Braun3 09 Tif

Managerial Accounting, 3e (Braun/Tietz)Chapter 9 The Master Budget

1) Strategic planning involves setting short-term goals extending three to four months into the future.Answer: FALSEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

2) Budgeting is helpful to plan for cash inflows and outflows.Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

3) A budget is a quantitative expression of a plan that helps managers coordinate and implement the plan.Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

4) Budgets do not provide benchmarks to help managers evaluate performance.Answer: FALSEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

5) Budgets communicate financial plans throughout the company.Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

6) One of the key benefits of budgeting is that it forces managers to plan.Answer: TRUEDiff: 1LO: 9-1EOC: S9-2

1Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall

AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

7) The capital expenditures budget is not part of the operating budget.Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

8) The master budget is the set of budgeted financial statements and supporting schedules for the entire organization.Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

9) The master budget includes both the operating budgets and the financial budgets.Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

10) Management uses budgeting to express its plans and to assess how well it's reaching its goals. Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


11) Strategic planning involves setting long-term goals that extend 5-10 years into the future. Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

12) A rolling budget is a budget that is continuously updated so that the next 12 months of operations are always budgeted.Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

13) The financial budgets project the collection and payment of cash, as well as forecast the company's budgeted balance sheet. Answer: TRUEDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

14) Budget committees most often would include all of the following people exceptA) CEOB) Research and development managerC) ShareholderD) Marketing managerAnswer: CDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


15) Budgets are used for all of the following, exceptA) planning for the future.B) controlling operations.C) recording actual results.D) directing operations. Answer: CDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

16) Strategic planning involvesA) setting long-term goals that extend 5-10 years into the future.B) setting short-term goals that extend one year into the future.C) setting goals for next month.D) executing directives from the board of directors. Answer: ADiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

17) A rolling budget is a budget thatA) extends 5-10 years into the future.B) is continuously updated, so that the next 12 months of operations are always budgeted.C) begins with zero for each expense, and then amounts are added in.D) is rolled out by upper management.Answer: BDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


18) Most companies use ________ when developing the budgets each year.A) a top-down approachB) zero-based budgetsC) slack-based budgetsD) participative budgetingAnswer: DDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

19) Which of the following is a potential disadvantage of participative budgeting?A) Managers are more likely to be motivated by budgets they helped to create.B) Managers may build slack into the budget.C) Managers should have more detailed knowledge for creating realistic budgets. D) None of the above are true.Answer: BDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

20) Managers may intentionally build slack into the budgetA) to have the resources they need in the event of budget cuts.B) to make their performance look worse.C) because of certainty about the future.D) because of all of the above. Answer: ADiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


21) Managers may intentionally build slack into the budgetA) because of uncertainty about the future.B) to make their performance look better.C) to have the resources they need in the event of budget cuts.D) because of all of the above. Answer: DDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

22) The budget committeeA) rarely has the final say on the budget.B) usually is made up of the accounting staff.C) usually is made up of managers from all areas of the value chain.D) usually is made up of the Board of Directors.Answer: CDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

23) All of the following are functions of the budget committee exceptA) reviews submitted budgets.B) determines the bonuses awarded to those who achieve budget targets.C) approves the final budget.D) removes unwarranted slack. Answer: BDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


24) Which of the following is the starting place for budgeting?A) Last year's budgetB) Last year's actual amountsC) ZeroD) Any of the aboveAnswer: DDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

25) Which of the following is an advantage of zero-based budgeting?A) It is time consuming.B) It forces managers to justify every dollar put in the budget, so some expenses may be lower than they were in previous years.C) It is labor intensive.D) All of the above are advantages.Answer: BDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

26) The ________ budget is part of the financial budgets.A) cash B) sales C) direct materialsD) operating expense Answer: ADiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


27) The ________ budget is part of the financial budgets.A) direct laborB) capital expenditureC) budgeted income statementD) manufacturing overhead Answer: BDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

28) The ________ budget is part of the financial budgets.A) production B) budgeted income statementC) budgeted balance sheetD) sales Answer: CDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

29) The ________ budget is part of the operating budgets.A) capital expenditureB) budgeted balance sheetC) production D) cash Answer: CDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


30) Which of the following alternatives reflects the proper order of preparing components of the master budget?1. Production budget2. Sales budget3. Direct materials budgetA) 2, 3, 1B) 1, 3, 2C) 3, 1, 2D) 2, 1, 3Answer: DDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

31) Which of the following is an advantage of the budgeting process?A) Coordinates the activities of the organizationB) Assures that the lowest cost materials will be obtainedC) Assures the company will achieve its objectives D) Guarantees that a profit will be achieved Answer: ADiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

32) Regarding the budgeting process, which of the following statements is true?A) The budget should always be designed by top corporate management.B) The budget should be approved by the company's external auditors.C) The budget should be designed from the bottom up, with input from employees at all levels.D) All of the listed statements are true regarding the budgeting process.Answer: CDiff: 1LO: 9-1EOC: S9-2AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


33) Which of the following is a benefit of budgeting?A) Focuses management's attention on the futureB) Improved decision-making processesC) Improved motivation by employeesD) All of the aboveAnswer: DDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

34) Which of the following statements about budgeting is not true?A) Budgeting is an aid to planning and control.B) The operating budget should be prepared by top management, rather than mid-management personnel, because they have the overall objectives of the company in mind.C) Budgets help to coordinate the activities of the entire organization.D) Budgets promote communication and coordination between departments.Answer: BDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

35) Which of the following alternatives reflects the proper order of preparing components of the master budget?1. Financial budget2. Operating budget3. Capital expenditures budgetA) 1, 3, 2B) 2, 3, 1C) 1, 2, 3D) 3, 1, 2Answer: BDiff: 2LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


36) Which of the following budgets is a major part of the master budget and focuses on the income statement and its supporting schedules?A) cash B) operatingC) capital expendituresD) financialAnswer: BDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

37) Which of the following budgets is the cornerstone of the master budget?A) salesB) cashC) budgeted balance sheetD) operating expenseAnswer: ADiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

38) "Sets the targeted revenue and expenses for the period" is best described by which of the following terms?A) Responsibility centerB) Capital budgetC) Operating budgetD) Sensitivity analysisAnswer: CDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


39) "The comprehensive budget" is best described by which term below?A) Operating budgetB) Sensitivity analysis C) Responsibility centerD) Master budgetAnswer: DDiff: 1LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

40) List and describe three reasons why a company and its managers could benefit from the use of budgeting.Answer: 1. Planning: The budgeting process forces managers to spend time planning for the future, rather than only concerning themselves with daily operations. 2. Coordination and Communication: The budget coordinates a company's activities. It forces managers to consider relations among operations across the entire value chain. 3. Benchmarking: Budgets provide a benchmark that motivates employees and helps managers evaluate performance. The budget provides a target that most managers will try to achieve, especially if they participated in the budgeting process and the budget has been set at a realistic level.Diff: 2LO: 9-1EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

41) When creating the sales budget, management simply takes the sales from the year before and divides that total by 12 months. Thus, each month will always predict the same amount of budgeted sales. Answer: FALSEDiff: 1LO: 9-2EOC: E9-16AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

42) The first component of the operating budget is the production budget.Answer: FALSEDiff: 1LO: 9-2EOC: E9-16AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

43) The three components of the operating budget are the sales budget; inventory, purchases and cost of goods sold budget; and the cash budget.Answer: FALSEDiff: 1LO: 9-2


EOC: E9-23AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

44) The sales budget must be prepared after every other component of the operating budget.Answer: FALSEDiff: 1LO: 9-2EOC: E9-16AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

45) Budgeting includes planning for ending inventory. Answer: TRUEDiff: 1LO: 9-2EOC: E9-18AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

46) The sales budget is the cornerstone of the master budget.Answer: TRUEDiff: 1LO: 9-2EOC: E9-23AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


47) On the production budget, the number of units to be produced is computed as A) unit sales + desired end inventory + beginning inventory. B) unit sales + desired end inventory - beginning inventory.C) unit sales - desired end inventory - beginning inventory. D) unit sales - desired end inventory + beginning inventory.Answer: BDiff: 1LO: 9-2EOC: E9-18AAACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

48) On the direct labor budget, the total quantity of direct labor hours needed is computed as A) units to be produced × direct labor hour per unit.B) quantity needed for production + indirect labor hours - direct labor hours.C) units to be produced - indirect labor hours × cost per labor hour.D) estimated direct labor hours needed × cost per hour.Answer: ADiff: 1LO: 9-2EOC: E9-18AAACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

49) On the direct materials budget, the total quantity of direct materials needed is computed as A) quantity needed for production + desired end inventory of DM - beginning inventory of DM.B) units to be produced + desired end inventory of DM - beginning inventory of DM. C) units to be produced - desired end inventory of DM + beginning inventory of DM.D) quantity needed for production - desired end inventory of DM + beginning inventory DM.Answer: ADiff: 1LO: 9-2EOC: E9-18AAACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


50) The ________ budget is the only budget stated ONLY in units, not dollars. A) productionB) salesC) direct materials D) manufacturing overhead Answer: ADiff: 1LO: 9-2EOC: E9-18AAACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

51) The ________ budget starts with the number of units to be produced.A) productionB) operating expenseC) direct materials D) All of these choices start with the number of units to be produced. Answer: CDiff: 1LO: 9-2EOC: E9-23AAACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

52) The ________ budget begins with the number of units to be sold. A) manufacturing overhead B) direct materialsC) productionD) capital expenditures Answer: CDiff: 1LO: 9-2EOC: E9-16AAACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


53) Which of the following budgets usually shows separate sections for fixed and variable costs?A) Direct materials and manufacturing overhead budgetB) Manufacturing overhead budget and production budgetC) Production budget and manufacturing overhead budgetD) Operating expense budget and manufacturing overhead budgetAnswer: DDiff: 1LO: 9-2EOC: E9-23AAACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

54) Which of the following budgets or financial statements is part of the operating budget?A) Sales budgetB) Budgeted balance sheetC) Capital expenditures budgetD) Cash budgetAnswer: ADiff: 1LO: 9-2EOC: E9-16AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

55) The ________ is a plan that shows the units to be sold and the projected selling price and is also the starting point in the budgeting process.A) cash budgetB) budgeted statement of cash flowsC) budgeted income statementD) sales budgetAnswer: DDiff: 1LO: 9-2EOC: E9-16AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


56) Which of the following is not part of the operating budget?A) Inventory, purchases and cost of goods sold budgetB) Cash budgetC) Sales budgetD) Budgeted income statementAnswer: BDiff: 1LO: 9-2EOC: E9-23AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

57) Which of the following is not included in the operating budget?A) Budgeted income statementB) Sales budgetC) Inventory budgetD) Budgeted balance sheetAnswer: DDiff: 1LO: 9-2EOC: E9-23AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

58) In preparing the operating budget, the first step is preparing theA) cash budget.B) sales budget.C) budgeted income statement.D) purchases budget.Answer: BDiff: 1LO: 9-2EOC: E9-23AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


59) Desired ending inventory is 20% of next month's sales. If cost of goods sold is $300,000 and next month's sales is $900,000, which of the following statements is true regarding purchases?A) Purchases will be more than cost of goods sold.B) Purchases cannot be predicted from the information given. C) Purchases will be less than cost of goods sold.D) Purchases will equal cost of goods sold.Answer: BDiff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

60) Desired ending inventory is 25% more than beginning inventory. If purchases total $160,000, which of the following statements is true regarding cost of goods sold (COGS)?A) COGS will exceed cost of goods available for sale. B) COGS will be less than purchases.C) COGS will exceed purchases.D) COGS will equal $55,000.Answer: BDiff: 3LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

61) Loyal Pet Company expects to sell 5,000 beefy dog treats in January and 9,000 in February for $3 each. What will be the total sales revenue reflected in the sales budget for those months?A) January $15,000; February $27,000B) January $1,667; February $3,000C) January $3,000; February $1,667D) January $27,000; February $15,000Answer: AExplanation: A) January 5000 × $3 = $15,000; February 9000 × $ 3 = $ 27,000Diff: 1LO: 9-2EOC: E9-16AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


62) Mockingbird Company expects to sell 5,200 bird perches in January and 9,500 in February for $3 each. What will be the total sales revenue reflected in the sales budget for those months?A) January $1,733; February $3,167B) January $15,600; February $28,500C) January $3,167; February $1,733D) January $28,500; February $15,600Answer: BExplanation: B) January 5,200 × $3 = $15,600; February 9,500 × $ 3 = $ 28,500Diff: 1LO: 9-2EOC: E9-16AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

63) Hewitt Company expects cash sales for July of $15,000, and a 22% monthly increase during August and September. Credit sales of $10,000 in July should be followed by 30% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?A) $19,500 and $12,200B) $25,350 and $14,884C) $22,326 and $16,900D) $18,300 and $13,000Answer: CExplanation: C) Cash sales $ 15,000 × 1.22% = $ 18,300 × 1.22% = $ 22,326; Credit sales $ 10,000 × 1.30% = $ 13,000 × 1.30 % = $ 16,900Diff: 2LO: 9-2EOC: E9-16AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

64) Piatt Company expects cash sales for July of $15,000, and a 26% monthly increase during August and September. Credit sales of $12,000 in July should be followed by 30% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?A) $19,500 and $15,120B) $25,350 and $19,051C) $18,900 and $15,600D) $23,814 and $20,280Answer: DExplanation: D) Cash sales $ 15,000 × 1.26% = $ 18,900 × 1.26% = $ 23,814; Credit sales $ 12,000 × 1.30% = $ 15,600 × 1.30 % = $ 20,280Diff: 2LO: 9-2EOC: E9-16AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

65) CatNap Company has two products: Kittyz and Katz. A March sales forecast projects 20,000 units of Kittyz and 15,000 units of Katz are going to be sold at prices of $15 and $12, respectively. The desired ending inventory of Kittyz is 20% higher than the beginning inventory, which was 2,000 units. How much are total March sales for Kittyz anticipated to


be?A) $100,000B) $180,000C) $300,000D) $240,000Answer: CExplanation: C) 20,000 × $ 15 = $ 300,000Diff: 1LO: 9-2EOC: E9-16AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

66) DogDayz Company has two products: Doggyz and Pupz. A March sales forecast projects 22,000 units of Doggyz and 15,000 units of Pupz are going to be sold at prices of $17.50 and $12.00, respectively. The desired ending inventory of Doggyz is 20% higher than the beginning inventory, which was 2,000 units. How much are total March sales for Doggyz anticipated to be?A) $180,000B) $385,000C) $264,000D) $110,000Answer: BExplanation: B) 22,000 × $ 17.50 = $ 385,000Diff: 1LO: 9-2EOC: E9-16AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


67) Russell Company expects cash sales for July of $15,000, and a 22% monthly increase during August and September. Credit sales of $6,000 in July should be followed by 15% decreases during August and September. What are budgeted cash sales and budgeted credit sales for September?A) $18,300 and $5,100B) $22,326 and $4,335C) $12,750 and $7,320D) $10,838 and $8,930Answer: BExplanation: B) Cash $15,000 × 1.22% = $ 8,300 × 1.22% = $22,326; Credit $6,000 × 85% = $5,100 × 85 % = $4,335 Diff: 2LO: 9-2EOC: E9-16AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

68) Kotrick Company has beginning inventory of 15,000 units and expected sales of 23,000 units. If the desired ending inventory is 18,000 units, how many units should be produced?A) 20,000B) 56,500C) 10,000D) 26,000Answer: DExplanation: D) Sales 23,000Less: BI 15,000= Need to produce 8,000+ desired EI 18,000= Total Production 26,000Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


69) McCoy Company wants to have an ending inventory of 7,000 units. McCoy Company has beginning inventory of 9,000 units and expects to sell 33,000 units. How many units should McCoy Company produce? A) 31,000B) 35,000C) 49,000D) 40,000Answer: AExplanation: A) Sales 33,000Less: BI 9,000= Need to produce 24,000+ desired EI 7,000= Total Production 31,000Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

70) Rubino Corporation desires a December 31 ending inventory of 900 units. Budgeted sales for December are 2,650 units. The November 30 inventory was 850 units. What are budgeted purchases in units?A) 3,550B) 2,600C) 2,700D) 4,400Answer: CExplanation: C) Sales 2,650Less: BI 850= Need to produce 1,800+ desired EI 900= Total Production 2,700Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


71) Bruner Stores wants to have 500 shovels in ending inventory on December 31. Budgeted sales for December are 1,950 shovels. The November 30 inventory was 320 shovels. How many shovels should Benson Stores purchase for December?A) 2,770B) 1,770C) 2,450D) 2,130Answer: DExplanation: D) Sales 1,950Less: BI 320= Need to produce 1,630+ desired EI 500= Total Production 2,130Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

72) Crafty Carpentry Company produces and sells a shelf for $25 each. The beginning inventory is 2,000 shelves, and the desired ending inventory is 2,200 shelves. If budgeted production is 12,500 shelves, what is the forecasted sales revenue from the shelves?A) $417,500B) $307,500C) $317,500D) $207,500Answer: BExplanation: B) Production 12,500+ BI 2,000Total Produced 14,500Less: EI 2,200Unit Sales 12,300 × $ 25 = $ 307,500Diff: 2LO: 9-2EOC: E9-16AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


73) SportSupplies Corporation has budgeted purchases of inventory for December of $140,000. Expected beginning inventory on December 1 and ending inventory on December 31 are $90,000 and $120,000, respectively. If cost of goods sold averages 88% of sales, what are budgeted sales for December?A) $125,000B) $96,800C) $193,182D) $397,727Answer: AExplanation: A) BI $90,000+ Purchases 140,000 = Goods Available 230,000Less : EI 120,000= Cost of Goods Sold$110,000Now 88% × (Sales) = $ 110,000 Sales = $ 125,500 Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

74) Willard's Department Store has budgeted cost of goods sold of $42,000 for its men's shorts in March. Management also wants to have $7,600 of men's shorts in inventory at the end of March to prepare for the summer season. Beginning inventory of men's shorts for March is expected to be $5,500. What dollar amount of men's shorts should be purchased in March?A) $39,900B) $44,100C) $55,100D) $29,900Answer: BExplanation: B) Cost of Goods Sold $ 42,000+ EI 7,600= Goods Available 49,600Less BI 5,500= Purchases 44,100Diff: 2LO: 9-2EOC: E9-20AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


75) Goddard's Department Store has budgeted cost of goods sold of $44,000 for its men's shorts in March. Management also wants to have $8,000 of men's shorts in inventory at the end of March to prepare for the summer season. Beginning inventory of men's shorts for March is expected to be $5,500. What dollar amount of men's shorts should be purchased in March?A) $46,500B) $41,500C) $57,500D) $30,500Answer: AExplanation: A) Cost of Goods Sold $ 44,000+ EI 8,000= Goods Available 52,000Less BI 5,500= Purchases 46,500Diff: 2LO: 9-2EOC: E9-20AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

76) Thomas Corporation recorded sales of $200,000 during March. Management expects sales to increase 5% in April, another 2% in May, and another 10% in June. Cost of goods sold is expected to be 80% of sales. What is the budgeted gross profit for June?A) $47,124B) $43,697C) $235,620D) $42,840Answer: AExplanation: A) $ 200,000 × 1.05% = 210,000 × 1.02% = 214,200 × 1.10% = $ 235,620Now Sales × 80% = Cost of Goods Sold - 188,496 = Gross Profit $ 47,124Diff: 2LO: 9-2EOC: E9-16AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


77) Meers Corporation had beginning inventory of 21,000 units and expects sales of 76,500 units during the year. Desired ending inventory is 19,500 units. How many units should Meers Corporation produce?A) 78,000 unitsB) 36,000 unitsC) 75,000 unitsD) 117,000 units Answer: CExplanation: C) Sales $76,500- BI 21,000Total needed 55,500+ EI 19,500= Production 75,000 Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

78) Dallas Corporation had beginning inventory of 19,500 units and expects sales of 85,000 units during the year. Desired ending inventory is 18,500 units. How many units should Dallas Corporation produce?A) 84,000 unitsB) 47,000 unitsC) 86,000 unitsD) 123,000 units Answer: AExplanation: A) Sales $85,000- BI 19,500Total needed 65,500+ EI 18,500= Production 84,000 Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


79) Sam's Toys budgeted sales of $300,000 for the month of November and cost of goods sold equal to 80% of sales. Beginning inventory for November was $50,000 and ending inventory for November is estimated at $55,000. How much are the budgeted purchases for November?A) $245,000B) $65,000C) $235,000D) $135,000Answer: AExplanation: A) 80 % x $ 300,000 = $240,000 Cost of Goods SoldLess BI 50,000= 190,000+ EI 55,000= Purchases $ 245,000Diff: 3LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

80) Fosnight Enterprises prepared the following sales budget:

Month Budgeted SalesMarch $6,000April $13,000May $12,000June $14,000

The expected gross profit rate is 30% and the inventory at the end of February was $10,000. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.

What is the desired beginning inventory on June 1?A) $840B) $1,680C) $1,960D) $9,800Answer: CExplanation: C) Sales = 100% - 30% Gross Profit = 70% Cost of Goods Sold (CGS)Now: June Sales $14,000 × 70% = 9,800 (CGS) × 20% = $ 1,960 Diff: 2LO: 9-2EOC: E9-20AAACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


Month Budgeted SalesMarch $6,000April $13,000May $12,000


June $14,000


What is the desired ending inventory on May 31?A) $840B) $9,800C) $1,680D) $1,960Answer: DExplanation: D) Sales = 100% - 30% Gross Profit = 70% Cost of Goods Sold (CGS)Now: June Sales $14,000 × 70% = 9,800 (CGS) × 20% = $ 1,960 Diff: 2LO: 9-2EOC: E9-20AAACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What is the budgeted cost of goods sold for May?A) $3,600B) $4,200C) $2,400D) $8,400Answer: DExplanation: D) $ 12.000 × 70% = $ 8,400Diff: 2LO: 9-2EOC: E9-18AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What are the total purchases budgeted for April?A) $8,680B) $10,920C) $8,960D) $9,240Answer: CExplanation: C) Cost of Goods Sold = $ 13,000 × 70% = $ 9,100 Ending Inventory = $12,000 × 70% = 8,400 × 20% = $ 1,680Beginning Inventory = $ 13,000 × 70% = 9,100 × 20% = $ 1,820Now: CGS $ 9,100 + EI 1,680 - BI 1,820 = Purchases $ 8,960Diff: 3LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What are the total purchases budgeted for May?A) $8,120B) $8,960C) $8,680D) $10,080Answer: CExplanation: C) May Beginning Inventory = $ 12,000 × 70% = 8,400 × 20% = $ 1,680May Ending Inventory = $ 14,000 × 70% = 9,800 × 20% = $ 1,960May Cost of Goods Sold = $ 12,000 × 70% = $ 8,400Now $ 8,400 + 1,960 - 1,680 = $ 8,680Diff: 3LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


85) Sander Enterprises prepared the following sales budget:



What is the desired beginning inventory on June 1?A) $1,440B) $1,680C) $1,120D) $8,400Answer: BExplanation: B) Sales = 100% - 40% Gross Profit = 60% Cost of Goods Sold (CGS)Now: June Sales $ 14,000 × 60% = 8,400 (CGS) × 20% = $ 1,680 Diff: 2LO: 9-2EOC: E9-20AAACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What is the desired ending inventory on May 31?A) $1,120B) $1,440C) $1,680D) $8,400Answer: CExplanation: C) Sales = 100% - 40% Gross Profit = 60% Cost of Goods Sold (CGS)Now: June Sales $14,000 × 60% = 8,400 (CGS) × 20% = $ 1,680 Diff: 2LO: 9-2EOC: E9-20AAACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What is the budgeted cost of goods sold for May?A) $7,200B) $4,800C) $2,400D) $8,400Answer: AExplanation: A) $ 12,000 × 60% = $ 7,200Diff: 2LO: 9-2EOC: E9-18AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What are the total purchases budgeted for April?A) $9,360B) $7,440C) $7,680D) $7,920Answer: CExplanation: C) Cost of Goods Sold = $ 13,000 × 60% = $ 7,800 Ending Inventory = $ 12,000 × 60% = 7,200 x 20% = $ 1,440Beginning Inventory = $ 13,000 × 60% = 7,800 × 20% = $ 1,560Now: CGS $ 7,800 + EI 1,440 - BI 1,560 = Purchases $ 7,680Diff: 3LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What are the total purchases budgeted for May?A) $8,640B) $7,680C) $6,960D) $7,440Answer: DExplanation: D) May Beginning Inventory = $ 12,000 × 60% = 7,200 × 20% = $ 1,440May Ending Inventory = $ 14,000 × 60% = 8,400 × 20% = $ 1,680May Cost of Goods Sold = $ 12,000 × 60% = $ 7,200Now $ 7,200 + 1,680 - 1,440 = $ 7,440Diff: 3LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

90) A lamp store purchased $3,800 of lamps in September. The store had $1,600 of lamps on hand at the beginning of September, and expected to have $1,300 of lamps at the end of September to cover part of anticipated October sales. What is the budgeted cost of goods sold for September?A) $5,400B) $4,100C) $6,700D) $3,500Answer: BExplanation: B) BI $ 1,600+ Purchases 3,800 = Goods Available 5,400Less : EI 1,300= Cost of Goods Sold $4,100Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

91) Warshaw Company budgets payroll at $3,600 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $13,200 with budgeted sales of $160,000. Sales for July are budgeted at $180,000 while purchases of inventory for July are budgeted at $95,000. Depreciation and insurance for July are estimated at $1,000 and $600, respectively. Office and administrative expenses related to purchasing inventory


are budgeted at 10% of purchases for the month. The purchase of $2,500 in equipment and $1,500 in furniture is expected in July.

The July payroll should be budgeted atA) $14,400.B) $13,200. C) $22,500.D) $15,300.Answer: AExplanation: A) Total Payroll $ 13,200- fixed payroll - 3,600= variable payroll = $ 9,600 divided by Sales = 6% (payroll as a % of Sales)

Now: $ 180,000 × 6% = $ 10,800 Variable Payroll + 3,600 Fixed

= $ 14,400 Total PayrollDiff: 3LO: 9-2EOC: E9-21AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


92) Warshaw Company budgets payroll at $3,600 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $13,200 with budgeted sales of $160,000. Sales for July are budgeted at $180,000 while purchases of inventory for July are budgeted at $95,000. Depreciation and insurance for July are estimated at $1,000 and $600, respectively. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month. The purchase of $2,500 in equipment and $1,500 in furniture is expected in July.

The total operating expenses budgeted for July areA) $23,900.B) $14,800.C) $25,500.D) $14,400.Answer: CExplanation: C) Inventory $ 95,000 10% = $9,500 Office and Adm. Expense

Total Payroll $13,200- fixed payroll -3,600= variable payroll = $ 9,600 divided by Sales = 6% (payroll as a % of Sales)

Now: $ 180,000 × 6% = $ 10,800 Variable Payroll + 3,600 Fixed

= $ 14,400 Total Payroll

Finally Payroll $ 14,400+ Office and Adm. expense 9,500 + Depreciation 1,000+ Insurance 600= Total Operating Expense $ 25,500Diff: 3LO: 9-2EOC: E9-23AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


93) Warshaw Company budgets payroll at $3,600 per month plus a percentage of monthly sales. The June operating expense budget includes total payroll of $13,200 with budgeted sales of $160,000. Sales for July are budgeted at $180,000 while purchases of inventory for July are budgeted at $95,000. Depreciation and insurance for July are estimated at $1,000 and $600, respectively. Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month. The purchase of $2,500 in equipment and $1,500 in furniture is expected in July.

If the percentage of monthly sales used in budgeting payroll increases 25%, what would the total payroll budgeted for July be?A) $20,025B) $17,100C) $13,500D) $14,400Answer: B

Explanation: B) June expense budget total payroll $ 13,200Fixed payroll budget $ (3,600)June variable payroll budget $ 9,600Divide byJune budgeted sales $ 160,000Old variable payroll budget (% of month's sales) 6%

Increase in variable payroll expense 25%Add 1

125%Old variable payroll budget (% of month's sales) 6%New variable payroll budget (% of month's sales) 8%

July budgeted sales $ 180,000New variable payroll budget (% of month's sales) 8%July variable payroll budget $ 13,500Fixed payroll budget $ 3,600July payroll $ 17,100

Diff: 3LO: 9-2EOC: E9-21AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


94) At the beginning of the year, Patio Living Corporation has 550 planters in inventory. The company plans to sell 5,200 planters during the year and wants to have 1,200 planters in inventory at the end of the year. How many planters must Patio Living Corporation produce during the year?A) 5,850B) 6,400C) 3,450D) 6,950Answer: AExplanation: A) Sales $ 5,200BI - 550EI + 1,200Production $ 5,850 Diff: 1LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

95) At the beginning of the year, Lakeview Corporation has 660 life vests in inventory. The company wants to have 2,100 vests in inventory at the end of the year and plans to sell 6,400 life vests during the year. How many life vests must Lakeview Corporation produce during the year?A) 8,500B) 3,640C) 7,840D) 9,160Answer: CExplanation: C) Sales $ 6,400BI - 660EI + 2,100Production $ 7,840 Diff: 1LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


96) Totz Company produces jump ropes. Totz Company has the following sales projections for the upcoming year:

First quarter budgeted jump rope sales in units 21,000Second quarter budgeted jump rope sales in units 35,000Third quarter budgeted jump rope sales in units 22,000Fourth quarter budgeted jump rope sales in units 30,000

Inventory at the beginning of the year was 4,200 jump ropes. Totz Company wants to have 20% of the next quarter's sales in units on hand at the end of each quarter. How many jump ropes should Totz Company produce during the first quarter?A) 16,800B) 21,000C) 23,800D) 32,200Answer: CExplanation: C) Unit Sales 2nd Qtr 35,000 × 20% = 7,000 EISales $ 21,000BI - 4,200EI + 7,000Production $ 23,800Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


97) Jolly Company produces hula hoops. Jolly Company has the following sales projections for the upcoming year:

First quarter budgeted hula hoop sales in units 22,100Second quarter budgeted hula hoop sales in units 28,000Third quarter budgeted hula hoop sales in units 22,000Fourth quarter budgeted hula hoop sales in units 30,000

Jolly Company wants to have 25% of the next quarter's sales in units on hand at the end of each quarter. Inventory at the beginning of the year was 5,525 hula hoops. How many hula hoops should Jolly Company produce during the first quarter?A) 34,625B) 23,575C) 16,575D) 22,100Answer: BExplanation: B) Unit Sales 2nd Qtr 28,000 × 25% = 7,000 EISales $ 22,100BI - 5,525EI + 7,000Production $ 23,575Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


98) Daisy Company manufactures dog collars. The following selected data relates to Daisy Company's budgeted sales and inventory levels of the dog collars for the upcoming quarter:

October expected unit sales 2,000November expected unit sales 2,600December expected unit sales 2,200October desired ending unit finished goods inventory 850November desired ending unit finished goods inventory 720December desired ending unit finished goods inventory 520

How many dog collars should Daisy Company produce in November?A) 2,870B) 3,320C) 4,170D) 2,470Answer: DExplanation: D) Sales $ 2,600BI - 850EI + 720Production 2,470 Diff: 2LO: 9-2EOC: E9-18AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


99) Victoria Corporation manufactures quality vases. Budgeted sales and production data for the vases are as follows:

Month 1 budgeted unit sales 2,000Month 2 budgeted unit sales 2,500Month 3 budgeted unit sales 3,200Month 1 budgeted unit production 2,400Month 2 budgeted unit production 2,700Month 3 budgeted unit production 3,400Raw material required for each finished unit (in pounds) 1

The ending inventory for each month should be equal to 20% of the next month's production needs. Each vase requires one pound of clay in its manufacture. Victoria Corporation has a policy that the inventory of clay at the end of each month needs to be equal to 20% of the production needs for the following month. At the beginning of January, 480 pounds of clay were in inventory. How many pounds of clay would Victoria Corporation need to purchase in February?A) 2,660B) 2,940C) 3,620D) 2,840Answer: DExplanation: D) Production Month 2 2,700Less BI (2,700 × 20%) - 540Plus EI (3,400 × 20%) +680Equals Purchases 2,840 Diff: 2LO: 9-2EOC: E9-19AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


100) Terrific Toys Company manufactures and sells children's skateboards. Each skateboard requires four bearings. For September, Terrific Toys Company has budgeted skateboard sales of 530 skateboards, while 570 skateboards are scheduled to be produced. Terrific Toys Company will begin September with 220 bearings in its beginning inventory. How many bearings should Terrific Toys Company purchase for September?A) 310B) 2,280C) 2,500D) 2,060Answer: DExplanation: D) Production 570 × 4 = 2,280 - 220 (BI) = 2,060Diff: 2LO: 9-2EOC: E9-19AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

101) Beloved Baby Company manufactures and sells children's strollers. Each stroller requires eight screws. For September, Beloved Baby Company will begin September with 380 screws in its beginning inventory. Beloved Baby Company has budgeted stroller sales of 530 strollers, while 570 strollers are scheduled to be produced. How many screws should Beloved Baby Company purchase for September?A) 150B) 4,180C) 4,940D) 4,560Answer: BExplanation: B) Production 570 × 8 = 4,560 - 380 (BI) = 4,180Diff: 2LO: 9-2EOC: E9-19AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


102) The Porch Cushion Company manufactures foam cushions. The number of cushions to be produced in the upcoming three months follows:

Number of foam cushions to be produced in July 12,000Number of foam cushions to be produced in August 15,000Number of foam cushions to be produced in September 10,000Each cushion requires 2 pounds of the foam used as stuffing. The company has a policy that the ending inventory of foam each month must be equal to 25% of the following month's expected production needs. How many pounds of foam does The Porch Cushion Company need to purchase in August?A) 27,500B) 20,000C) 22,500D) 42,500Answer: AExplanation: A) August Production 15,000 × 25% = 3,750 September Production 10,000 × 25% = 2,500

Now Production August 15,000Less BI - 3,750Plus EI + 2,500Equals Purchases 13,750 × 2 pounds = 27,500 Diff: 2LO: 9-2EOC: E9-19AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

103) Mighty Corporation manufactures end tables. Each end table requires .50 direct labor hours in its production. Mighty Corporation has a direct labor rate of $15 per direct labor hour. The production budget shows that Mighty Corporation plans to produce 1,000 end tables in March and 1,100 end tables in April. What is the total combined direct labor cost that should be budgeted for March and April?A) 8,250B) 7,500C) 15,750D) 31,500Answer: CExplanation: C) March production 1,000+ April production 1,100Total 2,100 × .5 = 1,050 hours × $ 15 = $ 15,750 Diff: 2LO: 9-2EOC: E9-21AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

104) Forty Winks Corporation manufactures night stands. The production budget shows that Forty Winks Corporation plans to produce 1,200 night stands in March and 1,050 night stands in April. Each night stand requires .50 direct labor hours in its production. Forty Winks Corporation has a direct labor rate of $12 per direct labor hour. What is the total combined direct labor cost that should be budgeted for March and April?


A) 6,300B) 7,200C) 27,000D) 13,500Answer: DExplanation: D) March production 1,200+ April production 1,050Total 2,250 × .5 = 1,125 hours × $ 12 = $ 13,500 Diff: 2LO: 9-2EOC: E9-21AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


105) List the operating budgets. Describe the purpose of each of the budgets listed and the order in which they are prepared. Describe how the budgets are interrelated.

Answer: The operating budgets are as follows:1. Sales budget — shows the number of units to be sold and the total sales revenue.2. Production budget — shows the number of units to be produced to support the sales to be made.3. Direct materials budget — shows the amount and dollar amount of direct materials to be purchased to support the production budget.4. Direct labor budget — shows the number of direct labor hours required to support the number of products to be purchased from the production budget.5. Manufacturing overhead budget — shows the budgeted manufacturing overhead to be incurred to support the number of units being produced as denoted on the production budget.6. Operating expenses budget — all research and development, design, marketing, distribution, and customer service costs will be shown on the operating expenses budget.7. Budgeted income statement — is constructed after preparing all of the above budgets.The operating budgets are the budgets needed to run the daily operations of the company. The operating budgets culminate in a budgeted income statement. The starting point of the operating budgets is the sales budget, because it affects most other components of the master budget. After estimating sales, manufacturers prepare the production budget, which determines how many units need to be produced. Once production volume is established, managers prepare the budgets determining the amounts of direct materials, direct labor, and manufacturing overhead that will be needed to meet production. Next, managers prepare the operating expenses budget. After all of these budgets are prepared, management will be able to prepare the budgeted income statement.Diff: 2LO: 9-2EOC: E9-23AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


106) Carlton Cookie Company produces a hand-processed gourmet cookie that is made with organic sugar. Five (5) pounds of organic sugar are required per batch of gourmet cookies. The organic sugar costs $2.40 per pound. The company needs to have 20% of the following month's production needs of organic sugar in ending inventory so it is on hand to start each month. A total of 120 pounds of organic sugar are expected to be on hand on April 1.

1. Budgeted production of the gourmet cookies for the first four months of the upcoming year is as follows:

Number of batches of cookies to be produced in January 600Number of batches of cookies to be produced in February 750Number of batches of cookies to be produced in March 800Number of batches of cookies to be produced in April 700

Required:

Prepare a direct materials budget for organic sugar for each of the months in the second quarter and for the second quarter in total. Include both the quantity of sugar to be purchased and the cost of the purchases in each month.Answer:

Diff: 3LO: 9-2EOC: E9-21AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


107) Frisbee Enterprises produces frisbees. Frisbee Enterprises has the following sales projections for the upcoming year:

First quarter budgeted frisbee sales in units 20,000Second quarter budgeted frisbee sales in units 35,000Third quarter budgeted frisbee sales in units 22,000Fourth quarter budgeted frisbee sales in units 30,000

Inventory at the beginning of the year was 6,000 frisbees. Frisbee Enterprises wants to have 30% of the next quarter's sales in units on hand at the end of each quarter. How many frisbees should Frisbee Enterprises produce during the first quarter? Show your calculations.Answer: Finished goods inventory at end of each quarter, as percent of next quarter's budgeted unit sales 30%Second quarter budgeted frisbee sales in units 35,000First quarter ending inventory 10,500

First quarter ending inventory 10,500First quarter budgeted frisbee sales in units 20,000Beginning frisbee inventory in units (6,000)Units to produce 24,500



108) Birch Company manufactures coffee makers. The following selected data relates to Birch Company's budgeted sales and inventory levels of the coffee makers for the upcoming quarter. How many coffee makers should Birch Company produce in November? Show your calculations.

October expected unit sales 1,000November expected unit sales 1,500December expected unit sales 3,300October desired ending unit finished goods inventory 800November desired ending unit finished goods inventory 950December desired ending unit finished goods inventory 600

Answer: November desired ending unit finished goods inventory 950November expected unit sales 1,500October desired ending unit finished goods inventory (800)Units to produce 1,650


109) Sally Scooters manufactures and sells scooters. Each scooter requires two rear view mirrors. For September, Sally Scooters has budgeted sales of 415 scooters, while 450 scooters are scheduled to be produced. Sally Scooters will begin September with 220 rear view mirrors in its beginning inventory. How many rear view wheels should Sally Scooters purchase for September?Answer: 680

Budgeted number of scooters to be produced 450Rear view mirrors per scooter 2Mirrors to be used 900Number of mirrors in beginning inventory (220)Rear view mirrors to purchase 680



110) Pristine Yards Manufacturing produces weed whackers. On March 31, Pristine Yards Manufacturing had 144 weed whackers in inventory. The company has a policy that the ending inventory in any month must be 12% of the following month's expected sales. Pristine Yards Manufacturing expects to sell the following number of weed whackers in each of the next four months:

Required:

Prepare a production budget for the second quarter, with a column for each month and for the quarter.Answer:



111) Flawless Lawns Manufacturing produces lawn edgers. The company has a policy that the ending inventory in any month must be 10% of the following month's expected sales. On March 31, Flawless Lawns Manufacturing had 140 lawn edgers in inventory. Flawless Lawns Manufacturing expects to sell the following number of lawn edgers in each of the next four months:

Required:

Prepare a production budget for the second quarter, with a column for each month and for the quarter.Answer:



112) Timber Run Company has prepared the following forecasts of monthly sales:

January February March AprilSales (in units) 3,400 4,790 3,570 3,210

Timber Run Company has decided that the number of units in its inventory at the end of each month should equal 80% of next month's sales. The budgeted cost per unit is $10.

How many units should be in January's beginning inventory?Answer: January unit sales 3,400Ending inventory (% next month's sales) 80%January unit beginning inventory 2,720


113) A cash collections budget is focused on the timing of cash receipts.Answer: TRUEDiff: 1LO: 9-3EOC: E9-31AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

114) A company's plan for purchases of property, plant, equipment, and other long-term assets is part of the budgeted balance sheet.Answer: TRUEDiff: 1LO: 9-3EOC: E9-31AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


115) The budgeted cash collections from credit customers generally only reflect sales made in the current month.Answer: FALSEDiff: 1LO: 9-3EOC: E9-26AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

116) The cash budget is prepared before the operating budget.Answer: FALSEDiff: 1LO: 9-3EOC: E9-26AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

117) The cash budget is prepared before the budgeted balance sheet is prepared.Answer: TRUEDiff: 1LO: 9-3EOC: E9-26AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

118) The cash budget helps managers determine whether or not the company will need financing in a given month.Answer: TRUEDiff: 1LO: 9-3EOC: E9-28AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

119) Budget committee is a what-if technique that asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes.Answer: FALSEDiff: 1LO: 9-3EOC: E9-26AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

120) A company sells goods and offers credit terms of "net 30 days." What does this mean for the company that sold the goods?A) It does not have to ship the goods for 30 daysB) It cannot recognize the sales credit for 30 daysC) It offers a 30% discount for customers that use credit cards.D) The customer has up to 30 days to pay back the seller for the goods purchased without penalty. Answer: D



121) Which of the following items would be shown on a cash payments budget?A) Bad debt expense B) Depreciation expenseC) Cash dividendsD) Gains on sales of equipmentAnswer: CDiff: 1LO: 9-3EOC: E9-26AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

122) Which of the following types of cash outlays has its own budget?A) Capital expendituresB) DividendsC) Income taxesD) All of the aboveAnswer: ADiff: 1LO: 9-3EOC: E9-31AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


123) All of the following are shown on the combined cash budget exceptA) projected cash balance at the end of the month.B) projected cash collections and cash payments.C) projected borrowings and repayments.D) All of the above are shown on the combined cash budgetAnswer: DDiff: 1LO: 9-3EOC: E9-28AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

124) A company should ________ when projecting cash receipts for a given month. A) include only cash collections from sales made in that monthB) only list COD sales made in that monthC) only list credit sales made in that monthD) include cash to be collected in that month regardless of when the sale was madeAnswer: DDiff: 1LO: 9-3EOC: E9-28AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

125) "Financial budget" is best described by which of the following? A) A company's plan for purchases of property, plant and equipment, and other long-term assets B) A budget that projects cash inflows and outflows and the end of period budgeted balance sheetC) A budget that shows projected sales, purchases and operating expensesD) A system for evaluating the performance of each responsibility center and its managerAnswer: BDiff: 1LO: 9-3EOC: E9-30AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


126) "Capital expenditures budget" is best described by which of the following?A) Details as to how the company expects to go from the beginning cash balance to the desired ending cash balanceB) A system for evaluating the performance of each responsibility center and its managerC) A company's plan for purchases of property, plant and equipment, and other long-term assetsD) A budget that projects cash inflows and outflows and the end of period budgeted balance sheetAnswer: CDiff: 1LO: 9-3EOC: E9-33AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

127) The ________ technique asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes.A) sensitivity analysisB) ratio analysisC) risk analysisD) strategic analysisAnswer: ADiff: 1LO: 9-3EOC: S9-2AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

128) "Cash budget" is best defined by which of the following?A) A company's plan for purchases of property, plant and equipment, and other long-term assetsB) Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance C) A system for evaluating the performance of each responsibility center and its managerD) A budget that projects cash inflows and outflows and the end of period budgeted balance sheetAnswer: BDiff: 1LO: 9-3EOC: E9-28AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


129) Which of the following budgets projects cash inflows and outflows and the budgeted balance sheet?A) Purchases budgetB) Capital expenditures budgetC) Financial budgetD) Cash budgetAnswer: CDiff: 1LO: 9-3EOC: E9-28AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

130) Which of the following is an example of a financial budget?A) Budgeted balance sheetB) Sales budgetC) Budgeted income statementD) Operating expenses budgetAnswer: ADiff: 1LO: 9-3EOC: E9-31AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

131) All of the following are considered when preparing the cash budget exceptA) payments for inventory.B) cash receipts from customers.C) depreciation expense.D) cash payments to suppliers.Answer: CDiff: 1LO: 9-3EOC: E9-28AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


132) The final step in the preparation of the financial budget is the preparation of which of the following?A) Master budgetB) Cash budgetC) Operating budgetsD) Budgeted balance sheetAnswer: DDiff: 2LO: 9-3EOC: E9-28AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

133) Distribution Corporation collects 40% of a month's sales in the month of sale, 55% in the month following sale, and 5% in the second month following sale. Budgeted sales for the upcoming four months are:

April budgeted sales $100,000May budgeted sales $150,000June budgeted sales $230,000July budgeted sales $180,000

The amount of cash that will be collected in July is budgeted to beA) $72,000.B) $179,500.C) $206,000.D) $195,500.Answer: CExplanation: C) May Sales $ 150,000 × 5% = $ 7,500June Sales 230,000 × 55% = 126,500July Sales 180,000 × 40% = 72,000

Total $ 206,000Diff: 2LO: 9-3EOC: E9-26AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


134) Eastern Corporation collects 10% in the second month following sale, 55% in the month following sale and 35% of a month's sales in the month of sale. Budgeted sales for the upcoming four months are:

April budgeted sales $100,000May budgeted sales $150,000June budgeted sales $230,000July budgeted sales $180,000

The amount of cash that will be collected in July is budgeted to beA) $63,000.B) $204,500.C) $173,000.D) $197,000.Answer: BExplanation: B) May Sales $ 150,000 × 10% = $ 15,000June Sales 230,000 × 55% = 126,500July Sales 180,000 × 35% = 63,000



135) Natcher Corporation collects 30% of a month's sales in the month of sale, 55% in the month following sale, and 10% in the second month following sale. The company has found that 5% of their sales are uncollectible. Budgeted sales for the upcoming four months are:

August budgeted sales $300,000September budgeted sales $280,000October budgeted sales $330,000November budgeted sales $260,000

The amount of cash that will be collected in November is budgeted to beA) $287,500.B) $283,000.C) $78,000.D) $291,500.Answer: AExplanation: A) Sept. Sales $ 280,000 × 10% = $28,000Oct. Sales 330,000 × 55% =181,500Nov. Sales 260,000 × 30% = 78,000



136) Sharon Corporation collects 15% in the second month following sale, 45% in the month following sale and 35% of a month's sales in the month of sale. The company has found that 5% of their sales are uncollectible. Budgeted sales for the upcoming four months are:

August budgeted sales $300,000September budgeted sales $280,000October budgeted sales $330,000November budgeted sales $260,000

The amount of cash that will be collected in November is budgeted to beA) $286,500.B) $285,500.C) $91,000.D) $281,500.Answer: DExplanation: D) Sept. Sales $ 280,000 × 15% = $42,000Oct. Sales 330,000 × 45% =148,500Nov. Sales 260,000 × 35% = 91,000


137) Einstein Company is preparing its cash budget for the upcoming month. The beginning cash balance for the month is expected to be $14,000. Budgeted cash receipts are $84,000, while budgeted cash disbursements are $72,000. Einstein Company wants to have an ending cash balance of $40,000. The excess (deficiency) of cash available over disbursements for the month would beA) $170,000.B) $(26,000).C) $112,000.D) $26,000.Answer: DExplanation: D) Beginning Cash $ 14,000Cash Receipts + 84,000Cash Disbursements -72,000Cash Available $ 26,000Diff: 2LO: 9-3EOC: E3-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

138) Wriston Company is preparing its cash budget for the upcoming month. The beginning cash balance for the month is expected to be $12,000. Budgeted cash disbursements are $70,500, while budgeted cash receipts are $86,100. Wriston Company wants to have an ending cash balance of $40,000. The excess (deficiency) of cash available over disbursements for the month would beA) $27,600.


B) $168,600.C) $(27,600).D) $110,500.Answer: AExplanation: A) Beginning Cash $ 12,000Cash Receipts + 86,100Cash Disbursements -70,500Cash Available $ 27,600Diff: 2LO: 9-3EOC: E3-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

139) Roman Company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $40,000. Budgeted cash receipts are $101,000, while budgeted cash disbursements are $123,000. Roman Company wants to have an ending cash balance of $45,000. How much would Roman Company need to borrow to achieve its desired ending cash balance?A) $18,000B) $27,000C) $23,000D) $63,000Answer: BExplanation: B) Beginning Cash $ 40,000Cash Receipts +101,000Cash Disbursements -123,000Cash Available $ 18,000Desired Balance -45,000Borrow = 27,000Diff: 2LO: 9-3EOC: E3-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


140) Brockman Company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $35,000. Budgeted cash disbursements are $123,000, while budgeted cash receipts are $130,000. Brockman Company wants to have an ending cash balance of $48,000. How much would Brockman Company need to borrow to achieve its desired ending cash balance?A) $6,000B) $90,000C) $42,000D) $55,000Answer: AExplanation: A) Beginning Cash $ 35,000Cash Receipts + 130,000Cash Disbursements - 123,000Cash Available $ 42,000Desired Balance - 48,000Borrow = 6,000Diff: 2LO: 9-3EOC: E3-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


141) BusyBody Company expects its November sales to be 20% higher than its October sales of $180,000. Purchases were $110,000 in October and are expected to be $160,000 in November. All sales are on credit and are collected as follows: 35% in the month of the sale and 60% in the following month. Purchases are paid 40% in the month of purchase and 60% in the following month. The cash balance on November 1 is $13,500. The cash balance on November 30 will beA) $4,100.B) $53,600.C) $67,100.D) $40,100.Answer: CExplanation: C) Oct. Sales $ 180,000 × 60% = 108,000Nov. Sales 180,000 × 1.2% = 216,000 × 35% = 75,600Total Cash Receipts 183,600

Oct. Purchases $110,000 × 60% = 66,000Nov. Purchases 160,000 × 40% = 64,000 Total Cash Disbursements $ 130,000

Beginning Cash $ 13,500Cash Receipts + 183,600Cash Disbursements - 130,000 Ending Cash $ 67,100 Diff: 3LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


142) Romona Company expects its November sales to be 20% higher than its October sales of $165,000. All sales are on credit and are collected as follows: 35% in the month of the sale and 60% in the following month. Purchases were $110,000 in October and are expected to be $140,000 in November. Purchases are paid 40% in the month of purchase and 60% in the following month. The cash balance on November 1 is $13,500. The cash balance on November 30 will beA) $46,300.B) $59,800.C) $2,050.D) $32,800.Answer: BExplanation: B) Oct. Sales $ 165,000 × 60% = 99,000Nov. Sales 165,000 × 1.2% = 198,000 × 35% = 69,300Total Cash Receipts 168,300

Oct. Purchases $110,000 × 60% = 66,000Nov. Purchases 140,000 × 40% = 56,000 Total Cash Disbursements $ 122,000

Beginning Cash $ 13,500Cash Receipts + 168,300Cash Disbursements - 122,000 Ending Cash $ 59,800 Diff: 3LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

143) June sales were $5,000 while projected sales for July and August were $6,500 and $7,000, respectively. Sales are 35% cash and 65% credit. All credit sales are collected in the month following the sale. What are the expected collections for July?A) $7,975B) $5,525C) $6,825D) $5,975Answer: BExplanation: B) July Cash Sales $ 6,500 × 35% = $ 2,275Cash Collections on account June 5,000 × 65% = 3,250Total Collections $ 5,525Diff: 2LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

144) June sales were $6,000 while projected sales for July and August were $8,500 and $7,000, respectively. All credit sales are collected in the month following the sale. Sales are 75% credit and 25% cash. What are the expected collections for July?A) $8,375B) $7,875C) $7,375


D) $6,625Answer: DExplanation: D) July Cash Sales $ 8,500 × 25% = $ 2,125Cash Collections on account June 6,000 × 75% = 4,500Total Collections $ 6,625Diff: 2LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

145) Purchases for May were $60,000, while expected purchases for June and July are $75,000 and $92,000, respectively. All purchases are paid 35% in the month of purchase and 65% the following month. At what amount are June payments for purchases budgeted?A) $69,750B) $65,250C) $86,050 D) $97,450Answer: BExplanation: B) May $ 60,000 × 65% = $ 39,000June 75,000 × 35%= 26,250Total $ 65,250Diff: 2LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


146) Expected purchases for June and July are $80,000 and $92,000, respectively. Purchases for May were $60,000. All purchases are paid 45% in the month of purchase and 55% the following month. At what amount are June payments for purchases budgeted?A) $69,000B) $71,000C) $86,600 D) $110,400Answer: AExplanation: A) May $ 60,000 × 55% = $ 33,000June 80,000 × 45% = 36,000Total $ 69,000Diff: 2LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

147) McEwen Company has budgeted the following credit sales during the last four months of the year: September, $16,000; October, $22,000; November $21,000; December, $24,000. Experience has shown that payment for the credit sales is received as follows: 20% in the month of sale, 55% in the first month after sale, 20% in the second month after sale, and 5% uncollectible. How much cash can McEwen Company expect to collect in November as a result of credit sales?A) $15,300B) $19,500C) $16,300D) $19,750Answer: BExplanation: B) Sept. $ 16,000 × 20% = $ 3,200Oct. 22,000 × 55% = 12,100Nov. 21,000 × 20% = 4,200Total $19,500Diff: 2LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


148) For Dubinsky Company, experience has shown that payment for the credit sales is received as follows: 10% in the month of sale, 65% in the first month after sale, 20% in the second month after sale, and 5% uncollectible. Dubinsky Company has budgeted the following credit sales during the last four months of the year: September, $20,000; October, $24,000; November $22,000; December, $28,000. How much cash can Dubinsky Company expect to collect in November as a result of credit sales?A) $17,800B) $19,600C) $21,800D) $22,000Answer: CExplanation: C) Sept. $ 20,000 × 20% = $ 4,000Oct. 24,000 × 65% = 15,600Nov. 22,000 × 10% = 2,200Total $21,800Diff: 2LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

149) Kennedy Enterprises has budgeted sales for the months of September and October at $120,000 and $150,000, respectively. Monthly sales are 70% credit and 30% cash. Of the credit sales, 20% are collected in the month of sale and 80% are collected in the following month. What are the October cash collections from customers?A) $133,200B) $66,000C) $189,000D) $88,200Answer: AExplanation: A) Sept. Sales $ 120,000 × 70% = 84,000 × 80% = $67,200Oct. Sales 150,000 × 70% = 105,000 × 20% = 21,000Total collections on account

Cash sales $ 150,000 × 30% = 45,000Total Cash collected $ 133,200



150) Hammond's Cookie Toppings makes payments on its inventory purchases as follows: 25% in the month of purchase, 65% in the following month, and 10% in the second month following purchase. Budgeted inventory purchases for June, July, and August are $15,000, $19,000 and $24,000, respectively. At what amount are cash payments for inventory in August budgeted?A) $18,500B) $7,850C) $5,800D) $19,850Answer: DExplanation: D) June $ 15,000 × 10%$ 1,500July 19,000 × 65 % 12,350Aug. 24,000 × 25% 6,000Total $ 19,850Diff: 2LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

151) Cave Hardware's forecasted sales for April, May, June, and July are $200,000, $230,000, $190,000, and $240,000, respectively. Sales are 65% cash and 35% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 75% of sales and ending inventory is maintained at $60,000 plus 10% of the following month's cost of goods sold. All inventory purchases are paid 22% in the month of purchase and 78% in the following month.

What are the cash collections budgeted for June?A) $150,500B) $193,500C) $123,500D) $204,000Answer: DExplanation: D) May Sales$230,000 × 35% = 80,500 × 100% = $ 80,500June 190,000 × 35% = 66,500 × 00 = 00000Cash Sales June $190,000 × 65% 123,500Total Cash Collected 204,000Diff: 3LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


152) Cave Hardware's forecasted sales for April, May, June, and July are $200,000, $230,000, $190,000, and $240,000, respectively. Sales are 65% cash and 35% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 75% of sales and ending inventory is maintained at $60,000 plus 10% of the following month's cost of goods sold. All inventory purchases are paid 22% in the month of purchase and 78% in the following month.

What are the budgeted cash payments in June for inventory purchases?A) $495,000B) $315,750C) $164,385D) $167,415Answer: CExplanation: C) Ending Inventory April $60,000 + (10% × 172,500) = $77,250May 60,000 + (10% × 142,500) = 74,250June 60,000 + (10% × 180,000) = 78,000

Cost of Goods Sold May $230,000 × 75% = 172,500June 190,000 × 75% = 142,500July 240,000 × 75% = 180,000

May JuneCost of Goods sold$ 172,500 142,500+Ending Inventory 74,250 78,000-Beginning Inventory77,250 74,250=Purchases 169,500 146,250

× 78% × 22%Cash Payments 132,210 + 32,175 = $ 164,385Diff: 3LO: 9-3EOC: E9-28AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


153) Cave Hardware's forecasted sales for April; May; June; and July are $200,000; $230,000; $190,000; and $240,000; respectively. Sales are 65% cash and 35% credit with all accounts receivables collected in the month following the sale. Cost of goods sold is 75% of sales and ending inventory is maintained at $60,000 plus 10% of the following month's cost of goods sold. All inventory purchases are paid 22% in the month of purchase and 78% in the following month.

What is the balance of accounts payable on the June 30 budgeted balance sheet?A) $32,175B) $108,225 C) $146,250D) $114,075Answer: DExplanation: D) June sales 190,000Cost of goods sold (% of sales) 75%June cost of goods sold $ 142,500

July sales $ 240,000Cost of goods sold (% of sales) 75%July cost of goods sold $ 180,000

June cost of goods sold $ 142,500Additional ending inventory (% of next month's cost of goods sold) 10%Additional ending inventory $ 14,250Minimum ending inventory $ 60,000June beginning inventory/May ending inventory $ 74,250

July cost of goods sold $ 180,000Additional ending inventory (% of next month's cost of goods sold) 10%Additional ending inventory $ 18,000Minimum ending inventory $ 60,000July beginning inventory/June ending inventory $ 78,000

June cost of goods sold $ 142,500July beginning inventory/June ending inventory $ 78,000June beginning inventory/May ending inventory $ (74,250)June purchases $ 146,250

June purchases $ 146,250Inventory payments month after purchase 78%Accounts payable balance at the end of June $ 114,075



154) Two Brothers Moving prepared the following sales budget:

Month Cash Sales Credit SalesMarch $20,000 $10,000April $36,000 $16,000May $42,000 $40,000June $54,000 $48,000

Credit collections are 25% in the month of sale, 60% in the month following the sale, and 10% two months following the sale. The remaining 5% is expected to be uncollectible.

What are the total cash collections in May?A) $62,600B) $20,600C) $65,000D) $76,100Answer: AExplanation: A) March Sales $ 10,000 × 10% = $1,000April Sales 16,000 × 60% = 9,600May Sales 40,000 × 25% = 10,000Total $ 20,600Plus May Cash Sales 42,000Total $ 62,600Diff: 2LO: 9-3EOC: E9-26AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What are the total cash collections in June?A) $37,600B) $86,800C) $91,600D) $96,300Answer: CExplanation: C) June credit sales $ 48,000Credit collections month of sale 25%Collections from June credit sales $ 12,000

May credit sales $ 40,000Credit collections month after sale 60%Collections from May credit sales $ 24,000

April credit sales $ 16,000Credit collections 2 months after sale 10%Collections from April credit sales $ 1,600

June cash sales $ 54,000Collections from June credit sales $ 12,000Collections from May credit sales $ 24,000Collections from April credit sales $ 1,600Total June cash collections $ 91,600






What is the total cash received in April from April sales?A) $40,000B) $4,000C) $38,500D) $2,500Answer: AExplanation: A) April credit sales $ 16,000Credit collections month of sale 25%Collections from April credit sales $ 4,000

April cash sales $ 36,000Collections from April credit sales $ 4,000Total cash received from April sales $ 40,000



157) Feeney Furniture prepared the following sales budget:


Credit collections are 15% two months following the sale, 50% in the month following the sale and 30% in the month of sale. The remaining 5% is expected to be uncollectible.

What are the total cash collections in May?A) $21,500B) $63,500C) $65,900D) $75,600Answer: BExplanation: B) March Sales $ 10,000 × 15% =$1,500April Sales 16,000 × 50% = 8,000May Sales 40,000 × 30% =12,000Total $ 21,500Plus May Cash Sales 42,000Total $ 63,500Diff: 2LO: 9-3EOC: E9-26AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget




Credit collections are 15% two months following the sale, 50% in the month following the sale, and 30% in the month of sale. The remaining 5% is expected to be uncollectible.

What are the total cash collections in June?A) $36,800B) $90,800C) $86,000D) $96,600Answer: B

Explanation: B) June credit sales $ 48,000Credit collections month of sale 30%Collections from June credit sales $ 14,400

May credit sales $ 40,000Credit collections month after sale 50%Collections from May credit sales $ 20,000

April credit sales $ 16,000Credit collections 2 months after sale 15%Collections from April credit sales $ 2,400

June cash sales $ 54,000Collections from June credit sales $ 14,400Collections from May credit sales $ 20,000Collections from April credit sales $ 2,400Total June cash collections $ 90,800





Credit collections are 15% two months following the sale, 50% in the month following the sale, and 30% in the month of sale. The remaining 5% is expected to be uncollectible.

What is the total cash received in April from April sales?A) $4,800B) $39,000C) $3,000D) $40,800Answer: DExplanation: D) April credit sales $ 16,000Credit collections month of sale 30%Collections from April credit sales $ 4,800

April cash sales $ 36,000Collections from April credit sales $ 4,800Total cash received from April sales $ 40,800



160) Goliath Company prepared the following purchases budget:

Month Budgeted PurchasesJune $35,600July $42,500August $39,600September $45,800October $49,400

All purchases are paid for as follows: 30% in the month of purchase, 45% in the following month, and 25% two months after purchase.

What are the cash disbursements in August for June purchases?A) $10,680B) $20,610C) $16,020D) $8,900Answer: DExplanation: D) $ 35,600 × 25% = $ 8,900Diff: 1LO: 9-3EOC: E9-27AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What are the cash disbursements in October for September purchases?A) $20,610B) $11,450C) $8,900D) $152,667Answer: AExplanation: A) $45,800 × 45% = $ 20,610Diff: 1LO: 9-3EOC: E9-27AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What are the total cash disbursements in August for the purchase of merchandise?A) $45,330B) $31,005C) $39,905D) $11,880Answer: C

Explanation: C) August purchases $ 39,600Payment month of purchase 30%Disbursements from August purchases $ 11,880

July purchases $ 42,500Payment month after purchase 45%Disbursements from July purchases $ 19,125

June purchases $ 35,600Payment 2 months after purchase 25%Disbursements from June purchases $ 8,900

Disbursements from August purchases $ 11,880Disbursements from July purchases $ 19,125Disbursements from June purchases $ 8,900Total August cash disbursements $ 39,905






What are the total cash disbursements in October for the purchase of merchandise?A) $45,330B) $39,905C) $14,820D) $35,430Answer: AExplanation: A) Aug. Purchases $ 39,600 × 25% = $ 9,900Sept. 45,800 × 45% = 20,610Oct. 49,400 × 30% = 14,820Total $ 45,330Diff: 2LO: 9-3EOC: E9-27AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


164) Lough Company prepared the following purchases budget:


All purchases are paid for as follows: 20% two months after purchase, 55% in the following month, and 25% in the month of purchase.

What are the cash disbursements in August for June purchases?A) $8,000B) $25,300C) $22,000D) $10,000Answer: AExplanation: A) $ 40,000 × 20% = $ 8,000Diff: 1LO: 9-3EOC: E9-27AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What are the cash disbursements in October for September purchases?A) $9,200B) $25,300C) $8,000D) $184,000Answer: BExplanation: B) $ 46,000 × 55% = $ 25,300Diff: 1LO: 9-3EOC: E9-27AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget





What are the total cash disbursements in August for the purchase of merchandise?A) $41,550B) $45,495C) $33,550D) $9,900Answer: A

Explanation: A) August purchases $ 39,600Payment month of purchase 25%Disbursements from August purchases $ 9,900

July purchases $ 43,000Payment month after purchase 55%Disbursements from July purchases $ 23,650

June purchases $40,000Payment 2 months after purchase 20%Disbursements from June purchases $ 8,000

Disbursements from August purchases $ 9,900Disbursements from July purchases $ 23,650Disbursements from June purchases $ 8,000Total August cash disbursements $ 41,550






What are the total cash disbursements in October for the purchase of merchandise?A) $12,275B) $37,575C) $41,550D) $45,495Answer: DExplanation: D) Aug. Purchases $ 39,600 × 20% = $ 7,920Sept. 46,000 × 55% = 25,300Oct. 49,100 × 25% = 12,275Total $ 45,495Diff: 2LO: 9-3EOC: E9-27AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

168) Lakewood Jet Skis has budgeted sales for June and July at $420,000 and $480,000, respectively. Sales are 75% credit, of which 40% is collected in the month of sale and 60% is collected in the following month. What is the accounts receivable balance on July 31?A) $189,000B) $288,000C) $216,000D) $360,000Answer: CExplanation: C) July 480,000 × 75% = 360,000 × 60% = $ 216,000Diff: 1LO: 9-3EOC: E9-30AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


169) Define operating budgets and financial budgets. List the specific budgets which are operating budgets. List the specific budgets which are financial budgets.Answer: Operating budgets:1. sales budget2. production budget3. direct materials budget4. direct labor budget5. manufacturing overhead budget6. operating expenses budget7. budgeted income statement

The operating budgets are the budgets needed to run the daily operations of the company. The operating budgets culminate in a budgeted income statement. The starting point of the operating budgets is the sales budget, because it affects most other components of the master budget. After estimating sales, manufacturers prepare the production budget, which determines how many units need to be produced. Once production volume is established, managers prepare the budgets determining the amounts of direct materials, direct labor, and manufacturing overhead that will be needed to meet production. Next, managers prepare the operating expenses budget. After all of these budgets are prepared, management will be able to prepare the budgeted income statement.

Financial budgets:1. capital expenditures budget2. cash budgets3. budgeted balance sheet

The financial budgets project the collection and payment of cash, as well as forecast the company's budgeted balance sheet. The capital expenditure budget shows the company's plan for purchasing property, plant, and equipment. The cash budget projects the cash that will be available to run the company's operations and determines whether the company will have extra funds to invest or whether the company will need to borrow cash. Finally, the budgeted balance sheet forecasts the company's position at the end of the budget period.Diff: 3LO: 9-3EOC: S9-2AACSB: Analytical ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


170) Beyerly Corporation anticipates the following sales revenue over a five month period:

Byerly Corporation's sales are 40% cash and 60% credit. The Beyerly Corporation's collection history indicates that credit sales are collected as follows:

Month of sale 20%Month after sale 50%Two months after sale 25%Uncollectible 5% Required:Prepare a cash collections budget for each month in the quarter (January, February, and March) and for the quarter in total.Answer:



171) PotatoState Manufacturing is preparing its cash payments budget for the coming month. The following information pertains to the cash payments:a. PotatoState Manufacturing pays for 70% of its direct materials purchases in the month of purchase and the remainder the following month. Last month's direct material purchases were $40,000, while FirstState Manufacturing anticipates $45,000 of direct material purchases this coming month.b. Direct labor for the upcoming month is budgeted to be $25,000 and will be paid at the end of the upcoming month.c. Overhead is estimated to be 150% of direct labor cost each month and is paid in the month in which it is incurred. This monthly estimate includes $8,000 of depreciation on the plant and equipment.d. Monthly operating expenses for next month are expected to be $27,500, which includes $1,500 of depreciation on office equipment and $2,000 of bad debt expense. These monthly operating expenses are paid during the month in which they are incurred. e. PotatoState Manufacturing will be making an estimated tax payment of $6,000 next month.

Required:Prepare a cash payments budget for the month.Answer:



172) The Alec Corporation sells inflatable pools. On June 30, there were 105 pools in ending inventory, and accounts receivable had a balance of $12,000. Sales of inflatable pools (in units) have been budgeted at the following levels for the upcoming months:

Accounts receivable, June 30 $12,000Number of pools budgeted to be sold in July 350Number of pools budgeted to be sold in August 420Number of pools budgeted to be sold in September 370Number of pools budgeted to be sold in October 300 The company has a policy that the ending inventory of inflatable pools should be equal to 30% of the number of pools to be sold in the following month. The Outdoor Leisure Store sells the inflatable pools for $100 each. The company's collection history shows that 30% of the sales in a month are paid for by customers in the month of sale, while the remainder is collected in the following month.

Required:a. Prepare a merchandise purchases budget showing how many pools should be purchased in each of the months including July, August, and September.b. Prepare a cash collections budget for each of the months including July, August, and September.Answer: Part a.Merchandise Purchases Budget July August September OctoberBudgeted unit sales 350 420 370 300Desired ending inventory (30% of next month's sales) 126 111 90Total needs 476 531 460Less beginning inventory 105 126 111Required purchases 371 405 349

PART b.Cash Collections Budget July August SeptemberBudgeted unit sales 350 420 370Selling price per unit $100.00 $100.00 $100.00Budgeted sales $35,000 $42,000 $37,000Accounts receivable, June 30 $12,000July sales $10,500 $24,500August sales $12,600 $29,400September sales $11,100Total cash collections $22,500 $37,100 $40,500


173) A merchandising company will have a production budget.Answer: FALSEDiff: 1LO: 9-5EOC: E3-34


AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

174) The master budget of a service company has fewer individual budget components than does the master budget of a manufacturing company. Answer: TRUEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

175) The operating budgets of retailers and manufacturers are virtually identical.Answer: FALSEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

176) Merchandisers use a "cost of goods sold, inventory, and purchases" budget to calculate the amount of merchandise to purchase. Answer: TRUEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

177) The financial budgets prepared for manufacturers are different than those for merchandising and service companies.Answer: FALSEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

178) Manufacturing, merchandising, and service companies prepare operating expense budgets. Answer: TRUEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

179) Merchandising companies do not prepare a direct materials budget. Answer: TRUEDiff: 1


LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

180) Service companies do not prepare a cash budget. Answer: FALSEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

181) Which of the following types of companies use a direct materials budget? A) ManufacturingB) MerchandisingC) ServiceD) All of the aboveAnswer: ADiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


182) Which of the following types of companies would combine cost of goods sold, inventory, and purchases into one budget?A) ManufacturingB) MerchandisingC) ServiceD) All of the aboveAnswer: BDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

183) Which of the following types of companies use a sales budget? A) ManufacturingB) MerchandisingC) ServiceD) All of the aboveAnswer: DDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

184) Which of the following types of companies use an operating expense budget? A) ManufacturingB) MerchandisingC) ServiceD) All of the aboveAnswer: DDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


185) Which of the following types of companies use a "cost of goods sold, inventory, and purchases" budget?A) MerchandisingB) Manufacturing C) ServiceD) All of the aboveAnswer: ADiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

186) Which of the following types of companies use a capital expenditures budget?A) ManufacturingB) MerchandisingC) ServiceD) All of the aboveAnswer: DDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

187) The format of the "cost of goods sold, inventory, and purchases" budget is as follows:A) desired ending inventory + beginning inventory - cost of goods sold.B) cost of goods sold + desired ending inventory - beginning inventory.C) cost of goods sold - desired ending inventory + beginning inventory.D) desired ending inventory - beginning inventory - cost of goods sold. Answer: BDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


188) Merchandising companies prepare which of the following budgets?A) SalesB) CashC) Operating expenseD) All of the aboveAnswer: DDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

189) All of the following budgets are prepared by service companies exceptA) cost of goods sold, inventory and purchases.B) cash.C) operating expense.D) sales. Answer: ADiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

190) All of the following budgets are prepared by merchandising companies exceptA) sales.B) operating expense.C) direct materials.D) cost of goods sold, inventory and purchases. Answer: CDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


191) All of the following budgets are prepared by merchandising companies exceptA) manufacturing overhead.B) capital expenditures. C) budgeted income statement.D) cash.Answer: ADiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

192) Merchandising companies prepare sales, cash, and operating expense budgets.Answer: TRUEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

193) Service companies do not prepare a cost of goods sold, inventory, and purchases budget.Answer: TRUEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

194) Merchandising companies prepare a direct materials budget. Answer: FALSEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget

195) Merchandising companies prepare a manufacturing overhead budget.Answer: FALSEDiff: 1LO: 9-5EOC: E3-34AACSB: Reflective ThinkingLearning Outcome: Discuss basic budgeting concepts and identify and prepare the budgets that comprise the master budget


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