Question

17. WHich of the following is NOT part of the operating budget?
    1. Manufacturing overhead budget?
    2. Selling and administrative expense budget
    3. Production budget
    4. Cash Budget

18. Which of the following is NOT an advantage of budgeting?
    1. It forces managers to plan ahead and so they can be prepared for future
    2. It provides a standard or benchmark for performance evaluation
    3. It guarantees an improvement in organizational efficiency and performance
    4. It improves communication and coordination among organizational members

19. Asian Lamp Company manufactures lamps. The following sales have been forecasted:

October November December

Sales               10,000units     14,000 units    13,000 units

Finished goods inventory at the end of September was 3,000 units. Desired ending finished goods inventory for each month is budgeted to equal 25% of the next month’s sales

How many units of lamps should be produced in November?

1. 14,000 units
2. 13,750 units
3. 14250 units
4. 17250 units

20. The PDQ company makes collections on credit sales according to the following schedule: 25% in the month of sale

70% in the next month

4% in the second month after the sale 1% uncollectible

The following sales have been budgeted:

January           February         March

Sales $100,000         $120,000         $110,000

The expected cash collections in MARCH would be:

A. 111,000

B. 110,000

C. 115,500

D. 151500

Answer 1

1) Direct materials budget, direct labor budget, Manufacturing overhead budget, Selling and administrative expense, Production budget.

All the budget except cash budget is not a part of operating budget.

So, the answer is option D) Cash Budget

2) Budgeting is prepared to for the future. It also helps in communicating with other parties.

So, the answer is option C) It guarantees an improvement in organisational efficiency and performance

3)

Asian Lamp Company
Production Budget
Expected sales	14000
Add: Desired ending inventory (13000*25%)	3250
Total needs	17250
Less: Beginning inventory (14000*25%)	(3500)
Production in November	13750

4)

Cash Collection In March
Cash Collected- March (110000*25%)	27500
February's collection (120000*70%)	84000
January's collection (100000*4%)	4000
Total cash collected in march	115500