Budgets Planning Quiz

Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process. This is because when all levels of management are involved in the budgeting process, it ensures that different perspectives and insights are considered. It also increases the likelihood of buy-in and support from various departments and individuals within the organization. By involving all levels of management, the budget becomes a collaborative effort and is more likely to be accepted and implemented effectively.

The proper preparation sequencing of the budgets is as follows: first, the Sales Budget is prepared to forecast the expected sales for a period. Then, the Selling and Administrative Budget is created to estimate the expenses related to selling and administrative activities. Next, the Budgeted Income Statement is prepared to determine the expected profit or loss based on the sales and expenses. Finally, the Budgeted Balance Sheet is generated to show the financial position of the company at a specific point in time, taking into account the projected assets, liabilities, and equity.

The total budgeted direct labor cost for May can be calculated by multiplying the number of units to be produced (33,400) by the direct labor time per unit (3 hours), and then multiplying that by the labor cost per hour ($12). Therefore, the calculation would be 33,400 units * 3 hours per unit * $12 per hour = $1,202,400.

Budgets are useful in the planning process because they help communicate goals and provide a basis for evaluation. By setting financial targets and allocating resources accordingly, budgets outline the company's objectives and priorities. This allows all stakeholders to understand and work towards the same goals. Additionally, budgets provide a framework for evaluating performance and progress. By comparing actual results to budgeted amounts, management can identify areas of success and areas that need improvement, enabling them to make informed decisions and take necessary actions.

The responsibility for coordinating the preparation of the budget is often assigned to a budget committee in many companies. This committee is typically composed of individuals from various departments within the company who have expertise in financial matters. They work together to gather relevant information, analyze financial data, and make recommendations for the budget. This approach ensures that the budgeting process is comprehensive and considers the input and perspectives of different stakeholders within the organization. Additionally, having a dedicated committee for budget coordination helps to streamline the process and ensure that it is done efficiently and effectively.

The capital expenditure budget is not used in preparing the budgeted income statement because it focuses on the long-term investments in assets such as property, plant, and equipment. It is used to plan and allocate funds for acquiring or upgrading fixed assets, rather than for day-to-day operating expenses and revenue generation. The other budgets listed, such as the direct labor budget, selling and administrative budget, and sales budget, are all directly related to the operational costs and revenue of the business and therefore play a role in preparing the budgeted income statement.

The starting point in preparing a master budget is the sales budget. This is because the sales budget provides the foundation for all other budgets in the master budget. It helps determine the expected sales revenue, which then influences the production budget, purchasing budget, and personnel budget. The sales budget is crucial in forecasting the company's sales targets and planning the necessary resources and expenses to achieve those targets.

The last step in developing the master budget is preparing the budgeted balance sheet. This is because the budgeted balance sheet provides a snapshot of the company's financial position at a specific point in time, showing the assets, liabilities, and equity. It is important to prepare the budgeted balance sheet after the other components of the master budget, such as the budgeted income statement and cash budget, have been completed. This allows for a comprehensive view of the company's financial performance and position, aiding in decision-making and planning for the future.

A master budget is a comprehensive financial plan that includes both long-term and short-term budgets. The long-term plan sets the overall strategic direction and goals of the company, while the operating budgets outline the specific financial targets and plans for each department or division. These budgets are interrelated because the operating budgets are based on the goals and objectives set in the long-term plan. Therefore, the correct answer is interrelated financial budgets and operating budgets.

The cash disbursements for materials purchases in August will be $202,500. This is because three-fourths of the materials purchased in August, which is $210,000, will be paid for in the month of purchase. Therefore, the amount paid in August will be $210,000 multiplied by three-fourths, which equals $157,500.

The company's beginning cash balance is $480,000. Cash receipts for the month are $304,000 and cash disbursements are $544,000. To determine the amount the company would have to borrow, we need to calculate the ending cash balance. Subtracting the cash disbursements from the beginning cash balance and adding the cash receipts, we get $480,000 - $544,000 + $304,000 = $240,000. Since the company has a policy of maintaining a minimum end of the month cash balance of $400,000, the shortfall is $400,000 - $240,000 = $160,000. Therefore, the company would have to borrow $160,000.

Depreciation expense would never appear on a cash budget because it is a non-cash expense. Depreciation is the allocation of the cost of an asset over its useful life, and it represents the decrease in value of the asset over time. Since it does not involve any cash outflow, it is not included in a cash budget, which focuses on tracking cash inflows and outflows.

The total budgeted selling and administrative expenses for October can be calculated by multiplying the variable cost per unit sold by the number of units sold and adding the monthly fixed costs. In this case, the variable cost per unit sold is $10 ($1 for sales commissions + $3 for shipping + $4 for advertising + $2 for other expenses), and the monthly fixed costs are $140,000 ($10,000 for sales commissions + $120,000 for executive salaries + $4,000 for depreciation on office equipment + $6,000 for other expenses). Therefore, the total budgeted selling and administrative expenses for October is $940,000.

The cash budget is a financial tool that helps businesses track and manage their cash flow. It typically includes sections for cash disbursements (outflows of cash), financing (such as loans or investments), and cash receipts (inflows of cash). Capital expenditures, on the other hand, are not typically listed as a separate section on the cash budget. Capital expenditures refer to investments in long-term assets, such as property, equipment, or vehicles. These expenditures are usually accounted for separately in a company's budgeting process and are not directly related to day-to-day cash flow management.

The total expected cash receipts during March can be calculated by first determining the credit sales for January, February, and March. The credit sales for January would be $120,000 x 60% = $72,000. For February, it would be $180,000 x 60% = $108,000. And for March, it would be $150,000 x 60% = $90,000.

Next, we need to calculate the collections for each month. For January credit sales, 50% is collected in the same month, so it would be $72,000 x 50% = $36,000. For February credit sales, 50% is collected in the same month, so it would be $108,000 x 50% = $54,000. For March credit sales, 50% is collected in the same month, so it would be $90,000 x 50% = $45,000.

Finally, we add up the cash collections for March, which would be $36,000 + $54,000 + $45,000 = $135,000. However, since 40% of the sales are for cash, we need to add the cash sales for March as well, which would be $150,000 x 40% = $60,000.

Therefore, the total expected cash receipts during March would be $135,000 + $60,000 = $195,000.

However, none of the answer choices match this calculation, so the correct answer is not available.

The cash budget is a financial tool that helps businesses track their cash inflows and outflows. It typically includes separate sections for cash disbursements, cash receipts, and financing activities. Cash expenditures, on the other hand, are not typically listed as a separate section on the cash budget. Cash expenditures are usually included within the cash disbursements section, as they represent the outflow of cash for various expenses such as operating costs, inventory purchases, and overhead expenses. Therefore, cash expenditures do not appear as a separate section on the cash budget.

The adoption of a budget helps in several ways, such as serving as a deterrent to waste, providing a basis for performance evaluation, and promoting efficiency. However, it does not guarantee the accomplishment of the profit objective. A budget is a financial plan that outlines expected revenues and expenses, but it cannot guarantee that the profit objective will be achieved. Various factors such as market conditions, competition, and unforeseen events can impact the actual profitability of a business.

An unrealistic budget is more likely to result when it has been developed in a top-down fashion. This is because in a top-down approach, the budget is created by higher-level management without much input or understanding of the actual needs and constraints of the lower-level departments or teams. As a result, the budget may not accurately reflect the resources required for various activities and may be overly optimistic or unrealistic. On the other hand, a bottom-up approach involves input from all levels of management, which allows for a more accurate and realistic budgeting process.

Based on the information given, Doe Manufacturing plans to sell 5,700 purple lawn chairs in June. The company keeps 15% of the next month's sales as ending inventory, which means that 15% of the sales in July will be kept as inventory for June. Since the company plans to sell 6,000 chairs in July, 15% of that would be 900 chairs. Therefore, the total number of chairs Doe Manufacturing should produce in June is the planned sales for June (5,700) plus the ending inventory from July (900), which equals 5,700 + 900 = 5,745 units.

The company desires to have 3,200 units available to start the next quarter. To calculate the number of finished goods units that should be produced during the quarter, we need to add the desired units to the sales budgeted for the quarter. Therefore, the correct answer is 428,000 units.

Based on the given information, the desired ending direct materials are 48,000 pounds and the total materials required are 69,000 pounds. The direct materials purchases are 63,200 pounds. To calculate the total direct materials needed for production, we can subtract the desired ending direct materials from the total materials required and then add the direct materials purchases. Therefore, the total direct materials needed for production is 21,000 pounds.

If a company has adopted continuous budgeting, it means that they regularly update and revise their budget throughout the year. This approach involves planning and forecasting for the current year and the next year simultaneously. By doing so, the company can anticipate future financial needs and make informed decisions in advance. Therefore, the budget will show plans for a full year ahead.

The November 30, 2016 budgeted Accounts Receivable can be calculated by adding the amount of credit sales in November and half of the amount of credit sales in October. This is because 50% of the credit sales in November will be collected in November, and the remaining 50% will be collected in December. Therefore, the November 30, 2016 budgeted Accounts Receivable is $870,000 (credit sales in November) + $60,000 (half of the credit sales in October) = $930,000.

The budgeted cash disbursements for August are $696,000. This can be calculated by taking the direct materials purchases for July and August ($300,000 + $480,000 = $780,000) and multiplying it by the percentage of purchases paid in the month of purchase (70%). This gives us $546,000. Then, we take the remaining 30% of purchases ($780,000 - $546,000 = $234,000) and add it to the previous amount. Therefore, the total budgeted cash disbursements for August are $546,000 + $234,000 = $696,000.