1.

What is a budget? How does a budget contribute to good management? 2. Kate Cey and Joe Coulter are discussing the benefits of budgeting. They ask you to identify the primary benefits of budgeting. Comply with their request.

3. Jane Gilligan asks your help in understanding the essentials of effective budgeting. Identify the essentials for Jane.

4.

"Accounting plays a relatively unimportant role in budgeting." Is this true? Explain why or why not. What responsibilities does management have in budgeting? 5. What criteria are helpful in determining the length of the budget period? What is the most common budget period?

6. Lori Wilkins maintains that the only difference between budgeting and long-range planning is time. Is this true? Explain why or why not.

7. What is participative budgeting? What are its potential benefits? What are its potential disadvantages?

8. What is budgetary slack? What incentive do managers have to create budgetary slack?

9. Distinguish between a master budget and a sales forecast.

10. What budget is the starting point in preparing the master budget? What may result if this budget is inaccurate?

11. "The production budget shows both unit production data and unit cost data." Is this true? Explain why or why not.

12. Alou Company has 20,000 beginning finished goods units. Budgeted sales units are 160,000. If management desires 15,000 ending finished goods units, what are the required units of production?

13. In preparing the direct materials budget for Quan Company, management concludes that required purchases are 64,000 units. If 52,000 direct materials units are required in production and there are 9,000 units of beginning direct materials, what are the desired units of ending direct materials?

14. The production budget of Justus Company calls for 80,000 units to be produced. If it takes 45 minutes to make one unit and the direct labor rate is $16 per hour, what is the total budgeted direct labor cost?

15. Ortiz Company's manufacturing overhead budget shows total variable costs of $198,000 and total fixed costs of $162,000. Total production in units is expected to be 150,000. It takes 20 minutes to make one unit, and the direct labor rate is $15 per hour. Express the manufacturing overhead rate as (a) a percentage of direct labor cost, and (b) an amount per direct labor hour.

16. Everly Company's variable selling and administrative expenses are 12% of net sales. Fixed expenses are $50,000 per quarter. The sales budget shows expected sales of $200,000 and $240,000 in the first and second quarters, respectively. What are the total budgeted selling and administrative expenses for each quarter?

17. For Goody Company, the budgeted cost for one unit of product is direct materials $10, direct labor $20, and manufacturing overhead 80% of direct labor cost. If 25,000 units are expected to be sold at $65 each, what is the budgeted gross profit?

18. Indicate the supporting schedules used in preparing a budgeted income statement through gross profit for a manufacturer.

19. Identify the three sections of a cash budget. What balances are also shown in this budget?

20. Noterman Company has credit sales of $600,000 in January. Past experience suggests that 40% is collected in the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Compute the cash collections from January sales in January, February, and March.

21. What is the equation for determining required merchandise purchases for a merchandiser?

22. How might expected revenues in a service company be computed?