Topic 4 Budgets

The strategic planning process relates to:

• shorter term planning (usually less than 1 year).

• shorter term planning (usually 1 to 3 months).

• longer term planning (often 3 to 5 years).

• large entities only.

Which of the following statements about a budget is correct?

• It is an entity’s short-term plan expressed quantitatively.

• Budget targets are always impossible to meet.

• It is an entity’s long-term plan expressed quantitatively.

• Budgets must be prepared by all types of entities.

The three wheels of planning shows the interrelationships between:

• cash, sales and profit.

• cash, profit and return on investment.

• profit, cash and assets.

• return on investment, cash and assets.

The schedule of receipts from accounts receivable is prepared to provide information for the:

• cash budget.

• sales budget.

• production budget.

• budgeted balance sheet.

It takes 2 labour hours to produce 1 board and is paid $280/8hr day. The cost to produce 500 units is

• $17 500

• $14 000

• $28 000

• $35 000

Sharpe Ltd made these estimates. The cash bal at 1 July is $13,000. The cash bal at 31 Dec is:

• surplus of $13 500.

• surplus of $11 000.

• surplus of $26 500.

• deficit of $15 000.

At the end of Feb, Brayden Pty Ltd reviewed its performance and noted the following:

• $7000 U, $1200 U, $1500 F

• $7000 F, $1200 F, $1500 U.

• $7000 U, $1200 F, $1500 U.

• $7000 F, $1200 U, $1500 U.

Which of the following statements regarding the participative style of budgeting is not true?

• Often results in targets that are easier to achieve.

• Budgets are set after negotiations between senior management & department manager.

• Provides department manager opportunity to create some ‘room to move’.

• Department managers do not have ownership of the target and budget.

Total Sales for

April- $42,000

May- $54,000

June- $38,000

Credit sales are normally settled in the pattern:-

- 50% in the month of sales

- 40% in first month following the sales

- The balance in the second month following the sales

Calculate the estimated cash received from total sales for June.

• $44 800

• $25 800

• $19 000

• $40 600

Which of these is not a strategy to reduce cash outflow?

• Minimise inventory on hand.

• Sell unnecessary non-current assets.

• Defer capital expenditure.

• Make use of credit terms offered by suppliers.