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1. Personal An accounting device used to plan and control resources of operational departments and divisions.Budget

   At the beginning of the school year, Priscilla Wescott decided to prepare a A budget of estimated cash receipts and payments.cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget:

   Cash balance, September 1 (from a summer job)	$7,390
   Purchase season football tickets in September	100
   Additional entertainment for each month	260
   Pay fall semester tuition in September	4,000
   Pay rent at the beginning of each month	360
   Pay for food each month	200
   Pay apartment deposit on September 2 (to be returned December 15)	500
   Part-time job earnings each month (net of taxes)	920

   a. Prepare a cash budget for September, October, November, and December. Enter all amounts as positive values except cash decrease which should be indicated with a minus sign.

   Priscilla Wescott
   Cash Budget
   For the Four Months Ending December 31
   	September	October	November	December
   Estimated cash receipts from:
   Additional entertainment Food Part-time job Rent Tuition	$	$	$	$
   Additional entertainment Deposit Food Rent Tuition
   Total cash receipts	$	$	$	$
   Less estimated cash payments for:
   Cash Insurance Movie tickets Part-time job Season football tickets	$
   Additional entertainment Cash Insurance Movie tickets Part-time job		$	$	$
   Cash Insurance Movie tickets Part-time job Tuition
   Cash Insurance Movie tickets Part-time job Rent
   Cash Food Insurance Movie tickets Part-time job
   Deposit Insurance Movie tickets Part-time job Prepaid rent
   Total cash payments	$	$	$	$
   Cash increase (decrease)	$	$	$	$
   Less cash balance at beginning of month Plus cash balance at beginning of month
   Cash balance at end of month	$	$	$	$

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   b. Are the four monthly budgets that are presented prepared as A budget that does not adjust to changes in activity levels.static budgets or A budget that adjusts for varying rates of activity.flexible budgets?

   • Static
   • Flexible

   c. What are the budget implications for Priscilla Wescott?

   Priscilla can see that her present plan

   • will provide
   • will not provide
   sufficient cash. If Priscilla did not budget but went ahead with the original plan, she would be $
   • over
   • short
   at the end of December, with no time left to adjust.

2. Flexible Budget for Selling and Administrative Expenses for a Service Company

   Cloud Productivity Inc. uses flexible An accounting device used to plan and control resources of operational departments and divisions.budgets that are based on the following data:

   Sales commissions	15% of sales
   Advertising expense	20% of sales
   Miscellaneous administrative expense	$8,000 per month plus 12% of sales
   Office salaries expense	$30,000 per month
   Customer support expenses	$13,000 per month plus 20% of sales
   Research and development expense	$30,000 per month

   Prepare a flexible selling and administrative expenses budget for March for sales volumes of $400,000, $500,000, and $600,000. (Use Exhibit 5 as a model.)

   Cloud Productivity Inc.
   Flexible Selling and Administrative Expenses Budget
   For the Month Ending March 31
   Total sales	$400000	$500000	$600000
   Variable cost:
   Cash Office salaries expense Sales commissions Supplies expense Wages expense	$	$	$
   Advertising expense Cash Office salaries expense Supplies expense Wages expense
   Miscellaneous administrative expense Office salaries expense Prepaid insurance Rent expense Wages expense
   Customer support expenses Rent expense Research and development expense Supplies expense Wages expense
   Total variable cost	$	$	$
   Fixed cost:
   Insurance expense Miscellaneous administrative expense Rent expense Supplies expense Wages expense	$	$	$
   Insurance expense Office salaries expense Prepaid insurance Rent expense Wages expense
   Customer support expenses Insurance expense Rent expense Supplies expense Wages expense
   Insurance expense Rent expense Research and development expense Supplies expense Wages expense
   Total fixed cost	$	$	$
   Total selling and administrative expenses	$	$	$

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