Deck 8: Master Budgeting

Question 1

One disadvantage of budgeting is that budgeting makes it more difficult to coordinate the plans and activities of departmental managers.

Answer 1

False

Question 2

A benefit from budgeting is that it forces managers to think about and plan for the future.

Answer 2

True

Question 3

The manufacturing overhead budget lists all costs of production other than direct materials and direct labor.

Answer 3

True

Question 4

Control involves developing goals and preparing various budgets to achieve those goals.

Question 5

The budgeted income statement is typically prepared before the budgeted balance sheet.

Question 6

A continuous or perpetual budget is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed.

Question 7

One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks.

Question 8

The production budget is typically prepared before the direct materials budget.

Question 9

The direct labor budget shows the direct labor-hours required to satisfy the production budget.

Question 10

The master budget consists of a number of separate but interdependent budgets.

Question 11

The number of units to be produced in a period can be determined by adding the expected sales to the desired ending inventory and then deducting the beginning inventory.

Question 12

The cash budget is the starting point in preparing the master budget.

Question 13

In the manufacturing overhead budget, the non-cash charges (such as depreciation) are deducted from the total budgeted manufacturing overhead to determine the expected cash disbursements for manufacturing overhead.

Question 14

In a production budget, if the number of units in finished goods inventory at the end of the period is less than the number of units in finished goods inventory at the beginning of the period, then the expected number of units sold is less than the number of units to be produced during the period.

Question 15

When preparing a direct materials budget, beginning inventory for raw materials should be added to production needs, and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased.

Question 16

Cash collections in a schedule of cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period.

Question 17

The selling and administrative budget is typically prepared before the cash budget.

Question 18

The production budget is typically prepared prior to the sales budget.

Question 19

The direct labor budget begins with the required production in units from the production budget.

Question 20

In the merchandise purchases budget, the required purchases (in units) for a period can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units) and desired ending merchandise inventory (in units).

Question 21

All of Gaylord Corporation's sales are on account. Thirty-five percent of the sales on account are collected in the month of sale, 45% in the month following sale, and the remainder are collected in the second month following sale. The following are budgeted sales data for the company: What is the amount of cash that should be collected in March?

A) $24,000
B) $37,000
C) $41,000
D) $51,000

Question 22

The disbursements section of a cash budget consists of all cash payments for the period except cash payments for dividends.

A) the direct materials purchase budget.
B) the budgeted income statement.
C) the sales forecast or sales budget.
D) the production budget.

Question 23

The BRS Corporation makes collections on sales according to the following schedule:30% in month of sale66% in month following sale4% in second month following saleThe following sales have been budgeted: Budgeted cash collections in June would be:

A) $146,200
B) $140,000
C) $140,520
D) $141,000

Question 24

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

Question 25

Which of the following budgets are prepared before the sales budget?

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 26

Sioux Corporation is estimating the following sales for the first four months of next year: Sales are normally collected 60% in the month of sale and 40% in the month following the sale. Based on this information, how much cash should Sioux expect to collect during the month of April?

A) $370,000
B) $222,000
C) $119,000
D) $358,000

Question 27

The selling and administrative expense budget lists all costs of production other than direct materials and direct labor.

Question 28

The budgeted variable selling and administrative expense is calculated by multiplying the budgeted unit sales by the variable selling and administrative expense per unit.

Question 29

Parwin Corporation plans to sell 43,000 units during August. If the company has 18,000 units on hand at the start of the month, and plans to have 19,000 units on hand at the end of the month, how many units must be produced during the month?

A) 44,000
B) 42,000
C) 62,000
D) 61,000

Question 30

Corvi Corporation produces and sells one product. The budgeted selling price per unit is $126. Budgeted unit sales are shown below: All sales are on credit with 40% collected in the month of the sale and 60% in the following month. The expected cash collections for August is closest to:

A) $551,880
B) $579,600
C) $919,800
D) $1,131,480

Question 31

Crocetti Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected:40% in the month of the sale60% in the following monthThe budgeted accounts receivable balance at the end of February is closest to:

A) $544,500
B) $907,500
C) $605,000
D) $363,000

Question 32

The BRS Corporation makes collections on sales according to the following schedule:30% in month of sale60% in month following sale10% in second month following saleThe following sales have been budgeted: Budgeted cash collections in June would be:

A) $137,000
B) $85,000
C) $45,000
D) $123,000

Question 33

Seventy percent of Pitkin Corporation's sales are collected in the month of sale, 20% in the month following sale, and 10% in the second month following sale. The following are budgeted sales data for the company: Total budgeted cash collections in April would be:

A) $175,000
B) $275,000
C) $70,000
D) $30,000

Question 34

Which of the following statements is NOT correct concerning the Manufacturing Overhead Budget?

A) The Manufacturing Overhead Budget provides a schedule of all costs of production other than direct materials and labor costs.
B) The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead.
C) The Manufacturing Overhead Budget shows the expected cash disbursements for manufacturing overhead.
D) The Manufacturing Overhead Budget is prepared after the Sales Budget.

Question 35

Which of the following statements is NOT correct concerning the Cash Budget?

A) It is not necessary to prepare any other budgets before preparing the Cash Budget.
B) The Cash Budget should be prepared before the Budgeted Income Statement.
C) The Cash Budget should be prepared before the Budgeted Balance Sheet.
D) The Cash Budget builds on earlier budgets and schedules as well as additional data.

Question 36

Jeanclaude Corporation produces and sells one product. The budgeted selling price per unit is $105. Budgeted unit sales for July, August, September, and October are 7,400, 7,500, 13,800, and 15,300 units, respectively. All sales are on credit. Regarding credit sales, 40% are collected in the month of the sale and 60% in the following month.The budgeted accounts receivable balance at the end of August is closest to:

A) $525,000
B) $315,000
C) $472,500
D) $787,500

Question 37

All of Pocast Corporation's sales are on account. Sixty percent of the credit sales are collected in the month of sale, 30% in the month following sale, and 10% in the second month following sale. The following are budgeted sales data for the company: Cash receipts in April are expected to be:

A) $530,000
B) $360,000
C) $460,000
D) $410,000

Question 38

When preparing a direct materials budget, the required purchases of raw materials in units equals:

A) raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.
B) raw materials needed to meet the production schedule − desired ending inventory of raw materials − beginning inventory of raw materials.
C) raw materials needed to meet the production schedule − desired ending inventory of raw materials + beginning inventory of raw materials.
D) raw materials needed to meet the production schedule + desired ending inventory of raw materials + beginning inventory of raw materials.

Question 39

Sirignano Corporation produces and sells one product. The budgeted selling price per unit is $84. Budgeted unit sales for October, November, December, and January are 8,400, 12,000, 13,800, and 14,300 units, respectively. All sales are on credit with 40% collected in the month of the sale and 60% in the following month. The expected cash collections for November is closest to:

A) $826,560
B) $705,600
C) $423,360
D) $403,200

Question 40

Budgeted sales in Acer Corporation over the next four months are given below: Thirty percent of the company's sales are for cash and 70% are on account. Collections for sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in the month of sale, 30% are collected in the month following sale, and 20% are collected in the second month following sale. Given these data, cash collections for December should be:

A) $141,800
B) $100,500
C) $118,700
D) $161,400

Question 41

Pabon Corporation makes one product. Budgeted unit sales for August and September are 11,100 and 12,600 units, respectively. The ending finished goods inventory equals 40% of the following month's sales. The direct labor wage rate is $19.00 per hour. Each unit of finished goods requires 2.5 direct labor-hours. The estimated direct labor cost for August is closest to:

A) $389,000
B) $555,750
C) $29,250
D) $222,300

Question 42

Paradise Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. * Three pounds of raw material are needed to produce each unit of finished product. If Paradise Corporation plans to sell 510,000 units during next year, the number of units it would have to manufacture during the year would be:

A) 500,000 units
B) 520,000 units
C) 510,000 units
D) 570,000 units

Question 43

Paradise Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. * Three pounds of raw material are needed to produce each unit of finished product. If Paradise Corporation plans to sell 525,000 units during next year, the number of units it would have to manufacture during the year would be:

A) 495,000units
B) 476,000 units
C) 525,000 units
D) 555,000 units

Question 44

Douglas Corporation plans to sell 24,000 units of Product A during July and 30,000 units during August. Sales of Product A during June were 25,000 units. Past experience has shown that end-of-month inventory should equal 3,000 units plus 30% of the next month's sales. On June 30 this requirement was met. Based on these data, how many units of Product A must be produced during the month of July?

A) 28,800
B) 22,200
C) 24,000
D) 25,800

Question 45

BW Department Store expects to generate the following sales for the next three months: BW's cost of goods sold is 60% of sales dollars. At the end of each month, BW wants a merchandise inventory balance equal to 25% of the following month's expected cost of goods sold. What dollar amount of merchandise inventory should BW plan to purchase in August?

A) $330,000
B) $314,600
C) $352,800
D) $327,800

Question 46

Sill Corporation makes one product. Budgeted unit sales for January, February, March, and April are 9,900, 11,400, 11,900, and 13,400 units, respectively. The ending finished goods inventory equals 20% of the following month's sales. The ending raw materials inventory equals 40% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. If 61,000 pounds of raw materials are required for production in March, then the budgeted raw material purchases for February is closest to:

A) 58,900 pounds
B) 104,900 pounds
C) 57,500 pounds
D) 81,900 pounds

Question 47

Frolic Corporation has budgeted sales and production over the next quarter as follows: The company has 4,100 units of product on hand at July 1. 10% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 72,000 units. Budgeted sales for September would be (in units):

A) 64,350
B) 55,500
C) 62,400
D) 64,500

Question 48

Frolic Corporation has budgeted sales and production over the next quarter as follows: The company has 17,500 units of product on hand at July 1. 25% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 97,000 units. Budgeted sales for September would be (in units):

A) 88,000
B) 90,000
C) 86,000
D) 84,000

Question 49

Jannusch Corporation makes one product. Budgeted unit sales for July, August, September, and October are 10,000, 11,600, 13,300, and 12,700 units, respectively. The ending finished goods inventory should equal 20% of the following month's sales. The budgeted required production for August is closest to:

A) 11,600 units
B) 11,940 units
C) 14,260 units
D) 16,580 units

Question 50

The following information relates to Mapfes Manufacturing Corporation for next quarter: How many units should the company plan on producing for the month of February?

A) 428,000 units
B) 391,000 units
C) 390,000 units
D) 389,000 units

Question 51

Reaser Corporation makes one product. Each unit of finished goods requires 4 pounds of raw materials. The ending finished goods inventory equals 10% of the following month's sales. The ending raw materials inventory equals 40% of the following month's raw materials production needs. If 50,600 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:

A) 56,600 pounds
B) 42,056 pounds
C) 71,144 pounds
D) 36,360 pounds

Question 52

Cardle Corporation makes one product. Budgeted unit sales are shown below: The ending finished goods inventory should equal 30% of the following month's sales. The budgeted required production for February is closest to:

A) 11,630 units
B) 14,210 units
C) 9,050 units
D) 8,600 units

Question 53

Stut Corporation, a retailer, plans to sell 28,000 units of Product X during the month of August. If the company has 6,000 units on hand at the start of the month, and plans to have 9,000 units on hand at the end of the month, how many units of Product X must be purchased from the supplier during the month?

A) 37,000
B) 25,000
C) 31,000
D) 28,000

Question 54

On October 1, Gala Corporation has 300 units of Product XYZ on hand. The company plans to sell 1,200 units of Product XYZ during October, and plans to have 500 units on hand October 31. How many units of Product XYZ must be produced during October?

A) 1,400
B) 1,500
C) 1,000
D) 2,000

Question 55

Parwin Corporation plans to sell 23,000 units during August. If the company has 8,000 units on hand at the start of the month, and plans to have 9,000 units on hand at the end of the month, how many units must be produced during the month?

A) 24,000
B) 22,000
C) 32,000
D) 31,000

Question 56

Fiwrt Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales Fiwrt (in units) for the next three months are as follows: Fiwrt likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. How many mugs should Fiwrt plan on producing during the month of November?

A) 35,400 mugs
B) 26,800 mugs
C) 36,000 mugs
D) 34,300 mugs

Question 57

The following information was taken from the production budget of Piwte Corporation for next quarter: How many units is the company expecting to sell in the month of February?

A) 132,000
B) 138,000
C) 135,000
D) 134,000

Question 58

Masde Corporation produces and sells Product CharlieD. To guard against stockouts, the company requires that 25% of the next month's sales be on hand at the end of each month. Budgeted sales of Product CharlieD over the next four months are: Budgeted production for August would be:

A) 57,500 units
B) 107,000 units
C) 77,000 units
D) 80,000 units

Question 59

Sleeter Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:Budgeted unit sales for April, May, June, and July are 7,500, 11,900, 10,800, and 14,800 units, respectively. All sales are on credit.The ending finished goods inventory equals 30% of the following month's sales.The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 6 pounds of raw materials. The raw materials cost $5.00 per pound.If 72,000 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

A) $559,230
B) $455,100
C) $350,970
D) $347,100

Question 60

Bentsen Corporation makes one product. The ending finished goods inventory equals 40% of the following month's sales. The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 6 pounds of raw materials. The raw materials cost $2.00 per pound. If 76,680 pounds of raw materials are required for production in September, then the budgeted cost of raw material purchases for August is closest to:

A) $133,704
B) $131,520
C) $160,008
D) $146,856

Question 61

Dustman Manufacturing Corporation's most recent production budget indicates the following required production: Each unit of finished product requires 3 feet of raw materials. The company maintains raw materials inventory equal to 2,000 feet plus 10% of the next month's expected production needs. The raw material used in Dustman Manufacturing Corporation's product costs $4.50 per foot. What is the value of raw material that Dustman Manufacturing should plan on purchasing for the month of February?

A) $73,575
B) $74,250
C) $81,000
D) $80,325

Question 62

The Tobler Corporation has budgeted production for next year as follows: Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 pounds. 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 the third quarter would be:

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

Question 63

The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,500 direct labor-hours will be required in January. The variable overhead rate is $5 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,010 per month, which includes depreciation of $3,750. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A) $55,510
B) $12,500
C) $51,760
D) $39,260

Question 64

Pooler Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.60 direct labor-hours. The direct labor rate is $9.00 per direct labor-hour. The production budget calls for producing 6,800 units in April and 6,600 units in May. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

A) $72,850
B) $73,025
C) $72,360
D) $72,535

Question 65

Tracie Corporation manufactures and sells women's skirts. Each skirt (unit) requires 2.2 yards of cloth. Selected data from Tracie's master budget for next quarter are shown below: Each unit requires 0.8 hours of direct labor, and the average hourly cost of Tracie's direct labor is $18. What is the cost of Tracie Corporation's direct labor in September?

A) $198,000
B) $158,400
C) $187,200
D) $234,000

Question 66

Haylock Incorporated bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 5,600 direct labor-hours will be required in August. The variable overhead rate is $5.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $69,440 per month, which includes depreciation of $15,680. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A) $99,680
B) $84,000
C) $53,760
D) $30,240

Question 67

Pooler Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.15 direct labor-hours. The direct labor rate is $7.00 per direct labor-hour. The production budget calls for producing 6,500 units in April and 6,200 units in May. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

A) $13,825.00
B) $13,335.00
C) $14,000.00
D) $13,510.00

Question 68

Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below: Two pounds 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 42,000 pounds of raw materials on hand on January 1. Budgeted production for February should be:

A) 103,400 units
B) 80,600 units
C) 80,000 units
D) 74,000 units

Question 69

Tracie Corporation manufactures and sells women's skirts. Each skirt (unit) requires 2.2 yards of cloth. Selected data from Tracie's master budget for next quarter are shown below: Each unit requires 0.7 hours of direct labor, and the average hourly cost of Tracie's direct labor is $20. What is the cost of Tracie Corporation's direct labor in September?

A) $248,000
B) $173,600
C) $201,600
D) $288,000

Question 70

The following are budgeted data: One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:

A) 19,600 pounds
B) 20,400 pounds
C) 18,400 pounds
D) 18,600 pounds

Question 71

Catano Corporation pays for 40% of its raw materials purchases in the month of purchase and 60% in the following month. If the budgeted cost of raw materials purchases in July is $256,550 and in August is $278,050, then in August the total budgeted cash disbursements for raw materials purchases is closest to:

A) $265,150
B) $153,930
C) $166,830
D) $111,220

Question 72

Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below: Four pounds 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 25% of the following month's production needs. The company is expected to have 71,700 pounds of raw materials on hand on January 1. Budgeted production for February should be:

A) 88,400 units
B) 89,100 units
C) 88,500 units
D) 29,533 units

Question 73

Depasquale Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.51 direct labor-hours. The direct labor rate is $8.90 per direct labor-hour. The production budget calls for producing 6,900 units in May and 7,300 units in June. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

A) $31,319.10
B) $33,134.70
C) $32,226.90
D) $64,453.80

Question 74

Depasquale Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.41 direct labor-hours. The direct labor rate is $8.10 per direct labor-hour. The production budget calls for producing 5,000 units in May and 5,400 units in June. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

A) $16,605.00
B) $17,933.40
C) $17,269.20
D) $34,538.40

Question 75

Arciba Incorporated bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,400 direct labor-hours will be required in January. The variable overhead rate is $9.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $130,980 per month, which includes depreciation of $10,360. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for January should be:

A) $27.20
B) $25.80
C) $17.70
D) $9.50

Question 76

The manufacturing overhead budget at Franklyn Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 4,400 direct labor-hours will be required in January. The variable overhead rate is $1.30 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $60,280 per month, which includes depreciation of $17,160. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A) $5,720
B) $43,120
C) $48,840
D) $66,000

Question 77

Haylock Incorporated bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,600 direct labor-hours will be required in August. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,420 per month, which includes depreciation of $8,930. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A) $10,640
B) $102,130
C) $91,490
D) $111,060

Question 78

The Jung Corporation's production budget calls for the following number of units to be produced each quarter for next year:Budgeted production Each unit of product requires three pounds of direct material. The company's policy is to begin each quarter with an inventory of direct materials equal to 30% of that quarter's direct material requirements. Budgeted direct materials purchases for the third quarter would be:

A) 114,600 pounds
B) 89,400 pounds
C) 38,200 pounds
D) 29,800 pounds

Question 79

Garry Corporation's most recent production budget indicates the following required production: Each unit of finished product requires 5 pounds of raw materials. The company maintains raw materials inventory equal to 25% of the next month's expected production needs. How many pounds of raw material should Garry plan on purchasing for the month of November?

A) 1,006,250
B) 793,750
C) 1,012,500
D) 893,500

Question 80

The following are budgeted data: One pound of material is required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for February would be budgeted to be:

A) 21,020 pounds
B) 20,680 pounds
C) 20,580 pounds
D) 18,220 pounds