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Exam 21: The Master Budget and Responsibility Accounting

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Question 31

Multiple Choice

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When performing a sensitivity analysis, an increase in the budgeted direct labor hourly wage rate will Not result in which of the following?

A) An increase in the budgeted total manufacturing cost per unit
B) An increase in budgeted cost of goods manufactured
C) An increase in budgeted gross margin
D) A decrease in budgeted retained earnings

E) A) and B)
F) A) and C)

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Question 32

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Heath Company has beginning inventory of 21,000 units and expected sales of 48,000 units. If the desired ending inventory is 15,500 units, how many units should be produced?

A) 27,000
B) 42,500
C) 45,000
D) 53,000

E) B) and C)
F) A) and D)

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Question 33

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Norton Company prepared the following sales budget: $\begin{array} { | l | l | } \hline \text { Month } & \text { Budgeted Sales } \\\hline \text { March } & \$ 200,000 \\\hline \text { April } & \$ 180,000 \\\hline \text { May } & \$ 220,000 \\\hline \text { June } & \$ 260,000 \\\hline\end{array}$ The expected gross profit rate is 40% and the inventory at the end of February was $36,000. Desired inventory levels at the end of the month are 30% of the next month's cost of goods sold. What are the total purchases budgeted for April?

The following information has been provided by Jared Incorporated: Budgeted sales for August and September are $120,000 and $140,000, respectively. Budgeted inventory purchases for August and September are $60,000 and $84,000, respectively. 30% of purchases are paid for during the month of purchase and the remaining 70% are paid for during the subsequent month. 20% of sales are collected during the month of sale and the remaining 80% are collected during the subsequent month. Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $21,000 monthly and include depreciation expense of $7,000. Operating costs are paid for in the month that they are incurred. The cash balance on September 1st was $10,000. Jared's goal is to maintain a $10,000 cash balance. Jared can borrow cash in increments of $1,000. How much cash will be colleted from customers during September?

Stone Company's budgeted operating expenses for April are $98,000 which includes $10,000 of depreciation expense and insurance expense. During April, Stone's budgeted insurance expense is $3,500; and, Stone's prepaid insurance account is budgeted for a $1,000 increase during April. How much are Stone's budgeted cash payments for operating expenses for the month of April?

The manager of which of the following responsibility centers is responsible primarily for controlling expenses?

An investment center is a responsibility center in which a manager is accountable for maximizing only operating income.

The following information has been provided by Jared Incorporated: Budgeted sales for August and September are $120,000 and $140,000, respectively. Budgeted inventory purchases for August and September are $60,000 and $84,000, respectively. 30% of purchases are paid for during the month of purchase and the remaining 70% are paid for during the subsequent month. 20% of sales are collected during the month of sale and the remaining 80% are collected during the subsequent month. Variable operating costs are budgeted at 25% of sales. Fixed operating costs are budgeted at $36,000 monthly and include depreciation expense of $7,000. Operating costs are paid for in the month that they are incurred. The cash balance on September 1st was $10,000. Jared's goal is to maintain at least a $10,000 cash balance. Jared can borrow cash in increments of $1,000. How much will Jared have to borrow during September in order to maintain the $10,000 minimum cash balance?

Della Company prepared the following purchases budget: $\begin{array} { | l | l | } \hline \text { Month } & \text { Budgeted Purchases } \\\hline \text { June } & \$ 67,000 \\\hline \text { July } & \$ 72,500 \\\hline \text { August } & \$ 76,300 \\\hline \text { September } & \$ 73,700 \\\hline \text { October } & \$ 69,200 \\\hline\end{array}$ All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after purchase. What are the cash disbursements in August for June purchases?

Which of the following budgets is not an operating budget?

Which of the following statements is incorrect?

The cash budget impacts both the budgeted balance sheet and budgeted statement of cash flows.

Bolin's, an elite clothier, expects its November sales to be 30% higher than its October sales of $200,000. Purchases were $100,000 in October and are expected to be $150,000 in November. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Purchases are paid 25% in the month of purchase and 75% in the following month. The cash balance on November 1 is $9,000. What will be the cash balance on November 30?

During July, Neptune Company had actual sales of $144,000 compared to budgeted sales of $156,000. Actual cost of goods sold was $108,000, compared to a budget of $109,200. Monthly operating expenses, budgeted at $22,400, totaled $20,000. Interest revenue of $2,000 was earned during July but had not been included in the budget. The performance report for July would show a net income variance of what amount?

Hogan's management has forecasted sales of 50,000 units and an increase in finished goods of 10,000 units for the upcoming year. How many units is Hogan planning to produce next year?

Griffith Company has budgeted purchases of inventory for December of $105,000. Expected beginning inventory on December 1 and ending inventory on December 31 are $120,000 and $129,000, respectively. If cost of goods sold averages 75% of sales, what are budgeted sales for December?

Which of the following statements is incorrect?

Caribbean Tool and Die Company's forecasted sales for April, May, June, and July are $150,000, $225,000, $180,000, and $210,000, respectively. Sales are 50% cash and 50% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 60% of sales and ending inventory is maintained at $85,000 plus 20% of the following month's cost of goods sold. All inventory purchases are paid 20% in the month of purchase and 80% in the following month. What are the budgeted cash payments in June for inventory purchases?

During April, Cherry Company had actual sales of $180,000 compared to budgeted sales of $195,000. Actual cost of goods sold was $135,000, compared to a budget of $136,500. Monthly operating expenses, budgeted at $28,000, totaled $25,000. Interest revenue of $2,500 was earned during April but had not been included in the budget. The performance report for April would show a net income variance of what amount?

Lan Corporation had beginning inventory of 42,000 units and expects sales of 96,000 units during the year. Desired ending inventory is 31,000 units. How many units should Lan Corporation produce?