Which of the following statements are true? Statement I. In a production budget, if the number of units in finished goods inventory at the of the period is less than the number of units in finished goods inventory at the beginning of t period, then the expected number of units sold is less than the number of units to be produce during the period. Statement II. In the merchandise purchases budget, the required purchases (in units) for a peri can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units) and desired ending merchandise inventory (in units). Statement III. When preparing a direct materials budget, beginning inventory for raw materials

Which of the following statements are true? Statement I. In a production budget, if the number of units in finished goods inventory at the of the period is less than the number of units in finished goods inventory at the beginning of t period, then the expected number of units sold is less than the number of units to be produce during the period. Statement II. In the merchandise purchases budget, the required purchases (in units) for a peri can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units) and desired ending merchandise inventory (in units). Statement III. When preparing a direct materials budget, beginning inventory for raw materials

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Master Budget

A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.

Sales Budget and Selling

A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.

Question

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Which of the following statements are true?
Statement I. In a production budget, if the number of units in finished goods inventory at the end
of the period is less than the number of units in finished goods inventory at the beginning of the
period, then the expected number of units sold is less than the number of units to be produced
during the period.
Statement II. In the merchandise purchases budget, the required purchases (in units) for a period
can be determined by subtracting the beginning merchandise inventory (in units) from the
budgeted sales (in units) and desired ending merchandise inventory (in units).
Statement III. When preparing a direct materials budget, beginning inventory for raw materials
should be added to production needs, and desired ending inventory should be subtracted to
determine the amount of raw materials to be purchased.
Only Statement I is true.
O Only Statement II is true.
Statements I and II are true.
Statements II and III are true.
O None of the statements are true.

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LB Enterprises (LB) is preparing its budget for the first quarter of 2019. LB's balance sheet as of December 31, 2018 is as follows: Assets Liabilities Cash $5,000 Accounts Payable $9500 Accounts Recievable 28,000 Inventories Direct Materials 8,100 Finished Goods (500 Units) 16,870 Stockholders Equity Equipment - gross 45,000 Accumulated depreciation 15.000 Common Stock $15,000 Net Equipment 30,000 Retained Earnings 63,470 Total Assets $87,970 Total Liabilities and $87,960 Equity LB sells one product for $45/unit. The Company forecasts that it will sell 2,000; 1,500; 1,600; and 1,700 units in January, February, March and April, respectively. • Sales to customers are all on credit. 40% of the cash for these sales is collected in the month of the sale and the remaining 60% is collected in the following month. LB wants finished goods inventory equal to 25% of the next month's sales on hand at the end of each month. LB wants direct materials equal to 75% of the current month's production…
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