Which one of the following schedules would be the last item to be prepared in the normal
budget preparation process?
Answer (B) is correct.
The budget process begins with the sales budget, proceeds to the
production and expense budgets, and eventually the cash budget. The
cash budget cannot be prepared until the end of the process because all
other budgets provide inputs to the cash budget.
After the goals of the company have been established and communicated, the next step in
the planning process is development of the
Answer (D) is correct. The sales budget is the first step in the operating budget process because it is needed to prepare all of the other budgets. For example, the production budget cannot be prepared until the sales department has determined how many units are needed.
The production budget process usually begins with the
Answer (D) is correct. Neither a master budget nor a production budget can be prepared until after the sales budget has been complet expected sales, production can be estimated. The production budget is based on assumptions appearing in the sales budget; thus, the sales budget is the first step in the preparation of a production budget.
Individual budget schedules are prepared to develop an annual comprehensive or master budget. The budget schedule that would provide the necessary input data for the direct labor budget would be the
Answer (D) is correct. Once the production budget has been completed, the next step is to prepare the direct labor, raw material, and overhead budgets. Thus, the production budget provides the data for the completion of the direct labor budget.
Which one of the following items should be done first when developing a comprehensive budget for a manufacturing company?
Answer (B) is correct. The sales budget is the first to be prepared because all other elements of a comprehensive budget depend on projected sales. For example, the production budget is based on an estimate of unit sales and desired inventory levels. Thus, sales volume affects purchasing levels, operating expenses, and cash flow.
There are various budgets within the master budget cycle. One of these budgets is the production budget. Which one of the following best describes the production budget?
Answer (D) is correct. A production budget is based on sales forecasts, in units, with adjustments for beginning and ending inventories. It is used to plan when items will be produced. After the production budget has been completed, it is used to prepare materials purchases, direct labor, and factory overhead budgets.
The budget that is usually the most difficult to forecast is the
Answer (C) is correct. Following the preparation of the sales budget, all other budgets are prepared based on the assumptions used in the sales budget. For this reason, the sales budget is the most difficult to prepare because there are no internal figures to use as a guide. Sales are based on the desires of consumers and the current business climate.
When sales volume is seasonal in nature, certain items in the budget must be coordinated. The three most significant items to coordinate in budgeting seasonal sales volume are
Answer (B) is correct. The most important items that need to be coordinated in a seasonal business are sales volume and production. The sales budget is the basis for other budgets. The sales projection determines how much needs to be purchased and produced. In turn, projected sales and production (or purchases) must be coordinated with existing quantities on hand (inventory) and with amounts to be held in the future. If a manufacturer faces sharp variations in demand, this coordination becomes especially crucial.
Maximilian Computer Company uses a comprehensive budgeting system in planning its annual operations. Which of the following best describes the information needed to determine the budgeted cost of circuit boards to be purchased for use in building its laptop computer? Assume one circuit board is used in each laptop.
Answer (D) is correct. Since each laptop requires exactly one circuit board, the beginning figure of the calculation equals the number of finished products to be produced:
Units needed for production X,XXX
Add: desired ending inventory XXX
Less: beginning inventory (XXX)
Raw material to be purchased X,XXX
Times: per-unit purchase price × $ X.XX
Total raw materials cost $X,XXX
Which one of the combinations listed correctly depicts the chronological order of preparation
for the following budgets?
I. Cost of goods sold budget
II. Production budget
III. Purchases budget
IV. Administrative budget
Answer (D) is correct.
The components of the operating budget are prepared in the following
order: sales budget, production budget, direct materials budget, direct
labor budget, manufacturing overhead budget, ending finished goods
inventory budget, cost of goods sold budget, and nonmanufacturing
budget. This last budget consists of the research and development
budget, design budget, marketing budget, distribution budget, customer
service budget, and administrative budget.