Question 1

A plan that shows the units to be sold and the projected selling price and is also the starting point in the budgeting process, is called the

Accepted Answer

A sales budget is a plan that outlines the expected sales in terms of units to be sold and the projected selling price. This information serves as the starting point for developing the other budgets in the budgeting process, such as the cash budget and budgeted income statement. The sales budget helps a business to forecast its revenue and plan its operations accordingly.

Question 2

On the direct materials budget, the total quantity of direct materials needed is computed as

Accepted Answer

The total quantity of direct materials needed is calculated by adding the quantity needed for production to the desired ending inventory of direct materials and then subtracting the beginning inventory of direct materials. This accounts for both the materials needed for production and adjustments for inventory levels.

Question 3

On the production budget, the number of units to be produced is computed as

Accepted Answer

The number of units to be produced is the sum of the unit sales, desired end inventory, and the difference between the desired end inventory and the beginning inventory. This formula is expressed as follows: Units to be Produced = Unit Sales + Desired End Inventory - Beginning Inventory.

Question 4

Which of the following budgets usually shows separate sections for fixed and variable costs?

Accepted Answer

The operating expense budget and manufacturing overhead budget usually show separate sections for fixed and variable costs. The manufacturing overhead budget shows the fixed and variable costs of the manufacturing process, while the operating expense budget shows the fixed and variable costs of running the business.

Question 5

MedSupplies Company has budgeted purchases of inventory for December of $140,000. Expected beginning inventory on December 1 and ending inventory on December 31 are $90,000 and $120,000, respectively. If cost of goods sold averages 80% of sales, what are budgeted sales for December?

Accepted Answer

We can use the following formula to find the budgeted sales:

Budgeted sales = Cost of goods sold / (1 - Gross margin percentage)

We are given that cost of goods sold averages 80% of sales, so the gross margin percentage is 20%.

Beginning inventory + Purchases - Ending inventory = Cost of goods sold

Substituting the given values, we have:

$90,000 + Purchases - $120,000 = 80% of budgeted sales
Purchases = $110,000

Budgeted sales = $110,000 / (1 - 20%) = $137,500

Therefore, the best choice is C.

Question 6

Clark Company has beginning inventory of 16,000 units and expected sales of 23,000 units. If the desired ending inventory is 18,000 units, how many units should be produced?

Accepted Answer

To determine the units to be produced, add the expected sales (23,000 units) to the desired ending inventory (18,000 units) and subtract the beginning inventory (16,000 units). This calculation results in 25,000 units to be produced: $23,000 + 18,000 - 16,000 = 25,000$.

Question 7

Benson Stores wants to have 500 flashlights in ending inventory on December 31. Budgeted sales for December are 1,950 flashlights. The November 30 inventory was 300 flashlights. How many flashlights should Benson Stores purchase for December?

Accepted Answer

To determine how many flashlights Benson Stores should purchase for December, we need to calculate the desired ending inventory, which is 500 flashlights.

Next, we need to calculate the total number of flashlights needed for December sales and ending inventory. This is calculated as follows:

Total needed = Budgeted sales + Desired ending inventory - Beginning inventory 
Total needed = 1,950 + 500 - 300 
Total needed = 2,150

Therefore, Benson Stores should purchase 2,150 flashlights for December, which is option C.

Question 8

Which of the following budgets or financial statements is part of the operating budget?

Accepted Answer

The sales budget is a part of the operating budget, as it outlines the expected sales revenue for a given period. The capital expenditures budget outlines the expected spending on long-term assets, and the budgeted balance sheet shows projected financial position at a point in time. The cash budget outlines expected cash inflows and outflows, but is not necessarily a part of the operating budget.

Question 9

Lawrence Corporation desires a December 31 ending inventory of 900 units. Budgeted sales for December are 2,650 units. The November 30 inventory was 750 units. What are budgeted purchases in units?

Accepted Answer

To determine the budgeted purchases in units, we need to use the following formula:

Budgeted Purchases = Desired Ending Inventory + Budgeted Sales - Beginning Inventory

Substituting the given values, we get:

Budgeted Purchases = 900 + 2,650 - 750
Budgeted Purchases = 2,800

Therefore, the best choice is B - 2,800.

Question 10

Good Doggie Treatz Company expects to sell 5,000 gourmet dog biscuits in January and 9,000 in February for $2 each. What will be the total sales revenue reflected in the sales budget for those months?

Accepted Answer

D) January 5000 × $2 = $10,000; February 9000 × $2 = $18,000

Question 11

Rong Company expects cash sales for July of $15,000, and a 20% monthly increase during August and September. Credit sales of $6,000 in July should be followed by 10% decreases during August and September. What are budgeted cash sales and budgeted credit sales for September?

Accepted Answer

To calculate the budgeted cash sales for September, we need to first calculate the cash sales for August: $15,000 x 1.2 = $18,000. Then, we can calculate the cash sales for September: $18,000 x 1.2 = $21,600. 
To calculate the budgeted credit sales for September, we need to first calculate the credit sales for August: $6,000 x 0.9 = $5,400. Then, we can calculate the credit sales for September: $5,400 x 0.9 = $4,860. Therefore, the answer is (C) $21,600 and $4,860.

Question 12

Bright Lights Company produces and sells a lantern for $20 each. The beginning inventory is 2,000 lanterns, and the desired ending inventory is 2,200 lanterns. If budgeted production is 12,500 lanterns, what is the forecasted sales revenue from the lanterns?

Accepted Answer

The forecasted sales revenue is calculated by determining the number of lanterns sold, which is beginning inventory plus production minus ending inventory: (2,000 + 12,500 - 2,200) = 12,300 lanterns sold. The sales revenue is 12,300 lanterns * $20 = $246,000.

Question 13

Desired ending inventory is 25% more than beginning inventory. If purchases total $160,000, which of the following statements is TRUE regarding cost of goods sold (COGS)?

Accepted Answer

COGS will be less than purchases because the desired ending inventory being 25% more than the beginning inventory implies that not all purchased goods will be sold; some will be added to inventory, thus reducing the COGS compared to the total purchases.

Question 14

Desired ending inventory is 80% of beginning inventory. If cost of goods sold is $300,000, which of the following statements is TRUE regarding purchases?

Accepted Answer

To calculate purchases, we need to use the formula:

Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory

We are given that Ending Inventory is 80% of Beginning Inventory. Let's assume Beginning Inventory is X. Therefore, Ending Inventory will be 0.8X.

Now we can substitute the values in the formula:

Purchases = $300,000 + 0.8X - X
Purchases = $300,000 - 0.2X

Since the desired ending inventory is less than the beginning inventory, purchases will be less than the cost of goods sold. Therefore, the statement that is TRUE is D) Purchases will be less than cost of goods sold.

Question 15

Beedie Company has two products: Beedlez and Bugz. A March sales forecast projects 20,000 units of Beedlez and 15,000 units of Bugz are going to be sold at prices of $10 and $12, respectively. The desired ending inventory of Beedlez is 20% higher than the beginning inventory, which was 2,000 units. How much are total March sales for Beedlez anticipated to be?

Accepted Answer

A) 20,000 × $10 = $200,000

Question 16

Stiller Company expects cash sales for July of $15,000, and a 20% monthly increase during August and September. Credit sales of $10,000 in July should be followed by 25% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?

Accepted Answer

B) Cash sales $15,000 × 1.20% =$18,000 × 1.20% = $21,600;
Credit sales $10,000 × 1.25% = 12,500 × 1.25% = $15,625

Question 17

Which of the following budgets begins with the number of units to be sold?

Accepted Answer

The production budget is the only budget that begins with the number of units to be sold. It is used to plan and schedule the production of goods based on the expected sales for the period. The other budgets listed (manufacturing overhead budget, direct materials budget, and capital expenditures budget) are all based on the production budget and support the production process in different ways.

Question 18

Artwell Company wants to have an ending inventory of 7,000 units. Artwell Company has beginning inventory of 8,000 units and expects to sell 33,000 units. How many units should Artwell Company produce?

Accepted Answer

The answer of Artwell Company wants to have an ending...

Question 19

Which of the following budgets is the only one stated only in units, not dollars?

Accepted Answer

The production budget is the only budget stated only in units, not dollars. It outlines the number of units to be produced during the budget period based on the sales budget and inventory levels. The sales budget, direct materials budget, and manufacturing overhead budget all involve dollar amounts.

Question 20

Lacy's Department Store has budgeted cost of goods sold of $42,000 for its men's suits in March. Management also wants to have $7,500 of men's suits in inventory at the end of March to prepare for the summer season. Beginning inventory of men's suits for March is expected to be $5,500. What dollar amount of men's suits should be purchased in March?

Accepted Answer

To find the dollar amount of men's suits to be purchased in March, use the formula: Purchases = (Budgeted Cost of Goods Sold + Desired Ending Inventory) - Beginning Inventory. Plugging in the given values: Purchases = ($42,000 + $7,500) - $5,500 = $44,000.

Quiz 9: The Master Budget and Responsibility Accounting