Chapter 22: Q4RQ (page 1228)
What is budgetary slack? Why might managers try to build slack into their budgets?
Budgetary slack means higher expectations for estimated expenses and least expectations for estimated revenues.
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Preparing an operating budget—sales budget
Yarbrough Company manufactures T-shirts printed with tourist destination logos. The following table shows sales prices and projected sales volume for the summer months:
Projected Sales in Units T-Shirt Sizes Sales Price June July August Youth $ 7 575 500 525 Adult—regular 17 625 900 825 Adult—oversized 18 400 500 475 Prepare a sales budget for Yarbrough Company for the three months.
How is benchmarking beneficial?
Connor Company began operations on January 1 and has projected the following selling and administrative expenses:
Rent Expense $ 1,000 per month, paid as incurred
Utilities Expense 500 per month, paid in month after incurred
Depreciation Expense 300 per month
Insurance Expense 100 per month, 6 months prepaid on January 1
Determine the cash payments for selling and administrative expenses for the first three months of operations.
Preparing an operating budget—cost of goods sold budget
Refer to the budgets prepared in Exercise E22-24. Determine the cost per kit to manufacture the model airplane kits. Grady projects sales of 100, 150, 100, and 200 kits for the next four quarters. Prepare a cost of goods sold budget for the year. Grady has no kits in beginning inventory. Round amounts to two decimal places.
Preparing a financial budget—budgeted income statement and balance sheet
Buncomb Companyhas the following post-closing trial balance on December 31, 2018:
The company’s accounting department has gathered the following budgeting information for the first quarter of 2019:
Budgeted total sales,all on account $ 121,700 Budgeted purchases of merchandise inventory,
all on account 61,200 Budgeted cost of goods sold 60,850 Budgeted selling and administrative expenses: Commissions expense 6,085 Salaries expense 3,000 Rent expense 4,100 Depreciation expense 900 Insurance expense 300 Budgeted cash receipts from customers 126,450 Budgeted cash payments for merchandise inventory 67,925 Budgeted cash payments for salaries and commissions 14,836 Budgeted income tax expense 4,700 Additional information:
Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.
Requirements
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