ACT2000 CH15
Major Brands, Inc., a clothing manufacturer, is planning to sell 9,000 jackets during February and its production is estimated at 8,700 jackets during February. Each jacket requires 4.4 yards of fabric at $4.00 per yard and .25 direct labor hours at $12 per hour. Manufacturing overhead is applied at 110% of direct labor costs. Major Brands has 39,000 yards of fabric in beginning inventory and wants 45,000 yards in ending inventory. What is the total amount to be budgeted for manufacturing overhead for February?
Manufacturing overhead is an indirect cost in production. In this problem, it is calculated at 110% of direct labor. Direct Labor is direct labor hours need to produce one unit multiplied by the rate per hour. Direct labor= $8,700 jackets x 0.25 direct labor hour x $12 per hour $26,100 Manufactoring overhead = $26,100 x 110% = $28,710
Bears Unlimited produces children's teddy bears. The company has projected sales of 97,000 bears for the month. Each bear requires 3 buttons for eyes and nose. The company has projected beginning inventory of 18,000 buttons and it plans to have 8% less than that in ending inventory. What are the standard direct materials for buttons needed for the month to meet production and achieve the desired inventory reduction?
Production = Sales + Desired Ending inventory - Beginning inventorySales = 97,000 bears x 3 buttons = 291,000 buttonsBeginning inventory = 18,000 buttonsEnding inventory = 0.92 x 18,000 = 16,560 buttonsProduction = 291,000 + 16,560 - 18,000 = 289,560 buttons
Ellen is a manager who helps develop sales promotions, targets customers for upselling, and searches for potential new customers. Which of the following budgets would Ellen most likely help develop?
All of Ellen's tasks revolve around increasing sales of finished products. Therefore, she is most likely to help develop the sales budget.
B&R Tax Services is preparing its direct labor budget for the first quarter of the year. The total direct labor budget for the first quarter is $55,500. The firm expects to prepare 300 small returns which take 1 hour each, 200 medium returns which take 1.75 hours each, and 100 complicated returns which take 2.75 each. What is B&R's direct labor cost per hour?
direct labor cost per hour is total direct labor cost divided by total direct labor hours required. Using this formula, B & R Tax Services can calculate the direct labor cost per hour as $55,500 / [(300 x 1) + (200 x 1.75) + (100 x 2.75)] = $60 per hour.
Eliciting information from lower-level operating managers and their subordinates with the help of a bottom-up budgeting process
In comparison with a top-down budgeting process, the main purpose of bottom up budgeting is to obtain decentralized information residing in various parts of the organization and incorporate that information into realistic budgets. This process also ensures greater commitment of operating managers to their budgets since they play a significant role in their development. While this process is usually preferred and may even be necessary, it is time consuming and costly.
Rose Company is preparing its direct labor budget for May. Projections for the month are that 8,350 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $9, what is the total budgeted direct labor cost for May?
The budget for total budgeted direct labor is total required direct labor hours multiplied by the direct labor cost per hour. Total required direct labor hours is 8,350 units x 3 hrs per unit = 25,050 hours.Direct labor cost per hour is $9. Total budgeted direct labor cost for May is 25,050 x $9 = $225,450.
Boots Unlimited has budgeted $2,783,104 in sales of cowboy boots for October. It wants to start every month with inventory equal to 15 days' worth of the next month's sales (based on a 30-day month). September sales are projected at $2,550,016. The sales price is $128 per pair. Inventory at the beginning of September is estimated at 9,960 pairs of cowboy boots. How many pairs of cowboy boots should Boots Unlimited manufacture in September?
Budgeted Production = Sales volume + Ending Inventory - Beginning Inventory Sales Volume, Sept = $2,550,016 / $128 per pair = 19,922 pairs of cowboy boots Desired Ending Inventory, Sept = $2,783,104 / 30 days x 15 days / $128 per pair = 10,872 pairs of cowboy boots Beginning Inventory, Sept = 9,960 pairs Budgeted Production = 19,922 + 10,872 - 9,960 = 20,834 pairs of cowboy boots
Michael was asked to collect the financial data from all the different departments so that top management could determine if they met their goals. At what point is the company in its budgeting process?
Collecting financial data from different departments involves evaluating actual results at the end of the period against the budget set at the beginning of the period. At this point, the company is at the end of the budgeting process.
Quality Foods has budgeted $1,500,000 in sales of ginger chicken for May. It wants to end every month with inventory equal to 10 days' worth of the next month's sales (based on a 30-day month). April sales are projected at $1,400,000. The sales price is $5 per box. Inventory at the beginning of April is estimated at 93,400 boxes of ginger chicken. How many boxes of ginger chicken should Quality Foods manufacture in April?
Production = Sales + Ending Inventory - Beginning Inventory Sales based on a 30 day month for April = $1,400,000 Ending inventory is 10 days worth of next month's sale = $1,500,000 /30 days x 10 days = $ 500,000 Beginning inventory = 93,400 boxes Sales Price is $5 per box ($1,400,000/$5) + ($500,000/$5) - 93,400boxes = 286,600 boxes
Dobbins Resources pays sales commissions of $2 per unit and shipping costs of $0.75 per unit. If Dobbins expects to sell 12,000 units in the third quarter, what will their total variable expenses be?
Variable costs per unit are $2 + $0.75 = $2.75$2.75 × 12,000 units = $33,000 total variable costs.
McKinnon Grocers expects to have sales of $800,000 in September and $810,000 in October. Their cost of goods sold is usually 65% of their sales. If they plan to purchase $520,520 in September, what percent of their next month's inventory do they plan to keep in stock?
Cost of goods sold is beginning inventory plus purchases less ending inventory. In the problem, cost of goods sold is 65% of sales. The budgeted purchase amount is already determined, therefore, the formula can be adjusted as: Cost of Goods Sold + Ending Inventory - Beginning Inventory = Required Purchases. X is the percentage of inventory to keep in stock.65% ( $800,000 + $810,000X - $800,000X) = $520,520 $520,000 + $526,500X - $520,000X) = $520,520X = 8% Ending inventory is 8% of $810,000 of October sales or $64,800.
Nancy's Nails and Spa is preparing its budgeted financial statements for 2022. Total assets on the budgeted balance sheet are $939,450. Current liabilities are $82,645. Ending retained earnings is $619,118. Nancy's paid no dividends. Common Stock on December 31, 2022, is $50,000. Compute total liabilities on December 31, 2022.
he balance sheet shows the financial resources at a specific point in time of a company. On one side is the assets and the other side is the liabilities and stockholders' equity. Total liabilities + Stockholders' equity = Total assets Total liabilities + ($619,118 + $50,000) = $939,450 Total liabilities = $270,332
Philip is a manager who oversees raw materials ordering, inventory levels, employee efficiency and productivity, and assembly line maintenance. Which of the following budgets would Philip most likely help develop?
All of Philip's tasks revolve around the production of manufactured goods. Therefore, he is most likely to help develop budgets related to production, which include the production budget, the direct materials budget, the direct labor budget, and the manufacturing overhead budget.
Gulf Coast Shrimp Packaging supplies frozen shrimp to grocery chains. It expects sales of 34 tons of shrimp in the next quarter. It currently has an inventory of 15 tons of shrimp. If production of shrimp adds up to 26 tons in the upcoming quarter, what will be the company's inventory at the end of the quarter?
The formula for production requirements is Production = Sales + Ending Inventory - Beginning Inventory. The formula can be rearranged to determine the ending inventory amount: Production - Sales + Beginning Inventory = Ending Inventory. Using this formula, Gulf Coast Shrimp Packaging's inventory at year end is 26 tons - 34 tons + 15 tons = 7 tons
Nathan is working on the operating budgets for his company. He has already done the sales and production budgets, and he is now working on the direct materials, direct labor, and manufacturing overhead budgets. He decides to do the direct labor budget first, then the manufacturing overhead budget, then the direct materials budget. Do you think this is an appropriate way to prepare the budgets? Why or why not?
The variable cost portion of the manufacturing overhead budget is often based on direct labor hours, so the direct labor budget needs to be completed before the manufacturing overhead budget, in order for the manufacturing overhead budget to be accurate. However, neither the direct labor budget nor the manufacturing overhead budget depend on the direct materials budget, so the direct materials budget can be completed anywhere in the sequence.
Will's Tooling Shop's cash budget for 2022 shows a planned purchase of new machinery costing $175,000. Will's manufacturing overhead budget shows annual depreciation on machinery of $10,174. Will also owns office equipment that cost $52,000. Depreciation on that equipment is expected to be $6,595 in 2022. Will's December 31, 2021, balance sheet shows net machinery at $245,000. Calculate Will's net machinery and equipment balance on the budgeted balance sheet for December 31, 2022.
Total net ending balance for tangible assets includes beginning balance plus purchases of the current period less depreciation. Depreciation shows the decrease in value of a tangible asset over its life and is deducted to arrive at the net balance of the asset. The problem identified two tangible assets; Machinery and Equipment Machinery balance = ($245,000 + $175,000) - $10,174 = $409,826 Equipment balance = $52,000 - $6,595 = $ 45,405 Net Machine and Equipment, Dec 31, 2022 = $409,826 + $45,405 = $455,231.
S&S Cycle Shop is preparing its budgeted financial statements for 2022. The budgeted income statement shows a net loss of $9,862. Total assets on the budgeted balance sheet are $864,398. Current liabilities are $75,678. Beginning retained earnings is $577,533. S&S paid no dividends. Calculate the retained earnings balance at December 31, 2022.
Retained earnings is the accumulated income after paying dividends to the shareholders.Beginning retained earnings - Net loss - Dividends payment = Ending Retained Earnings$577,533 - $9,862 - $0= $567,671
Exceptional Cleaners is a commercial cleaning company. When developing their cash budget, they identified the following budgeted items:
The budgeted cash payments are the sum of all cash outflows for the month. Cleaning supplies, Advertising, and Office utilities are all cash payments. Depreciation for office building and Allowance for bad debts are noncash items and are not included in the cash budget. Total cash outlay is $27,000 + $14,000 + $1,800 = $42,800
