Accounting, Chapters 14-26
27th Edition
ISBN: 9781337272117
Author: WARREN, Carl S.; Reeve, James M.; Duchac, Jonathan
Publisher: South-Western College Pub
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Textbook Question
Chapter 22, Problem 22.9DQ
a. Discuss the purpose of the
b. If the cash for the first quarter of the fiscal year indicates excess cash at the end of each of the first two months, how might the excess cash be used?
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What revenue sources allow this budget to be balanced in each year? What revenue source will have the greatest impact on the budget? What assumptions
have been made with respect to revenue sources? What two expenditures will have the greatest impact upon the budget?
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…
Chapter 8: Applying Excel: Exercise (Part 2 of 2)
Requirement 2:
The company has just hired a new marketing manager who insists that unit sales can be dramatically increased by dropping the selling
price from $8 to $7. The marketing manager would like to use the following projections in the budget:
Year 2 Quarter
Year 3 Quarter
Data
1
2
3
1
2
Budgeted unit sales
Selling price per unit
45,000
$7
70,000
120,000
60,000
80,000
95,000
A.
B
D
E
G
1 Chapter 8: Applying Excel
2
Data
Year 3 Quarter
4
1
2
3
4
1
2
5 Budgeted unit sales
45,000
70,000
120,000
60,000
80,000
95,000
6.
7 · Selling price per unit
- Accounts receivable, beginning balance
9 · Sales collected in the quarter sales are made
Sales collected in the quarter after sales are made
$
7 per unit
8
$
65,000
75%
10
25%
11 · Desired ending finished goods inventory is
12 · Finished goods inventory, beginning
13 · Raw materials required to produce one unit
30% of the budgeted unit sales of the next quarter
12,000 units
5 pounds
14 ·…
Chapter 22 Solutions
Accounting, Chapters 14-26
Ch. 22 - Prob. 22.1DQCh. 22 - Briefly describe the type of human behavior...Ch. 22 - What behavioral problems are associated with...Ch. 22 - What behavioral problems are associated with...Ch. 22 - Under what circumstances is a static budget...Ch. 22 - How do computerized budgeting systems aid firms in...Ch. 22 - Why should the production requirements set forth...Ch. 22 - Why should the timing of direct materials...Ch. 22 - a. Discuss the purpose of the cash budget. b. If...Ch. 22 - Prob. 22.10DQ
Ch. 22 - Flexible budgeting At the beginning of the period,...Ch. 22 - Flexible budgeting At the beginning of the period,...Ch. 22 - Production budget Daybook Inc. projected sales of...Ch. 22 - Prob. 22.2BPECh. 22 - Direct materials purchases budget Daybook Inc....Ch. 22 - Direct materials purchases budget Magnolia Candle...Ch. 22 - Direct labor cost budget Daybook Inc. budgeted...Ch. 22 - Direct labor cost budget Magnolia Candle Inc....Ch. 22 - Cost of goods sold budget Prepare a cost of goods...Ch. 22 - Cost of goods sold budget Prepare a cost of goods...Ch. 22 - Cash budget Daybook Inc. collects 30% of its sales...Ch. 22 - Cash budget Magnolia Candle Inc. pays 10% of its...Ch. 22 - Personal budget At the beginning of the school...Ch. 22 - Flexible budget for selling and administrative...Ch. 22 - Static budget versus flexible budget The...Ch. 22 - Flexible budget for Assembly Department Steelcase...Ch. 22 - Production budget Weightless Inc. produces a small...Ch. 22 - Sales and production budgets Sonic Inc....Ch. 22 - Professional fees earned budget for a service...Ch. 22 - Professional labor cost budget for a service...Ch. 22 - Direct materials purchases budget Lorenzo's Frozen...Ch. 22 - Prob. 22.10EXCh. 22 - Direct materials purchases budget Anticipated...Ch. 22 - Direct labor cost budget MatchPoint Racket Company...Ch. 22 - Direct labor budget for a service business...Ch. 22 - Production and direct labor cost budgets Levi...Ch. 22 - Factory overhead cost budget Sweet Tooth Candy...Ch. 22 - Cost of goods sold budget Wilmington Chemical...Ch. 22 - Cost of goods sold budget The controller of...Ch. 22 - Schedule of cash collections of accounts...Ch. 22 - Schedule of cash collections of accounts...Ch. 22 - Schedule of cash payments for a service company...Ch. 22 - Schedule of cash payments for a service company...Ch. 22 - Capital expenditures budget On January 1, 20Y2,...Ch. 22 - Forecast sales volume and sales budget For 20Y6,...Ch. 22 - Sales, production, direct materials purchases, and...Ch. 22 - Budgeted income statement and supporting budgets...Ch. 22 - Cash budget The controller of Sonoma Housewares...Ch. 22 - Budgeted income statement and balance sheet As a...Ch. 22 - Forecast sales volume and sales budget Sentinel...Ch. 22 - Sales, production, direct materials purchases, and...Ch. 22 - Budgeted income statement and supporting budgets...Ch. 22 - Cash budget The controller of Mercury Shoes Inc....Ch. 22 - Budgeted income statement and balance sheet As a...Ch. 22 - Prob. 22.1CPCh. 22 - Communication The city of Milton has an annual...Ch. 22 - Prob. 22.4CPCh. 22 - Static budget for a service company A bank manager...Ch. 22 - Objectives of the master budget Dominos Pizza...
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- A. Discuss the purpose of the cash budget. B. If the cash for the first quarter of the fiscal year indicates excess cash at the end of each of the first two months, how might the excess cash be used?arrow_forwardIf the company wants to find out the likely balance of cash in hand at the end of July, August and September 2021. Which of the following helps the company to fulfill their objective? a. Purchase budget b. Cash budget c Sales budget d. Materials budgetarrow_forwardA. Prepare Cash Budget for the period of 6 months from July to December 2020. B. Explain the advantages and disadvantages of cash budgeting.arrow_forward
- A cash flow budget can be used to A. estimate when and how much money will need to be borrowed during the year B. estimate when and how much debt can be repaid during the year C. estimate when excess cash may be available so plans can be made to invest it D. all of the abovearrow_forwardThe amount of prepaid expense reflected in the disbursement section of the cash budget is the same amount that is found on the monthly operating statement. True Falsearrow_forwardMarch Madness" refers to which of the following: O a. Financial year end O b. A period when financial statements by government departments are due A period when the budget is due d. The last month of the Financial year and all funds must be utilizedarrow_forward
- (a) The business needs to have a sense of its future cashflows and therefore requires thepreparation of the following: ▪ A schedule of budgeted cash collections for trade receivables (sales on account) for each of the months October to December. ▪ A schedule of expected cash disbursements for accounts payable (purchases on account) for each of the months October to December. ▪ A cash budget, with a total column, for the quarter ending December 31, 2021, showing the expected cash receipts and payments for each month and the ending cash balance for each of the three months, given that no financing activities took place.arrow_forward(a) The business needs to have a sense of its future cashflows and therefore requires thepreparation of the following:▪ A schedule of budgeted cash collections for trade receivables (sales on account) for each of the months October to December. ▪ A schedule of expected cash disbursements for accounts payable (purchases on account)for each of the months October to December.▪ A cash budget, with a total column, for the quarter ending December 31, 2021, showing the expected cash receipts and payments for each month and the ending cash balance for each of the three months, given that no financing activities took place.arrow_forwardWhy should an organization revise its budget for the fourth quarter?arrow_forward
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