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Chapter 22: Q1TI (page 1187)

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鈥� performance.

4. Managers work with managers in other divisions.

Short Answer

Expert verified
  1. Planning
  2. Controlling
  3. Benchmarking
  4. Coordinating and communicating

Step by step solution

01

Planning is a budgeting benefit

Managers are required to think about future business activities in a systematic way so that the decisions can be taken as per formalized plan and haphazard decision making can be avoided.

02

Controlling is a budgeting objective

Managers use feedback to identify corrective action.The controlling step is not the end but a start to developing strategies step.

03

 Step 3: Benchmarking is a budgeting benefit

Managersuse results to evaluate employees鈥� performanceby comparing them with the benchmarks set by the company.

04

Coordinating and communicating is a budgeting benefit

Managers work with managers in other divisions so thatthey can work together to make a single, unified, comprehensive plan for the business.

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Most popular questions from this chapter

Preparing a financial budget鈥攃ash budget, sensitivity analysis

Leichter Auto Parts, a family-owned auto parts store, began January with \(10,500 cash. Management forecasts that collections from credit customers will be \)11,000 in January and \(15,200 in February. The store is scheduled to receive \)8,500 cash on a business note receivable in January. Projected cash payments include inventory purchases (\(15,600 in January and \)14,800 in February) and selling and administrative expenses (\(2,900 each month).

Leichter Auto Part'sbank requires a \)10,000 minimum balance in the store鈥檚 checking account. At the end of any month when the account balance falls below \(10,000, the bank automatically extends credit to the store in multiples of \)1,000. Leichter Auto Parts borrows as little as possible and pays back loans in quarterly installments of \(2,000, plus 4% APR interest on the entire unpaid principal. The first payment occurs three months after the loan.

Requirements

1. Prepare Leichter Auto Part'scash budget for January and February.

2. How much cash will Leichter Auto Parts borrow in February if collections from customers that month total \)14,200 instead of $15,200?

Preparing a financial budget鈥攕chedule of cash receipts, schedule of cash payments, cash budget

Haney Company has provided the following budget information for the first quarter of 2018:

Total sales \(214,000 Budgeted purchases of direct materials 40,300 Budgeted direct labor cost 37,200 Budgeted manufacturing overhead costs:

Variable manufacturing overhead 1,150 Depreciation 1,200 Insurance and property taxes 6,600 Budgeted selling and administrative expenses: Salaries expense 13,000 Rent expense 2,500 Insurance expense 1,100 Depreciation expense 350 Supplies expense 4,280 Additional data related to the first quarter of 2018 for Haney Company:

a. Capital expenditures include \)38,000 for new manufacturing equipment, to be purchased and paid in the first quarter.

b. Cash receipts are 65% of sales in the quarter of the sale and 35% in the quarter following the sale.

c. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.

e. Income tax expense for the first quarter is projected at \(44,000 and is paid in the quarter incurred.

f. Haney Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter.

g. The December 31, 2017, balance in Cash is \)45,000, in Accounts Receivable is \(23,200, and in Accounts Payable is \)9,000.

Requirements

1. Prepare Haney Company鈥檚 schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2018.

2. Prepare Haney Company鈥檚 cash budget for the first quarter of 2018.

Preparing an operating budget鈥攄irect labor budget Baker Company expects to produce 2,050 units in January and 1,994 units in February. Baker budgets five direct labor hours per unit. Direct labor costs average $9 per hour. Prepare Baker鈥檚 direct labor budget for January and February.

How is benchmarking beneficial?

Preparing an operating budget鈥攑roduction budget Bailey Company expects to sell 1,500 units of finished product in January and 1,750 units in February. The company has 180 units on hand on January 1 and desires to have an ending inventory equal to 80% of the next month鈥檚 sales. March sales are expected to be 1,820 units. Prepare Bailey鈥檚 production budget for January and February.
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