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1. The production budget is typically prepared prior to the sales budget.
2. One benefit of budgeting is that it coordinates the activities of the entire organization.
3. Both planning and control are needed for an effective budgeting system.
4. One difficulty with self-imposed budgets is that they are not subject to any type of review.
5. The master budget is a network consisting of many separate budgets that are
interdependent.
6. Planning and control are essentially the same thing.
7. Sales forecasts are drawn up after the cash budget has been completed because only
then are the funds available for marketing known.
8. A sales budget is a detailed schedule showing the expected sales for the budget period;
typically, it is expressed in both dollars and units of product.
9. Both variable and fixed manufacturing overhead costs are included in the manufacturing
overhead budget.
10. In the selling and administrative budget, the non-cash charges (such as depreciation) are
added to the total budgeted selling and administrative expenses to determine the expected cash
disbursements for selling and administrative expenses.
11. Which of the following represents the normal sequence in which the indicated budgets
are prepared?
12. Which of the following is not a benefit of budgeting?
13. Self-imposed budgets typically are:
14. Which of the following represents the correct order in which the indicated budget
documents for a manufacturing company would be prepared?
15. National Telephone company has been forced by competition to put much more
emphasis on planning and controlling its costs. Accordingly, the company's controller has
suggested initiating a formal budgeting process. Which of the following steps will NOT help the
company gain maximum acceptance by employees of the proposed budgeting system?
16. A continuous (or perpetual) budget:
17. Which of the following statements is not correct?
18. Budgeted production needs are determined by:
19. The budgeted amount of raw materials to be purchased is determined by:
20. Which of the following is not correct regarding the manufacturing overhead budget?
21. Shown below is the sales forecast for Cooper Inc. for the first four months of the coming
year.
On average, 50% of credit sales are paid for in the month of the sale, 30% in the month following
sale, and the remainder are paid two months after the month of the sale. Assuming there are no
bad debts, the expected cash inflow in March is:
22. Budgeted sales in Allen Company over the next four months are given below:
Twenty-five percent of the company's sales are for cash and 75% are on account. Collections for
sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in
the month of sale, 30% are collected in the month following sale, and 15% are collected in the
second month following sale. The remainder are uncollectible. Given these data, cash collections
for December should be:
23. The following data have been taken from the budget reports of Brandon company, a
merchandising company.
Forty percent of purchases are paid for in cash at the time of purchase, and 30% are paid for in
each of the next two months. Purchases for the previous November and December were
$150,000 per month. Employee wages are 10% of sales for the month in which the sales occur.
Selling and administrative expenses are 20% of the following month's sales. (July sales are
budgeted to be $220,000.) Interest payments of $20,000 are paid quarterly in January and April.
Brandon's cash disbursements for the month of April would be:
24. Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in
May and 70,000 units in June. The company desires that the inventory on hand at the end of each
month be equal to 40% of the next month's expected unit sales. Due to excessive production
during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given
this information, Walsh Company's production of Product W for the month of April should be:
25. Berol Company plans to sell 200,000 units of finished product in July and anticipates a
growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished
product is 80% of the next month's estimated sales. There are 150,000 finished units in inventory
on June 30.
Berol Company's production requirement in units of finished product for the three-month period
ending September 30 is:
26. The Willsey Merchandise Company has budgeted $40,000 in sales for the month of
December. The company's cost of goods sold is 30% of sales. If the company has budgeted to
purchase $18,000 in merchandise during December, then the budgeted change in inventory levels
over the month of December is:
27. Prestwich Company has budgeted production for next year as follows:
Two pounds of material A are required for each unit produced. The company has a policy of
maintaining a stock of material A on hand at the end of each quarter equal to 25% of the next
quarter's production needs for material A. A total of 30,000 pounds of material A are on hand to
start the year. Budgeted purchases of material A for the second quarter would be:
28. Veltri Corporation is working on its direct labor budget for the next two months. Each unit
of output requires 0.77 direct labor-hours. The direct labor rate is $11.20 per direct labor-hour.
The production budget calls for producing 7,100 units in October and 6,900 units in November.
The company guarantees its direct labor workers a 40-hour paid work week. With the number of
workers currently employed, that means that the company is committed to paying its direct labor
work force for at least 5,480 hours in total each month even if there is not enough work to keep
them busy. What would be the total combined direct labor cost for the two months?
29. Hagos Corporation is working on its direct labor budget for the next two months. Each
unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour.
The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct
labor work force is fully adjusted to the total direct labor-hours needed each month, what would
be the total combined direct labor cost for the two months?
30. Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The
direct labor budget indicates that 8,100 direct labor-hours will be required in May. The variable
overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing
overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed
manufacturing overhead costs represent current cash flows. The May cash disbursements for
manufacturing overhead on the manufacturing overhead budget should be:
