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Exam 7: Planning for Profit and Cost Control

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Question 71

Multiple Choice

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How much will the cash payments for purchases be in December?

A) $44,500
B) $50,000
C) $46,000
D) $45,500

E) A) and B)
F) All of the above

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Question 72

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The selling and administrative expense budget is prepared prior to the cash budget.

A) True
B) False

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Question 73

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Which of the following budgets or schedules uses data contained in the selling and administrative expense budget?

What is the amount of budgeted cash collections for June?

Which of the following statements is incorrect?

Hernandez Company expects credit sales for January to be $100,000. Cash sales are expected to be $60,000. The company expects credit and cash sales to increase 10% for the month of February. Credit sales are collected in the month following the month in which sales are made. Based on this information the amount of cash collections in February would be:

Chu Company provided the following information related to its inventory sales and purchases for December Year 1 and the first quarter of Year 2: Desired ending inventory levels are 25% of the following month's projected cost of goods sold. Budgeted purchases of inventory in February Year 2 would be: $\begin{array} { | l | c | c | c | c | } \hline & \text { Dec. Year 1 } & \text { Jan. Year 2 } & \text { Feb. Year 2 } & \text { Mar. Year 2 } \\\hline & \text { (Actual) } & \text { (Budgeted) } & \text { (Budgeted) } & \text { (Budgeted) } \\\hline \text { Cost of goods sold } & \$ 80,000 & \$ 140,000 & \$ 180,000 & \$ 120,000 \\\hline\end{array}$

How much will the cash payments for purchases be in November?

Select the incorrect statement about budgeting committees.

A schedule of cash receipts is often prepared in conjunction with the sales budget.

The following budget information is available for Crescent Company for January Year 2: Sales $ 800,000 Cost of goods sold 540,000 Utilities expense 2,500 Administrative salaries 100,000 Sales commissions 5% of sales Advertising 20,000 Depreciation on store equipment 50,000 Rent on administration building 60,000 Miscellaneous administrative expenses 10,000 Percentage of sales on credit 80% All operating expenses are paid in cash in the month incurred. The amount of expected cash outflow for selling and administrative expenses would be:

Budgeting that involves the development of a master budget to direct the firm's activities over the short-term is referred to as:

When a company's district managers submitted their preliminary budget proposals, top management discovered that the southern district manager had requested a new project management information system. Unfortunately, the system is incompatible with the system used at headquarters. Which of the following advantages of budgeting reduces the likelihood that the company will end up with two incompatible systems?

The master budget includes several individual budgets, which are interdependent. Provide at least two examples of connections (relationships) between budgets.

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?