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Exam 8: The Master Budget

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Question 51

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The primary reason that managers impose a minimum cash balance in the cash budget is

A) because management needs discretionary cash for unforeseen business opportunities.
B) managers lack discipline to control their spending.
C) that it protects the organization from the uncertainty of the budgeting process.
D) that it makes the financial statements look more appealing to creditors.

E) A) and B)
F) All of the above

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Question 52

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The document that results from the budgeting process is referred to as the ______________________________.

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Question 53

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The master budget usually includes

Budgeted sales for Madonna Inc. for the first quarter the year are shown below: The company has a policy that requires the ending inventory in each period to be 10 percent of the following period's sales. Assuming that the company follows this policy, what quantity of production should be scheduled for February?

The material purchases budget tells a manager all of the following except the

A budget that is developed by both top management and operating personnel is referred to as a(n) ______________________________.

Simmons Co. manufactures card tables. The company has a policy of maintaining a finished goods inventory equal to 40 percent of the next month's planned sales. Each card table requires 3 hours of labor. The budgeted labor rate for the coming year is $13 per hour. Planned sales for the months of April, May, and June are respectively 4,000; 5,000; and 3,000 units. The budgeted direct labor cost for June for Simmons Co. is $136,500. What are budgeted sales for July for Simmons Co.?

Smith Builders in the building construction business. In Year 2, it is expected that 40 percent of a month's sales will be collected in cash, with the balance being collected the following month. Of the purchases, 50 percent are paid the following month, 30 percent are paid in two months, and the remaining 20 percent are paid during the month of purchase. The sales force receives $2,000 a month base pay plus a 2 percent commission. Labor expenses are expected to be $4,000 a month. Other operating expenses are expected to run about $2,000 a month, including $500 for depreciation. The ending cash balance for Year 1 was $4,500. Required:

The method of budgeting that adds one month's budget to the end of the plan when the current month's budget is dropped from the plan is called ____ budgeting.

Explain why different types of organizations will have different sets of budgets.

Which of the following represents a proper sequencing in which the budgets below are prepared?

An example of a recurring short-term plan is

Which of the following statements is true?

A budget manual should include a statement of the budgetary purpose and its desired results.

A budget is

Topaz Company has the following expected pattern of collections on credit sales: 70 percent collected in the month of sale, 15 percent in the month after the month of sale, and 14 percent in the second month after the month of sale. The remaining 1 percent is never collected. At the end of May, Topaz Company has the following accounts receivable balances: Topaz's expected sales for June are $150,000. What were total sales for April?

The first stage in the budgeting process is the preparation of a cash collections budget.

Balances for Accounts Receivable and Sales Discounts are projected after the cash collections schedule is prepared.

A budget aids in

A budget that is expressed in terms of both units and dollars is referred to a(n) ______________________________.