1. Leverenz & Wolfrum, Inc. recently heard about the great benefits of budgeting and the management team is ready to formalize the process within the company. The starting point in preparing a Master Budget should always be: a. the Sales Forecast. b. the Cash Budget. c. the General and Administrative Budget. d. the Purchases Budget. _____

2. With regards to financial statements, Pro Forma means: a. budgeted. b. prepared in advance. c. the financial condition or position that can be expected if planning assumptions prove correct. d. all of the above. _____

3. Which of the following will occur if X Co.'s May sales are lower than its budgeted sales for that month? a. X's actual inventory at the end of May will be higher than originally budgeted. b. Xs actual Cost of Goods Sold (COGS) would be higher in May than originally budgeted. c. X's actual June purchases will need to be higher than originally budgeted. d. All of the above could occur. _____

4. Falcon, Inc. budgeted for sales of 25,000 units for February and 30,000 for March. The Company always plans for ending monthly inventory equal to one-half of the following month's sales needs. Inventory on February 1st was as desired. Budgeted purchases for February should be: a. 25,000 units b. 27,500 units c. 32,500 units d. 40,000 units Use the following fact pattern for Question #16: McKinley & Kress, Inc. expects to begin operating on January 1. The company's Master Budget contained the following Operating Expense (i.e. S,G&A) Budget:

5. Sales commissions are paid in cash in the month following the month in which the expense is recognized. All other relevant expense items are to be paid in the month in which they are recognized. Based upon these management assumptions, and your analysis of the costs involved, the amount of cash to be paid for operating (S,G&A) expenses during the January month is expected to be: a. $12,000 b. $25,900 c. $26,800 d. $37,900 e. $38,800 6 Note: For questions 17-19, all computational work must be shown.

6. Jess, Inc. projected sales to be $260,000 in June, $270,000 in July and $300,000 in August. The company expects to collect 20% of a month's sales in the month of sale, 60% in the month following the sale, and 18% in the second month following the sale. The remaining amounts are expected to be uncollectible. Cash collections in August would be: a. $60,000 b $254,600 c. $266,200 d. $268,800 e. $277,000

7. (2 pts) Rangler, Inc. has projected sales to be $260,000 in June, $270,000 in July and $300,000 in August. The company expects to collect 30% of a month's sales in the month of sale, 60% in the month following the sale, and 10% in the second month following the sale. The budgeted Accounts Receivable balance on August 31st at close of business would be: a. $96,000 b. $210,000 c. $237,000 d. $264,000 e. $300,000 _____

8. (2 pts) Dexter, Inc. is in the process of preparing a Purchases Budget for the upcoming April-June quarter. The company has forecasted total sales revenue as follows: March $72,000 April $93,000 May $102,000 June $123,000 Cost of goods sold is expected to be 60% of sales. The company would like to have ending inventory each month equal to 10% of the following month's predicted cost of sales. Given these requirements, the total amount of purchases required for April would be:

a. $ 5,580

b. $ 55,800

c. $ 56,340

d. $ 61,920

e. $ 93,000