ACCTG202 CH9 QUESTIONS

In a direct materials budget, the desired ending raw materials inventory for the year is equal to:

the desired ending raw materials inventory for the last period

Smarton Company is in the process of preparing its budgeted income statement. It has determined its estimated gross margin to be $90,000. The company also expects to incur selling and administrative expenses of $30,000 and interest expense of $12,000. What would be Smarton's budgeted net income?

$48,000 Budgeted net income on Smarton's budgeted income statement would be $48,000. $48,000 = $90,000 - $30,000 - $12,000.

Which of the following is a reason that companies prepare direct labor budgets?

To avoid labor shortages

What is the purpose of preparing a direct materials budget?

To estimate the quantity of raw materials to be purchased

Film Studio, Inc. has beginning retained earnings of $80,000 and expects to earn a net income of $70,000 during the budget period. What would be the budgeted closing retained earnings balance if the company pays dividends of $50,000?

$100,000

For the budget period ending December 31, 2015, Aaron Corporation estimates its ending balances for cash as $4,000, accounts receivable as $16,000, finished goods inventory as $12,000, and raw materials inventory as $8,000. Raw materials worth $14,000 will be unpaid. What would be the amount of accounts payable reported on the budgeted balance sheet?

$14,000

Oscar Company has an accounts payable balance of $50,000 in the beginning of the first quarter. Oscar pays for 60 percent of the purchases in the period of the purchase of materials and the rest in the quarter following the period of purchase. What would be the expected cash disbursements for purchases of materials in the second quarter?

$147,900 The expected cash disbursements for materials in the second quarter is $147,900. $147,900 = ($151,500 × 60%) + ($142,500 × 40%)

Striker Company determines its expected receipts for the period to be $80,000 and expected disbursements to be $70,000. The beginning cash balance for the period was $5,000. The management wants to maintain a minimum balance of $40,000. What is the required borrowing?

$25,000 Required borrowing to maintain a minimum cash balance of $40,000 is $25,000. $25,000 = $40,000 - (($80,000 - $70,000) + $5,000).

Striker Company determines its expected receipts for the period to be $80,000 and expected disbursements to be $70,000. The beginning cash balance for the period was $5,000. The management wants to maintain a minimum balance of $40,000. What is the required borrowing assuming that the bank lends only in multiples of $10,000?

$30,000 Required borrowing to maintain a minimum cash balance of $40,000 is $25,000. Because the bank lends only in multiples of $10,000, Striker would need to borrow at least $30,000.

Pro Clean Company, a manufacturer of hand sanitizers, intends to produce 40,000 units in the third quarter and 35,000 units in the fourth quarter. Each unit requires 0.50 direct labor-hours to produce, and the cost of direct labor per hour is $18. What would be the total direct labor cost for the fourth quarter?

$315,000 Total direct labor cost for the fourth quarter = $315,000; $315,000 = 35,000 units × 0.50 direct labor-hour per unit × $18.

Perry, Inc. desires to maintain the ending inventory of raw materials at 40 percent of the next quarter's raw material needs. What is the cost of raw materials to be purchased in the first quarter?

$320,000 The cost of raw materials to be purchased in the first quarter is $320,000 (64,000 units of raw materials × $5). 64,000 units = 60,000 + (50,000 × 40%) − 16,000

For the budget period ending December 31, 2015, Aaron Corporation estimates its ending balances for cash as $4,000, accounts receivable as $16,000, finished goods inventory as $12,000, and raw materials inventory as $8,000. Raw materials worth $14,000 will be unpaid. Determine the amount of total current assets that will be reported on the budgeted balance sheet.

$40,000 Total current assets = Cash + Accounts receivable + Finished goods inventory + Raw materials inventory = $4,000 + $16,000 + $12,000 + $8,000 = $40,000.

Precision Company estimates its machine-hour requirements for the four quarters to be 35,000 hours, 20,000 hours, 15,000 hours, and 30,000 hours respectively. The variable manufacturing overhead rate is $4 per machine-hour. The fixed manufacturing overhead is $50,000 per quarter, which includes $20,000 of depreciation expense. Calculate the variable manufacturing overhead for the year.

$400,000 Variable manufacturing overhead for the year = Variable manufacturing overhead rate per machine-hour × Total machine-hours required for the year; $400,000 = $4 × 100,000 machine-hours.

What is the total direct labor cost for the fourth quarter, if William has a contract with the labor union which guarantees its workers pay for at least 40,000 hours every quarter?

$480,000 The total direct labor cost for the fourth quarter is $480,000 (40,000 hours × $12). Even though the total direct labor-hours worked in the fourth quarter were 39,000 hours, William's contract with the labor union requires it to pay for at least 40,000 hours.

Precision Company estimates its machine-hour requirements for the four quarters to be 35,000 hours, 20,000 hours, 15,000 hours, and 30,000 hours respectively. The variable manufacturing overhead rate is $4 per machine-hour. The fixed manufacturing overhead is $50,000 per quarter, which includes $20,000 of depreciation expense. Calculate Precision Surgical Company's predetermined overhead rate for the year.

$6 per machine-hour Predetermined overhead rate = (Variable manufacturing overhead + Fixed manufacturing overhead) / Total machine-hours required; $6 = (($4 × 100,000 machine-hours) + ($50,000 per quarter × 4 quarters)) / 100,000 machine-hours or ($400,000 + $200,000) / 100,000 machine-hours.

Which of the following is deducted from the total selling and administrative expense budget to determine the cash disbursements for selling and administrative expense budget?

Depreciation expense

Some manufacturing overhead costs such as depreciation are non-cash expenses and are not considered in the preparation of the manufacturing overhead budget.

False

Identify the major sections of the cash budget from the following.

The cash excess or deficiency section The disbursements section The financing section The receipts section

A company determines that the number of units sold is the cost driver for its variable selling and administrative expense budget. The product of its variable selling and administrative rate and budgeted unit sales will be:

Total variable selling and administrative expense budget When variable selling and administrative expense budget depend on the number of units sold, the variable selling and administrative rate multiplied by the budgeted sales give the total variable selling and administrative expense budget.

In a budgeted income statement, _________ is subtracted from net operating income to arrive at net income.

interest expense

In a direct materials budget, the beginning raw materials inventory for the year is the same as:

the beginning raw materials inventory for the first period

The schedule of expected cash disbursements for raw materials helps in the preparation of:

the cash budget