MAS.

06 Short-term Budgeting, AFN and Forecasting

1. An enterprise has excess capacity in production-related property, plant, and equipment. If in a given
year these assets are being used to only 80% of capacity and the sales level in that year is 2 million, the
full capacity sales level is
a. 2,500,000 b. 10,000,000 c. 2,000,000 d. 1,600,000

2. Jackson Co. has the following balance sheet as of December 31, 2020.

Current assets P600,000

Fixed assets     400,000

Total assets P1,000,000

Accounts payable P100,000

Accrued liabilities 100,000

Notes payable 100,000

Long-term debt 300,000

Total common equity     400,000

Total liabilities and

In 2020, the company reported sales of P5 million, net income of P100,000, and dividends of P60,000. 
The company anticipates its sales will increase 20 percent in 2021 and its dividend payout will remain
at 60 percent.  Assume the company is at full capacity, so its assets and spontaneous liabilities will
increase proportionately with an increase in sales. Assume the company uses the AFN formula and all
additional funds needed (AFN) will come from issuing new long-term debt.  Given its forecast, how
much long-term debt will the company have to issue in 2021?
a. 88,000 b. 112,000 c. 60,000 d. 92,000

3. Coleman, Inc., anticipates sales of 50,000 units, 48,000 units, and 51,000 units in July, August, and
September, respectively. Company policy is to maintain an ending finished-goods inventory equal to
40% of the following month's sales. On the basis of this information, how many units would the
company plan to produce in August?
a. 46,800 b. 52,200 c. 49,800 d. 49,200

Items 4 and 5

Sta. Barbara is one of the manufacturers of a part used in the production of a popular consumer
product.  Sales of the consumer product in 2021 are estimated at 5,000,000 units.   Sta. Barbara
MAS.06 Short-term Budgeting, AFN and Forecasting

regularly supplies 40% of the parts used in the new products.  Two parts units are needed for each
product unit.  Aside from the new products, there is also a replacement parts market.  Over the past
three years, the company has sold the following number of replacement parts:

2018 300,000
2019 330,000
2020 363,000

This trend is expected to continue.  The parts are sold for P4 per piece in the new products market and P4.50
in the replacement parts market. 

4. The estimated number of parts to be sold by Sta. Barbara in 2021 is

5. The amount of expected revenue based on the estimated number of parts to be sold in 2021 is
a. 9,796,850 c. 17,597,200
b. 16,000,000 d. 17,796,850

6. Swanson plans to sell 10,000 units of a particular product during July and expects sales to increase at
the rate of 10% per month during the remainder of the year. The June 30 and September 30 ending
inventories are anticipated to be 1,100 units and 950 units, respectively. On the basis of this
information, how many units should Swanson purchase for the quarter ended September 30?
a. 33,250 b. 32,950 c. 31,850 d. 32,150

7. When preparing the series of annual operating budgets, management usually starts the process with
the
a. Production budget c. Sales budget
b. Budgeted balance sheet d. Cash budget

8. Brooklyn makes all purchases on account, subject to the following payment pattern; 30% is paid in the
month of purchase, 65% is paid in the first month following purchase and 5% is paid in the second
month following purchase. If purchases for April, May, and June were P200,000, P160,000, and
P250,000, respectively, what was the firm's budgeted payables balance on June 30?
a. 175,000 b. 183,000 c. 179,000 d. 189,000

9. Chronologically, the last part of the master budget to be prepared would be the
a. Production budget c. Pro forma financial statements
b. Cash budget d. Capital budget

10.  Quattro makes all sales on account, subject to the following collection pattern: 30% are collected in
the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second
MAS.06 Short-term Budgeting, AFN and Forecasting

month after sale. If sales for April, May, and June were P60,000, P80,000, and P70,000, respectively,
what were the firm's budgeted collections for June?
a. 75,000 b. 21,000 c. 60,000 d. 69,000

11. Given the following weekly demand and weights, what is the forecast for the 4 th period of or week 4
using the weighted moving average?

Week Demand
1 650
2 678
3 720
4

Use the following weights:

a. 682.7 b. 699.0 c. 672.4 d. 693.4

12. Vern's makes all sales on account, subject to the following collection pattern: 20% are collected in the
month of sale; 70% are collected in the first month after sale; and 10% are collected in the second
month after sale. If sales for October, November, and December were P70,000, P60,000, and P50,000,
respectively, what was the budgeted receivables balance on December 31?
a. 46,000 b. 40,000 c. 49,000 d. 59,000

13. The following selected data pertain to Plaka Corporation:

Cash operating expenses P180,000

Depreciation 60,000

Merchandise purchases in July 560,000

Estimated payments in July for

  In June 220,000

  Prior to June 50,000

  In July 40%

July's cash disbursements are expected to be

a. 404,000 b. 464,000 c. 734,000 d. 674,000

14. Wilson Corporation is budgeting its equipment needs on an on-going basis, with a new quarter being
added to the budget as the current quarter is completed. This type of budget is most commonly known
as a
a. Revised budget c. Pro-forma budget
b. Capital budget d. Rolling budget

15. Which of the following budgets is based on many other master-budget components?
a. Selling and administrative expense budget.
b. Overhead budget
c. Cash budget
d. Direct labor budget