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Exercise On Operational Budgeting

1. The document provides instructions and questions for an operational budgeting exercise. It contains 5 multiple choice theory questions about the importance of budgeting and how preparation of budgets like cash and purchase budgets can help organizations. It also contains 5 problems involving computing production units, inventory levels, and cash receipts based on given sales budgets. Students are instructed to show work for problems and write legibly.

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Prince Pierre
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315 views

Exercise On Operational Budgeting

1. The document provides instructions and questions for an operational budgeting exercise. It contains 5 multiple choice theory questions about the importance of budgeting and how preparation of budgets like cash and purchase budgets can help organizations. It also contains 5 problems involving computing production units, inventory levels, and cash receipts based on given sales budgets. Students are instructed to show work for problems and write legibly.

Uploaded by

Prince Pierre
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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EXERCISE on OPERATIONAL BUDGETING

INSTRUCTION: For theories, each of the questions is worth 10 points. Make your
answers brief but complete. For problem solving, NO SOLUTION NO CREDIT.
Each of the #Problem is worth 10 points. Finally, in both theories and problems,
KINDLY WRITE LEGIBLY.

THEORIES:
1. In an organization like SPSPS, what do you think is the importance of budgeting?
2. Given today’s pandemic, is the sales budget still needed for companies?
3. One of today’s biggest smartphone manufacturers is Apple Incorporated. In
making the iPhone 13 as the next big thing, will preparing a purchase budget be
helpful to the company? Explain.
4. How will the preparation of a cash budget help an organization like SPSPS?
5. How do you think a failure to prepare a cash budget impacts an organization like
SAMSUNG?

PROBLEMS:

1. The SCOMAN1 Company has budgeted sales for the year as follows:
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Sales in units 10,000 12,000 14,000 16,000

The ending inventory of finished goods for each quarter should equal 20% of the next quarter's
budgeted sales in units. The finished goods inventory at the start of the year is 2,000 units.

REQUIRED: Compute the UNITS TO BE PRODUCED for each of the four (4) quarters. For
the computation in Quarter 4, assume that next year's Quarter 1 has a forecasted sales
of 20,000 units.

2. The SCOMAN1 Company has budgeted sales for the year as follows:
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Sales in units 20,000 30,000 40,000 50,000

The ending inventory of finished goods for each quarter should equal 10% of the next quarter's
budgeted sales in units. The finished goods inventory at the start of the year is 2,000 units.

REQUIRED: Compute the UNITS TO BE PRODUCED for each of the four (4) quarters. For
the computation in Quarter 4, assume that next year's Quarter 1 has a forecasted sales
of 100,000 units.

3. SCOMAN1 Company manufactures and sells dress shirts. Each shirt (unit)
requires 4 yards of cloth. Selected data from SCOMAN1's master budget
for next quarter are shown below:
April May June
Budgeted sales (in units) ...............................26,000 28,000 32,000
Budgeted production (in units) .......................28,000 32,000 36,000
Desired ending inventory of cloth (in yards) .. 2,100 2,800 3,000

How many yards of cloth should SCOMAN1 plan on purchasing in


APRIL, MAY and JUNE?
4. SCOMAN1 Company budgeted sales at P300,000 for July, P480,000 for August,
P300,000 for September and P100,000 for October. Approximately 75% of sales are on
credit; the remainder are cash sales. Collection experience indicates that 60% of the
budgeted credit sales will be collected the month after the sale, 36% will be collected
the second month, and 4% will be uncollectible. What is the budgeted cash receipts
for October?

5. SCOMAN1 Company budgeted sales at P300,000 for July, P480,000 for August,
P300,000 for September and P100,000 for October. Approximately 100% of sales are
on credit; the remainder are cash sales. Collection experience indicates that 60% of the
budgeted credit sales will be collected the month after the sale, 36% will be collected
the second month, and 4% will be uncollectible. What is the budgeted cash receipts
for October?

END 😎

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