Spirit Company sells three products with the following seasonal sales pattern: Products Quarter A B C 1 40% 30%

10% 2 30% 20% 40% 3 20% 20% 40% 4 10% 30% 10% The annual sales budget shows forecasts for the different products and their expected selling price per unit as follows: Units Selling Price Product A 50,000 $4 B 125,000 10 C 62,500 6 Required: Prepare a sales budget, in units and dollars, by quarters for the company for the coming year. First Second Third Fourth Product A: Sales (units) 20,000 15,000 10,000 5,000 50,000 Price $4 $4 $4 $4 $4 Sales $80,000 $60,000 $40,000 $20,000 $200,000 Product B: Sales (units) 37,500 25,000 25,000 37,500 125,000 Price $10 $10 $10 $10 $10 Sales $375,000 $250,000 $250,000 $375,000 $1,250,000 Product C: Sales (units) 6,250 25,000 25,000 6,250 62,500 Price $6 $6 $6 $6 $6 Sales $37,500 $150,000 $150,000 $37,500 $375,000 Total $492,500 $460,000 $440,000 $432,500 $1,825,000 Lubriderm Corporation has the following budgeted sales for the next six-month period: Month Unit Sales Month Unit Sales June 90,000 September 150,000 July 120,000 October 180,000 August 210,000 November 120,000 There were 30,000 units of finished goods in inventory at the beginning of June. Plans are to have an inventory of finished products that equal 20% of the unit sales for the next month. Five pounds of materials are required for each unit produced. Each pound of material costs $8. Inventory levels for materials are equal to 30% of the needs for the next month. Materials inventory on June 1 was 15,000 pounds. Required: a. Prepare production budgets in units for July, August, and September. b. Prepare a purchases budget in pounds for July, August, and September, and give total purchases in both pounds and dollars for each month. July August September Budgeted sales 120,000 210,000 150,000 Add: Required ending inventory 42,000 30,000 36,000 Total inventory requirements 162,000 240,000 186,000 Less: Beginning inventory 24,000 42,000 30,000 Budgeted production 138,000 198,000 156,000 b. Production in units 138,000 198,000 156,000 Targeted ending inventory in lbs. 297,000 234,000 252,000 Production needs in lbs. 690,000 990,000 780,000 Total requirements in lbs. 987,000 1,224,000 1,032,000 Less: Beginning inventory in lbs. 207,000 297,000 234,000 Purchases needed in lbs. 780,000 927,000 798,000 Cost ($8 per lb.) $8 $8 $8 Total material purchases $6,240,000 $7,416,000 $6,384,000 1

WRITE YOUR FINAL ANSWER ON THE SPACE PROVIDED BEFORE EACH NUMBER. USE CAPITAL LETTERS. NO SUPERIMPOSITIONS. YOU CAN ERASE YOUR FINAL ANSWER ONLY ONCE. Shimon Corporation manufactures industrial-sized water coolers and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 15,000 units Budgeted machine-hours 5,000 hours Budgeted variable manufacturing overhead costs for 15,000 units $161,250 Actual output units produced 22,000 units Actual machine-hours used 7,200 hours Actual variable manufacturing overhead costs $242,000 1) What is the budgeted variable overhead cost rate per output unit? A) $10.75 $161,250/15,000 = $10.75 B) $11.00 C) $32.25 D) $48.40 2) What is the flexible-budget amount for variable manufacturing overhead? A) $165,000 B) $236,500 22,000 ($161,250/15,000) = $236,500 C) $242,000 D) None of these answers is correct. 3) What is the flexible-budget variance for variable manufacturing overhead? A) $5,500 favorable B) $5,500 unfavorable $242,000 - [22,000 ($161,250/15,000)] = $5,500 unfavorable C) $4,300 favorable D) None of these answers is correct. 4 Variable manufacturing overhead costs were ________ for actual output. A) higher than expected B) the same as expected C) lower than expected D) indeterminable White Corporation manufactures football jerseys and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 20,000 units Budgeted machine-hours 30,000 hours Budgeted variable manufacturing overhead costs for 20,000 units $360,000 Actual output units produced 18,000 units Actual machine-hours used 28,000 hours Actual variable manufacturing overhead costs $342,000 5) What is the budgeted variable overhead cost rate per output unit? A) $12.00 B) $12.21 C) $18.00 $360,000/20,000 = $18.00 D) $19.00 6) What is the flexible-budget amount for variable manufacturing overhead? A) $324,000 18,000 ($360,000/20,000) = $324,000 B) $342,000 C) $380,000 D) None of these answers is correct. 7) What is the flexible-budget variance for variable manufacturing overhead? A) $18,000 favorable B) $18,000 unfavorable $342,000 - [18,000 ($360,000/20,000)] = $18,000 unfavorable C) zero D) None of these answers is correct. 8) Variable-manufacturing overhead costs were ________ for actual output. A) higher than expected B) the same as expected C) lower than expected D) indeterminable 2

Fearless Frank's Fertalizer Farm produces fertalizer and distributes the product by using his tanker trucks. Frank's uses budgeted fleet hours to allocate variable manufacturing overhead. The following information pertains to the company's manufacturing overhead data: Budgeted output units 300 truckloads Budgeted fleet hours 225 hours Budgeted pounds of fertalizer 12,000,000 pounds Budgeted variable manufacturing overhead costs for 300 loads $37,500 Actual output units produced and delivered 315 truckloads Actual fleet hours 218 hours Actual pounds of fertalizer produced and delivered 12,600,000 pounds Actual variable manufacturing overhead costs $38,250 9) What is the budgeted variable overhead cost rate per output unit? A) $120.00 B) $125.00 $37,500/300 = $125.00 C) $166.67 D) $175.00 10) What is the flexible-budget amount for variable manufacturing overhead? A) $40,000 B) $39,375 315 ($37,500/300) = $39,375 C) $37,500 D) $38,250 11) What is the flexible-budget variance for variable manufacturing overhead? A) $1,125 favorable $38,250 - [315 ($37,500/300)] ($37,500/300)] = $1,125 favorable B) $1,125 unfavorable C) zero D) None of these answers are correct. 12) Variable-manufacturing overhead costs were ________ for actual output. A) higher than expected B) the same as expected C) lower than than expected D) indeterminable Roberts Corporation manufactured 100,000 buckets during February. The overhead cost-allocation base is $5.00 per machine-hour. The following variable overhead data pertain to February: Budgeted Actual Production 100,000 units 100,000 units Machine-hours 9,800 hours 10,000 hours Variable overhead cost per machine-hour $5.25 $5.00 13) What is the actual variable overhead cost? A) $49,000 B) $50,000 C) $51,450 9,800 mh $5.25 = $51,450 D) None of these answers is correct. 14) What is the flexible-budget amount? A) $49,000 B) $50,000 10,000 mh $5.00 = $50,000 C) $51,450 D) None of these answers is correct. 15) What is the variable overhead spending variance? A) $1,000 favorable B) $1,450 unfavorable C) $2,450 unfavorable unfavorable ($5.25 - $5.00) 9,800 mh = $2,450 unfavorable D) None of these answers is correct.

16) Schultz Company expects to manufacture and sell 30,000 baskets in 20X4 for $6 each. There are 3,000 baskets in beginning finished goods inventory with target ending inventory of 4,000 baskets. The company keeps no work-inprocess inventory. What amount of sales revenue will be reported on the 20X4 budgeted income statement? A) $174,000 B) $180,000 30,000 $6 = $180,000 C) $186,000 D) $204,000 17) DeArmond Corporation has budgeted sales of 18,000 units, target ending finished goods inventory of 3,000 units, and beginning finished goods inventory of 900 units. How many units should be produced next year? A) 21,900 units B) 20,100 units 18,000 + 3,000 - 900 = 20,100 units C) 15,900 units D) 18,000 units 18) For next year, Galliart, Inc., has budgeted sales of 60,000 units, target ending finished goods inventory of 3,000 units, and beginning finished goods inventory of 1,800 units. All other inventories are zero. How many units should be produced next year? A) 58,800 units B) 60,000 units C) 61,200 units 60,000 + 3,000 - 1,800 = 61,200 units D) 64,800 units 19) Wilgers Company has budgeted sales volume of 30,000 units and budgeted production of 27,000 units, while 5,000 units are in beginning finished goods inventory. How many units are targeted for ending finished goods inventory? A) 5,000 units B) 8,000 units C) 3,000 units D) 2,000 units 5,000 + 27,000 - 30,000 = 2,000 20) In which order are the following developed? First to last: A = Production budget B = Direct materials costs budget C = Budgeted income statement D = Revenues budget A) ABDC B) DABC C) DCAB D) CABD 21) The budgeting process is MOST strongly influenced by: A) the capital budget B) the budgeted statement of cash flows C) the sales forecast D) the production budget 22) A company's actual performance should be compared against budgeted amounts for the same accounting period so A) adjustments for future conditions can be included B) no feedback is possible C) inefficiencies of the past year can be included D) a rolling budget can be implemented Racine Filter Corporation used the following data to evaluate their current operating system. The company sells items for $14.50 each and had used a budgeted selling price of $15 per unit. Actual Budgeted Units sold 206,000 units 200,000 units Variable costs $965,000 $950,000 Fixed costs $ 53,000 $ 50,000 23) What is the static-budget variance of revenues? A) $90,000 favorable B) $13,000 favorable C) $13,000 unfavorable unfavorable (206,000 units $14.50) - (200,000 units $15) = $13,000 U D) $6,000 favorable 24) What is the static-budget variance of variable costs? A) $13,000 favorable B) $13,000 unfavorable C) $15,000 favorable D) $15,000 unfavorable (206,000 units $14.50) - (200,000 units $15) = $13,000 U 4

After conducting a market research study, Potter Products decided to produce an electric coffee pot to complement its line of kitchen products. It is estimated that the new coffee pot can be sold at a target price of $46. The annual target sales volume for the coffee pot is 300,000. Potter has target operating income of 18% of sales. 25) What are the target sales revenues? A) $1,380,000 B) $13,800,000 $46 300,000 = $13,800,000 C) $1,200,000 D) $12,000,000 26) What is the target operating income? A) $2,400,000 B) $1,200,000 C) $1,242,000 D) $2,484,000 $46 300,000 x 18% = $2,484,000 27) What is the total target cost? A) $2,484,000 B) $11,316,000 $46 x 300,000 x (1 - .18) = $11,316,000 $11,316,000 C) $13,800,000 D) $1,000,000 28) What is the target cost for each coffee pot? A) $35.50 B) $37.72 $46 x (1 - .18) = $37.72 $37.72 C) $42.15 D) $46.00 Grant Company has invested $1,000,000 in a plant to make commercial juicer machines. The target operating income desired from the plant is $180,000 annually. The company plans annual sales of 7,000 juicer machines at a selling price of $200 each. 30) What is the target rate of return on investment for Grant Company? A) 22.0% B) 18.0% $180,000 / $1,000,000 = 18% C) 14.8% D) 12.9% 31) The breakeven point in CVP analysis is defined as: A) when fixed costs equal total revenues B) fixed costs divided by the contribution margin per unit C) revenues less variable costs equal operating income D) when the contribution margin percentage equals total revenues divided by variable costs 32) Which of the following statements about determining the breakeven point is FALSE? A) Operating income is equal to zero. B) Contribution margin - fixed costs is equal to zero. C) Revenues equal fixed costs plus variable costs. D) Breakeven revenues equal fixed costs divided by the variable cost per unit. 33) If unit outputs exceed the breakeven point: A) there is a loss B) total sales revenue exceeds total costs C) there is a profit D) Both total sales revenue exceeds total costs and there is a profit. 34) Contribution margin equals: A) revenues minus period costs B) revenues minus product costs C) revenues minus variable costs D) revenues minus fixed costs