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Exam 7: Planning for Profit and Cost Control

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Question 51

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Which of the following is not an advantage of budgeting?

A) Provides assurance that accounting records are in accordance with generally accepted accounting principles
B) Forces coordination among departments to promote decisions in the best interests of the company as a whole
C) Provides advance notice of potential shortages, bottlenecks, or other weaknesses in operating plans
D) Provides a way to evaluate performance

E) A) and C)
F) A) and B)

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Question 52

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Which of the following is not considered a pro forma financial statement?

A) Sales budget
B) Balance sheet
C) Cash flow statement
D) Income statement

E) A) and C)
F) None of the above

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Question 53

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How do short-term plans differ from long-term plans?

Markham Company has completed its sales budget for the first quarter of Year 2. Projected credit sales for the first four months of the year are shown below: The company's past records show collection of credit sales as follows: 40% in the month of sale and the balance in the following month. The total cash collection from receivables in March is expected to be: $\begin{array} { | l | l | } \hline \text { January } & \$ 30,000 \\\hline \text { February } & \$ 36,000 \\\hline \text { March } & \$ 45,000 \\\hline \text { April } & \$ 48,000 \\\hline\end{array}$

Benton Company's sales budget shows the following expected total sales: The company expects 80% of its sales to be on account (credit sales) . Credit sales are collected as follows: 25% in the month of sale, 72% in the month following the sale with the remainder being uncollectible and written off. The total cash receipts during April would be: $\begin{array} { | l | c | } \hline { \text { Month } } & \text { Sales } \\\hline \text { January } & \$ 25,000 \\\hline \text { February } & \$ 30,000 \\\hline \text { March } & \$ 35,000 \\\hline \text { April } & \$ 40,000 \\\hline\end{array}$

The nature of planning changes with the length of the time period being considered. Generally, the shorter the time period, the more general the plans.

Select the incorrect statement regarding the cash budget.

One company's practice is to provide bonuses to salespeople who exceed their sales targets. Which of the following advantages of budgeting enables the company to establish its recognition program?

Which of the following is a benefit of participative budgeting?

The accounts payable balance at the beginning of the year was $85,000. The company purchased $380,000 worth of goods on account, and the ending balance of the payables account was $70,000.What were the total payments on account?

Budgeting that involves decisions such as whether to buy or lease equipment or build a new factory is referred to as:

Compton Company expects the following total sales: The company expects 60% of its sales to be credit sales and 40% for cash. Credit sales are collected as follows: 30% in the month of sale, 70% in the month following the sale. The budgeted accounts receivable balance on May 31 is: $\begin{array}{|l|c|}\hline {\text { Month }} & \text { Sales } \\\hline \text { March } & \$ 30,000 \\\hline \text { April } & \$ 20,000 \\\hline \text { May } & \$ 30,000 \\\hline \text { June } & \$ 25,000 \\\hline\end{array}$

What is the role of top management in a participative budgeting system?

Which of the following is a benefit associated with budgeting?

Budgeted sales commissions would appear on the:

What information does the sales budget provide for pro forma financial statements?

Which of the following would be prepared first when a merchandising company uses a master budget?

What is the amount of ending inventory that the company will report on its pro forma balance sheet?

What budget is generally not included in a master budget?

Depreciation expense will appear on the schedule of cash payments for selling and administrative expenses.