of cash available } & & & & \\\hline \text { over disbursements } & 7 & 17 & (2) & 35 \\\hline \text { Financing: } & & & & \\\hline \text { Borrowings } & \mathrm{b} & - & 12 & - \\\hline \text { Repayments (including interest) } & - & \mathrm{d} & - & (21) \\\hline \text { Total financing } & ? & ? & 12 & (21) \\\hline \text { Cash balance, ending } & \underline{\$ 10} & ? & \$ 10 & \$ 14 \\\hline\end{array}$

-The repayment (including interest)of financing during the second quarter (item d in thousands)is:

A)$0.
B)$7.
C)$17.
D)$4.

Question 17

Avril Company makes collections on sales according to the following schedule: 30% collected in the month of sale
60% collected in the month following sale
8% collected in the second month following sale
2% uncollectible
The following sales are expected: $$\begin{array} { | l | l | } \hline & \text { Expected Sales } \\\hline \text { January } & \$ 100,000 \\\hline \text { February } & 120,000 \\\hline \text { March } & 110,000 \\\hline\end{array}$$ Cash collections in March should be budgeted to be:

A)$110,800.
B)$110,000.
C)$113,000.
D)$105,000.

Question 18

Pardee Company plans to sell 12,000 units during the month of August. If the company has 2,500 units on hand at the start of the month, and plans to have 2,000 units on hand at the end of the month, how many units must be produced during the month?

A)14,000 units.
B)11,500 units.
C)12,500 units.
D)12,000 units.

Question 19

Reference: 07-12
The Culver Company is preparing its Manufacturing Overhead Budget for the third quarter of the year. Budgeted variable factory overhead is $3.00 per unit produced; budgeted fixed factory overhead is $75,000 per month, with
$16,000 of this amount being factory depreciation. Variable factory overhead is paid in the month incurred.
If the budgeted production for August is 5,000 units, then the total budgeted factory overhead per unit is:

A)$15.
B)$20.
C)$18.
D)$22.

Question 20

Modesto Company produces and sells Product AlphaB. company requires that 20% of the next month's sales be on hand at the end of each month.
Budgeted sales of Product AlphaB over the next four months are: $$\begin{array} { | l | l | l | l | l | } \hline & \text { June } & \text { July } & \text { August } & \text { September } \\\hline \begin{array} { l } \text { Budgeted sales in } \\\text { units }\end{array} & 30,000 & 40,000 & 60,000 & 50,000 \\\hline\end{array}$$ Budgeted production units for August will be:

A)58,000.
B)50,000.
C)70,000.
D)62,000.

Question 21

Reference: 07-03
Information on the actual sales and inventory purchases of the Law Company for the first quarter follows: $$\begin{array} { | l | l | l | } \hline & \text { Sales } & \begin{array} { l } \text { Inventory } \\\text { Purchases }\end{array} \\\hline \text { January } & \$ 120,000 & \$ 60,000 \\\hline \text { February } & \$ 100,000 & \$ 78,000 \\\hline \text { March } & \$ 130,000 & \$ 90,000 \\\hline\end{array}$$ Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollectible. Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month.
The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be $38,000, of which $15,000 is salaries and $8,000 is depreciation. The remaining operating expenses are variable with respect to the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March
1 was $43,000, and on April 1 was $35,000.

-The expected cash disbursements during April for inventory purchases would be:

A)$97,000.
B)$100,000.
C)$87,300.
D)$90,000.

Question 22

Reference: 07-12
The Culver Company is preparing its Manufacturing Overhead Budget for the third quarter of the year. Budgeted variable factory overhead is $3.00 per unit produced; budgeted fixed factory overhead is $75,000 per month, with
$16,000 of this amount being factory depreciation. Variable factory overhead is paid in the month incurred.
If the budgeted cash disbursements for factory overhead for September are $80,000, then the budgeted production in units for September must be?

A)7,000.
B)6,500.
C)7,400.
D)6,200.

Question 23

Reference: 07-07
Barley Enterprises has budgeted unit sales for the next four months as follows: $$\begin{array} { | l | l | } \hline \text { October } & 4,800 \text { units } \\\hline \text { November } & 5,800 \text { units } \\\hline \text { December } & 6,400 \text { units } \\\hline \text { January } & 5,200 \text { units } \\\hline\end{array}$$ The ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on
September 30 was below this level and contained only 600 units.

-The desired ending inventory in units for December is:

A)870.
B)690.
C)780.
D)960.

Question 24

Reference: 07-08
Roberts Enterprises has budgeted sales in units for the next five months as follows: $$\begin{array} { | l | l | } \hline \text { June } & 4,500 \text { units } \\\hline \text { July } & 7,100 \text { units } \\\hline \text { August } & 5,300 \text { units } \\\hline \text { September } & 6,700 \text { units } \\\hline \text { October } & 3,700 \text { units } \\\hline\end{array}$$ Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on May 31 contained 410 units. The company needs to prepare a production budget for the second quarter of the year.

-The total number of units to be produced in July is:

A)7,630.
B)6,920.
C)7,280.
D)7,100.

Question 25

Reference: 07-08
Roberts Enterprises has budgeted sales in units for the next five months as follows: $$\begin{array} { | l | l | } \hline \text { June } & 4,500 \text { units } \\\hline \text { July } & 7,100 \text { units } \\\hline \text { August } & 5,300 \text { units } \\\hline \text { September } & 6,700 \text { units } \\\hline \text { October } & 3,700 \text { units } \\\hline\end{array}$$ Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on May 31 contained 410 units. The company needs to prepare a production budget for the second quarter of the year.

-The opening inventory in units for September is?

A)670.
B)370.
C)530.
D)6,700.

Question 26

Reference: 07-03
Information on the actual sales and inventory purchases of the Law Company for the first quarter follows: $$\begin{array} { | l | l | l | } \hline & \text { Sales } & \begin{array} { l } \text { Inventory } \\\text { Purchases }\end{array} \\\hline \text { January } & \$ 120,000 & \$ 60,000 \\\hline \text { February } & \$ 100,000 & \$ 78,000 \\\hline \text { March } & \$ 130,000 & \$ 90,000 \\\hline\end{array}$$ Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollectible. Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month.
The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be $38,000, of which $15,000 is salaries and $8,000 is depreciation. The remaining operating expenses are variable with respect to the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March
1 was $43,000, and on April 1 was $35,000.

-The expected cash disbursements during April for operating expenses would be:

A)$15,000.
B)$23,000.
C)$38,000.
D)$30,000.

Question 27

What is the budgeted accounts receivable balance on June 1 of the current year:

A)$132,000.
B)$76,000.
C)$64,000.
D)$56,000.

Question 28

Which of the following would you not expect to find when the Beyond Budgeting Model is used?

A)Performance targets are set relative to specific competitors.
B)All corporate resources are managed by senior head office personnel.
C)All personnel are included in reward programs.
D)Forecasts are regularly and frequently updated.

Question 29

Reference: 07-15
Jimbob Co. has budgeted direct labour-hours as follows: $$\begin{array} { | l | l | } \hline \text { Quarter } & \text { Hours } \\\hline 1 & 11,000 \\\hline 2 & 12,000 \\\hline 3 & 10,000 \\\hline 4 & \underline { 11,000 } \\\hline \text { Year } & \underline { \underline { 44,000 } } \\\hline\end{array}$$ Variable manufacturing overhead is applied using direct labour hours at a rate of $3.00 per DLH. Fixed manufacturing overhead is budgeted at $30,000 per quarter which includes $8,000 in depreciation expense.

-What is the predetermined overhead rate per DLH for the year (rounded to nearest cent)

A)$5.73.
B)$5.00.
C)$6.00.
D)$5.27.

Question 30

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget?

A)It summarizes the costs of producing required units for the budget period.
B)It details the required raw materials purchases.
C)It details the required direct labour hours.
D)It is calculated based on the sales budget, the desired beginning inventory and the desired ending inventory.

Question 31

Reference: 07-04
The LaPann Company has obtained the following sales forecast data: $$\begin{array} { | l | l | l | l | l | } \hline & { \text { July } } & { \text { August } } & \text { September } & { \text { October } } \\\hline \text { Cash sales } & \$ 80,000 & \$ 70,000 & \$ 50,000 & \$ 60,000 \\\hline \text { Credit sales } & \$ 240,000 & \$ 220,000 & \$ 180,000 & \$ 200,000 \\\hline\end{array}$$ July
The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts.

-The budgeted cash receipts for October are?

A)$226,000.
B)$278,000.
C)$188,000.
D)$248,000.

Question 32

The PDQ Company makes collections on credit sales according to the following schedule: 25% in month of sale
70% in month following sale
4% in second month following sale
1% uncollectible
The following sales have been budgeted: $$\begin{array} { | l | l | } \hline \text { Month } & \text { Sales } \\\hline \text { April } & \$ 100,000 \\\hline \text { May } & 120,000 \\\hline \text { June } & 110,000 \\\hline\end{array}$$ The budget for cash collections in June will be:

A)$115,500.
B)$111,000.
C)$113,400.
D)$110,000.

Question 33

Reference: 07-15
Jimbob Co. has budgeted direct labour-hours as follows: $$\begin{array} { | l | l | } \hline \text { Quarter } & \text { Hours } \\\hline 1 & 11,000 \\\hline 2 & 12,000 \\\hline 3 & 10,000 \\\hline 4 & \underline { 11,000 } \\\hline \text { Year } & \underline { \underline { 4 } , 000 } \\\hline\end{array}$$ Variable manufacturing overhead is applied using direct labour hours at a rate of $3.00 per DLH. Fixed manufacturing overhead is budgeted at $30,000 per quarter which includes $8,000 in depreciation expense.

-What is the total variable manufacturing overhead budgeted for the year

A)$252,000.
B)$220,000.
C)$120,000.
D)$132,000.

Question 34

The cash budget must be prepared before you can complete the:

A)raw materials purchases budget.
B)schedule of cash disbursements.
C)production budget.
D)budgeted balance sheet.

Question 35

Reference: 07-09
Noel Enterprises has budgeted sales in units for the next five months as follows: $$\begin{array} { | l | l | } \hline \text { January } & 6,800 \text { units } \\\hline \text { February } & 5,400 \text { units } \\\hline \text { March } & 7,200 \text { units } \\\hline \text { April } & 4,600 \text { units } \\\hline \text { May } & 3,800 \text { units } \\\hline\end{array}$$ Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year.

-The opening inventory in units for April is?

A)460.
B)720.
C)4,600.
D)380.

Question 36

Reference: 07-14
A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question
mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands.
Carney Company
Cash Budget $\begin{array}{|l|l|l|l|l|}\hline &{\text { Quarters }} \\\hline &1 & 2 & 3 & 4\\\hline \text { Cash balance, beginning } & \$ 16 & \$ \mathrm{e} & \$ 13 & \$ 10 \\\hline \text { Add collections from customers } & \text { a } & 70 & 67 & 80 \\\hline \text { Total cash available } & ? & ? & 80 & 90 \\\hline \text { Less disbursements: } & & & & \\\hline \text { Purchase of inventory } & 31 & \mathrm{c} & 40 & 35 \\\hline \text { Operating expenses } & 35 & 22 & ? & 15 \\\hline \text { Equipment purchases } & 10 & 14 & 19 & 0 \\\hline \text { Dividends } & 0 & 6 & 0 & 5 \\\hline \text { Total disbursements } & 66 & ? & \mathrm{f} & 55 \\\hline \text { Excess (deficiency) of cash available } & & & & \\\hline \text { over disbursements } & 7 & 17 & (2) & 35 \\\hline \text { Financing: } & & & & \\\hline \text { Borrowings } & \mathrm{b} & - & 12 & - \\\hline \text { Repayments (including interest) } & - & \mathrm{d} & - & (21) \\\hline \text { Total financing } & ? & ? & 12 & (21) \\\hline \text { Cash balance, ending } & \underline{\$ 10} & ? & \$ 10 & \$ 14 \\\hline\end{array}$

-The collections from customers during the first quarter (item a in thousands)are:

A)$50.
B)$73.
C)$60.
D)$57.

Question 37

Reference: 07-06
Pardise Company plans the following beginning and ending inventory levels (in units) for July: $$\begin{array} { | l | l | l | } \hline & \text { July 1 } & \text { July } 30 \\\hline \text { Raw material } & 40,000 & 50,000 \\\hline \text { Work in process } & 10,000 & 10,000 \\\hline \text { Finished goods } & 80,000 & 50,000 \\\hline\end{array}$$ Two units of raw material are needed to produce each unit of finished product.

-If 500,000 finished units were to be manufactured during July, the units of raw material needed to be purchased would be:

A)1,000,000.
B)990,000.
C)1,010,000.
D)1,020,000.

Question 38

The budgeted cash disbursements for December are:

A)$472,500.
B)$477,500.
C)$382,500.
D)$442,500.

Question 39

Which of the following statements is true about zero-based budgeting

A)Managers are required to justify all budgeted expenditures.
B)Budgets have no financial components - are specified in product units only.
C)The process starts with last year's budget and changes anticipated are added or subtracted to get the current budget.
D)Managers are required to use the prior year's budget without changes for the current year.

Question 40

Orion Corporation is preparing a cash budget for the six months beginning January 1. Shown below are the company's expected collection pattern and the budgeted sales for the period.
Expected collection pattern:
65% collected in the month of sale
20% collected in the month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible $$\begin{array} { | l | l | } \hline & \text { Budgeted sales } \\\hline \text { January } & \$ 160,000 \\\hline \text { February } & 185,000 \\\hline \text { March } & 190,000 \\\hline \text { April } & 170,000 \\\hline \text { May } & 200,000 \\\hline \text { June } & 180,000 \\\hline\end{array}$$ The estimated total cash collections during April from sales and accounts receivables will be:

A)$171,666.
B)$167,000.
C)$155,900.
D)$173,400.

Question 41

Reference: 07-11
The International Company makes and sells only one product, Product SW. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data
are available: $$\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { Variable Cost Per } \\\text { Unit Sold }\end{array} & \text { Monthly Fixed Cost } \\\hline \text { Sales commissions } & \$ 0.70 & \\\hline \text { Shipping } & \$ 1.10 & \\\hline \text { Advertising } & \$ 0.20 & \$ 14,000 \\\hline \text { Executive salaries } & - & \$ 34,000 \\\hline \text { Depreciation on office equipment } & - & \$ 11,000 \\\hline \text { Other } & \$ 0.25 & \$ 19,000 \\\hline\end{array}$$ All expenses other than depreciation are paid in cash in the month they are incurred.

-If the budgeted cash disbursements for selling and administrative expenses for November total $123,250, then how many units of Product SW does the company plan to sell in November (rounded to the nearest whole unit):

A)22,952.
B)25,000.
C)33,444.
D)20,111.

Question 42

Which one of the following is the last schedule to be prepared in a normal budget preparation process?

A)The selling expense budget.
B)The cash budget.
C)The cost of goods sold budget.
D)The direct labour budget.

Question 43

Reference: 07-11
The International Company makes and sells only one product, Product SW. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data
are available: $$\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { Variable Cost Per } \\\text { Unit Sold }\end{array} & \text { Monthly Fixed Cost } \\\hline \text { Sales commissions } & \$ 0.70 & \\\hline \text { Shipping } & \$ 1.10 & \\\hline \text { Advertising } & \$ 0.20 & \$ 14,000 \\\hline \text { Executive salaries } & - & \$ 34,000 \\\hline \text { Depreciation on office equipment } & - & \$ 11,000 \\\hline \text { Other } & \$ 0.25 & \$ 19,000 \\\hline\end{array}$$ All expenses other than depreciation are paid in cash in the month they are incurred.

-If the company has budgeted to sell 25,000 units of Product SW in July, then the total budgeted selling and administrative expenses for July will be:

A)$123,250.
B)$56,250.
C)$78,000.
D)$134,250.

Question 44

Reference: 07-12
The Culver Company is preparing its Manufacturing Overhead Budget for the third quarter of the year. Budgeted variable factory overhead is $3.00 per unit produced; budgeted fixed factory overhead is $75,000 per month, with
$16,000 of this amount being factory depreciation. Variable factory overhead is paid in the month incurred.
If the budgeted production for July is 6,000 units, then the total budgeted factory overhead for July is:

A)$85,000.
B)$77,000.
C)$82,000.
D)$93,000.

Question 45

Which one of the following tasks should be done first, when developing a comprehensive budget for a manufacturing company?

A)Determination of the advertising budget.
B)Development of a sales budget.
C)Determination of equipment acquisitions.
D)Development of the capital budget.

Question 46

Reference: 07-02
Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. $$\begin{array} { | l | l | } \hline & \text { Expected Sales } \\\hline \text { January } & \$ 10,000 \\\hline \text { February } & 24,000 \\\hline \text { March } & 16,000 \\\hline \text { April } & 25,000 \\\hline\end{array}$$ The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the
next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of
the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable operating expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable operating expenses are made during the month the expenses are incurred.

-In a budget of cash receipts for March, the total cash receipts would be:

A)$17,800.
B)$20,200.
C)$8,200.
D)$16,000.

Question 47

Reference: 07-11
The International Company makes and sells only one product, Product SW. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data
are available: $$\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { Variable Cost Per } \\\text { Unit Sold }\end{array} & \text { Monthly Fixed Cost } \\\hline \text { Sales commissions } & \$ 0.70 & \\\hline \text { Shipping } & \$ 1.10 & \\\hline \text { Advertising } & \$ 0.20 & \$ 14,000 \\\hline \text { Executive salaries } & - & \$ 34,000 \\\hline \text { Depreciation on office equipment } & - & \$ 11,000 \\\hline \text { Other } & \$ 0.25 & \$ 19,000 \\\hline\end{array}$$ All expenses other than depreciation are paid in cash in the month they are incurred.

-If the company has budgeted to sell 24,000 units of Product SW in September, then the total budgeted fixed selling and administrative expenses for September would be?

A)$67,000.
B)$54,000.
C)$78,000.
D)$48,000.

Question 48

Reference: 07-03
Information on the actual sales and inventory purchases of the Law Company for the first quarter follows: $$\begin{array} { | l | l | l | } \hline & \text { Sales } & \begin{array} { l } \text { Inventory } \\\text { Purchases }\end{array} \\\hline \text { January } & \$ 120,000 & \$ 60,000 \\\hline \text { February } & \$ 100,000 & \$ 78,000 \\\hline \text { March } & \$ 130,000 & \$ 90,000 \\\hline\end{array}$$ Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollectible. Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month.
The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be $38,000, of which $15,000 is salaries and $8,000 is depreciation. The remaining operating expenses are variable with respect to the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March
1 was $43,000, and on April 1 was $35,000.

-The expected cash balance on April 30 would be:

A)$62,700.
B)$28,700.
C)$19,700.
D)$54,700.

Question 49

In a budgeted balance sheet, the merchandise inventory on February 28 would be:

A)$9,600.
B)$7,500.
C)$4,800.
D)$3,200.

Question 50

Reference: 07-02
Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. $$\begin{array} { | l | l | } \hline & \text { Expected Sales } \\\hline \text { January } & \$ 10,000 \\\hline \text { February } & 24,000 \\\hline \text { March } & 16,000 \\\hline \text { April } & 25,000 \\\hline\end{array}$$ The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the
next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of
the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable operating expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable operating expenses are made during the month the expenses are incurred.

-In a budgeted income statement for the month of February, net income would be:

A)$0.
B)$1,800.
C)$9,000.
D)$4,200.

Question 51

Reference: 07-02
Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. $$\begin{array} { | l | l | } \hline & \text { Expected Sales } \\\hline \text { January } & \$ 10,000 \\\hline \text { February } & 24,000 \\\hline \text { March } & 16,000 \\\hline \text { April } & 25,000 \\\hline\end{array}$$ The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the
next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of
the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable operating expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable operating expenses are made during the month the
expenses are incurred.

-The accounts receivable balance that would appear in the March 31 budgeted balance sheet would be:

A)$16,000.
B)$12,400.
C)$15,000.
D)$8,800.

Question 52

The budget or schedule that provides necessary input data for the direct labour budget is the:

A)cash budget.
B)raw materials purchases budget.
C)schedule of cash collections.
D)production budget.

Question 53

The budgeted cash receipts for December are?

A)$137,500.
B)$412,500.
C)$585,000.
D)$550,000.

Question 54

Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000 units in June. The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this information, Walsh Company's production of Product W
For the month of April should be how many units:

A)65,000.
B)75,000.
C)60,000.
D)66,000.

Question 55

Superior Industries' sales budget shows quarterly sales for the next year as follows: $$\begin{array} { | l | l | } \hline \text { Quarter } & \text { Sales (units) } \\\hline \text { First } & 10,000 \\\hline \text { Second } & 8,000 \\\hline \text { Third } & 12,000 \\\hline \text { Fourth } & 14,000 \\\hline\end{array}$$ Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production in units for the second quarter should be:

A)8,000.
B)8,400.
C)8,800.
D)7,200.

Question 56

The master budget process usually begins with the:

A)cash budget.
B)sales budget.
C)operating budget.
D)production budget.

Question 57

Reference: 07-15
Jimbob Co. has budgeted direct labour-hours as follows: $$\begin{array} { | l | l | } \hline \text { Quarter } & \text { Hours } \\\hline 1 & 11,000 \\\hline 2 & 12,000 \\\hline 3 & 10,000 \\\hline 4 & \underline { 11,000 } \\\hline \text { Year } & \underline { 44,000 } \\\hline\end{array}$$ Variable manufacturing overhead is applied using direct labour hours at a rate of $3.00 per DLH. Fixed manufacturing overhead is budgeted at $30,000 per quarter which includes $8,000 in depreciation expense.

-What is the total manufacturing overhead budgeted for quarter 1?

A)$55,000.
B)$41,000.
C)$33,000.
D)$63,000.

Question 58

Reference: 07-10
The LFM Company makes and sells a single product, Product T. Each unit of Product T requires 1.3 hours of labour at a labour rate of $9.10 per hour. LFM Company needs to prepare a Direct Labour Budget for the second quarter of next year.
The budgeted direct labour cost per unit of Product T would be:

A)$10.40.
B)$7.00.
C)$9.10.
D)$11.83.

Question 59

Reference: 07-14
A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question
mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands.
Carney Company
Cash Budget $\begin{array}{|l|l|l|l|l|}\hline &{\text { Quarters }} \\\hline &1 & 2 & 3 & 4\\\hline \text { Cash balance, beginning } & \$ 16 & \$ \mathrm{e} & \$ 13 & \$ 10 \\\hline \text { Add collections from customers } & \text { a } & 70 & 67 & 80 \\\hline \text { Total cash available } & ? & ? & 80 & 90 \\\hline \text { Less disbursements: } & & & & \\\hline \text { Purchase of inventory } & 31 & \mathrm{c} & 40 & 35 \\\hline \text { Operating expenses } & 35 & 22 & ? & 15 \\\hline \text { Equipment purchases } & 10 & 14 & 19 & 0 \\\hline \text { Dividends } & 0 & 6 & 0 & 5 \\\hline \text { Total disbursements } & 66 & ? & \mathrm{f} & 55 \\\hline \text { Excess (deficiency) of cash available } & & & & \\\hline \text { over disbursements } & 7 & 17 & (2) & 35 \\\hline \text { Financing: } & & & & \\\hline \text { Borrowings } & \mathrm{b} & - & 12 & - \\\hline \text { Repayments (including interest) } & - & \mathrm{d} & - & (21) \\\hline \text { Total financing } & ? & ? & 12 & (21) \\\hline \text { Cash balance, ending } & \underline{\$ 10} & ? & \$ 10 & \$ 14 \\\hline\end{array}$

-The cash balance at the beginning of the second quarter (item e in thousands)is:

A)$0.
B)$10.
C)$7.
D)$14.

Question 60

Reference: 07-01
KAB Inc., a small retail store, had the following results for May. The budgets for June and July are also given. $$\begin{array} { | l | l | l | l | } \hline & \text { May (actual) } & \text { June (budget) } & \text { July (budget) } \\\hline \text { Sales } & \$ 42,000 & \$ 40,000 & \$ 45,000 \\\hline \text { Cost of sales } & 21,000 & 20,000 & 22,500 \\\hline \text { Gross margin } & 21,000 & 20,000 & 22,500 \\\hline \text { Operating expenses } & 20,000 & 20,000 & 20,000 \\\hline \text { Operating income } & \$ 1,000 & \underline { \$ \quad 0 } & \$ 2,500 \\\hline\end{array}$$ Sales are collected 80% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to sale. Suppliers of the goods are paid in the month following the sale. The "operating expenses" are paid in the month of the sale.

-The amount of cash collected during the month of June should be:

A)$40,000.
B)$40,400.
C)$41,000.
D)$32,000.

Question 61

The usual starting point in budgeting for a for-profit organization is to make a forecast of cash receipts and cash disbursements.

Question 62

What is the total cash disbursements for manufacturing overhead budgeted for quarter 2

A)$58,000.
B)$32,000.
C)$53,000.
D)$66,000.

Question 63

Reference: 07-11
The International Company makes and sells only one product, Product SW. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data
are available: $$\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { Variable Cost Per } \\\text { Unit Sold }\end{array} & \text { Monthly Fixed Cost } \\\hline \text { Sales commissions } & \$ 0.70 & \\\hline \text { Shipping } & \$ 1.10 & \\\hline \text { Advertising } & \$ 0.20 & \$ 14,000 \\\hline \text { Executive salaries } & - & \$ 34,000 \\\hline \text { Depreciation on office equipment } & - & \$ 11,000 \\\hline \text { Other } & \$ 0.25 & \$ 19,000 \\\hline\end{array}$$ All expenses other than depreciation are paid in cash in the month they are incurred.

-If the company has budgeted to sell 20,000 units of Product SW in October, then the total budgeted variable selling and administrative expenses for October will be:

A)$40,000.
B)$78,000.
C)$56,250.
D)$45,000.

Question 64

Reference: 07-08
Roberts Enterprises has budgeted sales in units for the next five months as follows: $$\begin{array} { | l | l | } \hline \text { June } & 4,500 \text { units } \\\hline \text { July } & 7,100 \text { units } \\\hline \text { August } & 5,300 \text { units } \\\hline \text { September } & 6,700 \text { units } \\\hline \text { October } & 3,700 \text { units } \\\hline\end{array}$$ Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on May 31 contained 410 units. The company needs to prepare a production budget for the second quarter of the year.

-The desired ending inventory in units for August is:

A)370.
B)670.
C)710.
D)530.

Question 65

Reference: 07-14
A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question
mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands.
Carney Company
Cash Budget $\begin{array}{|l|l|l|l|l|}\hline &{\text { Quarters }} \\\hline &1 & 2 & 3 & 4\\\hline \text { Cash balance, beginning } & \$ 16 & \$ \mathrm{e} & \$ 13 & \$ 10 \\\hline \text { Add collections from customers } & \text { a } & 70 & 67 & 80 \\\hline \text { Total cash available } & ? & ? & 80 & 90 \\\hline \text { Less disbursements: } & & & & \\\hline \text { Purchase of inventory } & 31 & \mathrm{c} & 40 & 35 \\\hline \text { Operating expenses } & 35 & 22 & ? & 15 \\\hline \text { Equipment purchases } & 10 & 14 & 19 & 0 \\\hline \text { Dividends } & 0 & 6 & 0 & 5 \\\hline \text { Total disbursements } & 66 & ? & \mathrm{f} & 55 \\\hline \text { Excess (deficiency) of cash available } & & & & \\\hline \text { over disbursements } & 7 & 17 & (2) & 35 \\\hline \text { Financing: } & & & & \\\hline \text { Borrowings } & \mathrm{b} & - & 12 & - \\\hline \text { Repayments (including interest) } & - & \mathrm{d} & - & (21) \\\hline \text { Total financing } & ? & ? & 12 & (21) \\\hline \text { Cash balance, ending } & \underline{\$ 10} & ? & \$ 10 & \$ 14 \\\hline\end{array}$

-The total disbursements during the third quarter (item f in thousands)are:

A)$78.
B)$59.
C)$82.
D)$84.

Question 66

Reference: 07-05
The LaGrange Company had the following budgeted sales for the first half of the current year: $$\begin{array} { | l | l | l | } \hline & \text { Cash Sales } & \text { Credit Sales } \\\hline \text { January } & \$ 70,000 & \$ 340,000 \\\hline \text { February } & 50,000 & 190,000 \\\hline \text { March } & 40,000 & 135,000 \\\hline \text { April } & 35,000 & 120,000 \\\hline \text { May } & 45,000 & 160,000 \\\hline \text { June } & 40,000 & 140,000 \\\hline\end{array}$$ The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:
Collections on credit sales: 60% in month of sale
30% in month following sale
10% in second month following sale
The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000 represents uncollected December sales and $20,000 represents uncollected November sales.

-The total cash collected by LaGrange Company during January would be:

A)$331,500.
B)$344,000.
C)$410,000.
D)$254,000.

Question 67

In zero-based budgeting, the preparers are required to justify all expenditures, not just changes in the budget from the previous year.

Question 68

Reference: 07-14
A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question
mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands.
Carney Company
Cash Budget $\begin{array}{|l|l|l|l|l|}\hline &{\text { Quarters }} \\\hline &1 & 2 & 3 & 4\\\hline \text { Cash balance, beginning } & \$ 16 & \$ \mathrm{e} & \$ 13 & \$ 10 \\\hline \text { Add collections from customers } & \text { a } & 70 & 67 & 80 \\\hline \text { Total cash available } & ? & ? & 80 & 90 \\\hline \text { Less disbursements: } & & & & \\\hline \text { Purchase of inventory } & 31 & \mathrm{c} & 40 & 35 \\\hline \text { Operating expenses } & 35 & 22 & ? & 15 \\\hline \text { Equipment purchases } & 10 & 14 & 19 & 0 \\\hline \text { Dividends } & 0 & 6 & 0 & 5 \\\hline \text { Total disbursements } & 66 & ? & \mathrm{f} & 55 \\\hline \text { Excess (deficiency) of cash available } & & & & \\\hline \text { over disbursements } & 7 & 17 & (2) & 35 \\\hline \text { Financing: } & & & & \\\hline \text { Borrowings } & \mathrm{b} & - & 12 & - \\\hline \text { Repayments (including interest) } & - & \mathrm{d} & - & (21) \\\hline \text { Total financing } & ? & ? & 12 & (21) \\\hline \text { Cash balance, ending } & \underline{\$ 10} & ? & \$ 10 & \$ 14 \\\hline\end{array}$

-The borrowing required during the first quarter to meet the minimum cash balance (item b in thousands)is:

A)$0.
B)$7.
C)$3.
D)$10.

Question 69

Reference: 07-06
Pardise Company plans the following beginning and ending inventory levels (in units) for July: $$\begin{array} { | l | l | l | } \hline & \text { July 1 } & \text { July 30 } \\\hline \text { Raw material } & 40,000 & 50,000 \\\hline \text { Work in process } & 10,000 & 10,000 \\\hline \text { Finished goods } & 80,000 & 50,000 \\\hline\end{array}$$ Two units of raw material are needed to produce each unit of finished product.

-If Pardise Company plans to sell 480,000 units during July, the number of units it would have to manufacture during July would be:

A)480,000.
B)440,000.
C)510,000.
D)450,000.

Question 70

The budgeted net income for December is?

A)$137,500.
B)$42,500.
C)$107,500.
D)$77,500.

Question 71

Parlee Company's sales are 30% in cash and 70% on credit. Sixty percent of the credit sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder are uncollectible. The following are budgeted sales data: $$\begin{array} { | l | l | l | l | l | } \hline & \text { January } & \text { February } & \text { March } & \text { April } \\\hline \text { Total sales } & \$ 60,000 & \$ 70,000 & \$ 50,000 & \$ 30,000 \\\hline\end{array}$$ Total cash receipts in April would be budgeted to be:

A)$27,230.
B)$38,900.
C)$47,900.
D)$36,230.

Question 72

The Stacy Company makes and sells a single product, Product R. Budgeted sales for April are $300,000. Gross margin is budgeted at 30% of sales dollars. If the net income for April is budgeted at $40,000, the budgeted selling and administrative expenses are:

A)$133,333.
B)$102,000.
C)$50,000.
D)$78,000.

Question 73

Which of the following is not a suggested benefit of using the "Beyond Budgeting" model?

A)The use of relative performance targets incorporating comparisons to other businesses in the same industry may be more useful.
B)Managers may be better able to respond quickly to changing circumstances.
C)Rolling forecasts are likely to be more accurate.
D)Individual managers may be more accurately compensated when they achieve their own fixed targets which were negotiated before the fiscal year began.

Question 74

Reference: 07-07
Barley Enterprises has budgeted unit sales for the next four months as follows: $$\begin{array} { | l | l | } \hline \text { October } & 4,800 \text { units } \\\hline \text { November } & 5,800 \text { units } \\\hline \text { December } & 6,400 \text { units } \\\hline \text { January } & 5,200 \text { units } \\\hline\end{array}$$ The ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on
September 30 was below this level and contained only 600 units.

-The total of units to be produced in October is?

A)5,670.
B)5,890.
C)5,070.
D)4,530.

Question 75

ABC Company has a cash balance of $9,000 on April 1. The company must maintain a minimum cash balance of $6,000. During April expected cash receipts are $45,000. Expected cash disbursements during the month total $52,000. During April the company will need to borrow:

A)$4,000.
B)$2,000.
C)$6,000.
D)$8,000.

Question 76

The budgeted accounts receivable balance on September 30 is:

A)$148,000.
B)$126,000.
C)$190,000.
D)$166,000.

Question 77

The Waverly Company has budgeted sales for next year as follows: $$\begin{array} { | c | l | l | l | l | } \hline \text { Quarter } & \text { First } & \text { Second } & \text { Third } & \text { Fourth } \\\hline \text { Sales in units } & 12,000 & 14,000 & 18,000 & 16,000 \\\hline\end{array}$$ The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units. The finished goods inventory at the start of the year is
3,000 units. Scheduled production in units for the third quarter should be:

A)17,500.
B)22,000.
C)18,500.
D)13,500.

Question 78

The Tobler Company has budgeted production for next year as follows: $$\begin{array} { | c | l | l | l | l | } \hline \text { Quarter } & \text { First } & \text { Second } & \text { Third } & \text { Fourth } \\\hline \text { Production in units } & 10,000 & 12,000 & 16,000 & 14,000 \\\hline\end{array}$$ Four kilograms of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 kilograms. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Budgeted purchases of raw materials in kilograms in the third quarter will be?

A)56,800.
B)62,400.
C)63,200.
D)50,400.

Question 79

On a budgeted balance sheet, the retained earnings number is the net income number as projected by the budgeted income statement.

Question 80

Budgeted sales in Allen Company over the next four months are given below: $$\begin{array} { | l | l | l | l | l | } \hline & \text { September } & \text { October } & \text { November } & \text { December } \\\hline \text { Budgeted sales } & \$ 100,000 & \$ 160,000 & \$ 180,000 & \$ 120,000 \\\hline\end{array}$$ Twenty-five percent of the company's sales are for cash and 75% are on credit. Collections for sales on credit follow a stable pattern as follows: 50% of a month's sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale. The remainder are uncollectible. Given these data, cash collections in December should be?

A)$103,500.
B)$153,000.
C)$133,500.
D)$120,000.