Questions and Answers
List the individual budgets of the master budget in the order in which they are prepared.
Sales Budget, Production Budget, Direct Materials, Direct Labor, and Factory Overhead Budgets, Cash Budgets.
If a company expects to sell 400 units of Product X in January and expects sales to increase by 10% per month, and Product X sells for $10 each, what will be the total sales for the first quarter of the year?
$13,240
Budgeted performance considers which of the following in relation to a benchmark? (Select all that apply)
What is the primary purpose of using short-term budgets?
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A production budget is unique in that it does not show costs; it is always expressed in units of product.
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A _____ budget is continually revised as time passes.
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Units to be produced in January will be?
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A manufacturing company would typically prepare all of the following budgets except?
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What is the first step in preparing the master budget?
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The _____ function requires that management evaluate operations against some norm.
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The formula to determine the materials to be purchased is?
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A manufacturer will prepare a _____ budget which shows the number of units to be produced during a period.
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The formula to compute the budgeted direct labor cost is?
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Units that need to be produced in the second quarter will be?
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The total budgeted overhead cost will be?
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What are the fixed costs per unit if direct materials are $15, direct labor is $7, and variable overhead costs are $2?
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The total cost of direct materials purchases for May will be?
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The total cost of direct labor for the month will be?
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The total budgeted overhead cost will be?
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If direct materials per unit are $20, direct labor per unit is $10, variable overhead per unit is $2, and fixed overhead per unit is $1, what is the total product cost per unit?
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The preliminary cash balance is?
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The total general and administrative expenses on the January general and administrative expense budget will be?
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The reporting of expected cash receipts and cash payments related to the sale and purchase of plant assets is reported on the _____ expenditures budget.
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If a company prepared a cash budget and has a preliminary cash balance of $25,000, what should the company do?
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The total cash receipts collected during March will be?
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What is the ending cash balance if HN Company had a beginning cash balance of $50,000, cash payments of $15,000, and a loan balance with the bank of $7,000 and maintains a minimum cash balance of $30,000?
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Cash payments for June for direct materials will be?
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Depreciation on non-manufacturing assets and property taxes are considered general and administrative expenses and, therefore, are included on the general and administrative expense budget.
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Which of the following items would be included on the capital expenditures budget? (Check all that apply)
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The preliminary cash balance is?
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The total cash collected during March will be?
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In order to maintain the desired cash balance of $50,000, the company will need to?
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The budget which shows predicted amounts of the company's assets, liabilities, and equity as of the end of the budget period is called the?
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Study Notes
Master Budgets Overview
- Master budgets consist of individual budgets, prepared in the following order: Sales Budget, Production Budget, Direct Materials, Direct Labor, and Factory Overhead Budgets, and Cash Budgets.
Sales Expectations
- Product X sales are projected to increase by 10% monthly, starting from 400 units in January, leading to total sales of $13,240 for the first quarter.
Budgeted Performance Considerations
- Budgeted performance evaluation involves assessing Economic, Company, and Industry Factors against a benchmark.
Short-term Budgets
- Short-term budgets primarily aim to evaluate performance and facilitate corrective measures.
Production Budget Characteristics
- The production budget is unique as it indicates quantities only, not costs, and serves as the foundational budget in the master budget process.
Continuous Budgeting
- A continuous budget is revisited and updated regularly as time progresses.
Production Needs Calculation
- Units to be produced in January are calculated to be 26,500, based on sales projections and inventory requirements.
Manufacturing Budgeting
- A manufacturing company does not typically prepare a Merchandise Inventory Budget.
Master Budget Preparation
- The process of preparing the master budget begins with the Sales Budget.
Management Control
- The control function in budgeting requires management to evaluate operational effectiveness against predetermined norms.
Material Purchases Formula
- The required materials for purchase can be determined using the formula: Units to produce x materials needed per unit + desired ending inventory - beginning inventory = materials to purchase.
Direct Labor Cost Calculation
- The budgeted direct labor cost formula is: Units to produce x direct labor hours per unit x direct labor rate = total direct labor cost.
Production and Inventory Goals
- For the second quarter, producing 509 units requires consideration of beginning and desired ending inventory amounts.
Overhead Cost Calculation
- Total budgeted overhead costs combine fixed costs and variable costs derived from budgeted labor hours and overhead rates.
Product Cost Analysis
- Total product costs per unit are derived from direct materials, labor, variable overhead, and fixed overhead, resulting in specified per unit costs.
Cash Flow Management
- A company's preliminary cash balance can be determined by assessing cash receipts, payments, and outstanding loans.
General and Administrative Expenses
- Total general and administrative expenses must be calculated based on all relevant costs, including salaries, commissions, advertising, and depreciation.
Capital Expenditures Budget
- Reports on expected cash receipts and cash payments related to plant asset transactions are prepared in the capital expenditures budget.
Loan Management
- Maintaining a minimum cash balance is essential; surplus cash can be utilized for loan repayments.
Cash Receipts and Sales Collection
- Effective cash flow management includes tracking collections from credit sales as they convert into cash in subsequent periods.
Budgeting for Fixed Costs
- Companies must anticipate fixed costs in budgeting to ensure overall financial stability.
Budgeted Balance Sheet
- The budgeted balance sheet forecasts the company's assets, liabilities, and equity at the end of the budget period.
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Description
Explore the fundamentals of master budgets, including their components such as sales, production, and cash budgets. This quiz delves into the evaluation of budgeted performance and the characteristics of short-term and continuous budgeting. Test your understanding of how these concepts interrelate within financial planning.
