Question

20. When preparing a production budget, the required production equals:

    1. Budgeted sales plus beginning inventory plus desired inventory

    2. Budgeted sales minus beginning inventory plus desired inventory

    3. Budgeted sales minus beginning inventory minus desired inventory

    4. Budgeted sales plus beginning inventory minus desired inventory

21. Bustillo Inc. is working on its cash budget for March. The budgeted beginning cash balance is $35,000. Budgeted cash receipts total $142,000 and budgeted cash disbursements total $151,000. The desired ending cash balance is $30,000. To attain its desired ending cash balance for March, the company needs to borrow:

    A. $0
    B. $4,000 C. $56,000 D. $30,000

27. Stag Corporation, a retailer, has an opportunity to purchase 28,000 units of Product X during the month of August. If the company has 6,000 units on hand at the start of the month, and only wants 9,000 units on hand at the end of the month, how many units of Product X must be sold during the month?

A. 37,000 B. 25,000 C. 31,000 D. 28,000

28. Latern Corporation pays for 40% of its raw materials purchases in the month of purchase and 60% in the following month. If the budgeted cost of raw materials purchases in July is $256,550 and in August is $278,050, then in August the total budgeted cash disbursements for raw materials purchases is closest to:

    A. $265,150B. $153,930C. $166,830 D. $111,220

29. The usual starting point for a master budget is:

    1. The direct materials purchase budget

    2. The budgeted income statement

    3. The sales forecast or sales budget

    4. Theproductionbudget

Answer 1

Answer 1:

Option B: Budgeted sales minus beginning inventory plus desired inventory

Explanation:

Closing inventory is added to sales and opening inventory is deducted while preparing the production budget.

The format of production budget is as follows:

Sales

Add: Desired Closing stock of Finished Goods

Total needs

Less: Opening stock of Finished Goods

Production required

Hence, option 'B' is correct and rest all are incorrect.

Answer 2:

Option B: $ 4,000

Explanation:

Budgeted closing balance = Opening balance + cash receipts (-) cash payments

= 35,000 + 142,000 (-) 151,000

= $ 26,000

Cash balance required at the end = $ 30,000

Borrowings required = 30,00 (-) 26,000

= $ 4,000

Hence, option 'B' is correct and rest all are incorrect.

Answer 3:

Option B: $ 25,000

Explanation:

Sales = Total purchases + Closing stock (-) Opening stock

= 28,000 + 6,000 (-) 9,000

= $ 25,000

Hence, option 'B' is correct and rest all are incorrect.

Answer 4:

Option A: $ 265,150

Explanation:

Payment of raw material = (278,050 * 40%) + (256,550 * 60%)

= $ 265,150

Hence, option 'A' is correct and rest all are incorrect.

Answer 5:

Option C: The sales forecast or sales budget

Explanation:

The master budget starts with a sales budget. This is because sales units need to be calculated in the beginning and all other budgets are calculated on the basis of sales units.

Production budget, direct material budget, and Income statement are created after the sales budget.

Hence, option 'C' is correct and rest all are incorrect.

In case of any doubt, please feel free to comment.