Chapter 07

Chapter 7
Profit Planning
True/False
1.Thesalesbudgetisusuallypreparedbeforetheproductionbudget.
Level:EasyLO:1,2,3Ans:T
2.Thecashbudgetisthestartingpointinpreparingthemasterbudget.
Level:MediumLO:1,8Ans:F
3.Thefirstbudgetacompanypreparesinamasterbudgetistheproductionbudget.
Level:MediumLO:1Ans:F
4.Oneoftheweaknessesofbudgetsisthattheyareoflittlevalueinuncoveringpotentialbottlenecksin
anorganization.
5.Oneoftheadvantagesofaselfimposedbudgetisthatthepersondirectlyinvolvedinanactivityis
morelikelytobeinapositiontomakegoodbudgetestimates.
Level:EasyLO:1Ans:T
6.Thebasicideabehindresponsibilityaccountingisthattopmanagementisresponsibleforpreparing
detailedbudgetsbywhichtheperformanceofmiddleandlowermanagementwillbeevaluated.
Level:EasyLO:1Ans:F
7.Budgetingisatradeoffbetweenplanningandcontrolinthatincreaseduseofbudgetingwillusually
improveplanningbutwillweakencontrol.
8.Thesalesbudgetoftenincludesascheduleofexpectedcashcollections.
Level:EasyLO:2Ans:T
9.Uncollectibleamountsoncreditsalestocustomerswillbelistedascashoutflowsonthescheduleof
expectedcashcollections.
Brewer,IntroductiontoManagerialAccounting,3/e
101
10.Thenumberofunitstobeproducedinaperiodcanbedeterminedbyaddingtheexpectedsalestothe
desiredendinginventoryandthendeductingthebeginninginventory.
Level:MediumLO:3Ans:T
11.Whenpreparingadirectmaterialsbudget,beginninginventoryforrawmaterialsshouldbeaddedto
productionneeds,anddesiredendinginventoryshouldbesubtractedtodeterminetheamountofraw
materialstobepurchased.
12.Themanufacturingoverheadbudgetprovidesascheduleofallcostsofproductionotherthandirect
materialsanddirectlabor.
Level:EasyLO:6Ans:T
13.Bothvariableandfixedmanufacturingoverheadcostsareincludedinthesellingandadministrative
expensebudget.
14.Onacashbudget,thetotalamountofbudgetedcashpaymentsformanufacturingoverheadshouldnot
includeanyamountsfordepreciationonfactoryequipment.
Level:EasyLO:8Ans:T
15.Inzerobasebudgeting,onlychangesfromthepriorbudgetmustbejustified.
Level:EasyLO:11Ans:F
MultipleChoice
16.Whichofthefollowingbudgetsarepreparedbeforetheproductionbudget?
A)AAbove
B)BAbove
C)CAbove
D)DAbove
Level:MediumLO:1Ans:C
102
103
17.Whichofthefollowingrepresentsthenormalsequenceinwhichthebelowbudgetsareprepared?
A)Sales,BalanceSheet,IncomeStatement
B)BalanceSheet,Sales,IncomeStatement
C)Sales,IncomeStatement,BalanceSheet
D)IncomeStatement,Sales,BalanceSheet
18.Thebudgetmethodthatmaintainsaconstanttwelvemonthplanninghorizonbyaddinganewmonth
ontheendasthecurrentmonthiscompletediscalled:
A)anoperatingbudget.
B)acapitalbudget.
C)acontinuousbudget.
D)amasterbudget.
Level:EasyLO:1Ans:C
19.Inpreparingamasterbudget,topmanagementisgenerallybestableto:
A)preparedetaileddepartmentallevelbudgetfigures.
B)provideaperspectiveonthecompanyasawhole.
C)pointouttheparticularpersonswhoaretoblameforinabilitytomeetbudgetgoals.
D)responsesa,b,andcareallcorrect.
Level:EasyLO:1Ans:B
20.Whichofthefollowingbenefitscouldanorganizationreasonablyexpectfromaneffectivebudget
program?
A)AAbove
B)BAbove
C)CAbove
D)DAbove
Level:EasyLO:1Ans:A
21.Whichofthefollowingisanadvantageofimplementingaselfimposedbudgetingsystem?
A)Budgetingisquickandeasybecauseonlyafewindividualsareinvolvedinthebudgetingprocess.
B)Upperlevelmanagementdoesnothavetoreviewbudgetestimates.
C)Motivationtomeetbudgetestimatesisusuallyenhanced.
D)Alloftheabove.
104
Level:EasyLO:1Ans:C
105
22.Allthefollowingareconsideredtobebenefitsofparticipativebudgeting,exceptfor:
A)Individualsatallorganizationallevelsarerecognizedasbeingpartofateam;thisresultsingreater
supportfortheorganization.
B)Thebudgetestimatesarepreparedbythoseindirectlyinvolvedinactivities.
C)Whenmanagerssettheirowntargetsforthebudget,topmanagementneednotbeconcernedwiththe
overallprofitabilityofoperations.
D)Managersareheldresponsibleforreachingtheirgoalsandcannoteasilyshiftresponsibilityby
blamingunrealisticgoalssetbyothers.
Source:CMA,adapted
Level:EasyLO:1Ans:C
23.WhichofthefollowingisNOTanobjectiveofthebudgetingprocess?
A)Tocommunicatemanagementsplansthroughouttheentireorganization.
B)Toprovideameansofallocatingresourcestothosepartsoftheorganizationwheretheycanbeused
mosteffectively.
C)Toensurethatthecompanycontinuestogrow.
D)Touncoverpotentialbottlenecksbeforetheyoccur.
Level:EasyLO:1Ans:C
24.Whenpreparingaproductionbudget,therequiredproductionequals:
A)budgetedsales+beginninginventory+desiredendinginventory.
B)budgetedsalesbeginninginventory+desiredendinginventory.
C)budgetedsalesbeginninginventorydesiredendinginventory.
D)budgetedsales+beginninginventorydesiredendinginventory.
Source:CIMA,adapted
Level:EasyLO:3Ans:B
25.Thedirectlaborbudgetisbasedon:
A)thedesiredendinginventoryoffinishedgoods.
B)thebeginninginventoryoffinishedgoods.
C)therequiredproductionfortheperiod.
D)therequiredmaterialspurchasesfortheperiod.
Level:EasyLO:5Ans:C
106
26.Whichofthefollowingmightbeincludedasadisbursementonacashbudget?
A)AAbove
B)BAbove
C)CAbove
D)DAbove
27.ThirtypercentofSharpCompanyssalesareforcashand70%areonaccount.Sixtypercentofthe
accountsalesarecollectedinthemonthofsale,25%inthemonthfollowingsale,and12%inthesecond
monthfollowingsale.Theremainderisuncollectible.Thefollowingarebudgetedsalesdataforthe
company:
TotalcashreceiptsinAprilareexpectedtobe:
A)$24,640
B)$35,200
C)$31,560
D)$33,640
Level:MediumLO:2Ans:D
28.RazzCompanyisestimatingthefollowingsales:
SalesatRazzarenormallycollectedasfollows:10%inthemonthofsale;60%inthemonthfollowing
thesale;andtheremaining30%inthesecondmonthfollowingthesale.InRazzsbudgetedbalancesheet
atDecember31,atwhatamountwillaccountsreceivablebeshown?
A)$49,500
B)$76,500
C)$120,500
107
D)$135,500
Level:MediumLO:2Ans:B
108
29.OnJanuary1,ColverCompanyhas6,500unitsofProductAonhand.Duringtheyear,thecompany
planstosell15,000unitsofProductA,andplanstohave5,000unitsonhandatyearend.Howmany
unitsofProductAmustbeproducedduringtheyear?
A)13,500
B)16,500
C)15,000
D)20,000
Level:EasyLO:3Ans:A
30.DouglasCompanyplanstosell24,000unitsofProductAduringJulyand30,000unitsduringAugust.
SalesofProductAduringJunewere25,000units.Pastexperiencehasshownthatendofmonth
inventoryshouldequal3,000unitsplus30%ofthenextmonthssales.OnJune30thisrequirementwas
met.Basedonthesedata,howmanyunitsofProductAmustbeproducedduringthemonthofJuly?
A)28,800
B)22,200
C)24,000
D)25,800
31.VilliManufacturingCorporationsmostrecentsalesbudgetindicatesthefollowingexpectedsales(in
units):
Villiwantstomaintainafinishedgoodsinventoryof20%ofthenextmonthsexpectedsales.Howmany
unitsshouldVilliplanonproducingforthemonthofAugust?
A)268,000units
B)282,000units
C)291,000units
D)337,000units
32.SharpCompany,aretailer,planstosell15,000unitsofProductXduringthemonthofAugust.Ifthe
companyhas2,500unitsonhandatthestartofthemonth,andplanstohave2,000unitsonhandatthe
endofthemonth,howmanyunitsofProductXmustbepurchasedfromthesupplierduringthemonth?
A)14,500
B)15,500
C)15,000
D)17,000
Level:EasyLO:3Ans:A
109
33.Thefollowingarebudgeteddata:
Onepoundofmaterialisrequiredforeachfinishedunit.Theinventoryofmaterialsattheendofeach
monthshouldequal20%ofthefollowingmonthsproductionneeds.Purchasesofrawmaterialsfor
Februaryshouldbe:
A)19,600pounds
B)20,400pounds
C)18,400pounds
D)18,600pounds
34.RhettCompanymanufacturesandsellsdressshirts.Eachshirt(unit)requires3yardsofcloth.
SelecteddatafromRhettsmasterbudgetfornextquarterareshownbelow:
HowmanyyardsofclothshouldRhettplanonpurchasinginMay?
A)84,700yards
B)96,700yards
C)98,100yards
D)98,800yards
35.SparksCompanyhasacashbalanceof$7,500onApril1.Thecompanymustmaintainaminimum
cashbalanceof$6,000.DuringApril,cashreceiptsof$48,000areplanned.Cashdisbursementsduring
themonthareexpectedtototal$52,000.Ignoringinterestpayments,duringAprilthecompanywillneed
toborrow:
A)$3,500
B)$2,500
C)$6,000
D)$4,000
Level:EasyLO:8Ans:B
36.ForMay,YoungCompanyhasbudgeteditscashreceiptsat$125,000anditscashdisbursementsat
$138,000.ThecompanyscashbalanceonMay1is$17,000.IfthedesiredMay31cashbalanceis
$20,000,thenhowmuchcashmustthecompanyborrowduringthemonth(beforeconsideringany
interestpayments)?
A)$4,000
B)$8,000
C)$12,000
110
D)$16,000
Level:EasyLO:8Ans:D
111
37.MilanoCorporationisworkingonitsdirectlaborbudgetforthenexttwomonths.Eachunitofoutput
requires0.50directlaborhours.Thedirectlaborrateis$9.80perdirectlaborhour.Theproduction
budgetcallsforproducing6,400unitsinOctoberand6,300unitsinNovember.Ifthedirectlaborwork
forceisfullyadjustedtothetotaldirectlaborhoursneededeachmonth,whatwouldbethetotal
combineddirectlaborcostforthetwomonths?
A)$30,870
B)$31,360
C)$62,230
D)$31,115
Level:EasyLO:5Ans:C
38.MorieCorporationisworkingonitsdirectlaborbudgetforthenexttwomonths.Eachunitofoutput
budgetcallsforproducing2,000unitsinMarchand2,300unitsinApril.Thecompanyguaranteesits
directlaborworkersa40hourpaidworkweek.Withthenumberofworkerscurrentlyemployed,that
meansthatthecompanyiscommittedtopayingitsdirectlaborworkforceforatleast1,760hoursintotal
eachmonthevenifthereisnotenoughworktokeepthembusy.Whatwouldbethetotalcombineddirect
laborcostforthetwomonths?
A)$28,512.00
B)$26,406.00
C)$28,228.50
D)$26,122.50
Level:EasyLO:5Ans:A
39.MorrishInc.basesitsmanufacturingoverheadbudgetonbudgeteddirectlaborhours.Thedirectlabor
budgetindicatesthat7,100directlaborhourswillberequiredinJanuary.Thevariableoverheadrateis
$1.80perdirectlaborhour.Thecompanysbudgetedfixedmanufacturingoverheadis$102,950per
month,whichincludesdepreciationof$19,880.Allotherfixedmanufacturingoverheadcostsrepresent
currentcashflows.TheJanuarycashdisbursementsformanufacturingoverheadonthemanufacturing
overheadbudgetshouldbe:
A)$115,730
B)$95,850
C)$12,780
D)$83,070
Level:EasyLO:6Ans:B
40.AxsomInc.basesitsmanufacturingoverheadbudgetonbudgeteddirectlaborhours.Thedirectlabor
budgetindicatesthat1,300directlaborhourswillberequiredinMarch.Thevariableoverheadrateis
$8.90perdirectlaborhour.Thecompanysbudgetedfixedmanufacturingoverheadis$20,020per
month,whichincludesdepreciationof$2,600.Allotherfixedmanufacturingoverheadcostsrepresent
currentcashflows.Thecompanyrecomputesitspredeterminedoverheadrateeverymonth.The
predeterminedoverheadrateforMarchshouldbe:
A)$22.30
B)$24.30
C)$15.40
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D)$8.90
Level:EasyLO:6Ans:B
113
41.ThemanufacturingoverheadbudgetatPendleyCorporationisbasedonbudgeteddirectlaborhours.
Thedirectlaborbudgetindicatesthat8,900directlaborhourswillberequiredinAugust.Thevariable
overheadrateis$5.50perdirectlaborhour.Thecompanysbudgetedfixedmanufacturingoverheadis
$133,500permonth,whichincludesdepreciationof$30,260.Allotherfixedmanufacturingoverhead
costsrepresentcurrentcashflows.Thecompanyrecomputesitspredeterminedoverheadrateevery
month.ThepredeterminedoverheadrateforAugustshouldbe:
A)$5.50
B)$17.10
C)$20.50
D)$15.00
Level:EasyLO:6Ans:C
42.ThemanufacturingoverheadbudgetatAmreinCorporationisbasedonbudgeteddirectlaborhours.
Thedirectlaborbudgetindicatesthat4,900directlaborhourswillberequiredinAugust.Thevariable
$96,040permonth,whichincludesdepreciationof$7,350.Allotherfixedmanufacturingoverheadcosts
representcurrentcashflows.TheAugustcashdisbursementsformanufacturingoverheadonthe
manufacturingoverheadbudgetshouldbe:
A)$88,690
B)$134,750
C)$46,060
D)$142,100
Level:EasyLO:6Ans:B
43.VandelInc.basesitssellingandadministrativeexpensebudgetonbudgetedunitsales.Thesales
budgetshows6,600unitsareplannedtobesoldinApril.Thevariablesellingandadministrativeexpense
is$9.70perunit.Thebudgetedfixedsellingandadministrativeexpenseis$127,380permonth,which
includesdepreciationof$8,580permonth.Theremainderofthefixedsellingandadministrativeexpense
representscurrentcashflows.Thecashdisbursementsforsellingandadministrativeexpensesonthe
Aprilsellingandadministrativeexpensebudgetshouldbe:
A)$191,400
B)$118,800
C)$64,020
D)$182,820
Level:EasyLO:7Ans:D
44.ThesellingandadministrativeexpensebudgetofRuffingCorporationisbasedonbudgetedunitsales,
whichare4,800unitsforFebruary.Thevariablesellingandadministrativeexpenseis$8.10perunit.The
budgetedfixedsellingandadministrativeexpenseis$71,520permonth,whichincludesdepreciationof
$16,800permonth.Theremainderofthefixedsellingandadministrativeexpenserepresentscurrentcash
flows.ThecashdisbursementsforsellingandadministrativeexpensesontheFebruarysellingand
administrativeexpensebudgetshouldbe:
A)$38,880
B)$54,720
C)$110,400
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D)$93,600
Level:EasyLO:7Ans:D
115
45.ArakakiInc.isworkingonitscashbudgetforJanuary.Thebudgetedbeginningcashbalanceis
$41,000.Budgetedcashreceiptstotal$114,000andbudgetedcashdisbursementstotal$113,000.The
desiredendingcashbalanceis$60,000.Thecompanyhasanopenlineofcredit,withinterestnotdue
untilthemonthfollowingthemonthinwhichfundsareborrowed.PriortoJanuary,thisopenlineof
creditwillnothavebeenused.Theexcess(deficiency)ofcashavailableoverdisbursementsforJanuary
willbe:
A)$42,000
B)$155,000
C)$40,000
D)$1,000
Level:EasyLO:8Ans:A
46.LaureyInc.isworkingonitscashbudgetforMay.Thebudgetedbeginningcashbalanceis$45,000.
Budgetedcashreceiptstotal$129,000andbudgetedcashdisbursementstotal$124,000.Thedesired
endingcashbalanceis$60,000.Thecompanyhasanopenlineofcredit,withinterestnotdueuntilthe
monthfollowingthemonthinwhichfundsareborrowed.PriortoMay,thisopenlineofcreditwillnot
havebeenused.ToattainitsdesiredendingcashbalanceforMay,thecompanyneedstoborrow:
A)$110,000
B)$0
C)$60,000
D)$10,000
Level:EasyLO:8Ans:D
Usethefollowinginformationtoanswer4749
HomeCompanywillopenanewstoreonJanuary1.Basedonexperiencefromitsotherretailoutlets,
HomeCompanyismakingthefollowingsalesprojections:
HomeCompanyestimatesthat70%ofthecreditsaleswillbecollectedinthemonthfollowingthemonth
ofsale,withthebalancecollectedinthesecondmonthfollowingthemonthofsale.
47.Basedonthesedata,thebalanceinaccountsreceivableonJanuary31willbe:
A)$40,000
B)$28,000
C)$12,000
D)$58,000
Level:EasyLO:2Ans:A
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48.TheMarch31balanceinaccountsreceivablewillbe:
A)$100,000
B)$60,000
C)$95,000
D)$75,000
49.InacashbudgetforthemonthofApril,thetotalcashreceiptswillbe:
A)$74,000
B)$57,000
C)$114,000
D)$97,000
RobertsCompanymanufactureshomecleaningproducts.Oneoftheproducts,Quickclean,requires2
poundsofMaterialAand5poundsofMaterialBperunitmanufactured.MaterialAcanbepurchased
fromthesupplierfor$0.30perpoundandMaterialBcanbepurchasedfor$0.50perpound.Thefinished
goodsinventoryonhandattheendofeachmonthmustbeequalto4,000unitsplus25%ofthenext
monthssales.Therawmaterialsinventoryonhandattheendofeachmonth(foreitherMaterialAor
MaterialB)mustbeequalto80%ofthefollowingmonthsproductionneeds.
50.AssumethatonJanuary1theinventoryofQuickcleanwas8,000units.ExpectedsalesinJanuaryare
14,000unitsandexpectedsalesinFebruaryare18,000units.Thenumberofunitsneededtobe
manufacturedinJanuarywouldbe:
A)10,500
B)14,000
C)14,500
D)15,000
51.Assumethattheproductionbudgetcallsfor26,000unitsofQuickcleantobemanufacturedinJune
and32,000unitsofQuickcleantobemanufacturedinJuly.OnMay31therewillbe41,600poundsof
MaterialAininventory.ThenumberofpoundsofMaterialAneededforproductionduringJunewould
be:
A)61,600
B)51,200
C)35,600
D)52,000
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52.Assumethattheproductionbudgetcallsfor26,000unitsofQuickcleantobemanufacturedinJune
and32,000unitstobemanufacturedinJuly.OnMay31therewillbe104,000poundsofMaterialBin
inventory.ThenumberofpoundsofMaterialBtobepurchasedduringJunewouldbe:
A)128,000
B)130,000
C)154,000
D)160,000
TheTSCompanyhasbudgetedsalesfortheyearasfollows:
Theendinginventoryoffinishedgoodsforeachquartershouldequal25%ofthenextquartersbudgeted
salesinunits.Thefinishedgoodsinventoryatthestartoftheyearis2,500units.Fourpoundsofraw
materialsarerequiredforeachunitproduced.Rawmaterialsonhandatthestartoftheyeartotal4,200
pounds.Therawmaterialsinventoryattheendofeachquartershouldequal10%ofthenextquarters
productionneedsinmaterial.
53.Scheduledproductionforthethirdquartershouldbe:
A)14,500units
B)18,500units
C)15,500units
D)13,500units
Level:MediumLO:3Ans:A
54.Scheduledpurchasesofrawmaterialsforthesecondquartershouldbe:
A)50,000pounds
B)55,800pounds
C)50,800pounds
D)55,000pounds
Level:HardLO:4Ans:C
SarterCorporationisintheprocessofpreparingitsannualbudget.Thefollowingbeginningandending
inventorylevelsareplannedfortheyear.
118
Eachunitoffinishedgoodsrequires3gramsofrawmaterial.
119
55.Ifthecompanyplanstosell880,000unitsduringtheyear,thenumberofunitsitwouldhaveto
manufactureduringtheyearwouldbe:
A)900,000units
B)930,000units
C)880,000units
D)830,000units
Level:EasyLO:3Ans:D
56.Howmuchoftherawmaterialshouldthecompanypurchaseduringtheyear?
A)2,550,000grams
B)2,490,000grams
C)2,480,000grams
D)2,500,000grams
ThefollowingarebudgeteddatafortheBinghamCompany,amerchandisingcompany:
Costofgoodssoldasapercentageofsalesis60%.Thedesiredendinginventoryis75%ofnextmonths
sales.
57.AssumingthattheBinghamCompanyhadinventoryonhandof$70,000(atcost)onJanuary1,the
purchasesforJanuary(atcost)wouldbe:
A)$180,000
B)$250,000
C)$263,000
D)$110,000
58.Thedesiredendinginventory(atcost)forthemonthofFebruarywouldbe:
A)$180,000
B)$300,000
C)$240,000
D)$160,000
Level:EasyLO:3Ans:A
120
59.Assumethatallpurchasesarepaidforinthemonthfollowingthemonthofpurchase.Thecash
disbursementsforpurchasesthatwouldappearintheAprilcashbudgetwouldbe:
A)$180,000
B)$157,500
C)$240,000
D)$217,500
LFMCorporationmakesandsellsaproductcalledProductWZ.EachunitofProductWZrequires3.5
hoursofdirectlaborattherateof$16.00perdirectlaborhour.Managementwouldlikeyoutopreparea
DirectLaborBudgetforJune.
60.ThebudgeteddirectlaborcostperunitofProductWZwouldbe:
A)$4.57
B)$19.50
C)$16.00
D)$56.00
Level:EasyLO:5Ans:D
61.Thecompanyplanstosell31,000unitsofProductWZinJune.Thefinishedgoodsinventorieson
June1andJune30arebudgetedtobe100and600units,respectively.Budgeteddirectlaborcostsfor
Junewouldbe:
A)$1,764,000
B)$504,000
C)$1,708,000
D)$1,736,000
Level:MediumLO:3,5Ans:A
MartysMerchandisehasbudgetedsalesasfollowsforthesecondquarteroftheyear:
Costofgoodssoldisequalto70%ofsales.Thecompanywantstomaintainamonthlyendinginventory
equalto120%ofthecostofgoodssoldforthefollowingmonth.TheinventoryonMarch31wasbelow
thistargetandwasonly$22,000.ThecompanyisnowpreparingaMerchandisePurchasesBudgetfor
April,May,andJune.
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62.ThedesiredbeginninginventoryforJuneis:
A)$42,000
B)$35,000
C)$50,000
D)$38,000
Level:EasyLO:3Ans:A
63.ThebudgetedpurchasesforMayare:
A)$49,400
B)$50,400
C)$60,000
D)$33,600
Harris,Inc.,hasbudgetedsalesinunitsforthenextfivemonthsasfollows:
Pastexperiencehasshownthattheendinginventoryforeachmonthshouldbeequalto20%ofthenext
monthssalesinunits.TheinventoryonMay31contained1,880units.Thecompanyneedstopreparea
productionbudgetforthenextfivemonths.
64.ThebeginninginventoryforSeptembershouldbe:
A)820units
B)1,880units
C)1,460units
D)1,080units
Level:EasyLO:3Ans:D
65.ThetotalnumberofunitsproducedinJulyshouldbe:
A)9,260units
B)7,700units
C)7,800units
D)7,900units
Level:EasyLO:3Ans:B
122
HamwayProducts,Inc.makesandsellsasingleproductcalledaWob.IttakestwoyardsofmaterialAto
makeoneWob.BudgetedproductionofWobsforthenextfourmonthsisasfollows:
ThecompanywantstomaintainmonthlyendinginventoriesofmaterialAequalto10%ofthefollowing
monthsproductionneeds.OnMarch31thistargethadnotbeenmetsinceonly1,500yardsofmaterialA
wereonhand.ThecostofmaterialAis$.90peryard.
66.ThetotalcostofmaterialAtobepurchasedinAprilis:
A)$22,680
B)$24,750
C)$26,750
D)$26,780
67.ThedesiredendinginventoryofmaterialAforthemonthofJuneis
A)2,480yards
B)1,120yards
C)1,870yards
D)2,240yards
Level:EasyLO:4Ans:D
TheGeraldCompanymakesandsellsasingleproductcalledaClop.EachCloprequirestheuseof1.1
hoursofdirectlabortime.Theplannedcostofdirectlabortimeis$8.20perhour.Thedirectlabor
workforceisfullyadjustedeachmonthtotherequiredworkload.ThecompanywishestoprepareaDirect
LaborBudgetforthefirstquarteroftheyear.
68.Ifthecompanyhasbudgetedtoproduce20,000ClopsinJanuary,thenthebudgeteddirectlaborcost
forJanuaryis:
A)$164,000
B)$180,400
C)$172,200
D)$195,600
Level:EasyLO:5Ans:B
123
69.IfthebudgeteddirectlaborcostforFebruaryis$162,360,thenthebudgetedproductionofClopsfor
Februaryis:
A)23,200units
B)21,000units
C)19,800units
D)18,000units
Level:EasyLO:5Ans:D
70.ThebudgeteddirectlaborcostperClopis:
A)$7.45
B)$8.20
C)$9.02
D)$9.76
Level:EasyLO:5Ans:C
AcmalManufacturingCompanyisestimatingthefollowingrawmaterialpurchasesforthelastfour
monthsoftheyear:
AtAcmal,25%ofrawmaterialspurchasesarenormallypaidforinthemonthofpurchase.Theremaining
75%ispaidforinthemonthfollowingthepurchase.
71.HowmuchcashshouldAcmalexpecttopayoutforrawmaterialpurchasesduringthemonthof
November?
A)$202,500
B)$832,500
C)$862,500
D)$877,500
72.InAcmalsbudgetedbalancesheetatDecember31,atwhatamountwillaccountspayablebeshown?
(Assumethataccountspayableisonlyusedforrawmaterialpurchases.)
A)$585,000
B)$607,500
C)$780,000
D)$802,500
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CashanCorporationmakesandsellsaproductcalledaMiniwarp.OneMiniwarprequires1.5kilograms
oftherawmaterialJurislon.BudgetedproductionofMiniwarpsforthenextfivemonthsisasfollows:
ThecompanywantstomaintainmonthlyendinginventoriesofJurislonequalto30%ofthefollowing
monthsproductionneeds.OnJuly31,thisrequirementwasnotmetsinceonly10,400kilogramsof
Jurislonwereonhand.ThecostofJurislonis$4.00perkilogram.ThecompanywantstoprepareaDirect
MaterialsPurchaseBudgetforthenextfivemonths.
73.ThedesiredendinginventoryofJurislonforthemonthofSeptemberis:
A)$29,640
B)$29,520
C)$44,460
D)$44,280
74.ThetotalcostofJurislontobepurchasedinAugustis:
A)$149,860
B)$252,400
C)$191,460
D)$147,000
ThePanzaCompanymakesandsellsonlyoneproductcalledaDeb.Thecompanyisintheprocessof
preparingitsSellingandAdministrativeExpenseBudgetfornextyear.Thefollowingbudgetdataare
available:
Alloftheseexpenses(exceptdepreciation)arepaidincashinthemonththeyareincurred.
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126
75.Ifthecompanyhasbudgetedtosell18,000DebsinJanuary,thenthetotalbudgetedvariableselling
andadministrativeexpensesforJanuarywillbe:
A)$13,500
B)$23,400
C)$37,900
D)$40,500
Level:EasyLO:7Ans:D
76.Ifthecompanyhasbudgetedtosell16,000DebsinFebruary,thenthetotalbudgetedfixedsellingand
administrativeexpensesforFebruaryis:
A)$36,000
B)$77,000
C)$62,000
D)$98,000
E)noneofthese
Level:EasyLO:7Ans:B
77.Ifthecompanyhasbudgetedtosell20,000DebsinMarch,thenthetotalbudgetedsellingand
administrativeexpensesperunitsoldforMarchis:
A)$2.25
B)$5.35
C)$5.80
D)$6.10
Level:EasyLO:7Ans:D
78.IfthebudgetedcashdisbursementsforsellingandadministrativeexpensesforApriltotal$116,000,
thenhowmanyDebsdoesthecompanyplantosellinApril?
A)17,333units
B)18,250units
C)24,000units
D)26,800units
DaveyCorporationispreparingitsManufacturingOverheadBudgetforthefourthquarteroftheyear.
Thebudgetedvariablefactoryoverheadrateis$3.00perdirectlaborhour;thebudgetedfixedfactory
overheadis$66,000permonth,ofwhich$10,000isfactorydepreciation.
79.IfthebudgeteddirectlabortimeforOctoberis6,000hours,thenthetotalbudgetedfactoryoverhead
forOctoberis:
A)$28,000
B)$56,000
C)$74,000
127
D)$84,000
Level:EasyLO:6Ans:D
128
80.IfthebudgeteddirectlabortimeforNovemberis9,000hours,thenthetotalbudgetedcash
disbursementsforNovembermustbe:
A)$56,000
B)$83,000
C)$37,000
D)$93,000
81.IfthebudgeteddirectlabortimeforDecemberis4,000hours,thenthepredeterminedfactory
overheadperdirectlaborhourforDecemberwouldbe:
A)$3.00
B)$19.50
C)$5.50
D)$17.00
PorissCorporationmakesandsellsasingleproductcalledaYute.Thecompanyisintheprocessof
preparingitsSellingandAdministrativeExpenseBudgetforthelastquarteroftheyear.Thefollowing
budgetdataareavailable:
Alloftheseexpenses(exceptdepreciation)arepaidincashinthemonththeyareincurred.
82.Ifthecompanyhasbudgetedtosell19,000YutesinNovember,thenthetotalbudgetedvariable
sellingandadministrativeexpensesforNovemberwouldbe:
A)$546,000
B)$280,000
C)$266,000
D)$536,000
129
83.Ifthecompanyhasbudgetedtosell16,000YutesinDecember,thenthebudgetedtotalcash
disbursementsforsellingandadministrativeexpensesforDecemberwouldbe:
A)$280,000
B)$494,000
C)$224,000
D)$504,000
84.IfthebudgetedcashdisbursementsforsellingandadministrativeexpensesforOctobertotal
$459,200,thenhowmanyYutesdoesthecompanyplantosellinOctober?
A)13,300units
B)12,500units
C)13,000units
D)12,800units
Level:HardLO:7Ans:D
SipanRetailCompanywasrecentlycreatedwithabeginningcashbalanceof$12,000.Theownerexpects
thefollowingforthefirstmonthofoperations:
Thedisplaycasesabovewerepurchasedatthebeginningofthemonthandarebeingdepreciatedatarate
of$200permonth.Thisamountisincludedinthesellingandadministrativeexpensesfigureabove.All
othersellingandadministrativeexpensesarepaidasincurred.Sipanwantstomaintainacashbalanceof
$10,000.Anyamountbelowthiscanbeborrowedfromalocalbankasneededinincrementsof$1,000.
Allborrowingsaremadeatmonthend.
85.InSipanscashbudgetforthisfirstmonth,howmuchmoneywillSipanneedtoborrowatmonth
end?
A)$7,000
B)$16,000
C)$17,000
D)$28,000
Level:HardLO:8Ans:B
130
86.InSipansbudgetedincomestatementforthisfirstmonth,whatwillnetincome(loss)beforthisfirst
month?
A)$(1,000)
B)$(2,000)
C)$7,400
D)$9,500
87.InSipansbudgetedbalancesheetattheendofthisfirstmonth,atwhatamountwillaccounts
receivablebeshown?
A)$0
B)$9,600
C)$18,000
D)$26,000
TheEllisCompanyhasbudgeteditsactivityforSeptemberaccordingtothefollowinginformation:
Salesarebudgetedat$392,000andallsalesareforcash.
Allpurchasesofmerchandiseinventoryareforcash.Merchandiseinventorywas$150,000onAugust31
andtheplannedmerchandiseinventoryonSeptember30is$140,000.Allmerchandiseissoldat40%
abovecost.
Thesellingandadministrativeexpensesarebudgetedat$92,000forthemonth.Alloftheseexpensesare
paidforincashexceptfordepreciationof$12,000.
88.ThebudgetednetincomeforSeptemberis:
A)$20,000
B)$143,200
C)$112,000
D)$64,800
89.ThebudgetedcashdisbursementsforSeptemberare:
A)$140,000
B)$270,000
C)$350,000
D)$362,000
131
KellyCompanyisaretailsportinggoodsstore.FactsregardingKellysoperationsareasfollows:
Salesarebudgetedat$220,000forNovemberand$200,000forDecember.
Collectionsareexpectedtobe60%inthemonthofsaleand38%inthemonthfollowingthesale.2%of
salesareexpectedtobeuncollectible.
Thecostofgoodssoldis75%ofsales.
Atotalof80%ofthemerchandiseispurchasedinthemonthpriortothemonthofsaleand20%is
purchasedinthemonthofsale.Paymentformerchandiseismadeinthemonthfollowingthepurchase.
Othermonthlyexpensestobepaidincashare$22,600.
Monthlydepreciationis$18,000.
90.ThebudgetedcashcollectionsforNovemberare:
A)$208,000
B)$132,000
C)$203,600
D)$212,000
Source:CMA,adapted
91.ThenetincomeforNovemberis:
A)$32,400
B)$28,000
C)$14,400
D)$10,000
Source:CMA,adapted
Level:HardLO:9Ans:D
132
133
92.TheprojectedbalanceinaccountspayableonNovember30is:
A)$162,000
B)$204,000
C)$153,000
D)$160,000
Source:CMA,adapted
93.TheprojectedbalanceininventoryonNovember30is:
A)$160,000
B)$120,000
C)$153,000
D)$150,000
Source:CMA,adapted
Level:HardLO:10Ans:B
DilbertFarmSupplyislocatedinasmalltownintheruralwest.Dataregardingthestoresoperations
follow:
Salesarebudgetedat$260,000forNovember,$230,000forDecember,and$210,000forJanuary.
Collectionsareexpectedtobe80%inthemonthofsale,19%inthemonthfollowingthesale,and1%
uncollectible.
Thecompanypurchases60%ofitsmerchandiseinthemonthpriortothemonthofsaleand40%inthe
monthofsale.Paymentformerchandiseismadeinthemonthfollowingthepurchase.
Ignoretaxes.
134
135
94.ExpectedcashcollectionsinDecemberare:
A)$230,000
B)$184,000
C)$233,400
D)$49,400
Level:HardLO:2Ans:C
95.ThecostofDecembermerchandisepurchaseswouldbe:
A)$141,700
B)$169,000
C)$81,900
D)$149,500
Level:HardLO:3Ans:A
96.Decembercashdisbursementsformerchandisepurchaseswouldbe:
A)$141,700
B)$149,500
C)$157,300
D)$81,900
Level:HardLO:3Ans:C
97.Theexcess(deficiency)ofcashavailableoverdisbursementsforDecemberwouldbe:
A)$55,800
B)$37,900
C)$93,700
D)$17,900
Level:HardLO:8Ans:A
98.ThenetincomeforDecemberwouldbe:
A)$60,200
B)$37,900
C)$40,200
D)$55,800
Level:HardLO:9Ans:B
99.ThecashbalanceattheendofDecemberwouldbe:
A)$180,500
B)$153,500
C)$82,800
D)$27,000
Level:HardLO:10Ans:A
136
100.Theaccountsreceivablebalance,netofuncollectibleaccounts,attheendofDecemberwouldbe:
A)$46,000
B)$93,100
C)$43,700
D)$81,300
Level:HardLO:10Ans:C
101.AccountspayableattheendofDecemberwouldbe:
A)$81,900
B)$141,700
C)$59,800
D)$149,500
Level:HardLO:10Ans:B
102.RetainedearningsattheendofDecemberwouldbe:
A)$380,400
B)$418,300
C)$471,300
D)$466,400
Level:HardLO:10Ans:D
BrackenCorporationisasmallwholesalerofgourmetfoodproducts.Dataregardingthestores
operationsfollow:
uncollectible.
Ignoretaxes.
137
103.ExpectedcashcollectionsinDecemberare:
A)$340,000
B)$328,100
C)$272,000
D)$56,100
Level:HardLO:2Ans:B
104.ThecostofDecembermerchandisepurchaseswouldbe:
A)$225,000
B)$178,500
C)$247,500
D)$255,000
Level:HardLO:3Ans:D
105.Decembercashdisbursementsformerchandisepurchaseswouldbe:
A)$178,500
B)$255,000
C)$225,000
D)$252,750
Level:HardLO:3Ans:D
138
106.Theexcess(deficiency)ofcashavailableoverdisbursementsforDecemberwouldbe:
A)$34,000
B)$19,550
C)$87,550
D)$53,550
Level:HardLO:8Ans:D
CarterLumbersellslumberandgeneralbuildingsuppliestobuildingcontractorsinamediumsizedtown
inMontana.Dataregardingthestoresoperationsfollow:
uncollectible.
Ignoretaxes.
107.ThenetincomeforDecemberwouldbe:
A)$114,500
B)$94,500
C)$101,400
D)$82,800
Level:HardLO:9Ans:D
139
140
108.ThecashbalanceattheendofDecemberwouldbe:
A)$182,400
B)$114,400
C)$13,000
D)$195,400
109.Theaccountsreceivablebalance,netofuncollectibleaccounts,attheendofDecemberwouldbe:
A)$105,300
B)$88,700
C)$117,000
D)$207,900
Level:HardLO:10Ans:A
110.AccountspayableattheendofDecemberwouldbe:
A)$253,500
B)$50,700
C)$208,000
D)$258,700
111.RetainedearningsattheendofDecemberwouldbe:
A)$259,600
B)$342,400
C)$422,000
D)$445,100
Level:HardLO:10Ans:C
CartierInc.basesitsmanufacturingoverheadbudgetonbudgeteddirectlaborhours.Thevariable
representcurrentcashflows.Thedirectlaborbudgetindicatesthat3,300directlaborhourswillbe
requiredinApril.
112.TheAprilcashdisbursementsformanufacturingoverheadonthemanufacturingoverheadbudget
shouldbe:
A)$59,070
B)$46,200
C)$27,060
D)$19,140
Level:EasyLO:6Ans:B
141
142
113.Thecompanyrecomputesitspredeterminedoverheadrateeverymonth.Thepredeterminedoverhead
rateforAprilshouldbe:
A)$14.00
B)$5.80
C)$17.90
D)$12.10
Level:EasyLO:6Ans:C
ThemanufacturingoverheadbudgetatCarderaCorporationisbasedonbudgeteddirectlaborhours.The
directlaborbudgetindicatesthat2,300directlaborhourswillberequiredinJanuary.Thevariable
representcurrentcashflows.
114.Thecompanyrecomputesitspredeterminedoverheadrateeverymonth.Thepredeterminedoverhead
rateforJanuaryshouldbe:
A)$1.00
B)$12.20
C)$11.20
D)$13.20
Level:EasyLO:6Ans:D
115.TheJanuarycashdisbursementsformanufacturingoverheadonthemanufacturingoverheadbudget
shouldbe:
A)$30,360
B)$2,300
C)$23,460
D)$25,760
Level:EasyLO:6Ans:D
RogersCorporationispreparingitscashbudgetforJuly.Thebudgetedbeginningcashbalanceis
desiredendingcashbalanceis$30,000.Thecompanyhasanopenlineofcreditthatallowsittoborrow
upto$160,000atanytime,withinterestnotdueuntilthefollowingmonth.Thisopenlineofcreditwill
nothavetobeuseduntilJuly,ifatall.
116.Theexcess(deficiency)ofcashavailableoverdisbursementsforJulyis:
A)$23,000
B)$2,000
C)$166,000
D)$27,000
143
Level:EasyLO:8Ans:D
144
117.ToattainitsdesiredendingcashbalanceforJuly,thecompanyshouldborrow:
A)$30,000
B)$0
C)$3,000
D)$57,000
Level:EasyLO:8Ans:C
MueckeInc.isworkingonitscashbudgetforApril.Thebudgetedbeginningcashbalanceis$40,000.
Budgetedcashreceiptstotal$150,000andbudgetedcashdisbursementstotal$158,000.Thedesired
endingcashbalanceis$50,000.Thecompanyhasanopenlineofcredit,withinterestnotdueuntilthe
monthfollowingthemonthinwhichfundsareborrowed.PriortoApril,thisopenlineofcreditwillnot
havebeenused.
118.Theexcess(deficiency)ofcashavailableoverdisbursementsforAprilwillbe:
A)$32,000
B)$190,000
C)$48,000
D)($8,000)
Level:EasyLO:8Ans:A
119.ToattainitsdesiredendingcashbalanceforApril,thecompanyneedstoborrow:
A)$18,000
B)$0
C)$50,000
D)$82,000
Level:EasyLO:8Ans:A
Essay
120.MateBoomerangCorporationmanufacturesandsellsplasticboomerangs.Expectedboomerang
sales(inunits)fortheupcomingmonthsareasfollows:
Sevenouncesofplasticresinareneededtoproduceeveryboomerang.Matelikestohaveenoughplastic
resinonhandattheendofthemonthtocover25%ofthenextmonthsproductionrequirements.Mate
alsolikestomaintainafinishedgoodsinventoryequalto10%ofthenextmonthsestimatedsales.
Required:
HowmanyouncesofplasticresinshouldMateplanonpurchasingduringthemonthofOctober?
Level:HardLO:2,3
145
Ans:
Octoberproduction=8,000+(7,00010%)(8,00010%)=7,900;
Novemberproduction=7,000+(11,00010%)(7,00010%)=7,400;
Octoberproductionresinneeds=7,9007=55,300ounces
Novemberproductionresinneeds=7,4007=51,800ounces
Octoberresinpurchases=55,300+(51,80025%)(55,30025%)
=54,425ounces
121.AllsalesatMeeksCompany,awholesaler,aremadeoncredit.Experiencehasshownthat70%of
theaccountsreceivablearecollectedinthemonthofthesale,26%arecollectedinthemonthfollowing
thesale,andtheremaining4%areuncollectible.ActualsalesforMarchandbudgetedsalesforthe
followingfourmonthsaregivenbelow:
Thecompanyscostofgoodssoldisequalto60%ofsales.Allpurchasesofinventoryaremadeoncredit.
MeeksCompanypaysforonehalfofamonthspurchasesinthemonthofpurchase,andtheotherhalfin
themonthfollowingpurchase.Thecompanyrequiresthatendofmonthinventoriesbeequalto25%of
thecostofgoodssoldforthenextmonth.
Required:
(a.)Computetheamountofcash,intotal,whichthecompanycanexpecttocollectinMay.
(b.)Computethebudgeteddollaramountofinventorywhichthecompanyshouldhaveonhandattheend
ofApril.
(c.)ComputetheamountofinventorythatthecompanyshouldpurchaseduringthemonthsofMayand
June.
(d.)ComputetheamountofcashpaymentsthatwillbemadetosuppliersduringJuneforpurchasesof
inventory.
Level:MediumLO:2,3,4
Ans:
(b.)BudgetedcostofgoodssoldforMay:
$500,00060%=$300,000
RequiredinventorylevelattheendofApril:
$300,00025%=$75,000
146
*Followingmonthscostofgoodssold25%
**Currentmonthscostofgoodssold25%
122.ThefollowinginformationisbudgetedforMcCrackenPlumbingSupplyCompanyfornextquarter:
AllsalesatMcCrackenareoncredit.Fortypercentarecollectedinthemonthofsale,58%inthemonth
followingthesale,andtheremaining2%areuncollectible.Merchandisepurchasesarepaidinfullthe
monthfollowingthemonthofpurchase.Thesellingandadministrativeexpensesaboveinclude$8,000of
depreciationondisplayfixturesandwarehouseequipment.Allothersellingandadministrativeexpenses
arepaidasincurred.McCrackenwantstomaintainacashbalanceof$15,000.Anyamountbelowthiscan
beborrowedfromalocalbankasneededinincrementsof$1,000.Allborrowingsaremadeatmonthend.
Required:
PrepareMcCrackenscashbudgetforthemonthofMay.Usegoodform.McCrackenexpectstohave
$24,000ofcashonhandatthebeginningofMay.
Level:MediumLO:2,3,7,8
147
Ans:
123.TheFraleyCompany,amerchandisingfirm,hasplannedthefollowingsalesforthenextfour
months:
Salesaremade40%forcashand60%onaccount.Fromexperience,thecompanyhaslearnedthata
monthssalesonaccountarecollectedaccordingtothefollowingpattern:
Thecompanyrequiresaminimumcashbalanceof$4,000tostartamonth.
Required:
(a.)ComputethebudgetedcashreceiptsforJune.
(b.)AssumethefollowingbudgeteddataforJune:
148
Usingthisdata,alongwithyouranswertopart(1)above,prepareacashbudgetingoodformforJune.
Clearlyshowanyborrowingneededduringthemonth.Thecompanycanborrowinanydollaramount,
butwillnotpayanyinterestuntilthefollowingmonth.
Level:MediumLO:2,8
Ans:
124.BledsoSupplyCorporationmanufacturesandsellscottongauze.Expectedsalesofgauze(inboxes)
forupcomingmonthsareasfollows:
Managementlikestomaintainafinishedgoodsinventoryequalto25%ofthenextmonthsestimated
sales.
Required:
Preparethecompanysproductionbudgetforthethirdquarterofthisyear(themonthsofJuly,August
andSeptember)ingoodform.Includeacolumnforeachmonthandatotalcolumnfortheentirequarter.
149
Level:MediumLO:3
150
Ans:
125.WeldonIndustrialGasCorporationsuppliesacetyleneandothercompressedgasestoindustry.Data
regardingthestoresoperationsfollow:
uncollectible.
Ignoretaxes.
151
Required:
(a.)PrepareaScheduleofExpectedCashCollectionsforNovemberandDecember.
(b.)PrepareaMerchandisePurchasesBudgetforNovemberandDecember.
(c.)PrepareCashBudgetsforNovemberandDecember.
(d.)PrepareBudgetedIncomeStatementsforNovemberandDecember.
(e.)PrepareaBudgetedBalanceSheetfortheendofDecember.
Level:HardLO:2,3,8,9,10
Ans:
152
126.CapriceCorporationisawholesalerofindustrialgoods.Dataregardingthestoresoperations
follow:
Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for January.
Collections are expected to be 80% in the month of sale, 16% in the month following the sale, and 4%
uncollectible.
The cost of goods sold is 70% of sales.
The company purchases 60% of its merchandise in the month prior to the month of sale and 40% in the
month of sale. Payment for merchandise is made in the month following the purchase.
The November beginning balance in the accounts receivable account is $78,000.
The November beginning balance in the accounts payable account is $254,000.
Required:
(a.)PrepareaScheduleofExpectedCashCollectionsforNovemberandDecember.
(b.)PrepareaMerchandisePurchasesBudgetforNovemberandDecember.
Level:MediumLO:2,3
153
Ans:
127.RehmerCorporationisworkingonitsdirectlaborbudgetforthenexttwomonths.Eachunitof
outputrequires0.61directlaborhours.Thedirectlaborrateis$8.90perdirectlaborhour.The
productionbudgetcallsforproducing2,600unitsinJulyand2,100unitsinJuly.
Required:
Constructthedirectlaborbudgetforthenexttwomonths,assumingthatthedirectlaborworkforceis
fullyadjustedtothetotaldirectlaborhoursneededeachmonth.
Level:EasyLO:5
Ans:
128.KoubaCorporationisworkingonitsdirectlaborbudgetforthenexttwomonths.Eachunitofoutput
budgetcallsforproducing4,000unitsinApriland3,400unitsinMay.Thecompanyguaranteesitsdirect
laborworkersa40hourpaidworkweek.Withthenumberofworkerscurrentlyemployed,thatmeans
thatthecompanyiscommittedtopayingitsdirectlaborworkforceforatleast920hoursintotaleach
monthevenifthereisnotenoughworktokeepthembusy.
Required:
154
Constructthedirectlaborbudgetforthenexttwomonths.
155
Level:MediumLO:5
Ans:
129.EdgingtonInc.basesitsmanufacturingoverheadbudgetonbudgeteddirectlaborhours.The
variableoverheadrateis$4.90perdirectlaborhour.Thecompanysbudgetedfixedmanufacturing
overheadis$39,590permonth,whichincludesdepreciationof$5,920.Allotherfixedmanufacturing
overheadcostsrepresentcurrentcashflows.TheNovemberdirectlaborbudgetindicatesthat3,700direct
laborhourswillberequiredinthatmonth.
Required:
(a.)DeterminethecashdisbursementformanufacturingoverheadforNovember.
(b.)DeterminethepredeterminedoverheadrateforNovember.
Level:EasyLO:6
Ans:
130.ThemanufacturingoverheadbudgetofPaparellaCorporationisbasedonbudgeteddirectlabor
hours.TheNovemberdirectlaborbudgetindicatesthat6,000directlaborhourswillberequiredinthat
month.Thevariableoverheadrateis$2.00perdirectlaborhour.Thecompanysbudgetedfixed
manufacturingoverheadis$79,200permonth,whichincludesdepreciationof$21,000.Allotherfixed
manufacturingoverheadcostsrepresentcurrentcashflows.
Required:
(a.)DeterminethecashdisbursementformanufacturingoverheadforNovember.Showyourwork!
(b.)DeterminethepredeterminedoverheadrateforNovember.Showyourwork!
Level:EasyLO:6
156
Ans:
131.SkeeteInc.basesitssellingandadministrativeexpensebudgetonthenumberofunitssold.The
variablesellingandadministrativeexpenseis$1.70perunit.Thebudgetedfixedsellingand
administrativeexpenseis$57,720permonth,whichincludesdepreciationof$9,360.Theremainderof
thefixedsellingandadministrativeexpenserepresentscurrentcashflows.Thesalesbudgetshows3,900
unitsareplannedtobesoldinNovember.
Required:
PreparethesellingandadministrativeexpensebudgetforNovember.
Level:EasyLO:7
Ans:
132.ThesellingandadministrativeexpensebudgetofGulletteCorporationisbasedonthenumberof
unitssold.,whicharebudgetedtobe2,700unitsinApril.Thevariablesellingandadministrativeexpense
is$1.90perunit.Thebudgetedfixedsellingandadministrativeexpenseis$35,640permonth,which
includesdepreciationof$7,290.Theremainderofthefixedsellingandadministrativeexpenserepresents
currentcashflows.
Required:
PreparethesellingandadministrativeexpensebudgetforApril.
Level:EasyLO:7
157
Ans:
133.ParlimanCorporationispreparingitscashbudgetforAugust.Thebudgetedbeginningcashbalance
is$12,000.Budgetedcashreceiptstotal$159,000andbudgetedcashdisbursementstotal$162,000.The
upto$160,000atanytime,withinterestnotdueuntilthefollowingmonth.Thecompanydoesnot
anticipateanyrequirementtousethisopenlineofcredituntilAugust.
Required:
PreparethecompanyscashbudgetforAugustingoodform.
Level:EasyLO:8
Ans:
134.FreetInc.ispreparingitscashbudgetforNovember.Thebudgetedbeginningcashbalanceis
upto$170,000atanytime,withinterestnotdueuntilthefollowingmonth.Thecompanydoesnot
anticipateanyrequirementtousethisopenlineofcredituntilNovember.
Required:
PreparethecompanyscashbudgetforNovemberingoodform.Makesuretoindicatewhatborrowing,if
any,wouldbeneededtoattainthedesiredendingcashbalance.
Level:EasyLO:8
158
Ans:
159

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