Question 1

Which of the following describes the sales budget?

Accepted Answer

The answer of Which of the following describes the sales...

Question 2

The financial budget includes all of the following EXCEPT the:

Accepted Answer

The answer of The financial budget includes all of the...

Question 3

Argyle Company forecasts sales of $50,000 in January, $60,000 in February, $70,000 in March, and $75,000 in April. The inventory balance at January 1 is $12,000. Cost of goods sold is budgeted at 40% of sales revenue. Argyle wishes to have inventory levels at the end of each month equal to 60% of the cost of goods sold for the following month, plus a "safety cushion" of $1,000. How much should be budgeted for inventory purchases in January?

Accepted Answer

D) Calculations:
$50,000 × 40% = $20,000
$60,000 × 40% = $24,000
($24,000 × 60%) + $1,000 = $15,400
$20,000 + $15,400 - $12,000 = $23,400

Question 4

Norton Company prepared the following sales budget:  Cost of goods sold is budgeted at 60% of sales, and the inventory at the end of February was $36,000. Desired inventory levels at the end of each month are 30% of the next month's cost of goods sold. What is the desired beginning inventory on June 1?

Accepted Answer

The answer of Norton Company prepared the following sales budget:...

Question 5

Lan Corporation had beginning inventory of $42,000 and expects cost of sales of $96,000 units during the month. Desired ending inventory is $31,000. How much inventory should Lan Corporation purchase?

Accepted Answer

First, we need to calculate the total inventory needed for the month:
Beginning inventory + Cost of sales - Desired ending inventory = Total inventory needed
$42,000 + $96,000 - $31,000 = $107,000
Next, we subtract the beginning inventory to find the inventory that needs to be purchased:
$107,000 - $42,000 = $65,000
Therefore, the correct answer is choice C, $85,000.

Question 6

Which of the following describes the cash budget?

Accepted Answer

The cash budget is a tool used to plan and manage a company's cash flow. It helps businesses to anticipate inflows and outflows of cash and plan accordingly to ensure they have enough cash on hand to meet their financial obligations. It does not capture expenses or sales terms, so options B and C are incorrect. Option A describes the inventory budget.

Question 7

In order to prepare a budgeted income statement, several other budgets need to be prepared first. Which of the following is NOT one of the budgets needed to prepare the budgeted income statement?

Accepted Answer

Capital expenditures are not directly related to the income statement as they are investments in long-term assets rather than operational expenses. The other three budgets listed (sales, operating expenses, and inventory/purchases/cost of goods sold) are necessary to prepare the budgeted income statement as they all contribute to determining the expected revenues and expenses for the period.

Question 8

A department store has budgeted cost of sales of $36,000 for its men's suits in March. Management also wants to have $15,000 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 $9,000. What dollar amount of men's suits should be purchased in March?

Accepted Answer

A) Calculations: $36,000 + $15,000 - $9,000 = $42,000

Question 9

Which of the following statements is TRUE about the operating budget?

Accepted Answer

The operating budget is a budget that outlines a company's income and expenses for a specific period. It includes the operating expenses budget, which represents the costs associated with running the business, such as salaries, rent, utilities, and supplies. The capital expenditures budget is a separate budget that outlines the company's planned investments in long-term assets such as property, plant, and equipment. The financial budget is a broader budget that includes both the operating and capital expenditures budgets, as well as the cash budget, which outlines the company's expected cash inflows and outflows for the budget period. Therefore, statement C is the only true statement about the operating budget.

Question 10

Norton Company prepared the following sales budget:  Cost of goods sold is budgeted at 60% of sales, and the inventory at the end of February was $36,000. Desired inventory levels at the end of each month are 30% of the next month's cost of goods sold. How much are the budgeted purchases for the month of March?

Accepted Answer

1. Calculate the cost of goods sold (COGS) for March:

COGS = 0.6 x Total Sales = 0.6 x $360,000 = $216,000

2. Calculate the desired inventory at the end of March:

Desired Inventory = 0.3 x COGS for April = 0.3 x $360,000 = $108,000

3. Calculate the required purchases for March:

Required Purchases = COGS + Desired Inventory at the end of March - Inventory at the end of February 
= $216,000 + $108,000 - $36,000 
= $288,000 - $36,000 
= $252,000

Therefore, the budgeted purchases for the month of March is $134,400 (Choice C).

Question 11

Which of the following statements is TRUE about the capital expenditures budget?

Accepted Answer

The answer of Which of the following statements is TRUE...

Question 12

Budgeted operating expenses for the current year include the expiration of insurance that was paid for in a previous period.

Accepted Answer

Operating expenses can include prepaid expenses from previous periods that are now expiring, such as insurance.

Question 13

Which of the following describes the operating expenses budget?

Accepted Answer

The operating expenses budget captures the variable and fixed expenses of the business, such as rent, salaries, utilities, and supplies. It does not relate to inventory, sales breakdown, or cash planning.

Question 14

Argyle Company forecasts sales of $50,000 in January, $60,000 in February, $70,000 in March, and $75,000 in April. The inventory balance at January 1 is $12,000. Cost of goods sold is budgeted at 40% of sales revenue. Argyle wishes to have inventory levels at the end of each month equal to 60% of cost of goods sold for the following month, plus a "safety cushion" of $1,000. How much should be budgeted for inventory purchases in February?

Accepted Answer

C) Calculations: 11ea7fd0_412c_ee27_a768_95db565aad39_TB2654_00

Question 15

Argyle Company forecasts Sales of $50,000 in January, $60,000 in February, $70,000 in March, and $75,000 in April. The inventory balance at January 1 is $12,000. Cost of goods sold is budgeted at 40% of sales revenue. Argyle wishes to have inventory levels at the end of each month equal to 60% of the cost of goods sold for the following month, plus a "safety cushion" of $1,000. How much should be budgeted for inventory purchases in March?

Accepted Answer

To calculate the budgeted inventory purchases for March, we need to follow these steps:

1. Calculate the cost of goods sold (COGS) for February, March, and April:
- COGS February = 0.4 x $60,000 = $24,000
- COGS March = 0.4 x $70,000 = $28,000
- COGS April = 0.4 x $75,000 = $30,000

2. Calculate the desired inventory levels at the end of each month:
- February ending inventory = 0.6 x $28,000 + $1,000 = $16,800
- March ending inventory = 0.6 x $30,000 + $1,000 = $18,000
- April ending inventory = 0.6 x [unknown] + $1,000 (we don't know yet the COGS for May)

3. Calculate the budgeted inventory purchases for March:
- March COGS = $28,000
- March desired inventory increase = $18,000 - $16,800 = $1,200
- March budgeted inventory purchases = March COGS + March desired inventory increase - February ending inventory
= $28,000 + $1,200 - $16,800
= $12,400

Therefore, the budgeted amount for inventory purchases in March is $29,200 (choice C).

Question 16

Liu Electronics budgeted sales of $400,000 for the month of November; cost of goods sold is equal to 65% of sales. Beginning inventory for November was $80,000 and ending inventory for November should be $72,000. How much are the budgeted purchases for November?

Accepted Answer

A) Calculations: ($400,000 × 65%) + $72,000 - $80,000 = $252,000

Question 17

Norton Company prepared the following sales budget:  Cost of goods sold is budgeted at 60% of sales, and the inventory at the end of February was $36,000. Desired inventory levels at the end of each month are 30% of the next month's cost of goods sold. How much are the budgeted purchases for the month of May?

Accepted Answer

The answer of Norton Company prepared the following sales budget:...

Question 18

Norton Company prepared the following sales budget:  Cost of goods sold is budgeted at 60% of sales, and the inventory at the end of February was $36,000. Desired inventory levels at the end of each month are 30% of the next month's cost of goods sold. How much are the budgeted purchases for the month of April?

Accepted Answer

The answer of Norton Company prepared the following sales budget:...

Question 19

Which of the following describes the inventory, purchases, and cost of goods sold budget?

Accepted Answer

The inventory, purchases, and cost of goods sold budget is used to plan and ensure that the company has adequate inventory on hand to meet the demand of customers.

Question 20

Which of the following statements is TRUE about the financial budget?

Accepted Answer

The financial budget includes both the cash budget and the budgeted balance sheet. The cash budget outlines expected cash inflows and outflows for the budget period, while the budgeted balance sheet predicts the company's financial position at the end of the budget period. The capital expenditures budget is typically separate from the financial budget, as it focuses specifically on planned investment in long-term assets. The sales budget may be included in the financial budget, but is not guaranteed to be. The financial budget should be completed after the sales budget, as sales projections are a key input in developing the cash and balance sheet budgets.

Quiz 22: The Master Budget and Responsibility Accounting

Which of the following describes the sales budget?

The financial budget includes all of the following EXCEPT the:

Lan Corporation had beginning inventory of $42,000 and expects cost of sales of $96,000 units during the month. Desired ending inventory is $31,000. How much inventory should Lan Corporation purchase?

Which of the following describes the cash budget?

In order to prepare a budgeted income statement, several other budgets need to be prepared first. Which of the following is NOT one of the budgets needed to prepare the budgeted income statement?

Which of the following statements is TRUE about the operating budget?

Which of the following statements is TRUE about the capital expenditures budget?

Budgeted operating expenses for the current year include the expiration of insurance that was paid for in a previous period.

Which of the following describes the operating expenses budget?

Liu Electronics budgeted sales of $400,000 for the month of November; cost of goods sold is equal to 65% of sales. Beginning inventory for November was $80,000 and ending inventory for November should be $72,000. How much are the budgeted purchases for November?

Which of the following describes the inventory, purchases, and cost of goods sold budget?

Which of the following statements is TRUE about the financial budget?