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Chapter 22: 1TIAT (page 1262)

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.

Short Answer

Expert verified
  1. Planning
  2. Controlling
  3. Benchmarking
  4. Coordinating and communicating

Step by step solution

01

Planning is a budgeting benefit 

Managers are required to think about future business activities in a systematic wayso that the decisions can be taken as per formalized plan and haphazard decision making can be avoided.

02

Controlling is a budgeting objective

Managers use feedback to identify corrective action.The controlling step is not the end but a start to developing strategies step.

03

Benchmarking is a budgeting benefit

Managersuse results to evaluate employees’ performance by comparing them with the benchmarks set by the company.

04

Coordinating and communicating is a budgeting benefit

Managers work with managers in other divisions so thatthey can work together to make a single, unified, comprehensive plan for the business.

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Most popular questions from this chapter

Preparing an operating budget—sales budget Brown Company manufactures luggage sets. Brown sells its luggage sets to department stores. Brown expects to sell 1,700 luggage sets for \(180 each in January and 2,050 luggage sets for \)180 each in February. All sales are cash only. Prepare the sales budget for January and February.

Preparing a financial budget—cash budget, sensitivity analysis

Leichter Auto Parts, a family-owned auto parts store, began January with \(10,500 cash. Management forecasts that collections from credit customers will be \)11,000 in January and \(15,200 in February. The store is scheduled to receive \)8,500 cash on a business note receivable in January. Projected cash payments include inventory purchases (\(15,600 in January and \)14,800 in February) and selling and administrative expenses (\(2,900 each month).

Leichter Auto Part'sbank requires a \)10,000 minimum balance in the store’s checking account. At the end of any month when the account balance falls below \(10,000, the bank automatically extends credit to the store in multiples of \)1,000. Leichter Auto Parts borrows as little as possible and pays back loans in quarterly installments of \(2,000, plus 4% APR interest on the entire unpaid principal. The first payment occurs three months after the loan.

Requirements

1. Prepare Leichter Auto Part'scash budget for January and February.

2. How much cash will Leichter Auto Parts borrow in February if collections from customers that month total \)14,200 instead of $15,200?

Using sensitivity analysis in budgeting

Refer to the Victors schedule of cash receipts from customers that you prepared in Short Exercise S22-15. Now assume that Victors’s sales are collected as follows:

40% in the month of the sale

20% in the month after the sale

39% two months after the sale

1% never collected

Prepare a revised schedule of cash receipts for January and February

: Completing a comprehensive budgeting problem—merchandising company

Belton Printing Company of Baltimore has applied for a loan. Its bank has requested a budgeted income statement for the month of April 2018 and a balance sheet at April 30, 2018. The March 31, 2018, balance sheet follows:

As Belton Printing’s controller, you have assembled the following additional information:

a. April dividends of \(7,000 were declared and paid.

b. April capital expenditures of \)17,000 budgeted for cash purchase of equipment.

c. April depreciation expense, \(800.

d. Cost of goods sold, 55% of sales.

e. Desired ending inventory for April is \)24,800.

f. April selling and administrative expenses includes salaries of \(29,000, 20% of which will be paid in cash and the remainder paid next month.

g. Additional April selling and administrative expenses also include miscellaneous expenses of 10% of sales, all paid in April.

h. April budgeted sales, \)86,000, 80% collected in April and 20% in May.

i. April cash payments of March 31 liabilities incurred for March purchases of inventory, \(8,300.

j. April purchases of inventory, \)22,900 for cash and $37,200 on account. Half the credit purchases will be paid in April and half in May

Requirements

1. Prepare the sales budget for April.

2. Prepare the inventory, purchases, and cost of goods sold budget for April.

3. Prepare the selling and administrative expense budget for April.

4. Prepare the schedule of cash receipts from customers for April.

5. Prepare the schedule of cash payments for selling and administrative expenses for April.

6. Prepare the cash budget for April. Assume the company does not use short-term financing to maintain a minimum cash balance.

7. Prepare the budgeted income statement for April.

8. Prepare the budgeted balance sheet at April 30, 2018.

Question: Meeks Company has the following sales for the first quarter of 2019:

January February March Cash sales \( 5,000 \) 5,500 \( 5,250 Sales on account 15,000 14,000 14,500 Total sales \) 20,000 \( 19,500 \) 19,750 Sales on account are collected the month after the sale. The Accounts Receivable balance on January 1 is $12,500, the amount of December’s sales on account. Calculate the cash receipts from customers for the first three months of 2019.
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