Chapter 8 Exam 2

Which of the following is needed to calculate raw materials to be purchased on the direct materials budget?

raw materials required per unit, beginning inventory of raw materials

The cash budget

is prepared near the end of the master budget process

Month Expected Sales Jan $120,000 Feb $150,000 March $160,000 April $200,000 May $220,000 June $250,000 Experiences has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of April.

200000 x 60%=96000 160000 x 40%=8000 =184,000

Month Required Production Jan 50,000 Feb 70,000 March 85,000 April 105,000 May 110,000 June 120,000 Each unit requires two pounds of material. Given a desired ending inventory of 20% of next month's production needs, the pounds of material to be purchased in February is:

February production needs (70,000 x 2)= 140,000 + Ending inventory 20% of March production needs: (85,000 x 2 x 20%)= 34,000 - Beginning inventory (20% of February production needs) 28,000 Answer= 146,000

What number does the direct materials budget take DIRECTLY from the production budget?

Required production

Which of the following budgets are directly based on information from the sales budget?

Selling & Admin production

In a manufacturing company, the _________ budget is used to determine the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

production

Budgets

-define goals and objectives that can serve as benchmarks for evaluating subsequent performance -force managers to think about and plan for the future -and the budgeting process can uncover potential bottlenecks before they occur -coordinate the activities of the entire org. by integrating the plans of its various parts

The purpose of a budget should be to

-measure operating results -isolate areas needing attention -establish goals

Davidson corporation's master budget shows expected direct labor cost of $90,000 for the month of May. During May, the company's expected sales equal 12,000 units and expected production is 15,000 units. If each unit requires 1/2 hours of direct labor, the budgeted direct labor rate is

Budgeted production= expected production x hour required/unit. expected DL for the month of May % Budgeted production. 15,000 x 1/2 = 7,500 $90,000/7,500= $12 per hour

Month Expected Sales Jan $120,000 Feb $150,000 March $160,000 April $200,000 May $220,000 June $250,000 Experiences has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of march.

March collections will be from sales in March and sales in February (since March is the month after February). Expected cash collections=60% of March sales ($96,000) + 40% of February sales ($60,000).

The cash budget uses information from several other budgets, which of the following budgets is NOT used to prepare the cash budget?

Production budget

On the cash budget, what is subtracted from total cash available to find the cash excess or deficiency?

cash disbursements

Factoring labor shortages or having to hire or lay off workers at awkward times are consequences of

neglect the budgeting process

When preparing a manufacturing overhead budget, the total budgeted cost must be adjusted for ________ expenses to determine cash disbursements for overhead.

noncash

Month Required Production Jan 50,000 Feb 70,000 March 85,000 April 105,000 May 110,000 June 120,000 Each unit requires two pounds of material. Given a desired ending inventory of 20% of next month's production needs, the pounds of material to be purchased in April is:

April production needs (105000 x 2)= 210,000 + Ending inventory 20% of May production needs: (110,000 x 2 x 20%)= 44,000 - Beginning inventory (20% of April production needs) 42,000 Answer= 212,000

Sperling company's master budget shows expected sales of 10,000 units and expected production of 11,000 units for the month of march. Each unit requires 1/2 hour of direct labor. the direct labor rate is $15 per hour. Calculate the expected total direct labor cost for the moth of March.

Units to be produced x time per unit x rate per hour 11,000 x 1/2 x 15= 82,500