Question 1

Flamingo,Inc.has the following budgeted figures: $$\begin{array} { | l | l | l | l | l | } 
\hline & \text { Jan } & \text { Feb } & \text { Mar } & \text { April } \
\hline \text { Sales } & \$ 50,200 & \$ 67,000 & \$ 84,000 & \$ 95,000 \
\hline \begin{array} { l } 
\text { Cost of goods } \
\text { sold }
\end{array} & \$ 0 \% \text { of sales } & & & \
\hline \begin{array} { l } 
\text { Required } \
\text { ending } \
\text { inventory }
\end{array} & \begin{array} { l } 
\$ 10,000 + 25 \% \
\text {of next month's } \
\text { sales }
\end{array} & & & \
\hline \begin{array} { l } 
\text { Inventory on } \
\text { hand on Jan 1 }
\end{array} & \$ 27,500 & & & \
\hline
\end{array}$$ Calculate cost of goods sold for the month of February.
A)$16,750
B)$30,120
C)$29,370
D)$40,200

Accepted Answer

The answer of Flamingo,Inc.has the following budgeted figures: \[\begin{array} {...

Question 2

From the following details,provided by a merchandising company,prepare the selling and administrative expenses budget for the first quarter of the next year.
 $$\begin{array} { | l | l | } 
\hline \text { Rent Expense } & \$ 8,000 \text { per month } \
\hline \text { Depreciation Expense } & \$ 3,500 \text { per month } \
\hline \text { Insurance Expense } & \$ 1,250 \text { per month } \
\hline \text { Miscellaneous Expense } & 2 \% \text { of sales, paid as incurred } \
\hline \text { Commissions Expense } & 10 \% \text { of sales } \
\hline \text { Salaries Expense } & \$ 7,000 \text { per month } \
\hline
\end{array}$$ $$\begin{array} { | l | l | l | r | } 
\hline & \text { Jan } & \text { Feb } & \text { March } \
\hline \text { Sales } & \$ 50,000 & \$ 65,000 & \$ 80,000 \
\hline
\end{array}$$

Accepted Answer

The answer of From the following details,provided by a merchandising...

Question 3

What is a common method of accessing short-term financing?

Accepted Answer

The answer of What is a common method of accessing...

Question 4

Regarding the sales budget,which of the following statements is incorrect?
A)The forecast of sales revenue is the cornerstone of the master budget.
B)The level of sales affects expenses and almost all other elements of the master budget.
C)The budgeted sales are carried from the sales budget to the balance sheet.
D)Budgeted total sales for each product equal the sales price multiplied by the expected number of units sold.

Accepted Answer

The budgeted sales from the sales budget are carried to the income statement, not the balance sheet. The balance sheet shows a company's assets, liabilities, and equity at a specific point in time, while the income statement shows a company's revenues and expenses over a period of time.

Question 5

Monument Corp.is preparing its budget for the first quarter of 2018.The following data is provided: $$\begin{array} { | l | r | r | r | } 
\hline \text { Inventory, Purchases, and COGS Budget } & \text { Jan } & \text { Feb } & \text { March } \
\hline \text { Cost of goods sold (a) } & \$ 34,000 & \$ 27,000 & \$ 22,500 \
\hline \text { Desired ending inventory (b) } & \underline { 11,750 } & \underline { 10,625 } & ? \
\hline \text { Total inventory required } & 45,750 & 37,625 & \
\hline \text { Less: Beginning inventory } & ( 20,000 & \underline { ( 11,750 } & \
\hline \text { Purchases } & 25,750 & 25,875 & \
\hline \text { (a) COGS } = 75 \% \text { of sales } & & & \
\hline \text { (b) } \$ 5,000 + 25 \% \text { of COGS for next month } & & & \
\hline
\end{array}$$ April's cost of goods sold is 32,000.The amount of Merchandise Inventory to be shown on the budgeted balance sheet at March 31 would be ________.
A)$10,625
B)$11,750
C)$34,000
D)$13,000

Accepted Answer

The desired ending inventory for March is calculated as $5,000 + 25%$ of April's COGS ($32,000), which equals $5,000 + $8,000 = $13,000.

Question 6

DGT Industries expects to sell 470 units of Product A and 410 units of Product B each day at an average price of $25 for Product A and $28 for Product B.The expected cost for Product A is 45% of its selling price and the expected cost for Product B is 65% of its selling price.DGT Industries has no beginning inventory,but it wants to have a four-day supply of ending inventory for each product.Compute the budgeted purchases for the next (seven-day)week.(Round the answer to the nearest dollar. )
A)$89,247
B)$92,920
C)$162,610
D)$140,245

Accepted Answer

D)Purchases = Cost of goods sold + Ending merchandise inventory - Beginning merchandise inventory
Cost of goods sold:
Product A: ($25 × 45%)× (470 units × 7 days)= $37,013
Product B: ($28 × 65%)× (410 units × 7 days)= $52,234
Total cost of goods sold: $37,013 + $52,234= $89,247
Desired ending inventory: (Daily sales × 4 days)× (Selling price × % expected cost)
Product A: (470 × 4)× ($25 × 45%)= $21,150
Product B: (410 × 4)× ($28 × 65%)= $29,848
Total Desired ending inventory: $21,150 + $29,848 = $50,998
Purchases: Cost of goods sold + Ending merchandise inventory - Beginning merchandise inventory
Product A: $37,013 + $21,150 - 0 = $58,163
Product B: $52,234 + $29,848 - 0 = $82,082
Total budgeted purchases: $58,163 + $82,082 = $140,245

Question 7

MFL Sales expects to sell 460 units of Product A and 450 units of Product B each day at an average price of $15 for Product A and $33 for Product B.The expected cost for Product A is 38% of its selling price and the expected cost for Product B is 57% of its selling price.MFL Sales has no beginning inventory,but it wants to have a six-day supply of ending inventory for each product.Compute the budgeted cost of goods sold for the next (seven-day)week.(Round the answer to the nearest dollar. )
A)$67,032
B)$66,519
C)$130,500
D)$77,606

Accepted Answer

D)Cost of goods sold = (Selling price × % expected cost )× units
Cost of goods sold:
Product A: ($15 × 38%)× (460 units × 7 days)= $18,354
Product B: ($33 × 57%)× (450 units × 7 days)= $59,252
Total cost of goods sold: $18,354 + $59,252 = $77,606

Question 8

Zale,Inc.has provided the following extracts from their budget for the first quarter of the forthcoming year: $$\begin{array} { | l | c | c | c | } 
\hline & \text { Jan } & \text { Feb } & \text { March } \
\hline \text { Sales (20\% cash) } & \$ 500,000 & \$ 750,000 & \$ 1,000,000 \
\hline
\end{array}$$ The company collects 70% of credit sales in the same month and the balance in the next month.Calculate the collections from the customers for the month of February.
A)$570,000
B)$540,000
C)$690,000
D)$750,000

Accepted Answer

In February, Zale, Inc. collects 20% of February's sales in cash, which is $150,000 (20% of $750,000). They also collect 70% of February's credit sales, which is $420,000 (70% of 80% of $750,000). Additionally, they collect the remaining 30% of January's credit sales, which is $120,000 (30% of 80% of $500,000). Therefore, total collections in February are $150,000 + $420,000 + $120,000 = $690,000.

Question 9

When preparing the selling and administrative expense budget,there is no need to separate mixed costs into the fixed and variable components.

Accepted Answer

When preparing the selling and administrative expense budget,mixed costs must be separated into the fixed and variable components.

Question 10

Allain,Inc.has the following budgeted figures: $$\begin{array} { | l | l | l | l | l | } 
\hline & \text { Jan } & \text { Feb } & \text { Mar } & \text { April } \
\hline \text { Sales } & \$ 55,300 & \$ 62,000 & \$ 89,000 & \$ 95,000 \
\hline \begin{array} { l } 
\text { Cost of goods } \
\text { sold }
\end{array} & & & & \
\hline \begin{array} { l } 
\text { Required of sales } \
\text { ending } \
\text { inventory }
\end{array} & \begin{array} { l } 
\$ 15,000 + 20 \% \
\text { ff next month's } \
\text { sales }
\end{array} & & & \
\hline \begin{array} { l } 
\text { Inventory on } \
\text { hand on Jan 1 }
\end{array} & \$ 27,000 & & & \
\hline
\end{array}$$ Calculate the ending merchandise inventory for the month of March.
A)$32,800
B)$68,400
C)$33,580
D)$53,400

Accepted Answer

The answer of Allain,Inc.has the following budgeted figures: \[\begin{array} {...

Question 11

The inventory,purchases,and cost of goods sold budget determines cost of goods sold for the budgeted income statement,ending Merchandise Inventory for the budgeted balance sheet,and merchandise inventory purchases for the cash budget.

Accepted Answer

The statement is true. The inventory, purchases, and cost of goods sold budget helps in determining various important figures in the budgeting process such as cost of goods sold for the budgeted income statement, ending merchandise inventory for the budgeted balance sheet, and merchandise inventory purchases for the cash budget.

Question 12

Keeping merchandise inventory at the maximum level that meets the needs of providing goods to customers,with turning over the merchandise inventory efficiently,helps reduce inventory storage costs,insurance costs,and warehousing costs.

Accepted Answer

Keeping merchandise inventory at the minimum level that meets the needs of providing goods to customers,with turning over the merchandise inventory efficiently,helps reduce inventory storage costs,insurance costs,and warehousing costs.

Question 13

The selling and administrative expense budget separates fixed and variable expenses.

Accepted Answer

The selling and administrative expense budget typically includes both fixed and variable expenses, and separates them out for analysis and planning purposes.

Question 14

Freighters,Inc.has the following budgeted figures: Calculate the budgeted purchases for the month of January.

A)$35,400
B)$61,650
C)$31,650
D)-$9,150

Accepted Answer

C)
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Question 15

Health Resources expects to sell 490 units of Product A and 420 units of Product B each day at an average price of $16 for Product A and $27 for Product B.The expected cost for Product A is 41% of its selling price and the expected cost for Product B is 63% of its selling price.Health Resources has no beginning inventory,but it wants to have a four-day supply of ending inventory for each product.Compute the company's budgeted sales for the next (seven-day)week.(Round the answer to the nearest dollar. )
A)$10,359
B)$76,720
C)$134,260
D)$19,180

Accepted Answer

C)Sales price × Expected number of units sold = Budgeted total sales
Product A: $16 × (490 units × 7 days)= $54,880
Product B: $27 × (420 units × 7 days)= $79,380
Total budgeted sales: $54,880 + $79,380 = $134,260

Question 16

The financial budget of a merchandising company is similar to that of a manufacturing company.

Accepted Answer

Both types of companies need to plan and allocate funds for materials, labor, overhead, and other expenses related to production or sales. The main difference is that a manufacturing company may have more direct costs related to the production process, while a merchandising company may have more indirect costs related to acquiring and selling inventory.

Question 17

What is the cornerstone of the master budget for a merchandising company? Why?

Accepted Answer

The answer of What is the cornerstone of the master...

Question 18

While calculating the budgeted cash payments for selling and administrative expenses,noncash expenses like depreciation are also considered.

Accepted Answer

Noncash expenses like depreciation are not considered in the budgeted cash payments for selling and administrative expenses because they do not involve an actual outflow of cash.

Question 19

What is the formula used to determine the amount of merchandise inventory to be purchased?

Accepted Answer

The answer of What is the formula used to determine...

Question 20

Purchases equals cost of goods sold plus beginning merchandise inventory minus ending merchandise inventory.

Accepted Answer

Purchases equals cost of goods sold plus ending merchandise inventory minus beginning merchandise inventory.

Quiz 22: Master Budgets