Budgeting is the common accounting tool companies use for planning and controlling. Budgets a. provide a measure of planned financial results. b. are prepared independent of the company's long-term strategies. e do not usually reflect actual results, so they are a useless exercise. d. serve as the financial expression of management's plans for the upcoming period. 2. [AICPA Adapted] Dewitt Co. budgeted its activity for October 2004 from the following information: Sales are budgeted at $750,000. All sales are credit sales and a provision for doubtful accounts is made monthly at the rate of 2 percent of sales. Merchandise inventory was $120,000 at September 30, 2004, and an increase of $10,000 is planned for the month. All merchandise is marked up to sell at invoice cost plus 50 percent. Estimated cash disbursements for selling and administrative expenses for the month are $105,000. Depreciation for the month is projected at $25,000. Dewitt is projecting operating income for October 2004 in the amount of a. S105,000 b. $119,000. C. $129,000. d. $230,000. 3. Which of the following is not a major benefit of budgets? a. Compels planning b. Eliminates innovation c. Provides performance criteria d. Promotes coordination and communication The following data apply to questions 4 and 5. Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels in units) are planned for the fiscal year of July 1, 2004 through June 30, 2005. July 1, 2004 June 30, 2005 Raw material 40,000 10,000 Work-in-process 8,000 8,000 Finished goods 30,000 5,000 Three (3) units of raw material are needed to produce each unit of finished product. CMA Adapted) If Hester Company plans to sell 500,000 units during the 2004-2005 fiscal year, the number of units it would have to manufacture during the year would be a. 505,000 units. b. 500,000 units. c. 480,000 units. d. 475,000 units. (CMA Adapted) If 450,000 finished units were to be manufactured during the 2004-2005 fiscal year by Hester Company, the units of raw material needed to be purchased would be a. 1,350,000 units. b. 1,360,000 units c. 1,320,000 units. d. 1,330,000 units. Which of the following does not pertain to financial planning models in software form? Reduces computational burden and time required to prepare budgets Eliminates need to update budgets as uncertainty resolved c. Assists managers with sensitivity analysis d. Performs calculations that are mathematical representations of relationships in master budget 7. The major cost management concept used in kaizen budgeting is that of a eliminating inventories of every type but materials. refinements in the indirect-cost categories for costing systems c. continuous improvement. d sensitivity analysis using computer-based financial planning models. . Which of the following statements does not describe responsibility accounting? It measures the plans and actions of each responsibility center It budgets to emphasize that for which each responsibility center is accountable. c. It calculates variances between budgeted and actual accountability for each responsibility center. d. It identifies managers at fault for operating problems by reports for each responsibility center. Controllability a is always clear cut as to who has responsibility for a cost. is another term for responsibility. c. is the responsibility of the corporate controller. d is the degree of influence a specific manager has over costs, revenues, and other items. 10 Budgetary slack a is going to be included in budget estimates, so it should just be ignored. provides managers with a hedge against unexpected circumstances. should be totally eliminated from the budget. is not found in povernmental hundets The following data apply to questions 11 and 12. Information pertaining to Brenton Corporation's sales revenue is presented in the following table. February March April Cash sales Credit sales Total sales $160,000 300.000 $460,000 $150,000 400.000 $550,000 $120.000 280.000 $400.000 Management estimates that 5 percent of credit sales are not collectible. Of the credit sales that are collectible, 60 percent are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month is 70 percent of the next month's projected total sales. All purchases of inventory are on account: 25 percent are paid in the month of purchase, and the remainder is paid in the month following the purchase. 11. [CMA Adapted) Brenton's budgeted total cash receipts in April are a. $448.000 b. S437,000 c. $431,600 d. S328,000. 12. (CMA Adapted) Brenton's budgeted total cash payments in March for inventory purchases are a. $385,000. b. S358,750. c. S306,250. S280,000