Use the Information Below to Answer the Following Questions

question 30

Multiple Choice

Use the information below to answer the following questions.
Saddle Company, a leather manufacturer, has a sales budget of $500,000 for February. The cost of sales is estimated to be 35% of sales. All materials purchased by Saddle Company are paid for in the month following the purchase. The beginning inventory for February is $10,000, and an ending inventory of $11,000 is desired. The trade payables balance at the beginning of February is $88,000.
-Which of these is a question that could be asked when evaluating the implications of the cash budget?

• A) Is the profit level satisfactory?
• B) Is the level of gearing satisfactory?
• C) Is there any need for additional finance?
• D) All are questions that could be asked.

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Definitions:

Unit Cost

The cost incurred to produce, store, and sell one unit of a product or service.

Unit Price

The cost assigned to a single unit of a product or service.

Journal Entries

Records of financial transactions in a company’s accounting system, providing a chronological record.

Periodic Inventory System

An inventory system that updates inventory balance after a certain period, typically incorporating physical counts to determine cost of goods sold.