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Exam 14: Planning for Profit and Cost Control

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Question 61

Multiple Choice

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Oakton Furniture provided the following information relevant to its sales for December Year 1 and the first quarter of Year 2 Based on the company's collection history, 42% of credit sales are collected in month of sale and the remainder is collected in the following month. Cash collections in January from December credit sales would be:

A) $69,600.
B) $81,200.
C) $72,000.
D) $84,000.

E) C) and D)
F) B) and D)

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Question 62

Multiple Choice

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Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

A) Depreciation expense
B) Administrative salaries
C) Advertising expense
D) Both administrative salaries and advertising expense are correct.

E) All of the above
F) A) and B)

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Question 63

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Janice was questioned recently about her department's spending in excess of the budget. This is an example of using the budget for performance measurement.

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.

Which of the following items would be least useful in preparing a schedule of cash receipts?

Barnes Company expects to begin operating on January 1. The company's master budget contained the following operating expense budget: Sales commissions are paid in cash in the month following the month in which the expense is recognized. All other expense items requiring cash payment are paid in the month in which they are recognized. The amount of accumulated depreciation appearing on the company's March 31 pro forma balance sheet is:

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

In a participative budgeting system, budget information flows in both directions, from bottom to top, and from top to bottom.

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual. Which advantage of budgeting would have helped him identify this problem sooner?

The cash budget is not the same as the pro forma cash flow statement.

Although only 20 units are on hand at the beginning of the year, World Company plans to sell 100 units during Year 2. Assuming the company desires an ending inventory of 10 units, it should plan to purchase 110 units.

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

Which of the following is not an advantage of budgeting?

If a budgeting system is designed correctly, top management will not have to get involved in the process.

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

Select the correct equation format for the purchases budget.

The pro forma income statement gives managers an advance estimate of a company's profitability.