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Exam 8: Master Budgeting

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Question 91

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A sales budget is given below for one of the products manufactured by the Key Co.: The inventory of finished goods at the end of each month should equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units. Each unit of product requires three specialized electrical switches. Since the production of these specialized switches by Key's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year. Required: a. Prepare a budget showing the required production each month for January, February, March, and April. b. Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March. March.

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a. The company's production bu...

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Question 92

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Roberts 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 450 units. The company needs to prepare a production budget for the second quarter of the year. The desired ending inventory for August is:

A) 530 units
B) 670 units
C) 710 units
D) 370 units

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

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Question 93

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Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: $\bullet$ Sales are budgeted at $290,000 for November, $310,000 for December, and $210,000 for January. $\bullet$ Collections are expected to be 65% in the month of sale and 35% in the month following the sale. $\bullet$ The cost of goods sold is 80% of sales. $\bullet$ The company desires to have an ending merchandise inventory at the end of each month equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. $\bullet$ Other monthly expenses to be paid in cash are $21,100. $\bullet$ Monthly depreciation is $21,000. $\bullet$ Ignore taxes. The cash balance at the end of December would be:

Fuson Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected: 30% in the month of the sale 70% in the following month Raw materials purchases are paid: 30% in the month of purchase 70% in the following month The ending finished goods inventory should equal 10% of the following month's sales. The ending raw materials inventory should equal 10% of the following month's raw materials production needs. If 40,380 pounds of raw materials are required for production in December, then the budgeted raw material purchases for November is closest to:

The manufacturing overhead budget lists all costs of production other than direct materials and direct labor.

Sevenbergen Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected: 40% in the month of the sale 60% in the following month Raw materials purchases are paid: 30% in the month of purchase 70% in the following month The ending finished goods inventory should equal 20% of the following month's sales. The ending raw materials inventory should equal 30% of the following month's raw materials production needs. If 41,920 pounds of raw materials are required for production in September, then the budgeted cost of raw material purchases for August is closest to:

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: $\bullet$ Sales are budgeted at $340,000 for November, $320,000 for December, and $310,000 for January. $\bullet$ Collections are expected to be 80% in the month of sale and 20% in the month following the sale. $\bullet$ The cost of goods sold is 75% of sales. $\bullet$ The company would like to maintain ending merchandise inventories equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. $\bullet$ Other monthly expenses to be paid in cash are $24,000. $\bullet$ Monthly depreciation is $15,000. $\bullet$ Ignore taxes. The difference between cash receipts and cash disbursements for December would be:

Avril Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $4.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $54,080 per month, which includes depreciation of $3,840. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 3,200 direct labor-hours will be required in October. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for October should be:

One disadvantage of budgeting is that budgeting makes it more difficult to coordinate the activities of the entire organization.

BW Department Store expects to generate the following sales for the next three months: BW's cost of goods sold is 60% of sales dollars. At the end of each month, BW wants a merchandise inventory balance equal to 25% of the following month's expected cost of goods sold. What dollar amount of merchandise inventory should BW plan to purchase in August?

Petrini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: a. The budgeted selling price per unit is $110. Budgeted unit sales for January, February, March, and April are 7,500, 10,600, 12,000, and 11,700 units, respectively. All sales are on credit. B. Regarding credit sales, 30% are collected in the month of the sale and 70% in the following month. C. The ending finished goods inventory equals 30% of the following month's sales. D. The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $4.00 per pound. E. Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month. F. The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.6 direct labor-hours. G.Manufacturing overhead is entirely variable and is $8.00 per direct labor-hour. H.The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $70,000. The budgeted sales for February is closest to:

Michard Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: a. The budgeted selling price per unit is $125. Budgeted unit sales for April, May, June, and July are 7,600, 10,500, 13,800, and 12,900 units, respectively. All sales are on credit. B. Regarding credit sales, 20% are collected in the month of the sale and 80% in the following month. C.The ending finished goods inventory equals 20% of the following month's sales. D. The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.00 per pound. E. Regarding raw materials purchases, 30% are paid for in the month of purchase and 70% in the following month. F. The direct labor wage rate is $25.00 per hour. Each unit of finished goods requires 3.0 direct labor-hours. G. The variable selling and administrative expense per unit sold is $3.40. The fixed selling and administrative expense per month is $80,000. If 54,480 pounds of raw materials are required for production in June, then the budgeted raw material purchases for May is closest to:

Masde Corporation produces and sells Product CharlieD. To guard against stockouts, the company requires that 25% of the next month's sales be on hand at the end of each month. Budgeted sales of Product CharlieD over the next four months are: Budgeted production for August would be:

The following are budgeted data: One pound of material is 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 February would be budgeted to be:

Hesterman Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected: 40% in the month of the sale 60% in the following month The ending finished goods inventory should equal 40% of the following month's sales. The ending raw materials inventory should equal 20% of the following month's raw materials production needs. If 39,720 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to:

The Bandeiras Corporation, a merchandising firm, has budgeted its activity for December according to the following information: $\bullet$ Sales at $550,000, all for cash. $\bullet$ Merchandise inventory on November 30 was $300,000. $\bullet$ The cash balance at December 1 was $25,000. $\bullet$ Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash. $\bullet$ Budgeted depreciation for December is $35,000. $\bullet$ The planned merchandise inventory on December 31 is $270,000. $\bullet$ The cost of goods sold is 75% of the sales price. $\bullet$ All purchases are paid for in cash. $\bullet$ There is no interest expense or income tax expense. The budgeted cash receipts for December are:

Petrini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: a. The budgeted selling price per unit is $110. Budgeted unit sales for January, February, March, and April are 7,500, 10,600, 12,000, and 11,700 units, respectively. All sales are on credit. B. Regarding credit sales, 30% are collected in the month of the sale and 70% in the following month. C. The ending finished goods inventory equals 30% of the following month's sales. D. The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $4.00 per pound. E. Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month. F. The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.6 direct labor-hours. G. Manufacturing overhead is entirely variable and is $8.00 per direct labor-hour. H. The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $70,000. If the company estimates that it will need 59,550 pounds of raw material to satisfy production needs in March, then the raw materials inventory balance at the end of February should be closest to:

Frolic Corporation has budgeted sales and production over the next quarter as follows: The company has 17,500 units of product on hand at July 1. 25% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 97,000 units. Budgeted sales for September would be (in units) :

Harden, Inc., has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on May 31 contained 1,050 units. The company needs to prepare a production budget for the next five months. The total number of units produced in July should be:

Mumbower Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected: 40% in the month of the sale 60% in the following month Raw materials purchases are paid: 40% in the month of purchase 60% in the following month The ending finished goods inventory should equal 20% of the following month's sales. The ending raw materials inventory should equal 40% of the following month's raw materials production needs. Required: a. What are the budgeted sales for November? b. What are the expected cash collections for November? c. What is the budgeted accounts receivable balance at the end of November? d. According to the production budget, how many units should be produced in November? e. If 40,000 pounds of raw materials are needed for production in December, how many pounds of raw materials should be purchased in November? f. What is the estimated cost of raw materials purchases for November? g. If the cost of raw material purchases in October is $201,040, then in November what are the total estimated cash disbursements for raw materials purchases? h. What is the estimated accounts payable balance at the end of November? i. What is the estimated raw materials inventory balance at the end of November? j. What is the total estimated direct labor cost for November assuming the direct labor workforce is adjusted to match the hours required to produce the forecasted number of units produced? k. For simplicity, we will assume that there is no fixed manufacturing overhead and that the variable manufacturing overhead is $7.00 per direct labor-hour. What is the estimated unit product cost? l. What is the estimated finished goods inventory balance at the end of November? m. What is the estimated cost of goods sold and gross margin for November? n. What is the estimated total selling and administrative expense for November? o. What is the estimated net operating income for November?