CHAPTER 10
Budgetary Planning and Control
Summary of Questions by Objectives and Bloom’s Taxonomy
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Multiple Choice Questions
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Matching
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Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10-2
Challenge Exercises
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Short-Answer Essays
TRUE-FALSE STATEMENTS
1. A budget is a formal document that quantifies a company’s plans for achieving its goals.
2. Budgets are useful in the control process because they provide a basis for evaluating
performance.
3. A bottom–up approach to budgeting involves substantial input from lower–level
managers.
4. Most managers believe that budgeting is more successful when a bottom–up approach
rather than a top-down approach is used.
5. Generally, budgets that span longer time periods provide less detail than those spanning
shorter time periods.
6. A zero-based budgeting is easier to prepare because it is based on prior period’s activity
levels.
7. Only manufacturing firms need to prepare a production budget.
8. Changes in economic conditions can be one of the causes for significant deviations from
the planned performance.
9. The first step in the budget process is preparing the sales forecast.
10. If the number of units produced equals the number of units sold, the number of units in
ending inventory will equal the number of units in beginning inventory on the production
budget.
11. The sales budget is constructed after the production budget is finalized based on a
company’s capacity.
12. All of the dollar amounts in the cash receipts budget represent revenues earned in the
current period.
13. The costs of acquisitions in the material purchases budget appear on the budgeted
income statement as part of cost of goods sold.
14. The amount and timing of cash flows is the focus of the cash receipts and
disbursements budget.
189.
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Chapter 10 Budgetary Planning and Control
10-3
15. A company will often have cash flow problems ahead of a period of increasing sales.
16. A company that utilizes just-in-time inventory eliminates the need for budgeting.
17. The budgeted balance sheet is also called a pro-forma balance sheet.
18. One way a company can perform “what if” budget analysis is by preparing a flexible
budget.
19. The selling and administrative expense budget is based on the numbers in the
production budget.
20. Differences between budgeted and actual amounts are referred to as flexible budgets.
21. A static budget is prepared for a single anticipated level of production.
22. If the actual activity level differs from the budgeted activity level on the flexible budget, it
is unfair to evaluate cost performance against that budget.
23. A master budget is a set of budget relationships that can be adjusted to various activity
levels.
24. In a management by exception approach, only large, unfavorable variances are
investigated.
25. Managers may be tempted to pad the budget to meet performance targets.
26. Generally, it is best to evaluate managers against a static budget since the volume used
on a static budget is used to generate expected results for the period.
27. Waiting until January 1 to ship an order and recognizing its revenue that was ready on
December 29 is an example of income shifting.
28. When a static budget is used for planning and control, managers may be tempted to
build slack into their budgets.
29. There is an inherent conflict when budgets are used for both planning and control.
30. Budgeting often involves both monetary and nonmonetary measures of performance.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10-4
MULTIPLE CHOICE
31. Which of the following is correct concerning a budget?
A. It is a formal document that quantifies a company’s plans for achieving its goals.
B. It is prepared by the budget committee.
C. It identifies the causes of significant deviations from expected performance.
D. All of the answer choices are correct.
32. The formal documents that quantify a company’s plans for achieving its goals are called
A. variance reports.
B. budgets.
C. cost sheets.
D. production reports.
33. A budget is useful in the planning process because it
A. determines who is to blame for poor operations.
B. forces managers to think about goals and objectives and means of achieving
them.
C. identifies budget padding.
D. creates budget slack.
34. Which statement is not true concerning the development of a budget?
A. It is a means of planning for management.
B. It often involves communication with and input from department managers.
C. It enhances communication and coordination among managers.
D. It is created by the budget committee.
35. Which of the following is not a reason that actual results may deviate from planned
performance?
A. A bottom-up approach to budgeting was used.
B. Managers have done a particularly good or particularly poor job of managing
operations.
C. Conditions have changed since the budget was developed.
D. The budget was poorly conceived and constructed.
36. The person evaluating a manager should consider
A. any deviation from budgeted amounts as an item that should be investigated.
B. all favorable variances as indications of good performance.
C. that managers will focus their attention on those measures that they know will be
part of their evaluation.
D. that all unfavorable variances indicate poor performance.
37. Who is responsible for the approval of the master budget?
A. The budget committee
B. The company’s cost accountant
C. The company’s auditors
D. The company’s board of directors
Chapter 10 Budgetary Planning and Control
10-5
38. The budget committee consists of
A. senior managers, including the CEO and CFO.
B. representatives from the stockholders and suppliers.
C. a company’s stockholders.
D. all employees interested in providing input to the budgeting process.
39. In a top-down approach to budgeting, what occurs?
A. The upper-level managers impose a budget without soliciting input from
department managers.
B. Lower-level managers are the primary source of information used in setting the
budget.
C. The production budget is developed before the sales budget.
D. Each budget amount projected by upper-level managers is approved or
disapproved by lower-level managers.
40. In a bottom-up approach to budgeting, the primary source of information used in setting
the budget is
A. based on forecasted economic conditions.
B. based on industry forecasts.
C. provided by the controller.
D. provided by lower-level managers.
41. Which of the following statements regarding approaches to budgeting is(are) true?
I. Most managers believe that successful budgeting requires a bottom–up
approach.
II. A top-down approach involves substantial input from lower-level managers.
A. Only I
B. Only II
C. Both I and II
D. Neither I nor II
42. Less detailed budgets are associated with
A. production costs.
B. governmental agencies.
C. longer time periods.
D. zero-based budgeting.
43. A method of budget preparation that requires all budgeted amounts to be justified, even
if the amounts were supported in prior periods, is called
A. variance budgeting.
B. flexible budgeting.
C. justified budgeting.
D. zero-based budgeting.
44. Which of the following is a characteristic of zero-based budgeting?
A. It uses the same level of activity as the prior budget period.
B. It is relatively inexpensive to implement.
C. It is used mostly by manufacturing companies.
D. It results in a fresh consideration of the validity of budget amounts.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10-6
45. Which of the following is the comprehensive planning document that incorporates a
number of individual budgets?
A. Static budget
B. Master budget
C. Flexible budget
D. Collective budget
46. Which of the following is not typically a part of the master budget?
A. Direct material purchases budget
B. Performance report budget
C. Projected cash receipts and disbursements
D. Budgeted balance sheet
47. The master budget incorporates individual budgets including those for
A. direct materials, direct labor, and selling and administrative expenses.
B. multiple levels of sales volume.
C. past and future accounting periods.
D. each employee in the company.
48. Which of the following is the correct order for the preparation of the listed budgets?
A. Budgeted income statement, sales budget, cash budget
B. Cash budget, capital acquisitions budget, direct labor budget
C. Sales budget, production budget, direct material purchases budget
D. Direct labor budget, sales budget, budgeted income statement
49. Which of the following budgets is prepared last?
A. Sales budget
B. Capital acquisitions budget
C. Budgeted income statement
D. Budgeted balance sheet
50. Which of the following budgets is prepared first?
A. Cash budget
B. Sales budget
C. Production budget
D. Budgeted balance sheet
51. Which of the following contains at least one item that is not a common method
companies use to estimate sales?
A. Economic models, and estimates from a company’s own sales force
B. Trends in a company’s own sales data, and estimates from a company’s own
sales force
C. Estimates from a company’s own sales force, and expected production levels
D. Economic models, and trends in a company’s own sales data
52. Which of the following is not a method that can reasonably be used to forecast sales?
A. Trends in the company’s sales data
B. Production capacity
C. Estimates from the company’s salespersons
D. Mathematical models adjusted by an experienced manager using professional
judgment
Chapter 10 Budgetary Planning and Control
10-7
53. Which of the following assumptions is made while preparing a sales budget?
A. The number of units to be sold and selling price per unit
B. The cash to be received from units sold
C. The contribution margin per unit and the number of units to be sold
D. The number of units the manufacturing facility is able to produce
54. Why is setting the sales budget very important?
A. The rest of the master budget is driven by the sales budget.
B. It is based on the production targets set by the production department.
C. It establishes the actual profits that will be earned by a company.
D. None of the answer choices are correct.
55. Which of the following is not used in deciding how many units to produce in a period?
A. The desired number of units in ending finished goods inventory
B. The expected sales in units
C. The number of units in beginning finished goods inventory
D. The number of units of raw material needed for production
56. Concerning relationship between beginning finished goods inventory, ending finished
goods inventory, production, and sales, which of the following is true?
A. Production = Beginning Inventory + Sales – Ending Inventory
B. Production = Sales + Ending Inventory – Beginning Inventory
C. Production = Beginning Inventory + Ending Inventory – Sales
D. Production = Beginning Inventory – Ending Inventory + Sales
57. Ace Ladders has fewer units in beginning finished goods inventory than in ending
finished goods inventory. The number of units sold is
A. less than the number of units produced.
B. greater than the number of units produced.
C. less than the number of units in beginning finished goods inventory.
D. greater than the number of units in ending finished goods inventory.
58. While preparing the production budget, the desired ending finished goods inventory for
the first period is
A. the same as the beginning inventory for the second period.
B. often expressed as a percentage of the first period’s sales.
C. generally more than the beginning finished goods inventory for the first period.
D. always zero.
59. Which of the following items affect the amount of direct material that must be purchased
during a period?
I. The amount of raw material in beginning inventory
II. The amount of raw material in ending inventory
A. Only I
B. Only II
C. Both I and II
D. Neither I nor II
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10-8
60. A significant difference between the direct material purchases budget and the direct
labor budget is that the direct material purchases budget
A. is based on units sold, while the direct labor budget is based on units produced.
B. considers beginning and ending inventory amounts, which are not part of the
direct labor budget.
C. is constructed for each quarter, while the direct labor budget is constructed for
each pay period.
D. is constructed from the top down, while the direct labor budget uses a bottom–up
approach.
61. Which of the following is likely to increase the amount budgeted for depreciation in the
manufacturing overhead budget?
A. Sale of production equipment at a loss
B. Increased variable costs related to estimated increases in sales
C. Planned acquisitions of new equipment
D. A decrease in the number of units to be produced
62. Which of the following is a reason the amount of cash paid out for manufacturing
overhead each period does not equal the total overhead incurred?
A. Depreciation is an overhead expense that does not require the use of cash.
B. Overhead expenses are only estimates, and they do not require cash.
C. Cash is only paid out for variable manufacturing overhead expenses.
D. The amount of cash paid out is adjusted for the number of units sold.
63. A significant difference between the direct material purchases budget and the production
budget is that the production budget considers
A. units to be produced, while the direct material purchases budget is based on
units to be sold.
B. beginning and ending finished goods inventory amounts, which are not part of a
direct material purchases budget.
C. finished goods inventory levels, while the material purchases budget considers
raw material inventory levels.
D. the capacity of the factory, while the direct material purchases budget does not.
64. Which of the following is not required to calculate cost of goods sold in the budgeted
income statement?
A. Number of units to be sold
B. Direct material costs to be used and direct labor costs to be incurred
C. Manufacturing overhead costs incurred
D. Direct material purchases expected during the period
65. If budgeted net income is projected to be less than the company’s goal, the company
should try to
A. increase revenues and decrease expenses.
B. incur more fixed costs and less variable costs.
C. increase the collection of cash receipts.
D. finance operations with a loan.
Chapter 10 Budgetary Planning and Control
10-9
66. Which of the following statements is true concerning the capital acquisitions budget?
A. It consists of a plan to acquire long-lived assets.
B. It is constructed directly from the values in the sales budget.
C. It is the same as the capital budgeting process.
D. It is dependent upon plant capacity.
67. Which of the following does not appear on the cash budget?
A. Beginning cash balance
B. Purchase of long-lived assets
C. Cost of goods sold
D. Collection of credit sales
68. Which of the following transactions will affect the cash budget for a particular month in
which each transaction occurs?
A. Sale of a product when payment will be received in 60 days
B. Payment for direct labor
C. Amortization of prepaid insurance
D. Depreciation of a piece of equipment that was purchased last year
69. A cash budget fails to alert the management for:
A. low projected cash balance.
B. low profit levels.
C. availability of excess cash for investment purposes.
D. availability of sufficient cash for loan repayments.
70. Which of the following is least likely to produce a need for temporary financing to bridge
a cash shortfall?
A. Building up inventory in anticipation of increased sales in the months ahead
B. Allowing customers to purchase on credit
C. Paying insurance policies in advance of the period insured
D. Purchasing materials on a just–in-time inventory basis
71. Winslow Inc. determined it had sold products during the month but not collected all of the
amounts owed. Where will this amount owed be reflected in the master budget for the
month?
A. On the budgeted balance sheet in the assets section
B. On the budgeted income statement
C. As part of the cash receipts section of the cash budget
D. As a reduction of inventory to be produced in the production budget
72. When using a computer program to do budgeting, which one of the following is not true?
A. A company can easily run “what if” analysis if the spreadsheet is well designed.
B. Cash flow problems generally erupt since cash is difficult to track and predict.
C. Worksheets should be formula driven so that a change in sales will update all
schedules.
D. A change in the sales budget should carry throughout all the individual budgets.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–10
73. SalaRita’s sales are 32% cash and 68% credit. Of the credit sales, 40% of credit sales
are collected in the month of sale, 45% in the month following the sale, and 15% is
collected two months after. Budgeted sales data is as follows:
June $200,000
July 120,000
August 150,000
How much is total ‘Accounts Receivable’ at the end of August?
A. $61,200
B. $73,440
C. $99,600
D. $108,000
74. Budgeted sales (in units) for the Rockwall Energy Drink Company are as follows:
September 45,000 units
October 60,000 units
November 40,000 units
December 75,000 units
The company wishes to have 10% of the next month’s sales on hand at the end of each
month. How much is budgeted production for November?
A. 43,500 units
B. 40,000 units
C. 47,500 units
D. 36,000 units
75. SalaRita’s sales are 32% cash and 68% credit. Of the credit sales, 40% of credit sales
are collected in the month of sale, 45% in the month following the sale, and 15% is
collected two months after. Budgeted sales data is as follows:
June $200,000
July 120,000
August 150,000
How much is total cash collected during August?
A. $145,920
B. $105,120
C. $88,800
D. $144,000
Chapter 10 Budgetary Planning and Control
10–11
76. Wisdom Toys has budgeted sales and production over the next quarter as follows:
Unit Sales Production
September 43,000 44,400
October 50,000 52,800
November 64,000 61,200
The company requires that 20% of the next month’s sales in units are on hand at the
end of each month. December sales are expected to be 50,000 units. How many video
games are in inventory at October 31?
A. 12,800 units
B. 34,400 units
C. 4,000 units
D. 10,000 units
77. Washam Company must maintain a minimum cash balance of $25,000. At the beginning
of June the company’s cash balance was $17,000. Budgeted cash receipts for June are
$150,000 and budgeted cash disbursements are $201,000. Budgeted net income for
July totals $11,000. How much will Washam Company need to borrow by the end of
June?
A. $43,000
B. $34,000
C. $9,000
D. $59,000
78. Alpha Caps Company has budgeted production of 14,000 units and sales of 16,500 units
in January. Each unit requires 12 minutes of labor. The standard labor rate is $13.00 per
hour. How much are total budgeted direct labor costs for January?
A. $36,400
B. $21,840
C. $42,900
D. $2,184,000
79. Each unit produced by Terra Electronics requires 4 pounds of raw materials. The raw
materials inventory must be equal to 10% of the next month’s production. Each pound of
raw materials costs $2.00. Budgeted production information follows.
April 28,000 units
May 30,000 units
June 25,000 units
How much are budgeted purchases of raw materials for May?
A. $118,000
B. $236,000
C. $221,000
D. None of the answer choices are correct.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–12
80. Shorstein Manufacturing Company purchases raw materials on account each month.
Purchases are paid for according to the following schedule:
30% is paid in the month of the purchase
60% is paid in the month following the purchase
10% is paid in the second month following the purchase
Budgeted purchases are as follows:
March $75,000
April $90,000
May $85,000
How much will be reported for Accounts Payable for material purchases as of the end of
May?
A. $59,500
B. $68,500
C. $87,000
D. $95,500
81. Sultan Sundries must maintain a minimum cash balance of $34,000. At the beginning of
February the company’s cash balance was $60,000. The budget for February is as
follows:
Total cash receipts $250,000
Total cash disbursements $245,000
Net income $50,000
Purchase machinery by signing a note $35,000
During February, how much will Sultan need to borrow?
A. $50,000
B. $0
C. $25,000
D. $4,000
82. DynaCare Products’ sales are all on account. History indicates that sales will be
collected as follows:
Month of sale 25%
Month following the sale 65%
Second month following the sale 8%
Never collected 2%
Budgeted sales data follows:
March $300,000
April $250,000
May $260,000
June $230,000
July $200,000
How much are total budgeted cash collections during May?
A. $230,500
B. $258,300
C. $65,000
D. $251,500
Chapter 10 Budgetary Planning and Control
10–13
83. Paradise Gifts has budgeted sales for the quarter as follows:
January 11,000 units
February 13,000 units
March 17,000 units
The ending inventory of finished goods each month should equal 25% of the next
month’s budgeted sales in units. How much is scheduled production for February?
A. 17,250 units
B. 14,000 units
C. 9,750 units
D. 12,000 units
84. Hanover Inc. sells buckets for $15 each. Budgeted unit sales for 4 months of 2017 are:
March 26,000 buckets
April 28,000 buckets
May 22,000 buckets
June 25,000 buckets
Hanover desires to have buckets on hand at the end of each month equal to 16 percent
of the following month’s budgeted unit sales. Each bucket requires 3.9 pounds of plastic.
At the end of each month, Hanover desires to have 12 percent of production material
needs for the next month on hand. The plastic costs $0.40 per pound. How many
buckets should Hanover produce during May?
A. 27,040 buckets
B. 31,520 buckets
C. 27,280 buckets
D. None of the answer choices are correct.
85. Samson Company has budgeted production for the next two months as follows:
July 16,000 units
August 22,000 units
Each unit requires 5 pounds of material. Raw materials at the end of each month should
equal 10% of the next month’s production requirements. How many pounds will be
budgeted for purchases of raw materials for July?
A. 83,000 pounds
B. 66,200 pounds
C. 80,600 pounds
D. 79,400 pounds
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–14
86. Green Company’s sales are 20% cash and 80% credit. Of the credit sales, 60% are
collected in the month of sale and 30% in the month following the sale. The balance is
collected during the following month. Budgeted sales data is as follows:
June $300,000
July $250,000
August $280,000
September $310,000
How much is total Accounts Receivable at the end of August?
A. $224,400
B. $89,600
C. $137,000
D. $109,600
87. Kitchen Stuff produces spatulas made out of acrylic. The company has estimated sales
for June at 12,000, July at 12,800, August at 15,000, and September at 16,000 spatulas.
The company plans to have 15% of the next month’s anticipated unit spatula sales and
22% of the next month’s acrylic needed for production on hand at the end of each
month. Each spatula uses 7 ounces of acrylic, which is purchased at a cost of $0.22 per
ounce. How much is budgeted production for July?
A. 12,470 units
B. 13,130 units
C. 15,050 units
D. None of the answer choices are correct.
88. Teva Sandals’ sales for the next three months are as follows:
February $130,000
March $170,000
April $200,000
Collection history for the company indicates that 60% of sales are collected in the month
of the sale, 36% is collected in the following month, and 4% of sales are uncollectible.
How much are budgeted cash receipts for April?
A. $181,200
B. $186,400
C. $120,000
D. $222,000
89. When budgets are used for evaluation, what is the difference between budgeted and
actual amounts called?
A. Exceptions
B. Budget variances
C. Performance results
D. Flexible budgets
Chapter 10 Budgetary Planning and Control
10–15
90. The main difference between a static budget and a flexible budget is that the static
budget is
A. constructed using a top-down approach, while the flexible budget uses a bottom-
up approach.
B. based on units produced, while a flexible budget is based on units sold.
C. for a single level of activity, while a flexible budget can be adjusted for different
activity levels.
D. used only for selling and administrative costs, while the flexible budget is used for
manufacturing costs.
91. Wilson, Inc. created a spreadsheet that utilized a set of budget relationships that could
be adjusted for various activity levels. What did Wilson create?
A. A capital budget
B. A static budget
C. A standard budget
D. A flexible budget
92. Which of the following assumptions is made while preparing a flexible manufacturing
overhead budget, when production levels change?
A. Total fixed costs remain the same.
B. The variable cost per unit changes.
C. Fixed costs per unit remain the same.
D. Total overhead costs remain the same when sales remain the same.
93. Exclusive Decor’s budgeted income statement for 2017 follows:
Sales (10,000 units) $128,000
Less:
Direct materials $27,600
Direct labor 6,000
Variable factory overhead 16,800
Fixed factory overhead 15,000
Fixed selling & admin expenses 30,000 95,400
Income before taxes $ 32,600
How much income before taxes will appear on a flexible budget for 11,000 units?
A. $35,860
B. $40,140
C. $85,140
D. $40,360
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–16
94. Yemesi, Inc.’s budgeted income statement for 2017 follows:
Sales (80,000 units) $360,000
Less:
Direct materials $128,000
Direct labor 36,000
Variable overhead 32,000
Fixed overhead 10,000
Fixed selling & admin expenses 12,000 218,000
Income before taxes $142,000
How much income before taxes would appear on a flexible budget for 84,000 units?
A. $150,200
B. $149,100
C. $140,900
D. $132,200
95. Carrier Company’s budgeted income statement for 2017 follows:
Sales (4,000 units) $84,000
Less:
Variable costs $44,000
Fixed costs 26,000 70,000
Income before taxes $14,000
How much would be reported as income before taxes on a flexible budget for 5,000
units?
A. $24,000
B. $50,000
C. $38,750
D. $52,000
96. KirbyCor’s budgeted income statement for 2017 follows:
Sales (80,000 units) $400,000
Less:
Direct materials $120,000
Direct labor 80,000
Variable overhead 40,000
Fixed costs 80,000 320,000
Income before taxes $ 80,000
How much would be reported for total variable costs on a flexible budget at 75,000
units?
A. $75,000
B. $300,000
C. $225,000
D. None of the answer choices are correct.
Chapter 10 Budgetary Planning and Control
10–17
97. Managers can create budget slack by
A. understating their actual level of sales.
B. reducing their sales forecasts.
C. understating expected expenses.
D. shifting income into another accounting period.
98. Which of the following are problem behaviors that may occur when budgets are used for
both planning and control?
I. Padding of budgets
II. Shifting of income between periods
III. Understatement of budgeted expenses
A. I, II, and III
B. I and II
C. II and III
D. I and III
99. Which of the following is not a method that managers may use to achieve a budget
income target in a given period?
A. Shift discretionary expenses to the next period
B. Encourage customers to take shipments at the end of the period even though
they do not want the products until the next period
C. Fraudulently recognize the next period’s sales in the current period
D. Understate budgeted expenses
100. Management by exception refers to the practice of only investigating variances
A. in product costs.
B. in which the actual cost exceeds the budget.
C. that are material in dollar amounts relative to budgeted amounts.
D. in areas of the company that have been performing poorly.
101. Under what circumstances may a manager be motivated to defer a shipment until the
next period?
A. When budgeted costs have been overstated for the current year
B. When revenue for the current year is less than expected
C. When this year’s budgeted income is less than expected
D. When the budgeted income for the current year has already been attained
102. Workman Company had sales of 15,000 units of its only product in the first quarter of
2017. In the first quarter of 2018, Workman anticipates selling 20% more units than it
sold in the first quarter of 2017, with a selling price of $68 per unit. What is the amount of
sales revenue that will appear in the budgeted income statement for the first quarter of
2018?
A. $1,224,000
B. $1,020,000
C. $1,468,800
D. $816,000
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–18
103. Hanson Meters had sales of 4,000, 4,500, 6,000, and 5,000 water meters during each of
the four quarters of 2017. Hanson expects sales in each quarter of 2017 to be 10% more
than the respective quarter of 2017. Each meter sells for $150. What amount will appear
as budgeted total sales revenue for 2018?
A. $3,217,500
B. $21,450
C. $2,925,000
D. None of the answer choices are correct.
104. Bombay Cabinet Store’s policy is to keep 25% of the next month’s sales in ending
inventory. If sales are expected to be 5,000 units in March, 5,800 units in April, and
6,000 units in May, how many units should be produced in April?
A. 7,300 units
B. 5,750 units
C. 6,050 units
D. 5,850 units
105. Cross Country Apparel plans to sell 22,000 ladders in May and 34,000 ladders in June.
Cross Country keeps 10% of the next month’s sales as ending inventory. If April’s
ending inventory reflects this policy, how many ladders should be produced in May?
A. 23,200 ladders
B. 20,800 ladders
C. 25,400 ladders
D. 19,800 ladders
106. Marks Company produces staplers. Its sales are projected to be 26,000 in June, 28,000
in July, and 30,000 in August. The company plans to have 15% of the next month’s
sales in inventory at the end of each month. How many staplers must Marks produce in
July?
A. 28,300 units
B. 28,600 units
C. 28,000 units
D. 32,500 units
107. RasDyne Chemicals has 40,000 pounds of krypton in inventory at the beginning of
August. The company plans to produce 6,000 rack joints made out of krypton in August.
If each rack joint requires 30 pounds of krypton and RasDyne wants 50,000 pounds of
krypton in inventory at the end of August, how many pounds of krypton should the
company plan to purchase during August?
A. 170,000 pounds
B. 180,000 pounds
C. 190,000 pounds
D. 210,000 pounds
Chapter 10 Budgetary Planning and Control
10–19
108. Budget Electronics is planning to sell 2,200 and produce 2,000 wicker baskets during
June. Each unit requires 120 linear feet of wicker and 0.70 hours of direct labor. Wicker
costs $0.35 per linear foot and employees of the company are paid $13.00 per hour.
Manufacturing overhead is applied at a rate of 140% of direct labor costs. The company
wants to have 10% of the wicker needed for the next month’s production available at the
end of each month. The expected production in July is 1,800 baskets. How many linear
feet of wicker should the company plan to buy during June?
A. 807,840 feet
B. 237,600 feet
C. 239,980 feet
D. 242,400 feet
109. Budget Electronics is planning to sell 2,200 and produce 2,000 wicker baskets during
June. Each unit requires 120 linear feet of wicker and 0.70 hours of direct labor. Wicker
costs $0.35 per linear foot and employees of the company are paid $13.00 per hour.
Manufacturing overhead is applied at a rate of 140% of direct labor costs. The company
wants to have 10% of the wicker needed for the next month’s production available at the
end of each month. The expected production in July is 1,800 baskets. What is the total
amount that will be budgeted for direct labor for June?
A. $18,200
B. $26,000
C. $20,020
D. $28,600
110. Budget Electronics is planning to sell 2,200 and produce 2,000 wicker baskets during
June. Each unit requires 120 linear feet of wicker and 0.70 hours of direct labor. Wicker
costs $0.35 per linear foot and employees of the company are paid $13.00 per hour.
Manufacturing overhead is applied at a rate of 140% of direct labor costs. The company
wants to have 10% of the wicker needed for the next month’s production available at the
end of each month. The expected production in July is 1,800 baskets. How much
manufacturing overhead will be charged to each basket sold during June?
A. $12.74
B. $9.10
C. $18.20
D. $11.58
111. Budget Electronics is planning to sell 2,200 and produce 2,000 wicker baskets during
June. Each unit requires 120 linear feet of wicker and 0.70 hours of direct labor. Wicker
costs $0.35 per linear foot and employees of the company are paid $13.00 per hour.
Manufacturing overhead is applied at a rate of 140% of direct labor costs. The company
wants to have 10% of the wicker needed for the next month’s production available at the
end of each month. The expected production in July is 1,800 baskets. What is the unit
cost of each basket produced in June?
A. $51.66
B. $47.34
C. $52.08
D. None of the answer choices are correct.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–20
112. Walker Entertainment is a distributor of video games and expects its video game sales
to be as follows for the first 4 months of 2017:
January $100,000
February $150,000
March $180,000
April $200,000
Walker’s cost of goods sold is 70% of sales. Ending inventory is expected to equal 40%
of the next month’s cost of goods sold. How much are budgeted inventory purchases for
February?
A. $105,000
B. $113,400
C. $117,000
D. $50,400
113. Walker Entertainment is a distributor of video games and expects its video game sales
to be as follows for the first 4 months of 2017:
January $100,000
February $150,000
March $180,000
April $200,000
Walker’s cost of goods sold is 70% of sales. Ending inventory is expected to equal 40%
of the next month’s cost of goods sold. How much are budgeted inventory purchases for
March?
A. $84,000
B. $131,600
C. $126,000
D. $112,000
114. Baby Boo Boutique had sales of $78,000 in December, 2017. Sales for the first three
months of 2018 are:
January $84,000
February 80,000
March 68,000
In the past, Baby Boo has found that 25% of the sales revenue is collected in the month
of the sale and 75% is collected in the following month. If this pattern continues, what will
be the amount of Baby Boo’s cash receipts in February?
A. $20,000
B. $83,000
C. $71,000
D. $81,000
115. Forever 39 has found that 30% of its sales are collected in the month of the sale and the
remainder of the sales is collected in the next month. If sales are expected to be
$100,000 in April, $120,000 in May, and $80,000 in June, what is the estimated amount
of cash receipts for May?
A. $114,000
B. $106,000
C. $92,000
D. $108,000