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Chapter 22: 17RQ (page 1228)

How does the master budget for a merchandising company differ from a manufacturing company?

Short Answer

Expert verified

There is little difference between the master budget of merchandising and manufacturing companies because merchandising companies only resell the products, and manufacturing companies do the manufacturing process also and then sell.

Step by step solution

01

Meaning of Merchandising Company

A Merchandising company is a company that does not manufacture goods butpurchases the goods from the manufacturers or wholesalersandresellsthem to customers.

02

Difference between the master budget for a merchandising company and a manufacturing company

The operating budget for a merchandising company includes the sales budget, inventory purchase and cost of goods sold budget, and selling and administrative expense budget.

Whereas the operating budget of the manufacturing company includes the sales budget, production, direct material, and direct labor budget, manufacturing overhead budget, cost of goods sold budget, and selling and administrative expense budget.

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Most popular questions from this chapter

11. Kendall Company projects 2019 first quarter sales to be $10,000 and increase by 5% per quarter. Determine the projected sales for 2019 by quarter and in total. Round answers to the nearest dollar.

12. Friedman Company manufactures and sells bicycles. A popular model is the XC. The company expects to sell 1,500 XCs in 2018 and 1,800 XCs in 2019. At the beginning of 2018, Friedman has 350 XCs in Finished Goods Inventory and desires to have 10% of the next year’s sales available at the end of the year. How many XCs will Friedman need to produce in 2018?

Preparing an operating budget—cost of goods sold budget

Refer to the budgets prepared in Exercise E22-24. Determine the cost per kit to manufacture the model airplane kits. Grady projects sales of 100, 150, 100, and 200 kits for the next four quarters. Prepare a cost of goods sold budget for the year. Grady has no kits in beginning inventory. Round amounts to two decimal places.

Match the following statements to the appropriate budgeting objective or benefit: developing strategies, planning, directing, controlling, coordinating and communicating, and benchmarking.

1. Managers are required to think about future business activities.

2. Managers use feedback to identify corrective action.

3. Managers use results to evaluate employees’ performance.

4. Managers work with managers in other divisions.

How is the predetermined overhead allocation rate determined?

Using sensitivity analysis in budgeting Riverbed Sporting Goods Store has the following sales budget:

Suppose June sales are expected to be \(81,000 rather than \)65,000. Revise Riverbed’s sales budget.
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