1. Budgeting is the common accounting tool companies use for planning and controlling. Budgets a. provide a measure of planned financial results.
b. focus managers’ energies on exploiting opportunities. c. help managers anticipate potential problems.
d. enable managers to control through a set of specific activities with defined corrective actions.
2. [AICPA Adapted] Dewitt Co. budgeted its activity for October 2004 from the following information: * Sales are budgeted at $750,000. All sales are credit sales and a provision for doubtful accounts is made monthly at the rate of 2% of sales. * Merchandise inventory was $120,000 at September 30, 2004, and an increase of $10,000 is planned for the month. * All merchandise is marked up to sell at invoice cost plus 50%. * Estimated cash disbursements for selling and administrative expenses for the month are $105,000. * Depreciation for the month is projected at $25,000.
Dewitt is projecting operating income for October 2004 in the amount of
a. $105,000.b. $119,000.c. $129,000.d. $230,000.
3. Which of the following is not a major benefit of budgets? a. Compels planning c. Provides performance criteria
b. Eliminates innovationd. Promotes coordination and communication
The following data apply to questions 4 and 5.
Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 2004, through June 30, 2005.
July 1, 2004June 30, 2005
Raw material1 40,000 10,000
Work in process 8,000 8,000
Finished goods 30,000 5,000
1 Three (3) units of raw material are needed to produce each unit of finished product.
4.[CMA Adapted] If Hester Company plans to sell 500,000 units during the 2004-2005 fiscal year, the...