Question
A) Swanson plans to sell 10,000 units of a product X during July and expects sales to increase at the rate of 10% per month
A) Swanson plans to sell 10,000 units of a product X during July and expects sales to increase at the rate of 10% per month during the remainder of the year. The July 1 beginning inventories and September 30 ending inventories are anticipated to be 1,100 units and 950 units, respectively. Based on this information, how many units should Swanson purchase for the third quarter ended September 30?
a. 32,950 units b. 32,150 units c. 33,250 units d. 31,850 units
B) Coleman, Inc. anticipates sales of 50,000 units, 48,000 units, and 51,000 units in July, August, and September, respectively. Company policy is to maintain an ending finished-goods inventory equal to 40% of the following month's sales. How many units would the company plan to produce in August?
a. 49,200 units b. 52,200 units c. 46,800 units d. 49,800 units
C) Brooklyn Co. makes all purchases on account, subject to the following payment pattern: Paid in the month of purchase: 30% Paid in the first month following purchase: 65% Paid in the second month following purchase: 5% If purchases for April, May, and June were $200,000, $160,000, and $250,000, respectively, what was the firm's budgeted payables balance on June 30?
a. $189,000 b. $170,500 c. $179,000 d. $175,000 e. $183,000
D) A manufacturing firm would begin preparation of its master budget by constructing a:
a. sales budget b. set of pro-forma financial statements c. cash budget d. capital budget e. production budget
E) Managers may __________________ their budgeted costs and/or __________________ their budgeted revenues to create a budget target that is easier to achieve, known as budget slack.
a. overstate, overstate b. understate, understate c. overstate, understate d. understate, overstate
F) Briefly explain the meaning of following discount term, 2/10, n/30.
G) Budgeting is the process of:
a. setting objectives by which strategic plans will be achieved
b. forecasting and committing to a financial plan for future operations
c. setting goals for a company
d. constructing standards for future operations
H) Farrell Co. has a sales budget for next month of $300,000. Cost of goods sold is expected to be 40% of sales. All goods are purchased in the month used and paid for in the month following purchase. The beginning inventory is $10,000, and an ending inventory of $12,000 is desired. Beginning accounts payable is $76,000. The cost of goods sold for next month is expected to be $________________.
I) Which of the following is least likely to be a reason for adopting a participatory approach to budgeting?
a. To develop fiscal responsibility and budgetary skills of employees
b. To blend the overview of top managers with operating details
c. To generate better morale and higher motivation
d. To reduce the chances of input from inexperienced managers
J) Felix Co. expects June sales to be $29,000, July sales to be $35,000, August sales to be $32,000, and September sales to be 33,000. 40% of sales are cash sales and remaining 60% are credit sales. Collection of credit sales are 50% in the month of sale, 40% in the month following sale and 5% two months following sale. The remaining 5% is uncollectible. What is the expected total cash collections in August?
K) The following events took place when Managers A, B, and C were preparing budgets for the upcoming period:
I. Manager A increased property tax expenditures by 2% when she was informed of a recent rate hike by local authorities.
II. Manager B reduced sales revenues by 4% when informed of recent aggressive actions by a new competitor.
III. Manager C, who supervises employees with widely varying skill levels, used the highest wage rate in the department when preparing the labor budget.
Assuming that the percentage amounts given are reasonable, which of the preceding cases is (are) an example(s) of building slack in budgets?
a. II and III b. II c. I and II d. I e.III
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