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Chapter 22: 2SE (page 1228)

Budgeting types Consider the following budgets and budget types.

Cash Cost of Goods Sold

Flexible Master

Operational Sales

Static Strategic

Which budget or budget type should be used to meet the following needs?

a. Upper management is planning for the next five years.

b. A store manager wants to plan for different levels of sales.

c. The accountant wants to determine if the company will have sufficient funds to pay expenses.

d. The CEO wants to make companywide plans for the next year.

Short Answer

Expert verified
  1. Strategic budget
  2. Flexible budget
  3. Operational budget
  4. Master budget

Step by step solution

01

Upper management is planning for the next five years

The upper management鈥檚 need for planning for the next five years is a long-term goal that requires a strategic budget

02

A store manager wants to make a plan for different levels of sales.

If the store manager wants to plan for a different level of sales, then he should prepare aflexible budget.

03

The accountant wants to determine if the company will have sufficient funds to pay expenses.

To determine if the company will have sufficient funds to pay expenses the accountant should prepare anoperational budget.

04

The CEO wants to make companywide plans for the next year

If the CEO wants to make companywide plans for the next year they should prepare amaster budget.

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Most popular questions from this chapter

Why is the sales budget considered the cornerstone of the master budget?

What are the three sections of the cash budget?

Preparing an operating budget鈥攄irect materials budget

Bell expects to produce 1,800 units in January and 2,155 units in February. The company budgets 3 pounds per unit of direct materials at a cost of $10 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is 4,950 pounds. Bell desires the ending balance in Raw Materials Inventory to be 20% of the next month鈥檚 direct materials needed for production. Desired ending balance for February is 4,860 pounds. Prepare Bell鈥檚 direct materials budget 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

Camp Company is a sporting goods store. The company sells a tent that sleeps six people. The store expects to sell 250 tents in 2018 and 280 tents in 2019. At the beginning of 2018, Camp Company has 25 tents in Merchandise Inventory and desires to have 5% of the next year鈥檚 sales available at the end of the year. How many tents will Camp Company need to purchase in 2018?
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