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Exam 8: Master Budgeting

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Question 51

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Luchini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:The budgeted selling price per unit is $111. Budgeted unit sales for April, May, June, and July are 7,100, 10,100, 13,300, and 14,000 units, respectively. All sales are on credit.Regarding credit sales, 40% are collected in the month of the sale and 60% in the following month.The ending finished goods inventory equals 10% of the following month's sales.The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $5.00 per pound.Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.The direct labor wage rate is $18.00 per hour. Each unit of finished goods requires 2.9 direct labor-hours.Variable manufacturing overhead is $7.00 per direct labor-hour. Fixed manufacturing overhead is zero.The estimated finished goods inventory balance at the end of May is closest to:

A) $102,676
B) $111,986
C) $26,999
D) $129,675

E) None of the above
F) B) and D)

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Question 52

Multiple Choice

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Sioux Corporation is estimating the following sales for the first four months of next year: Sales are normally collected 60% in the month of sale and 40% in the month following the sale. Based on this information, how much cash should Sioux expect to collect during the month of April?

A) $370,000
B) $222,000
C) $119,000
D) $358,000

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

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Question 53

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Smith Corporation makes and sells a single product called a Pod. Each Pod requires 1.4 direct labor-hours at $9.60 per direct labor-hour. The direct labor workforce is fully adjusted each month to the required workload. Smith Corporation is preparing a Direct Labor Budget for the second quarter of the year.The budgeted direct labor cost per Pod is closest to:

Carver 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 $350,000 for November, $320,000 for December, and $300,000 for January.Collections are expected to be 90% in the month of sale and 10% in the month following the sale.The cost of goods sold is 75% of sales.The company desires to have an ending merchandise inventory equal to 60% 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 $24,700.Monthly depreciation is $16,000.Ignore taxes. Retained earnings at the end of December would be:

Capes Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:Sales are budgeted at $440,000 for November, $450,000 for December, and $430,000 for January.Collections are expected to be 45% in the month of sale and 55% in the month following the sale.The cost of goods sold is 80% of sales.The company desires an ending merchandise inventory equal to 25% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase.The November beginning balance in the accounts receivable account is $79,000.The November beginning balance in the accounts payable account is $266,000.Required:a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December.

Acti Manufacturing Corporation is estimating the following raw material purchases for the final four months of the year: At Acti, 40% of raw materials purchases are normally paid for in the month of purchase. The remaining 60% is paid for in the month following the purchase.How much cash should Acti expect to pay out for raw material purchases during November?

Catano Corporation pays for 40% of its raw materials purchases in the month of purchase and 60% in the following month. If the budgeted cost of raw materials purchases in July is $256,550 and in August is $278,050, then in August the total budgeted cash disbursements for raw materials purchases is closest to:

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:Sales are budgeted at $340,000 for November, $320,000 for December, and $310,000 for January.Collections are expected to be 80% in the month of sale and 20% in the month following the sale.The cost of goods sold is 75% of sales.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.Other monthly expenses to be paid in cash are $24,000.Monthly depreciation is $15,000.Ignore taxes. The cost of December merchandise purchases would be:

Coles Corporation, Incorporated makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows: The company wants to maintain monthly ending inventories of Material K equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 2,500 yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year.The total needs (i.e., production requirements plus desired ending inventory) of Material K for November are:

LBC Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 3.6 hours of direct labor at the rate of $15.00 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June.The company plans to sell 33,000 units of Product WZ in June. The finished goods inventories on June 1 and June 30 are budgeted to be 550 and 130 units, respectively. Budgeted direct labor costs for June would be:

Control involves developing goals and preparing various budgets to achieve those goals.

Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:Sales are budgeted at $281,000 for November, $321,000 for December, and $212,000 for January.Collections are expected to be 75% in the month of sale and 25% in the month following the sale.The cost of goods sold is 75% of sales.The company desires to have an ending merchandise inventory at the end of each month equal to 90% 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 $20,100.Monthly depreciation is $22,000.Ignore taxes. The cost of December merchandise purchases would be:

The LaPann Corporation has obtained the following sales forecast data: The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts.The budgeted accounts receivable balance on September 30 would be:

Carver 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 $351,000 for November, $321,000 for December, and $301,000 for January.Collections are expected to be 80% in the month of sale and 20% in the month following the sale.The cost of goods sold is 80% of sales.The company desires to have an ending merchandise inventory equal to 70% 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 $24,800.Monthly depreciation is $16,200.Ignore taxes. The net income for December would be:

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 465 units. The company needs to prepare a production budget for the second quarter of the year.The total number of units to be produced in July is:

The selling and administrative budget is typically prepared before the cash budget.

Davis Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $1.70 per direct labor-hour; the budgeted fixed manufacturing overhead is $116,000 per month, of which $30,000 is factory depreciation.If the budgeted direct labor time for November is 7,000 hours, then the total budgeted cash disbursements for manufacturing overhead for November must be:

KAB Incorporated, a small retail store, had the following results for May. The budgets for June and July are also given. Sales are collected 80% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to sale. Suppliers of the goods are paid in the month following the sale. The "selling and administrative expenses" are paid in the month of the sale.The cash disbursements during June for goods purchased for sale and for selling and administrative expenses should be:

Frolic Corporation has budgeted sales and production over the next quarter as follows: The company has 4,100 units of product on hand at July 1. 10% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 72,000 units. Budgeted sales for September would be (in units) :

Petrini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: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.Regarding credit sales, 30% are collected in the month of the sale and 70% in the following month.The ending finished goods inventory equals 30% of the following month's sales.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.Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.6 direct labor-hours.Manufacturing overhead is entirely variable and is $8.00 per direct labor-hour.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: