BUS105 Exam Dumps : Managerial Accounting (SAYA-0009) Exam

Cash collections and payments for purchases are cash inflows and outflows that must be captured in the Cash Budget. The Cash Budget is a critical component of the master budget and is used to estimate the cash position of the company at various points during the budgeting period. This includes timing of cash collections from sales (accounts receivable) and cash disbursements for purchases, wages, overhead, and other expenses.

As per Saylor Academy BUS105: Managerial Accounting, Unit 9 – How Do Managers Use Budgets?, Section 9.3: Preparing a Cash Budget:

“The cash budget shows the company's expected cash inflows and outflows over a period of time. This includes all cash collected from sales and all payments made for expenses, purchases of direct materials, and other disbursements.”

Therefore:

Option A (Cash budget) is correct.

Option B (Budgeted income statement) records revenues and expenses, not timing of actual cash flows.

Option C (Manufacturing overhead budget) focuses on estimating overhead costs but not cash flow.

Option D (Direct materials purchases budget) estimates how much material to buy but does not directly reflect actual payments.

Bethel Bakery uses multiple departments (blending, cutting, baking, decorating, packaging) to produce a standardized product—frosted sugar cookies—in a continuous, repetitive flow. This is a textbook example of a business that uses process costing.

According to Saylor Academy BUS105:

“Process costing is used when the production process is continuous, and the units of output are indistinguishable from each other. Separate work-in-process (WIP) accounts are typically maintained for each department.”

Let’s evaluate the options:

A. Job costing is used for customized or unique products (e.g., custom furniture).

B. Process costing is used for mass-produced items through multiple production departments.✅

C. Departmental costing refers to applying overhead by department, not necessarily tied to production cost method.

D. Activity-based costing focuses on cost allocation based on activities but does not define how WIP is tracked across departments.

Answer: B

Target cost is a pricing strategy that starts with the selling price and subtracts the desired profit to determine the maximum allowable cost.

Formula:

Target Cost = Selling Price − Desired Profit

Desired Profit = Selling Price × Profit Percentage

= $350 × 0.40 = $140

Target Cost = $350 − $140 = $210

Answer: C