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Exam 7: Planning for Profit and Cost Control

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Question 31

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Select the term from the list of terms that best matches the description provided.

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Question 32

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Bantam Industries has budgeted the following information for March: $\begin{array} { l r } \text { Cash receipts } & \$ 271,000 \\\text { Beginning cash balance } & 5,000 \\\text { Cash payments } & 280,000 \\\text { Desired ending cash balance } & 25,000\end{array}$ If there is a cash shortage,the company borrows money from the bank.All cash is borrowed at the beginning of the month in $1,000 increments,and interest is paid monthly at 1% on the first day of the following month.The company had no debt before March 1.How much cash will the company need to borrow in March?

A) $25,000
B) $29,000
C) The company should not need to borrow any cash in March
D) $4,000

E) All of the above
F) C) and D)

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Question 33

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$\begin{array}{lrrr}&\text { October}&\text { November }&\text { December }\\\text { Budgeted S\&A Expenses }\\\text { Salary Expense } & 10,000 & 10,500 & 11,000 \\\text { Sales Commissions } 5 \% \text { of Sales } & 5,000 & 5,500 & 5,300 \\\text { Insurance Expense } & 2,000 & 2,000 & 2,000 \\\text { Rent } & 2,400 & 2,400 & 2,400 \\\text { Depreciation on equipment } & 1,500 & 1,500 & 1,500 \\\text { Utilities } & \underline{1,100}& \underline{1,300} & \underline{ 1,500}\\\text { Total Operating Expenses } & \underline{22,000} & \underline{ 23,200} & \underline{23,700}\\\text {Schedule of Cash Payments for S\&A }\\\text {Expenses}\\\text { Salary Expense } & ? & 10,500&? \\100 \% \text { of Prior Month Sales Commissions } & 5,100 & ?&? \\\text { Insurance Expense } & 2,000 & 2,000 &2,000\\\text { Rent } & ? & ?&? \\100 \% \text { of Prior Months Utilities Expense } & \underline{1,200} & \underline{\quad ? }& \underline{\quad?}\\\text { Total Payments for S\&A Expenses } & ? & ?&?\end{array}$ What is the amount of sales commissions payable that the company will report on its pro forma balance sheet at the end of the fourth quarter?

Which of the following statements is incorrect?

What budget is generally not included in a master budget?

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual.Which advantage of budgeting would have helped him identify this problem sooner?

Benton Company's sales budget shows the following expected total sales: $\begin{array}{lc}\text { Month } & \text { Sales } \\\text { January } & \$ 25,000 \\\text { February } & \$ 30,000 \\\text { March } & \$ 35,000 \\\text { April } & \$ 40,000\end{array}$ The company expects 80% of its sales to be on account (credit sales) .Credit sales are collected as follows: 25% in the month of sale and 72% in the month following the sale,with the remainder being uncollectible and written off.The total cash receipts during April would be:

Would you recommend that a business employ a participative approach to budgeting? Why or why not?

Which of the following would appear on a selling and administrative expense budget,but would not appear on a schedule of cash payments for selling and administrative expenses?

A schedule of cash receipts is often prepared in conjunction with the sales budget.

Which section is not included on the cash budget?

The three major components of the master budget are the financial budgets,the capital budgets,and the pro forma financial statements.

The budget director of Mandy's Kitchen Shop has prepared the following sales budget.The company had $50,000 of accounts receivable at January 1.The company normally collects 100% of its accounts receivable in the month following the sale. $\begin{array}{lrrrrr}\text { Sales } & \text { January } & \text { February } & \text { March }\\\text { Cash sales } & \$ 15,000 & \$ 33,000& \$ 36,000 \\\text { Sales on account } &\underline{ 45,000} &\underline{ 60,00 0}&\underline{ 70,000} \\\text { Total budgeted sales } & \$ 60,000 & \$ 93,000 & \$ 106,000\\\\\text { Schedule of cash receipts }\\\text { Current cash sales } & ? & ? & ? \\\text { Plus collection of accounts } & ? & ? & ? \\\text { receivable } & \underline{\quad?} & \underline{\quad?}&\underline{\quad?} \\\text { Total budgeted cash collections } & \underline{\quad?}& \underline{\quad?}&\underline{\quad?}\end{array}$ Required: (a)Complete the schedule of cash receipts by filling in the missing amounts.What are the total budgeted cash receipts for the first quarter? (b)Determine the amount of accounts receivable that Mandy's should report on the first quarter pro forma balance sheet.

Which of the following is not considered a pro forma financial statement?

How do short-term plans differ from long-term plans?

The accountant for Haven Industries could not prepare the following budgets because an item of information is missing for each one.Identify the missing items needed prior to preparing each budget.

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

If a company purchases its inventory on account,it need not prepare a schedule of cash payments for inventory purchases.

Four purposes or advantages for budgeting are planning,coordination,performance measurement,and punitive action.

Select the incorrect statement regarding the human factor in the budgeting process.