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Exam 1: Master Budgeting

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Question 21

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Carter Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: • Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000 for January. • Collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 3% uncollectible. • The cost of goods sold is 65% of sales. • The company desires to have an ending merchandise inventory equal to 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase. • Other monthly expenses to be paid in cash are $22,000. • Monthly depreciation is $20,000. • Ignore taxes. -Retained earnings at the end of December would be:

A) $259,600
B) $342,400
C) $422,000
D) $445,100

E) B) and D)
F) B) and C)

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Question 22

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Kouba Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.23 direct labor-hours. The direct labor rate is $11.20 per direct labor-hour. The production budget calls for producing 4,000 units in April and 3,400 units in May. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 920 hours in total each month even if there is not enough work to keep them busy. Required: Construct the direct labor budget for the next two months.

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Question 23

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The direct labor budget of Faier Corporation for the upcoming year contains the following details concerning budgeted direct labor-hours. The company's variable manufacturing overhead rate is $3.50 per direct labor-hour, and the company's fixed manufacturing overhead is $65,000 per quarter. The only noncash item included in the fixed manufacturing overhead is depreciation which is $22,000 per quarter. Required: Prepare Faier Corporation's manufacturing overhead budget for the upcoming fiscal year. Show both manufacturing overhead expense and cash disbursements for manufacturing overhead.

Richards Corporation has the following budgeted sales for the first half of next year: The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled: The accounts receivable balance on January 1 is $70,000. Of this amount, $60,000 represents uncollected December sales and $10,000 represents uncollected November sales. -The total cash collected during January would be:

Budgeted sales in Acer Corporation over the next four months are given below: Twenty-five percent of the company's sales are for cash and 75% are on account. Collections for sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale. The remainder are uncollectible. Given these data, cash collections for December should be:

The Adams Corporation, a merchandising firm, has budgeted its activity for November according to the following information: • Sales at $450,000, all for cash. • Merchandise inventory on October 31 was $200,000. • The cash balance November 1 was $18,000. • Selling and administrative expenses are budgeted at $60,000 for November and are paid for in cash. • Budgeted depreciation for November is $25,000. • The planned merchandise inventory on November 30 is $230,000. • The cost of goods sold is 70% of the selling price. • All purchases are paid for in cash. • There is no interest expense or income tax expense. -The budgeted net income for November is:

The following are budgeted data: Two pounds of material are required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for May should be:

When preparing a production budget, the required production equals:

Morrish Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in January. The variable overhead rate is $1.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $102,950 per month, which includes depreciation of $19,880. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Noel Enterprises has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on May 31 contained 400 units. The company needs to prepare a production budget for the second quarter of the year. -The beginning inventory in units for September is:

Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below: Two pounds of raw materials are required to produce one unit of product. The company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs. The company is expected to have 30,000 pounds of raw materials on hand on January 1. Budgeted production for February should be:

One disadvantage of a self-imposed budget is that budget estimates prepared by front-line managers are often less accurate and reliable than estimates prepared by top managers.

On a cash budget, the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment.

The sales budget is usually prepared before the production budget.

di Manufacturing Corporation is estimating the following raw material purchases for the final four months of the year: At Adi, 30% of raw materials purchases are normally paid for in the month of purchase. The remaining 70% is paid for in the month following the purchase. -In Adi's budgeted balance sheet at December 31, at what amount will accounts payable for raw materials be shown?

Milano Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.50 direct labor-hours. The direct labor rate is $9.80 per direct labor-hour. The production budget calls for producing 6,400 units in October and 6,300 units in November. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

Mutskic Corporation produces and sells Product BetaC. To guard against stockouts, the company requires that 30% of the next month's sales be on hand at the end of each month. Budgeted sales of Product BetaC over the next four months are: Budgeted production for August would be:

Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: • Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January. • Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible. • The cost of goods sold is 65% of sales. • The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. • Other monthly expenses to be paid in cash are $20,300. • Monthly depreciation is $20,000. • Ignore taxes. -Expected cash collections in December are:

The TS Corporation has budgeted sales for the year as follows: The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units. The finished goods inventory at the start of the year is 2,500 units. Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,200 pounds. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in material. -Scheduled production for the third quarter should be:

Which of the following budgets are prepared before the production budget?