RETL 262 Chapter 22 Quiz

1.     A formal statement of future plans, usually expressed in monetary terms, is a:

a.     Prospectus

b.     Budget

c.     Variance analysis

d.     Position statement

e.     Variance report

2.     Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months:

	January	February	March
Material Purchases	$12,040	$14,150	$10,970

a.     $13,095

b.     $6,500

c.     $12,520

d.     $18,540

e.     $9,270

3.     Frankie’s Chocolate Co. reports the following information from its sales budget:

Expected Sales:	July	$90,000
	August	$104,000
	September	$120,000

Cash sales are normally 25% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:

a.     $130,500

b.     $108,000

c.     $30,000

d.     $78,000

e.     $120,000

4.     The usual starting point for preparing a master budget is forecasting or estimating:

a.     Sales

b.     Cash payments

c.     Expenditures

d.     Income

e.     Production

5.     Walter Enterprises expects its September sales to be 20% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $7,500. The ending cash balance on September 30 would be:

a.     $31,500

b.     $67,500

c.     $54,000

d.     $136,500

e.     $61,500

6.     A sporting equipment store expects to purchase $8,000 of ski boots in October. The store had $2,000 of ski boots in merchandise inventory at the beginning of October, and expects to have $3,000 of ski boots in merchandise inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?

a.     $5,000

b.     $10,000

c.     $9,000

d.     $7,000

e.     $8,000

7.     Funcycle Manufacturing's budget includes the following credit sales for the current year: September, $145,000; October, $136,000; November, $120,000; December, $157,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 50% in the first month after sale, and 35% in the second month after sale. What are the cash collections of credit sales in the month of December?

a.     $23,550

b.     $107,600

c.     $83,550

d.     $157,000

e.     $131,150

8.     Use the following information to determine the ending cash balance to be reported on the month ended June 30 cash budget.

a.     Beginning cash balance on June 1, $73,000.

b.     Cash receipts from sales, $413,000.

c.     Budgeted cash disbursements for purchases, $268,000.

d.     Budgeted cash disbursements for salaries, $35,000.

e.     Other budgeted cash expenses, $57,000.

f.      Cash repayment of bank loan, $32,000.

g.     Budgeted depreciation expense, $34,000.

Answers:

a.     $149,000

b.     $60,000

c.     $21,000

d.     $94,000

e.     $126,000

9.     Memphis Company's May sales budget calls for sales of $900,000. The store expects to begin May with $50,000 of inventory and to end the month with $55,000 of inventory. Gross margin is typically 45% of sales. Compute the budgeted cost of merchandise purchases for May.

a.     $495,000

b.     $550,000

c.     $460,000

d.     $500,000

e.     $490,000

10.  Which of the following is not a result of following a well-designed budgeting process?

a.     Improved decision-making processes

b.     Assurance of future profits

c.     Improved performance evaluations

d.     Improved communication of management’s action plans

e.     Improved coordination of business activities

11.  Calgary Industries is preparing a budgeted income statement for 2018 and has accumulated the following information. Predicted sales for the year are $730,000 and cost of goods sold is 40% of sales. The expected selling expenses are $81,000 and the expected general and administrative expenses are $90,000, which includes $23,000 of depreciation. The company’s income tax rate is 30%. The budgeted net income for 2018 is:

a.     $80,100

b.     $84,700

c.     $438,000

d.     $186,900

e.     $267,000

12.  Southland Company is preparing a cash budget for August. The company has $17,000 cash at the beginning of August and anticipates $120,800 in cash receipts and $134,500 in cash disbursements during August. Southland Company wants to maintain a minimum cash balance of $10,000. The preliminary cash balance at the end of August before any loan activity is:

a.     ($13,700)

b.     $13,300

c.     $137,800

d.     $27,000

e.     $3,300

13.  When preparing the cash budget, all of the following should be considered except:

a.     Cash payments for capital expenditures

b.     Cash payments for income taxes

c.     Cash receipts from customers

d.     Cash payments for merchandise

e.     Depreciation expense

14.  Western Company is preparing a cash budget for June. The company has $12,000 cash at the beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during June. Western Company has an agreement with its bank to maintain a minimum cash balance of $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:

a.     Repay $2,500

b.     Borrow $10,000

c.     Borrow $4,500

d.     Repay $7,500

e.     Borrow $2,500

15.  A department store has budgeted sales of 12,000 men's suits in September. Management wants to have 6,000 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,000 suits. What is the dollar amount of the purchase of suits if each suit has a cost of $75.

a.     $1,200,000

b.     $1,350,000

c.     $750,000

d.     $1,050,000

e.     $900,000

16.  Bengal Co. provides the following sales forecast for the next three months:

	July	August	September
Sales Units	5,000	5,700	5,560

The company wants to end each month with ending finished goods inventory equal to 25% of the next month's sales. Finished goods inventory on June 30 is 1,250 units. The budgeted production units for August are:

a.     6,950 units

b.     5,665 units

c.     4,310 units

d.     7,090 units

e.     4,135 units

17.  Schrank Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 20% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be purchased in September?

a.     24,000

b.     20,000

c.     28,000

d.     22,000

e.     14,000

18.  Cameroon Corp. manufactures and sells electric staplers for $16 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the dollar amount of electric stapler sales budgeted for February should be:

a.     $166,400

b.     $160,000

c.     $187,177

d.     $179,978

e.     $173,056

19.  Grason Corporation is preparing a budgeted balance sheet for 2018. The retained earnings balance at December 31, 2017 was $533,500. The 2018 budgeted income statement shows expected net income of $112,000. The company expects to declare dividends during 2018 amounting to $40,000. The expected balance in retained earnings on the 2018 budgeted balance sheet is:

a.     $605,500

b.     $493,500

c.     $533,500

d.     $685,500

e.     $645,500

20.  A quantity of inventory that provides protection against lost sales caused by unfulfilled demands from customers is called:

a.     Just-in-time inventory

b.     Continuous inventory

c.     Capital stock

d.     Safety stock