Budgeting

Why are budgets useful in the planning process?

• They provide management with information about the company's past performance.
• They help communicate goals and provide a basis for evaluation.
• They guarantee the company will be profitable if it meets its objectives.
• They enable the budget committee to earn their paycheck.

Which one of the following is not a benefit of budgeting?

• It facilitates the coordination of activities.
• It provides definite objectives for evaluating performance.
• It provides assurance that the company will achieve its objectives.
• It requires all levels of management to plan ahead on a recurring basis.

A common starting point in the budgeting process is

• expected future net income.
• past performance.
• to motivate the sales force.
• a clean slate, with no expectations.

If there were 60,000 pounds of raw materials on hand on January 1, 120,000 pounds are desired for inventory at January 31, and 410,000 pounds are required for January production, how many pounds of raw materials should be purchased in January?

• 350,000 pounds
• 530,000 pounds
• 290,000 pounds
• 470,000 pounds

Which of the following is not an operating budget?

• Direct labor budget
• Sales budget
• Production budget
• Cash budget

A master budget consists of

• an interrelated long-term plan and operating budgets.
• financial budgets and a long-term plan
• interrelated financial budgets and operating budgets.
• all the accounting journals and ledgers used by a company.

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory.  

What is the total amount to be budgeted in pounds for direct materials to be purchased for the month?

• 38,280
• 37,680
• 38,880
• 40,200

Pell Manufacturing is preparing its direct labor budget for May. Projections for the month are that 33,400 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $12, what is the total budgeted direct labor cost for May?

• 1,159,200.
• 1,180,800
• 1,202,400.
• 1,296,000.

A company's past experience indicates that 60% of its credit sales are collected in the month of sale, 30% in the next month, and 5% in the second month after the sale; the remainder is never collected.
Budgeted credit sales were:
January  $360,000
February  216,000
March  540,000

The cash inflow in the month of March is expected to be

• $406,800.
• $307,800.
• $324,000.
• $388,800.

Which one of the following items would never appear on a cash budget?

• Office salaries expense
• Interest expense
• Depreciation expense
• Travel expense