Chapter 20: Q4DQ (page 912)
Question: Identify three usual time horizons for short-term planning and budgets.
These three usual time horizons for the short-term planning and budgeting mainly last for one year only.
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Question: Built-Tight is preparing its master budget for the quarter ended September 30, 2017. Budgeted sales and cash payments for product costs for the quarter follow:
Sales are 20% cash and 80% on credit. All credit sales are collected in the month following the sale. The June 30 balance sheet includes balances of \(15,000 in cash; \)45,000 in accounts receivable; \(4,500 in accounts payable; and a \)5,000 balance in loans payable. A minimum cash balance of \(15,000 is required. Loans are obtained at the end of any month when a cash shortage occurs. Interest is 1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If an excess balance of cash exists, loans are repaid at the end of the month. Operating expenses are paid in the month incurred and consist of sales commissions (10% of sales), office salaries (\)4,000 per month), and rent ($6,500 per month).
1. Prepare a cash receipts budget for July, August, and September.
2. Prepare a cash budget for each of the months of July, August, and September. (Round amounts to the dollar.)
Branson Belts makes handcrafted belts. The company budgets production of 4,500 belts during the second quarter. Each belt requires 4 direct labor hours, at a cost of $17 per hour. Prepare a direct labor budget for the second quarter.
Miami Solar budgets production of 5,000 solar panels in July. Each unit requires 4 hours of direct labor at a rate of $16 per hour. Prepare a direct labor budget for July.
Foyert Corp. requires a minimum \(30,000 cash balance. If necessary, loans are taken to meet this requirement at a cost of 1% interest per month (paid monthly). Any excess cash is used to repay loans at monthend. The cash balance on October 1 is \)30,000, and the company has an outstanding loan of $10,000. Forecasted cash receipts (other than for loans received) and forecasted cash payments (other than for loan or interest payments) follow. Prepare a cash budget for October, November, and December. (Round interest payments to the nearest whole dollar.)
Montel Company’s July sales budget calls for sales of \(600,000. The store expects to begin July with \)50,000 of inventory and to end the month with $40,000 of inventory. Gross margin is typically 40% of sales. Determine the budgeted cost of merchandise purchases for July.
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