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Chapter 22: Q9RQ (page 1228)
Why is the sales budget considered the cornerstone of the master budget?
The sales budget estimates the sales revenue in the future.
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Preparing the financial budget—cash budget Hoppy Company requires a minimum cash balance of $3,500. When the company expects a cash deficiency, it borrows the exact amount required on the first of the month. Expected excess cash is used to repay any amounts owed. Interest owed from the previous month’s principal balance is paid on the first of the month at 14% per year. The company has already completed the budgeting process for the first quarter for cash receipts and cash payments for all expenses except interest. Hoppy does not have any outstanding debt on January 1. Complete the cash budget for the first quarter for Hoppy Company. Round interest expense to the nearest whole dollar.
What are the three sections of the cash budget?
Preparing a financial budget—schedule of cash payments
Jefferson Company has budgeted purchases of merchandise inventory of \(457,500 in January and \)533,250 in February. Assume Jefferson pays for inventory purchases 70% in the month of purchase and 30% in the month after purchase. The Accounts Payable balance on December 31 is $98,275. Prepare a schedule of cash payments for purchases for January and February.
Match the budget types to the definitions.
Budget Types Definitions
5. Financial a. Includes sales, production, and cost of goods sold budgets
6. Flexible b. Long-term budgets
7. Operating c. Includes only one level of sales volume
8. Operational d. Includes various levels of sales volumes
9. Static e. Short-term budgets
10. Strategic f. Includes the budgeted financial statements
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.
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