What is the method used to determine whether the budgeting process is operating effectively?
Budget evaluation
Budget review
Budget appraisal
Budget audit
1. The cash budget is one of the primary financial budgets. Discuss the importance of the cash budget. Identify the individual sections of the cash budget and the information included in each section. (Points : 20)
2. Distinguish between fixed budgets and flexible budgets. When are each an appropriate means of evaluating a manager's performance and why?
3. Yappy Company is considering a capital investment of $320,000 in additional equipment. The new equipment is expected to have a useful life of 8 years with no salvage value. Depreciation is computed by the straight-line method. During the life of the investment, annual net income and cash inflows are expected to be $25,000 and $65,000, respectively. Yappy requires a 10% return on all new investments.
Part (a) Compute each of the following:
1: Payback period.
2: Net present value.
3: Profitability index.
4: Internal rate of return.
5: Accounting rate of return.
(b) Indicate whether the investment should be accepted or rejected.
4. Roswell Company has budgeted sales revenue as follows for the next 4 months as follows:
February $150,000
March $120,000
April $105,000
May $165,000
Past experience indicates that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 35% in the month following the sale, and 3% in the second month following the sale. The other 2% is uncollectible.
Prepare a schedule which shows expected cash receipts from sales for the month of May.
5. Northern Company's budgeted and actual sales for 2009 were:
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Product
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Budgeted Sales
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Actual Sales
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A
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6,000 units at $8.00 per unit
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6,810 units at $7.80 per unit
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B
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5,000 units at $10.00 per unit
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4,720 units at $10.40 per unit
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Part (a) Calculate the sales volume variance.
Part (b) Calculate the sales price variance.
Part (c) Calculate the total sales variance.
6. Herbart Company gathered the following information on power costs and factory machine usage for the last six months:
Power Cost Factory Machine Hours
January $24,400 13,900
February 30,300 17,600
March 29,000 16,800
April 22,340 13,200
May 19,900 11,600
June 14,900 6,600
Using the high-low method of analyzing costs, answer the following questions and show computations to support your answers.
Part (a) What is the estimated variable portion of power costs per factory machine hour?
Part (b) What is the estimated fixed power cost each month?
Part (c) If it is estimated that 10,000 factory machine hours will be run in July, what is the expected total power cost for July?