Which of the following statements concerning budget preparation for a merchandiser is correct? A. Operating expenses differ from operating cash outflows solely as a result of timing differences between when an expense is incurred and when an expense is paid. B. Only an understanding of cost behavior is required to prepare an operating expense budget. C. If a company requires its ending inventory to equal a certain percentage of the cost of next month’s sales, the company would be able to prepare purchases budgets for 4 months if it only knew the cost of sales for those 4 months. D. Assuming only a portion of a company’s sales are made on account, bad debt expense under the income statement method is calculated by multiplying sales on account by the estimated uncollectible percentage. E. None of the above statements are correct.
Which of the following statements concerning budget preparation for a merchandiser is correct? A. Operating expenses differ from operating cash outflows solely as a result of timing differences between when an expense is incurred and when an expense is paid. B. Only an understanding of cost behavior is required to prepare an operating expense budget. C. If a company requires its ending inventory to equal a certain percentage of the cost of next month’s sales, the company would be able to prepare purchases budgets for 4 months if it only knew the cost of sales for those 4 months. D. Assuming only a portion of a company’s sales are made on account, bad debt expense under the income statement method is calculated by multiplying sales on account by the estimated uncollectible percentage. E. None of the above statements are correct.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question
Which of the following statements concerning budget preparation for a merchandiser is correct?
Operating expenses differ from operating cash outflows solely as a result of timing differences between when an expense is incurred and when an expense is paid.
Only an understanding of cost behavior is required to prepare an operating expense budget.
If a company requires its ending inventory to equal a certain percentage of the cost of next month’s sales, the company would be able to prepare purchases budgets for 4 months if it only knew the cost of sales for those 4 months.
Assuming only a portion of a company’s sales are made on account, bad debt expense under the income statement method is calculated by multiplying sales on account by the estimated uncollectible percentage.
None of the above statements are correct.
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