ADM 2341 Lecture Notes - Lecture 27: Budget

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22 Apr 2018

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> consist of the capital expenditure budget, the cash budget, and the budgeted balance sheet. cash budget: > because cash is so vital, this budget is often considered to be the most important output in preparing nancial budgets. > a cash budget is typically prepared at least once a month, and in some companies, it is prepared daily. > the cash budget contains three sections (cash receipts, cash disbursements, and nancing) and the beginning and ending cash balances, cash receipts section: > includes expected receipts from the company"s main source(s) of revenue. These are usually cash sales and collections from customers on credit sales. This section also shows anticipated receipts of interest and dividends, and proceeds from planned sales of investments, plant assets, and the company"s capital stock. cash disbursements section: These payments include direct materials, direct labour, manufacturing overhead, and selling and administrative expenses. This section also includes projected payments for income taxes, dividends, investments, and plant assets.

Related Questions

Blue Spruce Corp. prepares monthly cash budgets. Here arerelevant data from operating budgets for 2017.

January February

Sales $360,700 $401,100

Purchases 121,500 131,400

Salaries 84,600 81,000

Administrative expenses 71,000 73,700

Selling expenses 79,000 86,900

All sales and purchases are on account. Budgeted collections anddisbursement data are given below. All other expenses are paid inthe month incurred except for administrative expenses, whichinclude $1,200 of depreciation per month.

Other data.

1. Collections from customers: January $328,100;February$378,200.

2. Payments for purchases: January $111,400;

February $144,900.

3. Other receipts: January: collection of December 31, 2016,notes receivable $18,400; February: proceeds from sale ofsecurities $5,500.

4. Other disbursements: February $13,000 cash dividend.

The companyâs cash balance on January 1, 2017, is expected to be$47,400. The company wants to maintain a minimum cash balance of$45,910.

Prepare a cash budget for January and February.

tanwoodchuck416

Colter Company prepares monthly cash budgets. Relevant data fromoperating budgets for 2017 are as follows:

January February

Sales 360,000 $400,000

Direct materials purchases 120,000 125,000

Direct labor 90,000 100,000

Manufacturing overhead 70,000 75,000

Selling and administrative expenses 79,000 85,000

All sales are on account. Collections are expected to be 50% inthe month of sale, 30% in the first month following the sale, and20% in the second month following the sale. Sixty percent (60%) ofdirect materials purchases are paid in cash in the month ofpurchase, and the balance due is paid in the month following thepurchase. All other items above are paid in the month incurredexcept for selling and administrative expenses that include $1,000of depreciation per month.

Other data:

1. Credit sales: November 2016, $250,000; December 2016,$320,000.

2. Purchases of direct materials: December 2016, $100,000.

3. Other receipts: JanuaryâCollection of December 31, 2016,notes receivable $15,000; FebruaryâProceeds from sale of securities $6,000.

4. Other disbursements: FebruaryâPayment of $6,000 cashdividend.

The companyâs cash balance on January 1, 2017, is expected to be$60,000. The company wants to maintain a minimum cash balance of$50,000.

Prepare schedules for (1) expected collections from customersand (2) expected payments for direct materials purchases forJanuary and February.

Prepare a cash budget for January and February in columnarform.

I need some feedback if these are correct.
1.
A flexible budget is a budget that:
A) is updated with actual costs as they occur during theperiod.
B) is updated to reflect the actual level of activity during theperiod.
C) is prepared using a computer spreadsheet application.
D) contains only variable production costs.
2.
Ofarrell Snow Removal's cost formula for its vehicle operating costis $1,840 per month plus $377 per snow-day. For the month ofNovember, the company planned for activity of 14 snow-days, but theactual level of activity was 19 snow-days. The actual vehicleoperating cost for the month was $9,280. The vehicle operating costin the flexible budget for November would be closest to:
A) $9,003
B) $7,118
C) $9,280
D) $9,660
3.
Entler Framing's cost formula for its supplies cost is $2,250 permonth plus $16 per frame. For the month of June, the companyplanned for activity of 502 frames, but the actual level ofactivity was 497 frames. The actual supplies cost for the month was$10,580. The supplies cost in the planning budget for June would beclosest to:
A) $10,580
B) $10,282
C) $10,686
D) $10,202
4.
Johannsen Catering uses two measures of activity, jobs and meals,in the cost formulas in its budgets and performance reports. Thecost formula for catering supplies is $310 per month plus $103 perjob plus $23 per meal. A typical job involves serving a number ofmeals to guests at a corporate function or at a host's home. Thecompany expected its activity in February to be 28 jobs and 187meals, but the actual activity was 26 jobs and 192 meals. Theactual cost for catering supplies in February was $7,620. Thecatering supplies in the flexible budget for February would beclosest to:
A) $7,495
B) $7,404
C) $7,620
D) $6,960
5.
Kimbril Catering uses two measures of activity, jobs and meals, inthe cost formulas in its budgets and performance reports. The costformula for catering supplies is $530 per month plus $91 per jobplus $12 per meal. A typical job involves serving a number of mealsto guests at a corporate function or at a host's home. The companyexpected its activity in January to be 27 jobs and 174 meals, butthe actual activity was 31 jobs and 173 meals. The actual cost forcatering supplies in January was $5,330. The activity variance forcatering supplies in January would be closest to:
A) $255 F
B) $255 U
C) $352 F
D) $352 U
6.
Lapinsky Air uses two measures of activity, flights and passengers,in the cost formulas in its budgets and performance reports. Thecost formula for plane operating costs is $31,400 per month plus$2,148 per flight plus $7 per passenger. The company expected itsactivity in April to be 89 flights and 261 passengers, but theactual activity was 84 flights and 260 passengers. The actual costfor plane operating costs in April was $204,810. The spendingvariance for plane operating costs in April would be closestto:
A) $8,842 U
B) $19,589 F
C) $19,589 U
D) $8,842 F
7.
Velten Corporation's flexible budget performance report for lastmonth shows that actual indirect materials cost, a variable cost,was $45,198 and that the spending variance for indirect materialscost was $9,114 favorable. During that month, the company worked18,600 machine-hours. Budgeted activity for the month had been19,000 machine-hours. The cost formula per machine-hour forindirect materials cost must have been closest to:
A) $1.90
B) $2.86
C) $1.94
D) $2.92
8.
Which of the following comparisons best isolates the impact thatchanges in prices of inputs and outputs have on performance?
A) static planning budget and flexible budget
B) static planning budget and actual results
C) flexible budget and actual results
D) master budget and static planning budget
9.
The excess or deficiency of cash available over disbursements onthe cash budget is calculated as follows:
A) The beginning balance less the expected cash receipts less theexpected cash disbursements.
B) The cash available less the expected cash receipts plus theexpected cash disbursements.
C) The beginning balance plus the expected cash receipts less theexpected cash disbursements.
D) None of the above.
10.
There are various budgets within the master budget. One of thesebudgets is the production budget. Which of the following BESTdescribes the production budget?
A) It details the required direct labor hours.
B) It details the required raw materials purchases.
C) It is calculated based on the sales budget and the desiredending inventory.
D) It summarizes the costs of producing units for the budgetperiod.
1.B
2.A
3.A
4.C
5.D
6.C
7.A
8.B
9.A
10.C

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ADM 2341 Lecture Notes - Lecture 27: Budget

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