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Test Bank Chapter 22 Budgeting

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Test Bank Chapter 22 Budgeting

Chapter 22--Budgeting

Student: ___________________________________________________________________________

1. A formal written statement of management's plans for the future, expressed in financial terms, is called a budget. 
 

 

2. Budgets are normally used only by profit-making businesses. 
 

 

3. The objectives of budgeting are (1) establishing specific goals for future operations, (2) executing plans to achieve the goals, and (3) periodically comparing actual results with these goals. 
 

 

4. When budget goals are set too tight, the budget becomes less effective as a tool for planning and controlling operations. 
 

 

5. Employees view budgeting more positively when goals are established for them by senior management. 
 

 

6. Budgetary slack can be avoided if lower and mid-level managers are requested to support all of their spending requirements with specific operational plans. 

 

7. Goal conflict can be avoided if budget goals are carefully designed for consistency across all areas of the organization. 
 

 

8. The budgeting process is used to effectively communicate planned expectations regarding profits and expenses to the entire organization. 
 

 

9. The budget procedures used by a large manufacturer of automobiles would probably not differ from those used by a small manufacturer of paper products. 
 

 

10. A budget procedure that provides for the maintenance at all times of a twelve-month projection into the future is called continuous budgeting. 
 

 

11. A budget procedure that provides for the maintenance at all times of a twelve-month projection into the future is called master budgeting. 
 

 

12. The budget procedure that requires all levels of management to start from zero in estimating sales, production, and other operating data is called zero-based budgeting. 
 

 

13. The budget procedure that requires all levels of management to start from zero in estimating sales, production, and other operating data is called continuous budgeting. 
 

 

14. Budgets are prepared in the Accounting Department and monitored by various department managers. 
 

 

15. Once a static budget has been determined, it is changed regularly as the underlying activity changes. 
 

 

16. The flexible budget is, in effect, a series of static budgets for different levels of activity. 
 

 

17. Flexible budgeting requires all levels of management to start from zero and estimate sales, production, and other operating data as though operations were being started for the first time. 
 

 

18. Flexible budgeting builds the effect of changes in level of activity into the budget system. 
 

 

19. In preparing flexible budgets, the first step is to identify the fixed and variable components of the various costs and expenses being budgeted. 
 

 

20. A process whereby the effect of fluctuations in the level of activity is built into the budgeting system is referred to as flexible budgeting. 
 

 

21. The master budget of a small manufacturer would normally include all necessary component budgets except the capital expenditures budget. 
 

 

22. The master budget of a small manufacturer would normally include all necessary component budgets except the budgeted balance sheet. 
 

 

23. The master budget of a small manufacturer would normally include all component budgets that impact on the financial statements. 
 

 

24. The first budget to be prepared is usually the sales budget. 
 

 

25. The first budget to be prepared is usually the production budget. 
 

 

26. The first budget to be prepared is usually the cash budget. 
 

 

27. After the sales budget is prepared, the production budget is normally prepared next. 
 

 

28. After the sales budget is prepared, the capital expenditures budget is normally prepared next. 
 

 

29. The budgeted volume of production is based on the sum of (1) the expected sales volume and (2) the desired ending inventory, less (3) the estimated beginning inventory. 
 

 

30. The budgeted volume of production is normally computed as the sum of (1) the expected sales volume and (2) the desired ending inventory. 
 

 

31. If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for 2012 is 202,000 units. 
 

 

32. If Division Inc. expects to sell 200,000 units in 2012, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for 2012 is 198,000 units. 
 

 

33. The budgeted direct materials purchases is based on the sum of (1) the materials needed for production and (2) the desired ending materials inventory, less (3) the estimated beginning materials inventory. 
 

 

34. The budgeted direct materials purchases is normally computed as the sum of (1) the materials for production and (2) the desired ending inventory. 
 

 

35. The production budget is the starting point for preparation of the direct labor cost budget. 
 

 

36. The sales budget is the starting point for preparation of the direct labor cost budget. 
 

 

37. Supervisor salaries, maintenance, and indirect factory wages would normally appear in the factory overhead cost budget. 
 

 

38. Supervisor salaries, maintenance, and indirect factory wages would normally appear in the operating expenses budget. 
 

 

39. Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget. 
 

 

40. Detailed supplemental schedules based on department responsibility are often prepared for major items in the operating expenses budget. 
 

 

41. The capital expenditures budget summarizes future plans for acquisition of fixed assets. 
 

 

42. The cash budget summarizes future plans for acquisition of fixed assets. 
 

 

43. The cash budget is affected by the sales budget, the various budgets for manufacturing costs and operating expenses, and the capital expenditures budget. 
 

 

44. The cash budget presents the expected inflow and outflow of cash for a specified period of time. 
 

 

45. The budgeted balance sheet assumes that all operating and financing plans are met. 
 

 

46. The master budget is an integrated set of budgets that tie together a company’s operating, financing and investing activities into an integrated plan for the coming year. 
 

 

47. The capital expenditures budget is part of the planned investing activities of a company. 
 

 

48. Consulting the persons affected by a budget when it is prepared can provide an effective means of motivation and cooperation. 
 

 

49. A budget can be an effective means of communicating management’s plans to the employees of a business. 
 

 

50. Past performance is the best overall basis for evaluating current performance and assessing the need for corrective action. 
 

 

51. Budget preparation is best determined in a top-down managerial approach. 
 

 

52. The task of preparing a budget should be the sole task of the most important department in an organization. 
 

 

53. The responsibility for coordinating the preparation of a master budget should be assigned to the CEO of a firm. 

 

54. The financial budgets of a business include the cash budget, the budgeted income statement, and the budgeted balance sheet. 
 

 

55. The sales budget is derived from the production budget. 
 

 

56. A capital expenditures budget is prepared before the operating budgets. 
 

 

57. Part of the cash budget is based on information drawn from the capital expenditures budget. 
 

 

58. A formal written statement of management's plans for the future, expressed in financial terms, is a: 
A. gross profit report
B. responsibility report
C. budget
D. performance report

 

59. The budget process involves doing all the following except: 
A. establishing specific goals
B. executing plans to achieve the goals
C. periodically comparing actual results with the goals
D. dismissing all managers who fail to achieve operational goals specified in the budget

 

60. The budgetary unit of an organization which is led by a manager who has both the authority over and responsibility for the unit's performance is known as a: 
A. control center
B. budgetary area
C. responsibility center
D. managerial department

 

61. The benefits of comparing actual performance of the operations against planned goals include all of the following except: 
A. providing prompt feedback to employees about their performance relative to the goal
B. preventing unplanned expenditures
C. helping to establish spending priorities
D. determining how managers are performing against prior years' actual operating results

 

62. Budgeting supports the planning process by encouraging all of the following activities except: 
A. requiring all organizational units to establish their goals for the upcoming period
B. increasing the motivation of managers and employees by providing agreed-upon expectations
C. directing and coordinating operations during the period
D. improving overall decision making by considering all viewpoints, options, and cost reduction possibilities

 

63. When management seeks to achieve personal departmental objectives that may work to the detriment of the entire company, the manager is experiencing: 
A. budgetary slack
B. padding
C. goal conflict
D. cushions

 

64. The budgeting process does not involve which of the following activities: 
A. Specific goals are established
B. Periodic comparison of actual results to goals
C. Execution of plans to achieve goals
D. Increase in sales by increasing marketing efforts.

 

65. Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following is not considered a human behavior problem? 
A. Setting goals among managers that conflict with one another.
B. Setting goals too tightly making it difficult to meet performance expectation.
C. Allowing employees the opportunity to be a part of the budget process.
D. Allowing goals to be so low that employees develop a “spend it or lose it” attitude.

 

66. Which of the following budgets allow for adjustments in activity levels? 
A. Static Budget
B. Continuous Budget
C. Zero-Based Budget
D. Flexible Budget

 

67. The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as: 
A. flexible budgeting
B. continuous budgeting
C. zero-based budgeting
D. master budgeting

 

68. A variant of fiscal-year budgeting whereby a twelve-month projection into the future is maintained at all times is termed: 
A. flexible budgeting
B. continuous budgeting
C. zero-based budgeting
D. master budgeting

 

69. Scott Manufacturing Co.'s static budget at 10,000 units of production includes $40,000 for direct labor and $4,000 for electric power. Total fixed costs are $25,000. At 12,000 units of production, a flexible budget would show: 
A. variable costs of $52,800 and $30,000 of fixed costs
B. variable costs of $44,000 and $25,000 of fixed costs
C. variable costs of $52,800 and $25,000 of fixed costs
D. variable and fixed costs totaling $69,000

 

70. Bob and Sons' static budget for 10,000 units of production includes $50,000 for direct materials, $44,000 for direct labor, variable utilities of $5,000, and supervisor salaries of $25,000. A flexible budget for 12,000 units of production would show: 
A. the same cost structure in total
B. direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $30,000
C. total variable costs of $148,000
D. direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $25,000

 

71. A disadvantage of static budgets is that they: 
A. are dependent on previous year's actual results
B. cannot be used by service companies
C. do not show possible changes in underlying activity levels
D. show the expected results of a responsibility center for several levels of activity

 

72. A series of budgets for varying rates of activity is termed a(n): 
A. flexible budget
B. variable budget
C. master budget
D. activity budget

 

73. For January, sales revenue is $700,000; sales commissions are 5% of sales; the sales manager's salary is $96,000; advertising expenses are $90,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are $2,100 plus 1/2 of 1% of sales. Total selling expenses for the month of January are: 
A. $157,100
B. $240,600
C. $183,750
D. $182,100

 

74. For February, sales revenue is $700,000; sales commissions are 5% of sales; the sales manager's salary is $96,000; advertising expenses are $80,000; shipping expenses total 2% of sales; and miscellaneous selling expenses are $2,500 plus 1/2 of 1% of sales. Total selling expenses for the month of February are: 
A. $151,000
B. $227,500
C. $225,000
D. $231,000

 

75. For March, sales revenue is $1,000,000; sales commissions are 5% of sales; the sales manager's salary is $80,000; advertising expenses are $75,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are $2,100 plus 1% of sales. Total selling expenses for the month of March are: 
A. $227,100
B. $215,000
C. $217,100
D. $152,100

 

76. Cameron Manufacturing Co.'s static budget at 5,000 units of production includes $40,000 for direct labor and $5,000 for variable electric power. Total fixed costs are $20,000. At 8,000 units of production, a flexible budget would show: 
A. variable costs of $64,000 and $25,000 of fixed costs
B. variable costs of $64,000 and $20,000 of fixed costs
C. variable costs of $72,000 and $20,000 of fixed costs
D. variable and fixed costs totaling $104,000

 

77. Tanya Inc.’s static budget for 10,000 units of production includes $60,000 for direct materials, $44,000 for direct labor, fixed utilities costs of $5,000, and supervisor salaries of $20,000. A flexible budget for 12,000 units of production would show: 
A. the same cost structure in total
B. direct materials of $72,000, direct labor of $52,800, utilities of $5,000, and supervisor salaries of $20,000
C. total variable costs of $154,800
D. direct materials of $60,000, direct labor of $52,800, utilities of $6,000, and supervisor salaries of $20,000

 

78. The primary difference between a static budget and a flexible budget is that a static budget 
A. is suitable in volatile demand situation while flexible budget is suitable in a stable demand situation.
B. is concerned only with future acquisitions of fixed assets, whereas a flexible budget is concerned with expenses that vary with sales.
C. includes only fixed costs, whereas a flexible budget includes only variable costs.
D. is a plan for a single level of production, whereas a flexible budget can be converted to any level of production.

 

79. At the beginning of the period, the Cutting Department budgeted direct labor of $155,000, direct material of $165,000 and fixed factory overhead of $15,000 for 9,000 hours of production. The department actually completed 10,000 hours of production. What is the appropriate total budget for the department, assuming it uses flexible budgeting? 
A. $416,000
B. $370,556
C. $368,889
D. $335,000

 

80. At the beginning of the period, the Assembly Department budgeted direct labor of $110,000, direct material of $170,000 and fixed factory overhead of $28,000 for 8,000 hours of production. The department actually completed 10,000 hours of production. What is the appropriate total budget for the department, assuming it uses flexible budgeting. 
A. $288,000
B. $305,000
C. $350,000
D. $378,000

 

81. The production budgets are used to prepare which of the following budgets. 
A. Operating expenses
B. Direct materials purchases, direct labor cost, factory overhead cost
C. Sales in dollars
D. Sales in units

 

82. Principal components of a master budget include which of the following? 
A. Production budget
B. Sales budget
C. Capital expenditures budget
D. All of the above

 

83. The first budget customarily prepared as part of an entity's master budget is the: 
A. production budget
B. cash budget
C. sales budget
D. direct materials purchases

 

84. Motorcycle Manufacturers, Inc. projected sales of 78,000 machines for 2012. The estimated January 1, 2012, inventory is 6,500 units, and the desired December 31, 2012, inventory is 7,000 units. What is the budgeted production (in units) for 2012? 
A. 77,500
B. 71,000
C. 78,500
D. 71,500

 

85. The budget that needs to be completed first when preparing the master budget is the: 
A. Production Budget
B. Sales Budget
C. Cash Budget
D. Capital Expenditures Budget

 

86. Which of the following budgets is not directly associated with the production budget? 
A. Direct materials purchases budget
B. Factory overhead cost budget
C. Capital Expenditures budget
D. Direct labor cost budget

 

87. Below is budgeted production and sales information for Flushing Company for the month of December:
 

 

Product XXX

Product ZZZ

Estimated beginning inventory

  32,000 units

  20,000 units

Desired ending inventory

  34,000 units

  17,000 units

Region I, anticipated sales

320,000 units

260,000 units

Region II, anticipated sales

180,000 units

140,000 units

 

 

 


The unit selling price for product XXX is $5 and for product ZZZ is $15.

 Budgeted sales for the month are: 
A. $3,180,000
B. $5,820,000
C. $1,800,000
D. $8,500,000

 

88. Below is budgeted production and sales information for Flushing Company for the month of December:
 

 

Product XXX

Product ZZZ

Estimated beginning inventory

  32,000 units

  20,000 units

Desired ending inventory

  34,000 units

  17,000 units

Region I, anticipated sales

320,000 units

260,000 units

Region II, anticipated sales

180,000 units

140,000 units

 

 

 


The unit selling price for product XXX is $5 and for product ZZZ is $15.

 Budgeted production for product XXX during the month is: 
A. 498,000 units
B. 502,000 units
C. 534,000 units
D. 566,000 units

 

89. Below is budgeted production and sales information for Flushing Company for the month of December:
 

 

Product XXX

Product ZZZ

Estimated beginning inventory

  32,000 units

  20,000 units

Desired ending inventory

  34,000 units

  17,000 units

Region I, anticipated sales

320,000 units

260,000 units

Region II, anticipated sales

180,000 units

140,000 units

 

 

 


The unit selling price for product XXX is $5 and for product ZZZ is $15.

 Budgeted production for product ZZZ during the month is: 
A. 403,000 units
B. 380,000 units
C. 397,000 units
D. 417,000 units

 

90. Manicotti Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 108,000 units, and desired ending inventory is 90,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below.

Material A   .50 lb. per unit @ $ .60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound

The dollar amount of direct material A used in production during the year is: 
A. $186,600
B. $181,200
C. $240,000
D. $210,600

 

91. Mandy Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below.

Material A   .50 lb. per unit @ $ .60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound

 The dollar amount of direct material B used in production during the year is: 
A. $1,057,400
B. $1,193,400
C. $1,026,800
D. $1,224,000

 

92. Mandy Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below.

Material A   .50 lb. per unit @ $ .60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound

 The dollar amount of direct material C used in production during the year is: 
A. $746,400
B. $724,800
C. $824,400
D. $758,160

 

93. Production and sales estimates for March for the Robin Co. are as follows:
 

Estimated inventory (units), March 1

18,000

Desired inventory (unit), March 31

21,300

 

 

Expected sales volume (units):

 

  Area M

7,000

  Area L

8,000

  Area O

9,000

Unit sales price

$15

 

 


The number of units expected to be manufactured in March is: 
A. 24,000
B. 27,000
C. 27,300
D. 21,300

 

94. Production and sales estimates for May for the Robin Co. are as follows:
 

Estimated inventory (units), May 1

19,500

Desired inventory (unit), May 31

19,300

Expected sales volume (units):

 

  Area W

6,000

  Area X

7,000

  Area Y

9,000

Unit sales price

$20

 

 


The number of units expected to be sold in May is: 
A. 22,000
B.  2,700
C. 21,800
D. 19,300

 

95. Production and sales estimates for June are as follows:
 

Estimated inventory (units), June 1

21,000

Desired inventory (units), June 30

19,000

Expected sales volume (units):

 

  Area X

7,000

  Area Y

4,000

  Area Z

5,500

Unit sales price

$20

 

 


The number of units expected to be manufactured in June is: 
A. 10,000
B. 11,500
C. 14,500
D. 12,500

 

96. Production and sales estimates for June are as follows:
 

Estimated inventory (units), June 1

8,000

Desired inventory (units), June 30

9,000

Expected sales volume (units):

 

  Area X

4,000

  Area Y

10,000

  Area Z

6,000

Unit sales price

$20

 

 


The budgeted total sales for June is: 
A. $200,000
B. $400,000
C. $380,000
D. $250,000

 

97. If the expected sales volume for the current period is 8,000 units, the desired ending inventory is 1,400 units, and the beginning inventory is 1,200 units, the number of units set forth in the production budget, representing total production for the current period, is: 
A. 10,600
B.   8,200
C.  66,000
D.   6,800

 

98. Production estimates for August are as follows:
 

Estimated inventory (units), August 1

12,000

Desired inventory (units), August 31

9,000

Expected sales volume (units), August

75,000

 

 


For each unit produced, the direct materials requirements are as follows:
 

Direct material A ($5 per lb.)

3 lbs.

Direct material B ($18 per lb.)

1/2 lb.

 

 



 The number of pounds of materials A and B required for August production is: 
A. 216,000 lbs. of A; 72,000 lbs. of B
B. 216,000 lbs. of A; 36,000 lbs. of B
C. 225,000 lbs. of A; 37,500 lbs. of B
D. 234,000 lbs. of A; 39,000 lbs. of B

 

99. Production estimates for August are as follows:
 

Estimated inventory (units), August 1

12,000

Desired inventory (units), August 31

9,000

Expected sales volume (units), August

75,000

 

 


For each unit produced, the direct materials requirements are as follows:
 

Direct material A ($5 per lb.)

3 lbs.

Direct material B ($18 per lb.)

1/2 lb.

 

 



 The total direct materials purchases (assuming no beginning or ending inventory of material) of materials A and B required for August production is: 
A. $1,080,000 for A; $1,296,000 for B
B. $1,080,000 for A; $648,000 for B
C. $1,125,000 for A; $675,000 for B
D. $1,170,000 for A; $702,000 for B

 

100. Based on the following production and sales estimates for May, determine the number of units expected to be manufactured in May.
 

Estimated inventory (units), May 1

20,000

Desired inventory (units), May 31

25,000

Expected sales volume (units):

 

  South region

20,000

  West region

40,000

  North region

20,000

Unit sales price

$10

 

 

 
A. 75,000
B. 90,000
C. 85,000
D. 115,000

 

101. Which of the following budgets provides the starting point for the preparation of the direct labor cost budget? 
A. Direct materials purchases budget
B. Cash budget
C. Production budget
D. Sales budget

 

102. Production and sales estimates for April are as follows:
 

Estimated inventory (units), April

19,000

Desired inventory (units), April 30

18,000

Expected sales volume (units):

 

  Area A

3,500

  Area B

4,750

  Area C

4,250

Unit sales price

$20

 

 


The number of units expected to be manufactured in April is: 
A. 11,500
B. 10,000
C. 12,500
D. 13,500

 

103. Production and sales estimates for April are as follows:
 

Estimated inventory (units), April 1

9,000

Desired inventory (units), April 30

8,000

Expected sales volume (units):

 

  Area A

3,500

  Area B

4,750

  Area C

4,250

Unit sales price

$20

 

 


The budgeted total sales for April is: 
A. $200,000
B. $230,000
C. $270,000
D. $250,000

 

104. If the expected sales volume for the current period is 7,000 units, the desired ending inventory is 400 units, and the beginning inventory is 300 units, the number of units set forth in the production budget, representing total production for the current period, is: 
A. 6,900
B. 7,000
C. 7,200
D. 7,100

 

105. Production estimates for July are as follows:
 

Estimated inventory (units), July 1

8,500

Desired inventory (units), July 31

10,500

Expected sales volume (units), July

76,000

 

 


For each unit produced, the direct materials requirements are as follows:
 

Direct material A ($5 per lb.)

3 lbs.

Direct material B ($18 per lb.)

1/2 lb.

 

 



 The number of pounds of materials A and B required for July production is: 
A. 216,000 lbs. of A; 36,000 lbs. of B
B. 216,000 lbs. of A; 72,000 lbs. of B
C. 234,000 lbs. of A; 39,000 lbs. of B
D. 225,000 lbs. of A; 37,500 lbs. of B

 

106. Production estimates for July are as follows:
 

Estimated inventory (units), July 1

8,500

Desired inventory (units), July 31

10,500

Expected sales volume (units), July

76,000

 

 


For each unit produced, the direct materials requirements are as follows:
 

Direct material A ($5 per lb.)

3 lbs.

Direct material B ($18 per lb.)

1/2 lb.

 

 



 The total direct materials purchases of materials A and B (assuming no beginning or ending material inventory) required for July production is: 
A. $1,080,000 for A; $648,000 for B
B. $1,080,000 for A; $1,296,000 for B
C. $1,170,000 for A; $702,000 for B
D. $1,125,000 for A; $675,000 for B

 

107. The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales.

 What should the budgeted production be for January? 
A. 236,000
B. 181,000
C. 200,000
D. 219,000

 

108. The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales.

 What would be the budgeted production for February? 
A. 186,000
B. 181,000
C. 222,000
D. 174,000

 

109. The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales.

 What would be the budgeted production for March? 
A. 256,000
B. 206,000
C. 214,000
D. 298,000

 

110. The Cardinal Company had a finished goods inventory of 55,000 units on January 1. Its projected sales for the next four months were: January - 200,000 units; February - 180,000 units; March - 210,000 units; and April - 230,000 units. The Cardinal Company wishes to maintain a desired ending finished goods inventory of 20% of the following months sales.

 What would be the budgeted inventory for March 31st? 
A. 46,000
B. 36,000
C. Cannot be determined from the data given
D. 42,000

 

111. The budget that summarizes future plans for the acquisition of fixed assets is the: 
A. direct materials purchases budget
B. production budget
C. sales budget
D. capital expenditures budget

 

112. Below is budgeted production and sales information for Bluebird Company for the month of December:
 

 

Product XXX

Product ZZZ

Estimated beginning inventory

  30,000 units

  18,000 units

Desired ending inventory

  32,000 units

  15,000 units

Anticipated sales

520,000 units

460,000 units

 

 

 


The unit selling price for product XXX is $5 and for product ZZZ is $14.

 Budgeted production for product XXX during the month is: 
A. 522,000 units
B. 552,000 units
C. 518,000 units
D. 520,000 units

 

113. Below is budgeted production and sales information for Bluebird Company for the month of December:
 

 

Product XXX

Product ZZZ

Estimated beginning inventory

  30,000 units

  18,000 units

Desired ending inventory

  32,000 units

  15,000 units

Anticipated sales

520,000 units

460,000 units

 

 

 


The unit selling price for product XXX is $5 and for product ZZZ is $14.

 Budgeted production for product ZZZ during the month is: 
A. 460,000 units
B. 475,000 units
C. 457,000 units
D. 463,000 units

 

114. Production and sales estimates for June are as follows:
 

Estimated inventory (units), June 1

16,000

Desired inventory (units), June 30

18,000

Expected sales volume (units):

 

  Area X

4,000

  Area Y

6,000

  Area Z

5,500

Unit sales price

$20

 

 


The number of units expected to be manufactured in June is: 
A. 15,500
B. 17,500
C. 16,500
D. 13,500

 

115. If the expected sales volume for the current period is 9,000 units, the desired ending inventory is 200 units, and the beginning inventory is 300 units, the number of units set forth in the production budget, representing total production for the current period, is: 
A. 9,000
B. 8,900
C. 8,700
D. 9,100

 

116. Consider the following budget information: materials to be used totals $64,750; direct labor totals $198,400; factory overhead totals $394,800; work in process inventory January 1, 2012, was expected to be $189,100; and work in progress inventory on December 31, 2012, is expected to be $197,600. What is the budgeted cost of goods manufactured? 
A. $649,450
B. $657,950
C. $197,600
D. $1,044,650

 

117. The budgeted finished goods inventory and cost of goods sold for a manufacturing company for the year 2012 are as follows: January 1 finished goods, $765,000; December 31 finished goods, $540,000; cost of goods sold for the year, $2,560,000. The budgeted costs of goods manufactured for the year is? 
A. $1,255,000
B. $2,335,000
C. $2,785,000
D. $3100,000

 

118. The budgeted finished goods inventory and cost of goods sold for a manufacturing company for the year 2012 are as follows: January 1 finished goods, $765,000; December 31 finished goods, $640,000; cost of goods sold for the year, $2,560,000. The budgeted costs of goods manufactured for the year is? 
A. $1,405,000
B. $2,560,000
C. $2,435,000
D. $3,965,000

 

119. The Warbler Jeans Company produces two different types of jeans. One is called the “Simple Life” and the other is called the “Fancy Life” The company’s Production Budget requires 353,500 units of Simple jeans and 196,000 Fancy jeans to be manufactured. It is estimated that 2.5 direct labor hours will be needed to manufacture one pair of Simple Life jeans and 3.75 hours of direct labor hours for each pair of Fancy Life jeans.

 What is the total number of direct labor hours needed for both lines of jeans? 
A. 883,750 direct labor hours
B. 1,618,750 direct labor hours
C. 735,000 direct labor hours
D. 353,500 direct labor hours

 

120. Woodpecker Co. has $296,000 in accounts receivable on January 1. Budgeted sales for January are $860,000. Woodpecker Co. expects to sell 20% of its merchandise for cash. Of the remaining 80% of sales on account, 75% are expected to be collected in the month of sale and the remainder the following month. The January cash collections from sales are: 
A. $812,000
B. $688,000
C. $468,000
D. $984,000

 

121. Estimated cash payments are planned reductions in cash from all of the following except: 
A. manufacturing and operating expenses
B. capital expenditures
C. notes and accounts receivable collections
D. payments for interest or dividends

 

122. Management accountants usually provide for a minimum cash balance in their cash budgets for which of the following reasons: 
A. stockholders demand a minimum cash balance
B. to comply with U.S. GAAP
C. it provides a safety buffer for variations in estimates
D. to have funds available for major capital expenditures

 

123. Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $260,000, $375,000, and $400,000, respectively, for September, October, and November. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale.

 The cash collections in September from accounts receivable are: 
A. $223,600
B. $145,600
C. $182,000
D. $168,000

 

124. Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $260,000, $375,000, and $400,000, respectively, for September, October, and November. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale.

 The cash collections in October from accounts receivable are: 
A. $246,400
B. $262,500
C. $210,000
D. $294,500

 

125. Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three months of business are $260,000, $375,000, and $400,000, respectively, for September, October, and November. The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are expected to be collected in the month of the sale and 20% in the month following the sale.

 The cash collections in November from accounts receivable are: 
A. $280,000
B. $316,400
C. $295,200
D. $276,500

 

126. Finch Company began its operations on March 31 of the current year.  Finch Co. has the following projected costs:
 

 

April

May

June

Manufacturing costs(1)

$156,800

$195,200

$217,600

Insurance expense (2)

$1,000

$1,000

$1,000

Depreciation expense

$2,000

$2,000

$2,000

Property tax expense(3)

$500

$500

$500

 

 

 

 


(1) 3/4 of the manufacturing costs are paid for in the month they are incurred.  1/4 is paid in the following month.
(2) Insurance expense is $1,000 a month, however, the insurance is paid four times yearly in the first month of the quarter, i.e. January, April, July, and October.
(3) Property tax is paid once a year in November.

 The cash payments for Finch Company in the month of April are: 
A. $122,600
B. $120,600
C. $123,100
D. $121,100

 

127. Finch Company began its operations on March 31 of the current year.  Finch Co. has the following projected costs:
 

 

April

May

June

Manufacturing costs(1)

$156,800

$195,200

$217,600

Insurance expense (2)

$1,000

$1,000

$1,000

Depreciation expense

$2,000

$2,000

$2,000

Property tax expense(3)

$500

$500

$500

 

 

 

 


(1) 3/4 of the manufacturing costs are paid for in the month they are incurred.  1/4 is paid in the following month.
(2) Insurance expense is $1,000 a month, however, the insurance is paid four times yearly in the first month of the quarter, i.e. January, April, July, and October.
(3) Property tax is paid once a year in November.

 The cash payments for Finch Company in the month of May are: 
A. $185,600
B. $149,900
C. $187,600
D. $189,100

 

128. Finch Company began its operations on March 31 of the current year.  Finch Co. has the following projected costs:
 

 

April

May

June

Manufacturing costs(1)

$156,800

$195,200

$217,600

Insurance expense (2)

$1,000

$1,000

$1,000

Depreciation expense

$2,000

$2,000

$2,000

Property tax expense(3)

$500

$500

$500

 

 

 

 


(1) 3/4 of the manufacturing costs are paid for in the month they are incurred.  1/4 is paid in the following month.
(2) Insurance expense is $1,000 a month, however, the insurance is paid four times yearly in the first month of the quarter, i.e. January, April, July, and October.
(3) Property tax is paid once a year in November.

 The cash payments for Finch Company in the month of June are: 
A. $215,500
B. $188,800
C. $214,000
D. $212,000

 

129. Planning for capital expenditures is necessary for all of the following reasons except: 
A. machinery and other fixed assets wear out
B. expansion may be necessary to meet increased demand
C. amounts spent for office equipment may be immaterial
D. fixed assets may fall below minimum standards of efficiency

 

130. As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March of 2012 were as follows: $120,000, $140,000 and $150,000. 20% of each month’s sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of January? 
A. $$74,000
B. $110,000
C. $71,600
D. $131,600

 

131. As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and March were as follows: $120,000, $140,000 and $150,000. 20% of each month’s sales are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale, with remaining 40% collected in the following month. What is the total cash collected (both from accounts receivable and for cash sales) in the month of February? 
A. $129,600
B. $62,400
C. $133,600
D. $91,200

 

132. As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for January, February, and

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