Ch8

Which of the following budgets are prepared before the sales budget? Budgeted Income Statement Direct Labor Budget A) Yes Yes B) Yes No C) No Yes D) No No

D) No No

Which of the following statements is NOT correct concerning the Cash Budget? A) It is not necessary to prepare any other budgets before preparing the Cash Budget. B) The Cash Budget should be prepared before the Budgeted Income Statement. C) The Cash Budget should be prepared before the Budgeted Balance Sheet. D) The Cash Budget builds on earlier budgets and schedules as well as additional data.

A) It is not necessary to prepare any other budgets before preparing the Cash Budget.

Seventy percent of Pitkin Corporation's sales are collected in the month of sale, 20% in the month following sale, and 10% in the second month following sale. The following are budgeted sales data for the company: January February March April Budgeted sales $200,000 $300,000 $350,000 $250,000 Total budgeted cash collections in April would be: A) $175,000 B) $275,000 C) $70,000 D) $30,000

B) $275,000 February sales ($300,000 × 10%) $30,000 March sales ($350,000 × 20%) $70,000 April sales ($250,000 × 70%) $175,000 Total cash collections $275,000

The direct labor budget of Yuvwell Corporation for the upcoming fiscal year contains the following details concerning budgeted direct labor-hours: 1st Quarter2nd Quarter3rd Quarter4th QuarterBudgeted direct labor-hours8,0008,2008,5007,800 The company uses direct labor-hours as its overhead allocation base. The variable portion of its predetermined manufacturing overhead rate is $3.25 per direct labor-hour and its total fixed manufacturing overhead is $48,000 per quarter. The only noncash item included in fixed manufacturing overhead is depreciation, which is $16,000 per quarter. Required: 1. Prepare the company's manufacturing overhead budget for the upcoming fiscal year. 2. Compute the company's predetermined overhead rate (including both variable and fixed manufacturing overhead) for the upcoming fiscal year.

1. 1stQuarter2ndQuarter3rdQuarter4thQuarterYearBudgeted direct labor-hours8,0008,2008,5007,80032,500Variable manufacturing overhead rate× $3.25× $3.25× $3.25× $3.25× $3.25Variable manufacturing overhead$26,000$26,650$27,625$25,350$105,625 2. Total budgeted manufacturing overhead for the year (a)$297,625Budgeted direct labor-hours for the year (b) 32,500Predetermined overhead rate for the year (a) ÷ (b)$9.16

The production manager of Rordan Corporation has submitted the following quarterly production forecast for the upcoming fiscal year: 1st Quarter2nd Quarter3rd Quarter4th QuarterUnits to be produced8,0006,5007,0007,500 Each unit requires 0.35 direct labor-hours, and direct laborers are paid $12.00 per hour. Required: 1. Prepare the company's direct labor budget for the upcoming fiscal year. Assume that the direct labor workforce is adjusted each quarter to match the number of hours required to produce the forecasted number of units produced. 2. Prepare the company's direct labor budget for the upcoming fiscal year, assuming that the direct labor workforce is not adjusted each quarter. Instead, assume that the company's direct labor workforce consists of permanent employees who are guaranteed to be paid for at least 2,600 hours of work each quarter. If the number of required direct labor-hours is less than this number, the workers are paid for 2,600 hours anyway. Any hours worked in excess of 2,600 hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct

2. Wages for regular hours: 1st Quarter = 2,600 × $12 per hour = $31,200 2nd Quarter = 2,600 × $12 per hour = $31,200 3rd Quarter = 2,600 × $12 per hour = $31,200 4th Quarter = 2,600 × $12 per hour = $31,200 Overtime wages: 1st Quarter = 200 × $12 per hour × 1.5 = $3,600 2nd Quarter = 0 × $12 per hour × 1.5 = $0 3rd Quarter = 0 × $12 per hour × 1.5 = $0 4th Quarter = 25 × $12 per hour × 1.5 = $450

When preparing a direct materials budget, the required purchases of raw materials in units equals: A) raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials. B) raw materials needed to meet the production schedule − desired ending inventory of raw materials − beginning inventory of raw materials. C) raw materials needed to meet the production schedule − desired ending inventory of raw materials + beginning inventory of raw materials. D) raw materials needed to meet the production schedule + desired ending inventory of raw materials + beginning inventory of raw materials.

A) raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.

Which of the following statements is NOT correct concerning the Manufacturing Overhead Budget? A) The Manufacturing Overhead Budget provides a schedule of all costs of production other than direct materials and labor costs. B) The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead. C) The Manufacturing Overhead Budget shows the expected cash disbursements for manufacturing overhead. D) The Manufacturing Overhead Budget is prepared after the Sales Budget.

B) The Manufacturing Overhead Budget shows only the variable portion of manufacturing overhead.

Jeanclaude Corporation produces and sells one product. The budgeted selling price per unit is $105. Budgeted unit sales for July, August, September, and October are 7,400, 7,500, 13,800, and 15,300 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 budgeted accounts receivable balance at the end of August is closest to: A) $525,000 B) $315,000 C) $472,500 D) $787,500

C) $472,500 Explanation: The budgeted accounts receivable balance at the end of August is: August sales 7,500 units × $105 per unit (a) $787,500 Percent uncollected (b) 60% Accounts receivable (a) × (b) $472,500

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget? A) It details the required direct labor hours. B) It details the required raw materials purchases. C) It is calculated based on the sales budget and the desired ending inventory. D) It summarizes the costs of producing units for the budget period.

C) It is calculated based on the sales budget and the desired ending inventory.

The usual starting point for a master budget is: A) the direct materials purchase budget. B) the budgeted income statement. C) the sales forecast or sales budget. D) the production budget.

C) the sales forecast or sales budget.

Corvi Corporation produces and sells one product. The budgeted selling price per unit is $126. Budgeted unit sales are shown below: July August September October Budgeted unit sales 7,300 11,500 14,200 12,100 All sales are on credit with 40% collected in the month of the sale and 60% in the following month. The expected cash collections for August is closest to: A) $551,880 B) $579,600 C) $919,800 D) $1,131,480

D) $1,131,480 Explanation: The expected cash collections for August are computed as follows: July sales: 7,300 units × $126 per unit = $919,800; $919,800 × 60% = $551,880 August sales: 11,500 units × $126 per unit = $1,449,000; $1,449,000 × 40% = 579,600 Total cash collections $1,131,480

All of Gaylord Corporation's sales are on account. Thirty-five percent of the sales on account are collected in the month of sale, 45% in the month following sale, and the remainder are collected in the second month following sale. The following are budgeted sales data for the company: January February March April Total sales $50,000 $60,000 $40,000 $30,000 What is the amount of cash that should be collected in March? A) $24,000 B) $37,000 C) $41,000 D) $51,000

D) $51,000 Explanation: March sales collected in March ($40,000 × 35%) $14,000 February sales collected in March ($60,000 × 45%) $27,000 January sales collected in March ($50,000 × 20%) $10,000 Total cash collections in March $51,000

Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next four months as follows: Unit SalesApril 50,000 May 75,000 June 90,000 July 80,000 The company is now in the process of preparing a production budget for the second quarter. Past experience has shown that end-of-month inventory levels must equal 10% of the following month's unit sales. The inventory at the end of March was 5,000 units. Required: Prepare a production budget by month and in total, for the second quarter.

Desired units of ending finished goods inventory is 10% of the following month's sales in units.

Three grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.50 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 Year 3 FirstSecondThirdFourth First Budgeted production, in bottles60,00090,000150,000100,000 70,000 Musk oil has become so popular as a perfume ingredient that it has become necessary to carry large inventories as a precaution against stock-outs. For this reason, the inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 36,000 grams of musk oil will be on hand to start the first quarter of Year 2. Required: Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.

Desired units of ending raw materials inventory: Fourth quarter: 70,000 units × 3 grams per unit × 20% = 42,000 grams.

Silver Company makes a product that is very popular as a Mother's Day gift. Thus, peak sales occur in May of each year, as shown in the company's sales budget for the second quarter given below: AprilMayJuneTotalBudgeted sales (all on account)$300,000$500,000$200,000$1,000,000 From past experience, the company has learned that 20% of a month's sales are collected in the month of sale, another 70% are collected in the month following sale, and the remaining 10% are collected in the second month following sale. Bad debts are negligible and can be ignored. February sales totaled $230,000, and March sales totaled $260,000. Required: 1. Prepare a schedule of expected cash collections from sales, by month and in total, for the second quarter. 2. What is the accounts receivable balance on June 30th?

February sales: $230,000 × 10%$23,000 $23,000March sales: $260,000 × 70%, 10% 182,000$26,000 208,000April sales: $300,000 × 20%, 70%, 10% 60,000 210,000$30,000 300,000May sales: $500,000 × 20%, 70% 100,000 350,000 450,000June sales: $200,000 × 20% 40,000 40,000Total cash collections$265,000$336,000$420,000$1,021,000 Accounts receivable at June 30: From May sales: $500,000 × 10% = $50,000 From June sales: $200,000 × (70% + 10%) = $160,000

Weller Company's budgeted unit sales for the upcoming fiscal year are provided below: 1st Quarter2nd Quarter3rd Quarter4th QuarterBudgeted unit sales15,00016,00014,00013,000 The company's variable selling and administrative expense per unit is $2.50. Fixed selling and administrative expenses include advertising expenses of $8,000 per quarter, executive salaries of $35,000 per quarter, and depreciation of $20,000 per quarter. In addition, the company will make insurance payments of $5,000 in the first quarter and $5,000 in the third quarter. Finally, property taxes of $8,000 will be paid in the second quarter. Required: Prepare the company's selling and administrative expense budget for the upcoming fiscal year. (Round "Per Unit" answers to 2 decimal places.)

budgeted unit sales 15,000 16,000 14,000 13,000 58,000 var sell admin unit 2.50 2.50 2.50 2.50 2.50 var sell admin 37,500 40,000 35,000 32,500 145,000 fixed sell admin advertising 8,000 8,000 8,000 8,000 32,000 exec salary 35,000 35,000 35,000 35,000 140,000 insurance 5,000 5,000 10,000 property taxes 8,000 8,000 depreciation 20,000 20,000 20,000 20,000 80,000 total fix sell admin 68,000 71,000 68,000 63,000 270,000 total sell admin 105,500 111,000 103,000 95,500 415,000 less depreciation 20,000 20,000 20,000 20,000 80,000 cash disburse sell admin 85,500 91,000 83,000 75,500 335,000