CH. 8 &9 (practice problems)

Trumbull Company budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Collection experience indicates that none of the budgeted sales will be collected in the month of the sale, 60% will be collected the month after the sale, 36% in the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be budgeted for September would be: A) $169,800 B) $147,960 C) $197,880 D) $194,760

A) $169,800

Which of the following is not correct regarding the manufacturing overhead budget? A) Total budgeted cash disbursements from manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead. B) Manufacturing overhead costs should be broken down by cost behavior. C) The manufacturing overhead budget should provide a schedule of all costs of the production other than direct materials and direct labor. D) A schedule showing budgeted cash disbursements for manufacturing overhead should be prepared for use in developing the cash budget

A) Total budgeted cash disbursements from manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead

The selling and administrative expense budget of Breckinridge Corporation is based on budgeted unit sales, which are 5,500 units for June. The variable selling and administrative expense is $1.00 per unit. The budgeted fixed selling and administrative expense is $101,200 per month, which includes depreciation of $6,050 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the June selling and administrative expense budget should be: A. $100,650 B. $106,700 C. $5,500 D. $95,150

A. $100,650

Shuck Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,100 direct labor-hours will be required in May. The variable overhead rate is $1.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,440 per month, which includes depreciation of $8,910. All other fixed manufacturing overhead costs represent current cash flows. The May cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: A. $102,870 B. $11,340 C. $91,530 D. $111,780

A. $102,870

Veltri Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.77 direct labor-hours. The direct labor rate is $11.20 per direct labor-hour. The production budget calls for producing 7,100 units in October and 6,900 units in November. The company guarantees its direct labor workers a 40-hour paid work week. With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 5,480 hours in total each month even if there is not enough work to keep them busy. What would be the total combined direct labor cost for the two months? A. $122,752.00 B. $120,736.00 C. $120,881.60 D. $122,606.40

A. $122,752.00

Deschambault Inc. is working on its cash budget for December. The budgeted beginning cash balance is $14,000. Budgeted cash receipts total $127,000 and budgeted cash disbursements total $126,000. The desired ending cash balance is $40,000. To attain its desired ending cash balance for December, the company needs to borrow: A. $25,000 B. $0 C. $55,000 D. $40,000

A. $25,000

Brayboy Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,260 square feet and the actual level of activity was 1,200 square feet. The company's owner budgets for supply costs, a variable cost, at $3.90 per square foot. The actual supply cost last month was $4,300. What would have been the spending variance for supply costs last month? A. $380 F B. $1,004 F C. $198 F D. $234 F

A. $380 F

The manufacturing overhead budget at Cutchin Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,800 direct labor-hours will be required in September. The variable overhead rate is $7.00 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,120 per month, which includes depreciation of $3,640. All other fixed manufacturing overhead costs represent current cash flows. The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: A. $59,080 B. $62,720 C. $19,600 D. $39,480

A. $59,080

Welcome Corporation produces metal telephone poles. In the most recent month, the company budgeted production of 4,100 poles. Actual production was 4,400 poles. According to standards, each pole requires 7.0 machine-hours. The actual machine-hours for the month were 31,140 machine-hours. The standard variable manufacturing overhead rate is $2.50 per machine-hour. The actual variable manufacturing overhead cost for the month was $83,787. The variable overhead efficiency variance is: A) $6,787 F B) $850 U C) $850 F D) $6,787 U

B) $850 U

Brattain Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,230 square feet and the actual level of activity was 1,140 square feet. The company's owner budgets for supply costs, a variable cost, at $2.10 per square foot. The actual supply cost last month was $3,260. In the company's flexible budget performance report for last month, what would have been the spending variance for supply costs? A. $257 F B. $866 U C. $677 U D. $189 F

B. $866 U

Summerlin Company budgeted 4,000 pounds of material costing $5.00 per pound to produce 2,000 units. The company actually used 4,500 pounds that cost $5.10 per pound to produce 2,000 units. What is the direct materials quantity variance? A) $400 unfavorable. B) $2,550 unfavorable. C) $2,500 unfavorable. D) $450 unfavorable. E) $2,950 unfavorable

C) $2,500 unfavorable

Shocker Company's sales budget shows quarterly sales for the next year as follows: Quarter 1--10,000 units Quarter 2--8,000 units Quarter 3--12,000 units Quarter 4--14,000 units Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production for the second quarter of the next year would be: A) 7,200 units B) 8,000 units C) 8,800 units D) 8,400 units

C) 8,800 units

The budgeted amount of raw materials to be purchased is determined by: A) adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule. B) subtracting the beginning inventory of raw materials from the raw materials needed to meet the production schedule. C) adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials. D) adding the beginning inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the desired ending inventory of raw materials

C) adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials

Mosbey Inc. is working on its cash budget for June. The budgeted beginning cash balance is $16,000. Budgeted cash receipts total $188,000 and budgeted cash disbursements total $187,000. The desired ending cash balance is $40,000. The excess (deficiency) of cash available over disbursements for June will be: A. $15,000 B. $1,000 C. $17,000 D. $204,000

C. $17,000

Lunderville Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 3,200 units are planned to be sold in December. The variable selling and administrative expense is $3.10 per unit. The budgeted fixed selling and administrative expense is $60,800 per month, which includes depreciation of $6,720 per month. The remainder of the fixed selling and administrative expense represents current cash flows. The cash disbursements for selling and administrative expenses on the December selling and administrative expense budget should be: A. $70,720 B. $54,080 C. $64,000 D. $9,920

C. $64,000

A company has established 5 pounds of Material J at $2 per pound as the standard for the material in its Product Z. The company has just produced 1,000 units of this product, using 5,200 pounds of Material J that cost $9,880. The direct materials quantity variance is: A) $520 favorable. B) $120 favorable. C) $400 favorable. D) $400 unfavorable. E) $520 unfavorable

D) $400 unfavorable

Fussner Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,610 patient-visits and the actual level of activity was 1,670 patient-visits. The cost formula for administrative expenses is $3.30 per patient-visit plus $17,900 per month. The actual administrative expense was $24,600. Last month, the spending variance for administrative expenses was: A. $1,287 U B. $198 U C. $69 U D. $1,189 U

D. $1,189 U

Cahalane Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 11,600 skeins and the actual level of activity was 12,000 skeins. The company's owner budgets for dye costs, a variable cost, at $0.31 per skein. The actual dye cost last month was $3,540. In the company's flexible budget performance report for last month, what would have been the spending variance for dye costs? A. $118 U B. $124 U C. $56 F D. $180 F

D. $180 F

Hagos Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months? A. $15,792.00 B. $15,002.40 C. $16,581.60 D. $31,584.00

D. $31,584.00

Bargas Framing's cost formula for its supplies cost is $2,240 per month plus $6 per frame. For the month of May, the company planned for activity of 808 frames, but the actual level of activity was 810 frames. The actual supplies cost for the month was $7,090. The supplies cost in the flexible budget for May would be closest to: A. $7,088 B. $7,090 C. $7,106 D. $7,100

D. $7,100

If the beginning cash balance is $15,000, the required ending cash balance is $12,000, cash disbursements are $125,000, and cash collections from customers are $90,000, the company must borrow: a. $32,000 b. $20,000 c. $8,000 d. $38,000

a. $32,000

Actual sales in Ward Company were $30,000 in June, $50,000 in July, and $70,000 in August. Sales in September are expected to be $60,000. Thirty percent of a month's sales are collected in the month of sale, 50% in the first month after sale, 15%in the second month after sale, and the remaining 5% is uncollectible. *Budgeted cash receipts for September should be:* a. $60,500 b. $62,000 c. $57,000 d. $70,000

a. $60,500

Refer to the data for Archer Company in question 8. Each unit requires 3 pounds of a material. A total of 24,000 pounds of the material were on hand on April 1, and the company requires materials on hand at the end of each month equal to 25% of the following month's production needs. The company plans to produce 32,000 units of finished goods in April. How many pounds of the material should the company plan to purchase in April? a. 105,000 b. 19,000 c. 87,000 d. 6,000

a. 105,000

Parwin Corporation plans to sell 23,000 units during August. If the company has 8,000 units on hand at the start of the month, and plans to have 9,000 units on hand at the end of the month, how many units must be produced during the month? a. 24,000 b. 22,000 c. 34,000 d. 31,000

a. 24,000

Compton, Inc. makes and sells a single product, Zippy. Three yards of cotton are needed to make one Zippy. Budgeted production of Zippys for the next three months is as follows: August 14,000 units; September 14,500 units; October 15,500 units. The company wants to maintain monthly ending inventories of cotton equal to 20% of the following month's production needs. On July 31, 2,500 yards of cotton were on hand. The cost of cotton is $.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the fourth quarter. *The total cost of cotton to be purchased in August is:* a. 40,970. b. 48,200. c. 33,840. d. 42,300.

a. 40,970.

Which of the following is the correct formula to determine required purchases of direct materials? a. Quantity required for production + Desired ending quantity - Beginning quantity. b. Quantity required for production - Desired ending quantity + Beginning quantity. c. Quantity required for production + Desired ending quantity + Beginning quantity. d. Beginning quantity + Purchases - Desired ending quantity.

a. Quantity required for production + Desired ending quantity - Beginning quantity

The term planning involves a. the development of future objectives and the preparation of various budgets to achieve these objectives. b. the steps taken to ensure that objectives set down by management are attained. c. the steps taken to ensure that all parts of the organization function in a manner consistent with organizational policies. d. comparing budgeted and actual results and taking steps to remedy unacceptable variations

a. the development of future objectives and the preparation of various budgets to achieve these objectives

Archer Company has budgeted sales of 30,000 units in April, 40,000 units in May, and 60,000 units in June. The company has 6,000 units on hand on April 1. If the company requires an ending inventory equal to 20% of the following month's sales, production during May should be: a. 32,000 units b. 44,000 units c. 36,000 units d. 40,000 units

b. 44,000 units

Compton, Inc. makes and sells a single product, Zippy. Three yards of cotton are needed to make one Zippy. Budgeted production of Zippys for the next three months is as follows: August 14,000 units; September 14,500 units; October 15,500 units. The company wants to maintain monthly ending inventories of cotton equal to 20% of the following month's production needs. On July 31, 2,500 yards of cotton were on hand. The cost of cotton is $.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the fourth quarter. *The amount of cotton to be purchased in August is:* a. 42,000 yards b. 48,200 yards c. 50,700 yards d. 53,200 yards

b. 48,200 yards

Barton, Inc. has budgeted sales in units for the next four months as follows: July 7,200 units; August 5,400 units; September 6,800 units; October 3,800 units. Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on June 30 contained 720 units. The company needs to prepare a Production Budget for the second quarter of the year. *The desired ending inventory for August is:* a. 540 units. b. 680 units. c. 720 units. d. 380 units.

b. 680 units

Dannie Company has developed the following sales projections for calendar year 2002. May $100,000; June $120,000; July $140,000; August $160,000. Normal cash collection experience has been that 50 percent of sales are collected during the month of sale and 45 percent in the month following sale. The remaining 5 percent of sales is never collected. Dannie's budgeted cash collections for June, July, and August are a. $420,000. b. $354,000. c. $372,000. d. $422,000

c. $372,000.

Actual sales in Ward Company were $30,000 in June, $50,000 in July, and $70,000 in August. Sales in September are expected to be $60,000. Thirty percent of a month's sales are collected in the month of sale, 50% in the first month after sale, 15%in the second month after sale, and the remaining 5% is uncollectible. *Budgeted cash receipts for August should be:* a. $40,500 b. $46,000 c. $50,500 d. $70,000

c. $50,500

Beecher Inc. is planning to purchase inventory for resale costing $90,000 in October,$70,000 in November, and $40,000 in December. The company pays for 40% of its purchases in the month of purchase and 60% in the month following purchase. What would be the budgeted cash disbursements for purchases of inventory in December? a. $40,000 b. $70,000 c. $58,000 d. $200,000

c. $58,000

Barton, Inc. has budgeted sales in units for the next four months as follows: July 7,200 units; August 5,400 units; September 6,800 units; October 3,800 units. Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on June 30 contained 720 units. The company needs to prepare a Production Budget for the second quarter of the year. *The total number of units to be produced in July is:* a. 7,740 units. b. 7,200 units. c. 7,020 units. d. 7,280 units

c. 7,020 units

Which of the following statements regarding budgets is false? a. They are formal documents that quantify a company's plans. b. They enhance communication and coordination. c. They are useful in planning but not in control. d. They provide a basis for evaluating performance.

c. They are useful in planning but not in control

A major advantage of budgeting is that it a. eliminates many of the uncertainties associated with the business environment. b. ensures that management's objectives will be met. c. requires managers to give planning top priority among their duties. d. eliminates the need for management to engage in control activities

c. requires managers to give planning top priority among their duties

Barton, Inc. has budgeted sales in units for the next four months as follows: July 7,200 units; August 5,400 units; September 6,800 units; October 3,800 units. Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units. The inventory on June 30 contained 720 units. The company needs to prepare a Production Budget for the second quarter of the year. *The opening inventory in units for September is:* a. 380 units. b. 6,800 units. c. 540 units. d. 680 units

d. 680 units

Compton, Inc. makes and sells a single product, Zippy. Three yards of cotton are needed to make one Zippy. Budgeted production of Zippys for the next three months is as follows: August 14,000 units; September 14,500 units; October 15,500 units. The company wants to maintain monthly ending inventories of cotton equal to 20% of the following month's production needs. On July 31, 2,500 yards of cotton were on hand. The cost of cotton is $.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the fourth quarter. *The desired ending inventory of cotton for the month of September is:* a. 7,560 yards b. 8,400 yards c. 8,700 yards d. 9,300 yards

d. 9,300 yards

Which of the following items do not require a cash outflow? a. Salaries. b. Purchase of raw materials. c. Advertising. d. Depreciation.

d. Depreciation

Which of the following represents the correct order in which the budget documents for a manufacturing company would be prepared? a. Sales budget, cash budget, direct materials budget, direct labor budget b. production budget, sales budget, direct materials budget, direct labor budget c. Sales budget, cash budget, production budget, direct materials budget d. Selling and administrative expense budget, cash budget, budgeted income statement, budgeted balance sheet

d. Selling and administrative expense budget, cash budget, budgeted income statement, budgeted balance sheet

Which of the following statements regarding a sales budget is false? a. Input from the sales force may be useful in predicting sales. b. Very large companies may hire economists to help forecast sales. c. The sales budget is prepared before the cash receipts and disbursements budget. d. The sales budget is developed after the production budget.

d. The sales budget is developed after the production budget