Test bank managerial accounting by garrison 13e chapter 09

Chapter Profit Planning True/False Questions The usual starting point in budgeting is to make a forecast of net income Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,9 Level: Easy A budget committee helps provide consistency in the budgeting process because it prepares all of the budgets for the various segments of the organization Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy A continuous or perpetual budget is one which covers a 12-month period but which is constantly adding a new month on the end as the current month is completed Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy Control involves developing objectives and preparing the various budgets to achieve those objectives Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy A self-imposed budget is one prepared by top management and passed downward through an organization Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy When using the self-imposed budget approach, it is generally best for top management to accept all budget estimates without question in order to minimize adverse behavioral responses from employees Ans: False AACSB: Reflective Thinking AICPA BB: Resource Management, Critical Thinking LO: Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition AICPA FN: Reporting 9-5 Chapter Profit Planning Cash collections in a schedule of cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy In a production budget, if the number of units in finished goods inventory at the end of the period is less than the number of units in finished goods inventory at the beginning of the period, then the expected number of units sold is greater than the number of units to be produced during the period Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium In a merchandising company, the required merchandise purchases for a period are determined by subtracting the units in beginning inventory from the sum of the units to be sold during the period and the desired ending inventory Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 10 The direct materials to be purchased for a period can be obtained by subtracting the desired ending inventory of direct materials from the total direct materials needed for the period Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium 11 The direct labor budget begins with sales in units from the sales budget Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 12 The selling and administrative expense budget lists all costs of production other than direct materials and direct labor Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6,7 Level: Easy 9-6 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 13 In the manufacturing overhead budget, the non-cash charges (such as depreciation) are deducted from the total budgeted manufacturing overhead to determine the expected cash disbursements for manufacturing overhead Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 14 The selling and administrative expense budget lists the budgeted expenses for areas other than manufacturing Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 15 The disbursements section of a cash budget consists of all cash payments for the period except cash payments for dividends Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium 16 Which of the following budgets are prepared before the sales budget? A) B) C) D) Budgeted Income Statement Direct Labor Budget Yes Yes Yes No No Yes No No Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 17 The usual starting point for a master budget is: A) the direct materials purchase budget B) the budgeted income statement C) the sales forecast or sales budget D) the production budget Ans: C AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-7 Chapter Profit Planning 18 Which of the following budgets are prepared before the cash budget? A) B) C) D) Selling and Administrative Expense Budget Production Budget Yes Yes Yes No No Yes No No Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium 19 Which of the following benefits could an organization reasonably expect from an effective budget program? A) Better control of the organization's costs B) Better coordination of an organization's activities C) Better communication of the organization's objectives D) All of the above Ans: D AACSB: Reflective Thinking AICPA BB: Resource Management, Critical Thinking LO: Level: Easy AICPA FN: Reporting 20 An organization's budget program should not be used: A) to motivate employees B) to assign blame to managers that not meet budgetary goals C) to help evaluate managers D) to allocate resources to the various parts of an organization Ans: B AACSB: Reflective Thinking AICPA BB: Resource Management, Critical Thinking LO: Level: Easy AICPA FN: Reporting 21 A basic idea underlying is that a manager should be held responsible only for those items that the manager can actually control to a significant extent A) participative budgeting B) planning and control C) responsibility accounting D) the master budget Ans: C AACSB: Reflective Thinking AICPA BB: Resource Management, Critical Thinking LO: Level: Easy 9-8 AICPA FN: Reporting Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 22 When preparing a merchandise purchases budget, the required purchases in units equals: A) budgeted unit sales + beginning merchandise inventory + desired merchandise ending inventory B) budgeted unit sales - beginning merchandise inventory + desired merchandise ending inventory C) budgeted unit sales - beginning merchandise inventory - desired merchandise ending inventory D) budgeted unit sales + beginning merchandise inventory - desired merchandise ending inventory Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 23 When preparing a direct materials budget, the required purchases of raw materials in units equals: A) raw materials needed to meet the production schedule + desired ending inventory of raw materials - beginning inventory of raw materials B) raw materials needed to meet the production schedule - desired ending inventory of raw materials - beginning inventory of raw materials C) raw materials needed to meet the production schedule - desired ending inventory of raw materials + beginning inventory of raw materials D) raw materials needed to meet the production schedule + desired ending inventory of raw materials + beginning inventory of raw materials Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 24 Which of the following statements is NOT correct concerning the Manufacturing Overhead Budget? A) The Manufacturing Overhead Budget provides a schedule of all costs of production other than direct materials and labor costs B) The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead C) The Manufacturing Overhead Budget shows the expected cash disbursements for manufacturing overhead D) The Manufacturing Overhead Budget is prepared after the Sales Budget Ans: B AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-9 Chapter Profit Planning 25 Which of the following statements is NOT correct concerning the Cash Budget? A) It is not necessary to prepare any other budgets before preparing the Cash Budget B) The Cash Budget should be prepared before the Budgeted Income Statement C) The Cash Budget should be prepared before the Budgeted Balance Sheet D) The Cash Budget builds on earlier budgets and schedules as well as additional data Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 26 Pitkins Company collects 20% of a month's sales in the month of sale, 70% in the month following sale, and 6% in the second month following sale The remainder is uncollectible Budgeted sales for the next four months are: January February March April Budgeted sales $200,000 $300,000 $350,000 $250,000 Cash collections in April are budgeted to be: A) $321,000 B) $313,000 C) $320,000 D) $292,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy Solution: April sales ($250,000 × 20%) March sales ($350,000 × 70%) February sales ($300,000 × 6%) Total 9-10 $ 50,000 245,000 18,000 $313,000 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 27 Sioux Company is estimating the following sales for the first six months of next year: January February March April May $250,000 $220,000 $240,000 $300,000 $360,000 Sales at Sioux are normally collected as 60% in the month of sale, 35% in the month following the sale, and the remaining 5% being uncollectible Based on this information, how much cash should Sioux expect to collect during the month of April? A) $250,800 B) $264,000 C) $290,700 D) $306,000 Ans: B AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium Solution: April sales ($300,000 × 60%) March sales ($240,000 × 35%) Total $180,000 84,000 $264,000 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-11 Chapter Profit Planning 28 All of Gaylord Company's sales are on account Thirty-five percent of the credit sales are collected in the month of sale, 45% in the month following sale, and the rest are collected in the second month following sale Bad debts are negligible and should be ignored The following are budgeted sales data for the company: Total sales January February March April $50,000 $60,000 $40,000 $30,000 What is the amount of cash that should be collected in March? A) $39,000 B) $37,000 C) $27,500 D) $51,000 Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy Solution: March sales ($40,000 × 35%) February sales ($60,000 × 45%) January sales ($50,000 × 20%*) Total *100% − 35% − 45% = 20% $14,000 27,000 10,000 $51,000 29 On January 1, Barnes Company has 8,000 units of Product A on hand During the year, the company plans to sell 30,000 units of Product A, and plans to have 6,500 units on hand at year end How many units of Product A must be produced during the year? A) 28,500 B) 31,500 C) 30,000 D) 36,500 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy Solution: Units produced = Ending inventory + Units sold − Beginning inventory = 6,500 + 30,000 − 8,000 = 28,500 9-12 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 30 Betz Company's sales budget shows the following projections for next year: First Quarter Second Quarter Third Quarter Fourth Quarter Sales in units 60,000 80,000 45,000 55,000 Inventory at the beginning of the year was 18,000 units The finished goods inventory at the end of each quarter is to equal 30% of the next quarter's budgeted unit sales How many units should be produced during the first quarter? A) 24,000 B) 48,000 C) 66,000 D) 72,000 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium Source: CPA, adapted Solution: Units produced = Ending inventory + Units sold + Beginning inventory = (30% × 80,000) + 60,000 − 18,000 = 24,000 + 60,000 − 18,000 = 66,000 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-13 Chapter Profit Planning 31 The following information relates to Minorca Manufacturing Corporation for next quarter: January February March Expected sales (in units) 440,000 390,000 400,000 Desired ending finished goods inventory (in units) 28,000 30,000 35,000 How many units should Minorca plan on producing for the month of February? A) 360,000 units B) 388,000 units C) 392,000 units D) 420,000 units Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium Solution: Ending inventory + Units sold − Beginning inventory = 30,000 + 390,000 - 28,000 = 392,000 9-14 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 116 Capes Corporation is a wholesaler of industrial goods Data regarding the store's operations follow:       Sales are budgeted at $390,000 for November, $360,000 for December, and $340,000 for January Collections are expected to be 85% in the month of sale, 10% in the month following the sale, and 5% uncollectible The cost of goods sold is 80% of sales The company purchases 40% of its merchandise in the month prior to the month of sale and 60% in the month of sale Payment for merchandise is made in the month following the purchase The November beginning balance in the accounts receivable account is $77,000 The November beginning balance in the accounts payable account is $320,000 Required: a Prepare a Schedule of Expected Cash Collections for November and December b Prepare a Merchandise Purchases Budget for November and December Ans: a Sales Schedule of Expected Cash Collections Accounts receivable November sales December sales Total cash collections b Cost of goods sold Merchandise Purchases Budget November sales December sales January sales Total purchases Disbursements for merchandise Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition November December $390,000 $360,000 $ 77,000 331,500 $408,500 $ 39,000 306,000 $345,000 November December $312,000 $288,000 $187,200 115,200 $302,400 $172,800 108,800 $281,600 $320,000 $302,400 9-69 Chapter Profit Planning AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,3 Level: Medium 9-70 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 117 Clay Company has projected sales and production in units for the second quarter of the coming year as follows: Sales Production April May June 50,000 40,000 60,000 60,000 50,000 50,000 Cash-related production costs are budgeted at $5 per unit produced Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month Selling and administrative expenses will amount to $100,000 per month The accounts payable balance on March 31 totals $190,000, which will be paid in April All units are sold on account for $14 each Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale Accounts receivable on April totaled $500,000 $(90,000 from February's sales and the remainder from March) Required: a Prepare a schedule for each month showing budgeted cash disbursements for the Clay Company b Prepare a schedule for each month showing budgeted cash receipts for Clay Company Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-71 Chapter Profit Planning Ans: a April May June Production units 60,000 50,000 50,000 Cash required per unit × $5 × $5 × $5 Production costs $300,000 $250,000 $250,000 Cash disbursements: Production this month (40%) Production prior month (60%) Selling and administrative Total disbursements April May June $120,000 $100,000 $100,000 190,000 180,000 150,000 100,000 100,000 100,000 $410,000 $380,000 $350,000 Payments relating to the prior month (March) in April represent the balance of accounts payable at March 31 b April May June Sales units 50,000 40,000 60,000 Sales price × $14 × $14 × $14 Total sales $700,000 $560,000 $840,000 April May June Cash receipts: February sales $ 90,000 March sales 307,500 $102,500 April sales 420,000 210,000 $ 70,000 May sales 336,000 168,000 June sales 504,000 Total receipts $817,500 $648,500 $742,000 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,4 Level: Hard 9-72 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 118 The Doley Company has planned the following sales for the next three months: Jan Feb Mar Budgeted sales $40,000 $50,000 $70,000 Sales are made 20% for cash and 80% on account From experience, the company has learned that a month’s sales on account are collected according to the following pattern: Month of sale 60% First month following sale 30% Second month following sale 8% Uncollectible 2% The company requires a minimum cash balance of $5,000 to start a month The beginning cash balance in March is budgeted to be $6,000 Required: a Compute the budgeted cash receipts for March b The following additional information has been provided for March: Inventory purchases (all paid in March) $28,000 Selling and administrative expenses (all paid in March) $40,000 Depreciation expense for March $5,000 Dividends paid in March $4,000 Prepare a cash budget in good form for the month of March, using this information and the budgeted cash receipts you computed for part (1) above The company can borrow in any dollar amount and will not pay interest until April Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-73 Chapter Profit Planning Ans: a Cash sales, March: $70,000 × 20% Collections on account: Jan sales: $40,000 × 80% × 8% Feb sales: $50,000 × 80% × 30% Mar sales: $70,000 × 80% × 60% Total cash receipts b $14,000 2,560 12,000 33,600 $62,160 Cash balance, beginning Add cash receipts from sales Total cash available $ 6,000 62,160 68,160 Less disbursements: Inventory purchases Selling and administrative expenses Dividends Total disbursements Cash excess (deficiency) Financing–borrowing Cash balance, ending 28,000 40,000 4,000 72,000 (3,840) 8,840 $ 5,000 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: 2,8 Level: Medium 9-74 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 119 A sales budget is given below for one of the products manufactured by the Key Co.: January February March April May June 21,000 units 36,000 units 61,000 units 41,000 units 31,000 units 25,000 units The inventory of finished goods at the end of each month should equal 20% of the next month's sales However, on December 31 the finished goods inventory totaled only 4,000 units Each unit of product requires three specialized electrical switches Since the production of these specialized switches by Key's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs This requirement had been met on January of the current year Required: Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March and in total for the quarter Ans: Budgeted sales (units) Add: Desired ending inventory Total needs Deduct: Beginning inventory Units to be produced January February 21,000 36,000 7,200 12,200 28,200 48,200 4,000 7,200 24,200 41,000 March 61,000 8,200 69,200 12,200 57,000 April 41,000 6,200 47,200 8,200 39,000 Units to be produced Switches per unit Production needs Add: Desired ending inventory Total needs Deduct: Beginning inventory Required purchases January February March Quarter 24,200 41,000 57,000 122,200 ×3 ×3 ×3 ×3 72,600 123,000 171,000 366,600 36,900 51,300 35,100 35,100 109,500 174,300 206,100 401,700 21,780 36,900 51,300 21,780 87,720 137,400 154,800 379,920 Beginning inventory, January 1: 72,600 × 0.3 = 21,780 Ending inventory, March 31: (39,000 × 3) × 0.3 = 35,100 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Hard Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-75 Chapter Profit Planning 120 One quarter gram of a rare seasoning is required for each bottle of Dipping Oil, a very popular product sold through gourmet shops that is produced by The Lucas Company The cost of the seasoning is $16 per gram Budgeted production of Dipping Oil is given below for the second quarter, and the first month of the third quarter April May June July Required production bottles 5,000 8,000 15,000 10,000 The seasoning is so difficult to get that the company must have on hand at the end of each month 20% of the next month's production needs A total of 250 grams will be on hand at the beginning of April Required: Prepare a direct materials budget for the seasoning, by month and in total for the second quarter Be sure to include both the quantity to be purchased and its cost for each month Ans: Lucas Company Direct Materials Budget for the Second Quarter April 5,000 May June 8,000 15,000 Total 28,000 Required production (bottles) Seasoning required per bottle (grams) ×0.25 ×0.25 ×0.25 ×0.25 Production needs (grams) 1,250 2,000 3,750 7,000 Add desired ending inventory of seasoning 400 750 500 500 Total needs 1,650 2,750 4,250 7,500 Less beginning inventory of seasoning 250 400 750 250 Seasoning to be purchased (grams) 1,400 2,350 3,500 7,250 Cost of seasoning per gram × $16 × $16 × $16 × $16 Cost of seasoning to be purchased $22,400 $37,600 $56,00 $116,000 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Easy 9-76 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 121 Whitmer Corporation is working on its direct labor budget for the next two months Each unit of output requires 0.05 direct labor-hours The direct labor rate is $11.80 per direct labor-hour The production budget calls for producing 7,100 units in February and 6,800 units in March Required: Construct the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month Ans: Required production in units Direct labor-hours per unit Total direct labor-hours needed Direct labor cost per hour Total direct labor cost February March 7,100 6,800 0.05 0.05 355 340 $11.80 $11.80 $4,189 $4,012 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Easy 122 Sthilaire Corporation is working on its direct labor budget for the next two months Each unit of output requires 0.34 direct labor-hours The direct labor rate is $11.10 per direct labor-hour The production budget calls for producing 8,000 units in April and 8,300 units in May The company guarantees its direct labor workers a 40-hour paid work week With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 2,840 hours in total each month even if there is not enough work to keep them busy Required: Construct the direct labor budget for the next two months Ans: April May Required production in units 8,000 8,300 Direct labor-hours per unit 0.34 0.34 Total direct labor-hours needed 2,720 2,822 Total direct labor-hours paid 2,840 2,840 Direct labor cost per hour $11.10 $11.10 Total direct labor cost $31,524 $31,524 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Medium Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-77 Chapter Profit Planning 123 Brockney Inc bases its manufacturing overhead budget on budgeted direct laborhours The variable overhead rate is $8.60 per direct labor-hour The company's budgeted fixed manufacturing overhead is $107,970 per month, which includes depreciation of $9,760 All other fixed manufacturing overhead costs represent current cash flows The July direct labor budget indicates that 6,100 direct labor-hours will be required in that month Required: a Determine the cash disbursement for manufacturing overhead for July b Determine the predetermined overhead rate for July Ans: a b Budgeted direct labor-hours Variable overhead rate Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing overhead Less depreciation Cash disbursement for manufacturing overhead July 6,100 $8.60 $ 52,460 107,970 160,430 9,760 $150,670 Total manufacturing overhead (a) Budgeted direct labor-hours (b) Predetermined overhead rate for the month (a)/(b) $160,430 6,100 $26.30 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Easy 9-78 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 124 The manufacturing overhead budget of Reigle Corporation is based on budgeted direct labor-hours The February direct labor budget indicates that 5,800 direct labor-hours will be required in that month The variable overhead rate is $4.60 per direct laborhour The company's budgeted fixed manufacturing overhead is $82,360 per month, which includes depreciation of $16,820 All other fixed manufacturing overhead costs represent current cash flows Required: a Determine the cash disbursement for manufacturing overhead for February Show your work! b Determine the predetermined overhead rate for February Show your work! Ans: a Budgeted direct labor-hours Variable overhead rate Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing overhead Less depreciation Cash disbursement for manufacturing overhead b February 5,800 $4.60 $ 26,680 82,360 109,040 16,820 $ 92,220 Total manufacturing overhead (a) $109,040 Budgeted direct labor-hours (b) 5,800 Predetermined overhead rate for the month (a)/(b) $18.80 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-79 Chapter Profit Planning 125 Wala Inc bases its selling and administrative expense budget on the number of units sold The variable selling and administrative expense is $8.20 per unit The budgeted fixed selling and administrative expense is $132,800 per month, which includes depreciation of $14,400 The remainder of the fixed selling and administrative expense represents current cash flows The sales budget shows 8,000 units are planned to be sold in July Required: Prepare the selling and administrative expense budget for July Ans: July Budgeted unit sales 8,000 Variable selling and administrative expense per unit $8.20 Budgeted variable expense $ 65,600 Budgeted fixed selling and administrative expense 132,800 Total budgeted selling and administrative expense 198,400 Less depreciation 14,400 Cash disbursements for selling and administrative expenses $184,000 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Easy 9-80 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 126 The selling and administrative expense budget of Garney Corporation is based on the number of units sold, which are budgeted to be 1,800 units in October The variable selling and administrative expense is $2.00 per unit The budgeted fixed selling and administrative expense is $22,680 per month, which includes depreciation of $7,020 The remainder of the fixed selling and administrative expense represents current cash flows Required: Prepare the selling and administrative expense budget for October Ans: Budgeted unit sales Variable selling and administrative expense per unit Budgeted variable expense Budgeted fixed selling and administrative expense Total budgeted selling and administrative expense Less depreciation Cash disbursements for selling and administrative expenses October 1,800 $2.00 $ 3,600 22,680 26,280 7,020 $19,260 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-81 Chapter Profit Planning 127 Romeiro Corporation is preparing its cash budget for September The budgeted beginning cash balance is $46,000 Budgeted cash receipts total $160,000 and budgeted cash disbursements total $152,000 The desired ending cash balance is $70,000 The company can borrow up to $120,000 at any time from a local bank, with interest not due until the following month Required: Prepare the company's cash budget for September in good form Ans: Cash balance, beginning Add cash receipts Total cash available Less cash disbursements Excess (deficiency) of cash available over disbursements Borrowings Cash balance, ending $ 46,000 160,000 206,000 152,000 54,000 16,000 $ 70,000 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Easy 9-82 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 128 Zolezzi Inc is preparing its cash budget for March The budgeted beginning cash balance is $42,000 Budgeted cash receipts total $178,000 and budgeted cash disbursements total $175,000 The desired ending cash balance is $50,000 The company can borrow up to $160,000 at any time from a local bank, with interest not due until the following month Required: Prepare the company's cash budget for March in good form Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance Ans: Cash balance, beginning Add cash receipts Total cash available Less cash disbursements Excess (deficiency) of cash available over disbursements Borrowings Cash balance, ending $ 42,000 178,000 220,000 175,000 45,000 5,000 $ 50,000 AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting, Measurement LO: Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-83 ... 9-32 $ 20,000 70,000 153,000 1 ,094 ,000 $1,337,000 $ 254,000 820,000 263,000 $1,337,000 Garrison/ Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter Profit Planning 60 Expected... AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy Garrison/ Noreen/Brewer, Managerial Accounting, Twelfth Edition 9-7 Chapter Profit Planning 18 Which of the following budgets are... accounting D) the master budget Ans: C AACSB: Reflective Thinking AICPA BB: Resource Management, Critical Thinking LO: Level: Easy 9-8 AICPA FN: Reporting Garrison/ Noreen/Brewer, Managerial Accounting,