Chapter 10 Budgetary Planning and Control
10–21
116. In recent years, Sands Retro Clothing has collected 45% of its sales in the month of the
sale, 53% in the month that follows the sale. The other 2% is not collected. During the
first five months of 2017, Sands is anticipating sales of $330,000, $415,000, $540,000,
$260,000, and $370,000, respectively. What is the amount of cash receipts budgeted for
March?
A. $472,950
B. $380,800
C. $473,750
D. $462,950
117. Haverti Auto Mart has budgeted the following amounts for auto part sales in 2017:
April $ 98,000
May 67,000
June 108,000
July 82,000
An analysis of past patterns of receipts shows that 60% of the sales dollars are received
in the month of the sale and 40% are received in the following month. Assuming this
pattern continues, how much cash does Haverti expect to receive during May?
A. $85,600
B. $97,600
C. $91,600
D. $79,400
118. Cringle Company expects sales as follows:
January $150,000
February 180,000
March 210,000
April 170,000
Sales are made 30% for cash, and 70% on credit. Credit sales are collected 40% in the
month of sale and 60% in the next month. How much are cash collections expected to
be in March?
A. $138,600
B. $255,000
C. $197,400
D. None of the answer choices are correct.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–22
119. Jazzy Janitors has found that only 10% of its invoiced amounts are paid in the same
month that the work is completed. 60% are paid in the month after the work is completed
and 30% are paid in the second month after the work is completed. During December,
2017, Jazzy Janitors’ invoiced $200,000 to clients. Projected revenues for the first six
months of 2018 are given below:
Month Revenue
January $180,000
February 215,000
March 220,000
April 218,000
May 240,000
June 255,000
What are the expected cash receipts for March 2018?
A. $224,800
B. $151,000
C. $265,000
D. $205,000
120. Jazzy Janitors has found that only 10% of its invoiced amounts are paid in the same
month that the work is completed. Sixty percent are paid in the month after the work is
completed and 30% are paid in the second month after the work is completed. During
December 2017, Jazzy Janitors’ invoiced $200,000 to clients. Projected revenues for the
first six months of 2018 are given below:
Month Revenue
January $180,000
February 215,000
March 220,000
April 218,000
May 240,000
June 255,000
What are the expected cash receipts for April 2018?
A. $218,300
B. $242,300
C. $153,800
D. $21,800
Chapter 10 Budgetary Planning and Control
10–23
121. Jazzy Janitors has found that only 10% of its invoiced amounts are paid in the same
month that the work is completed. Sixty percent are paid in the month after the work is
completed and 30% are paid in the second month after the work is completed. During
December 2017, Jazzy Janitors’ invoiced $200,000 to clients. Projected revenues for the
first six months of 2018 are given below:
Month Revenue
January $180,000
February 215,000
March 220,000
April 218,000
May 240,000
June 255,000
What is the expected Accounts Receivable balance at March 31, 2018?
A. $198,000
B. $280,500
C. $262,500
D. $205,000
122. Bandaloon Foods expects to make the following inventory purchases during the last
three months of the year:
Month Purchases
October $80,000
November 100,000
December 160,000
During September, Bandaloon purchased $72,000 of inventory. The restaurant typically
pays for 25% of the inventory purchases within the month of the purchase and 75% in
the following month. How much are estimated cash disbursements in November for
inventory purchases?
A. $95,000
B. $100,000
C. $85,000
D. $115,000
123. DuraBlend First Aid started operations on January 1, 2017. On that date, the only assets
were cash of $13,000, and inventory of $600 consisting of direct materials. The company
sells first aid kits for $18 each. Additional information concerning the company’s
operations follows:
• Variable costs of production are $5 for each kit consisting of direct materials of
$2.00, direct labor totaling $1.80, and $1.20 per unit in variable overhead.
• Other expenses include $1 per first aid kit in variable selling expenses, $22,000
per month in fixed production costs, and $14,000 per month in fixed selling and
administration costs.
• Sales are collected 40% in the month of sales and 60% in the month after the
sale.
• All expenses are paid in the month they are incurred except materials that are
paid in the month following purchase.
• The company plans its ending inventory of first aid kits to be 20% of the units to
be sold during the next month. Direct material inventory is budgeted to be equal
to 10% of the next month’s production requirements.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–24
• Sales in units are forecasted as follows:
January 6,000
February 8,000
March 7,000
April 9,000
What is the budgeted net income using the contribution format for February?
A. $66,000
B. $60,000
C. $68,000
D. None of the answer choices are correct.
124. DuraBlend First Aid started operations on January 1, 2017. On that date, the only assets
were cash of $13,000, and inventory of $600 consisting of direct materials. The company
sells first aid kits for $18 each. Additional information concerning the company’s
operations follows:
• Variable costs of production are $5 for each kit consisting of direct materials of
$2.00, direct labor totaling $1.80, and $1.20 per unit in variable overhead.
• Other expenses include $1 per first aid kit in variable selling expenses, $22,000
per month in fixed production costs, and $14,000 per month in fixed selling and
administration costs.
• Sales are collected 40% in the month of sales and 60% in the month after the
sale.
• All expenses are paid in the month they are incurred except materials that are
paid in the month following purchase.
• The company plans its ending inventory of first aid kits to be 20% of the units to
be sold during the next month. Direct material inventory is budgeted to be equal
to 10% of the next month’s production requirements.
• Sales in units are forecasted as follows:
January 6,000
February 8,000
March 7,000
April 9,000
How much are budgeted cash collections for February?
A. $57,600
B. $6,800
C. $122,400
D. $133,200
Chapter 10 Budgetary Planning and Control
10–25
125. DuraBlend First Aid started operations on January 1, 2017. On that date, the only assets
were cash of $13,000, and inventory of $600 consisting of direct materials. The company
sells first aid kits for $18 each. Additional information concerning the company’s
operations follows:
• Variable costs of production are $5 for each kit consisting of direct materials of
$2.00, direct labor totaling $1.80, and $1.20 per unit in variable overhead.
• Other expenses include $1 per first aid kit in variable selling expenses, $22,000
per month in fixed production costs, and $14,000 per month in fixed selling and
administration costs.
• Sales are collected 40% in the month of sales and 60% in the month after the
sale.
• All expenses are paid in the month they are incurred except materials that are
paid in the month following purchase.
• The company plans its ending inventory of first aid kits to be 20% of the units to
be sold during the next month. Direct material inventory is budgeted to be equal
to 10% of the next month’s production requirements.
• Sales in units are forecasted as follows:
January 6,000
February 8,000
March 7,000
April 9,000
How many first aid kits will the company produce in February?
A. 7,800 units
B. 7,400 units
C. 9,400 units
D. 8,200 units
126. DuraBlend First Aid started operations on January 1, 2017. On that date, the only assets
were cash of $13,000, and inventory of $600 consisting of direct materials. The company
sells first aid kits for $18 each. Additional information concerning the company’s
operations follows:
• Variable costs of production are $5 for each kit consisting of direct materials of
$2.00, direct labor totaling $1.80, and $1.20 per unit in variable overhead.
• Other expenses include $1 per first aid kit in variable selling expenses, $22,000
per month in fixed production costs, and $14,000 per month in fixed selling and
administration costs.
• Sales are collected 40% in the month of sales and 60% in the month after the
sale.
• All expenses are paid in the month they are incurred except materials that are
paid in the month following purchase.
• The company plans its ending inventory of first aid kits to be 20% of the units to
be sold during the next month. Direct material inventory is budgeted to be equal
to 10% of the next month’s production requirements.
• Sales in units are forecasted as follows:
January 6,000
February 8,000
March 7,000
April 9,000
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–26
How much will be reported for Accounts Receivable on the company’s balance sheet at
the end of February?
A. $122,400
B. $86,400
C. $43,200
D. $57,600
127. Bake Time makes and sells baking pans. Each pan uses 0.70 pounds of aluminum.
Budgeted production and sales of pans in units for the next five months is as follows:
June
July
August
October
Budgeted production
22,180
21,940
24,940
23,720
Budgeted sales
22,400
21,300
24,500
24,400
The company wants to maintain monthly ending inventories of aluminum equal to 15% of
the following month’s budgeted production needs, and monthly inventories of pans equal
to 20% of the number needed for next month’s sales. The cost of aluminum is $0.85 per
pound. How much is the cost of budgeted material purchases for August?
A. $14,693
B. $17,595
C. $14,955
D. None of the answer choices are correct.
128. Bake Time makes and sells baking pans. Each pan uses 0.70 pounds of aluminum.
Budgeted production and sales of pans in units for the next five months is as follows:
June
July
August
October
Budgeted production
22,180
21,940
24,940
23,720
Budgeted sales
22,400
21,300
24,500
24,400
The company wants to maintain monthly ending inventories of aluminum equal to 15% of
the following month’s budgeted production needs, and monthly inventories of pans equal
to 20% of the number needed for next month’s sales. The cost of aluminum is $0.85 per
pound. How much is budgeted raw materials to be reported on the company’s balance
sheet at August 31?
A. $2,342
B. $3,936
C. $2,755
D. $3,346
129. Harkin Products expects to make purchases of $65,000 in January; $80,000 in February;
$50,000 in March; and $90,000 in April. Purchases are paid 30% in the month of
purchase and 70% in the month after purchase. How much is budgeted accounts
payable at March 31?
A. $35,000
B. $71,000
C. $59,000
D. None of the answer choices are correct.
Chapter 10 Budgetary Planning and Control
10–27
130. Sharone Janitorial Supplies expects to make purchases of $100,000 in January;
$240,000 in February; $350,000 in March; and $230,000 in April. Purchases are paid
30% in the month of purchase and 70% in the month after purchase. How much is
budgeted accounts payable at the end of February?
A. $70,000
B. $168,000
C. $142,000
D. $72,000
131. Milkway Dairy Blend buys and resells 5 gallons containers of Greek yogurt for $38 per
container. Milkway pays $20 per container to buy the yogurt. Additionally, Milkway has
the following information:
• Operating fixed costs are $95,000 per month and office furniture depreciation is
$7,000 per month
• Inventory at the end of each month is maintained at 30% of the next month’s
projected cost of sales
• All sales are on credit. Collections are made 40% in the month of sale and 60%
in the month after sale
• All selling and administrative expenses are paid in the month after they are
incurred
• Inventory purchases are paid 30% in the month of purchase and 70% in the
month after purchase
• Budgeted monthly unit sales for the first five months of 2017 are as follows:
January 11,000 containers
February 13,000 containers
March 15,000 containers
April 14,000 containers
May 18,000 containers
How much Accounts Receivable will be reported on Milkway’s balance sheet at March
31?
A. $342,000
B. $539,600
C. $296,400
D. $524,400
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–28
132. Milkway Dairy Blend buys and resells 5 gallons containers of Greek yogurt for $38 per
container. Milkway pays $20 per container to buy the yogurt. Additionally, Milkway has
the following information:
• Operating fixed costs are $95,000 per month and office furniture depreciation is
$7,000 per month
• Inventory at the end of each month is maintained at 30% of the next month‘s
projected sales
• All sales are on credit. Collections are made 40% in the month of sale and 60% in
the month after sale
• All selling and administrative expenses are paid in the month after they are incurred
• Inventory purchases are paid 30% in the month of purchase and 70% in the month
after purchase
• Budgeted monthly unit sales for the first five months of 2017 are as follows:
January 11,000 containers
February 13,000 containers
March 15,000 containers
April 14,000 containers
May 18,000 containers
In the month of March, how many containers of yogurt will be purchased?
A. 14,700 units
B. 19,200 units
C. 15,000 units
D. 15,300 units
133. Milkway Dairy Blend buys and resells 5 gallons containers of Greek yogurt for $38 per
container. Milkway pays $20 per container to buy the yogurt. Additionally, Milkway has
the following information:
• Operating fixed costs are $95,000 per month and office furniture depreciation is
$7,000 per month
• Inventory at the end of each month is maintained at 30% of the next month’s
projected sales
• All sales are on credit. Collections are made 40% in the month of sale and 60% in
the month after sale
• All selling and administrative expenses are paid in the month after they are incurred
• Inventory purchases are paid 30% in the month of purchase and 70% in the month
after purchase
• Budgeted monthly unit sales for the first five months of 2017 are as follows:
January 11,000 containers
February 13,000 containers
March 15,000 containers
April 14,000 containers
May 18,000 containers
What much will the company budget for March purchases?
A. $306,000
B. $384,000
C. $300,000
D. $294,000
Chapter 10 Budgetary Planning and Control
10–29
134. Milkway Dairy Blend buys and resells 5 gallons containers of Greek yogurt for $38 per
container. Milkway pays $20 per container to buy the yogurt. Additionally, Milkway has
the following information:
• Operating fixed costs are $95,000 per month and office furniture depreciation is
$7,000 per month
• Inventory at the end of each month is maintained at 30% of the next month’s
projected sales
• All sales are on credit. Collections are made 40% in the month of sale and 60% in
the month after sale
• All selling and administrative expenses are paid in the month after they are incurred
• Inventory purchases are paid 30% in the month of purchase and 70% in the month
after purchase
• Budgeted monthly unit sales for the first five months of 2017 are as follows:
January 11,000 containers
February 13,000 containers
March 15,000 containers
April 14,000 containers
May 18,000 containers
How much is budgeted net income for March using variable costing?
A. $175,000
B. $168,000
C. $150,400
D. None of the answer choices are correct.
135. Tiny Toons distributes cartoon DVDs that sell for $12 each. Tiny Toons pays $7 per DVD
to buy the product. Selling costs of $1 per unit are incurred to deliver the DVDs to the
customer. This is paid in cash when the product is sold. Tiny Toons has $50,000 per
month in fixed selling and administrative expenses (including $3,000 in depreciation),
which are paid half in the month incurred and half in the next month. It is Tiny’s policy to
maintain an inventory at the end of each month equal to 30% of the next month’s
projected unit sales.
Tiny Toons makes 30% of sales in cash, and the remainder are on credit. Credit
sales are collected in the month after sale. Budgeted monthly sales for the first five
months of 2017 are:
January 20,000 units
February 22,000 units
March 26,000 units
April 28,000 units
May 40,000 units
How much are budgeted inventory purchases during February?
A. $154,000
B. $23,200
C. $162,400
D. $54,600
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–30
136. Tiny Toons distributes cartoon DVDs that sell for $12 each. Tiny Toons pays $7 per DVD
to buy the product. Selling costs of $1 per unit are incurred to deliver the DVDs to the
customer. This is paid in cash when the product is sold. Tiny Toons has $50,000 per
month in fixed selling and administrative expenses (including $3,000 in depreciation),
which are paid half in the month incurred and half in the next month. It is Tiny’s policy to
maintain an inventory at the end of each month equal to 30% of the next month’s
projected unit sales.
Tiny Toons makes 30% of sales in cash, and the remainder are on credit. Credit
sales are collected in the month after sale. Budgeted monthly sales for the first five
months of 2017 are:
January 20,000 units
February 22,000 units
March 26,000 units
April 28,000 units
May 40,000 units
How much is budgeted income for March using variable costing?
A. $312,000
B. $54,000
C. $57,000
D. $104,000
137. Tiny Toons distributes cartoon DVDs that sell for $12 each. Tiny Toons pays $7 per DVD
to buy the product. Selling costs of $1 per unit are incurred to deliver the DVDs to the
customer. This is paid in cash when the product is sold. Tiny Toons has $50,000 per
month in fixed selling and administrative expenses (including $3,000 in depreciation),
which are paid half in the month incurred and half in the next month. It is Tiny’s policy to
maintain an inventory at the end of each month equal to 30% of the next month’s
projected unit sales.
Tiny Toons makes 30% of sales in cash, and the remainder are on credit. Credit
sales are collected in the month after sale. Budgeted monthly sales for the first five
months of 2017 are:
January 20,000 units
February 22,000 units
March 26,000 units
April 28,000 units
May 40,000 units
How much are budgeted cash receipts for February?
A. $22,000
B. $79,200
C. $264,000
D. $247,200
Chapter 10 Budgetary Planning and Control
10–31
138. Tiny Toons distributes cartoon DVDs that sell for $12 each. Tiny Toons pays $7 per DVD
to buy the product. Selling costs of $1 per unit are incurred to deliver the DVDs to the
customer. This is paid in cash when the product is sold. Tiny Toons has $50,000 per
month in fixed selling and administrative expenses (including $3,000 in depreciation),
which are paid half in the month incurred and half in the next month. It is Tiny’s policy to
maintain an inventory at the end of each month equal to 30% of the next month’s
projected unit sales.
Tiny Toons makes 30% of sales in cash, and the remainder are on credit. Credit
sales are collected in the month after sale. Budgeted monthly sales for the first five
months of 2017 are:
January 20,000 units
February 22,000 units
March 26,000 units
April 28,000 units
May 40,000 units
How much will Tiny Toons report as budgeted Accounts Receivable at March 31 on its
balance sheet?
A. $218,400
B. $93,600
C. $278,400
D. $312,000
139. History Entertainment distributes a DVD that sells for $12 per unit. History pays $7 per
unit to buy the product. Selling cost of $1 per unit is incurred to deliver the product to the
customer. This is paid in cash when the product is sold. History has $50,000 per month
in fixed selling and administrative expenses (including $3,000 in depreciation), which are
paid half in the month incurred and half in the next month. It is History’s policy to
maintain an inventory at the end of each month equal to 30% of the next month’s
projected cost of sales. History makes 30% of sales in cash, and the rest are on credit.
Credit sales are collected in the month after sale. Budgeted monthly sales for the first
five months of 2017 are as follows:
January 20,000 units
February 22,000 units
March 26,000 units
April 28,000 units
May 40,000 units
How much is the budgeted cash payment for selling and administrative expenses in
April?
A. $78,000
B. $81,000
C. $75,000
D. $50,000
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–32
140. Maxim Fasteners distributes giant binder clips that sell for $3 each. Maxim pays $1.20 to
buy each clip. The company has $4,000 per month in fixed costs. Policies and other
information follow:
• Inventory is maintained at the end of each month equal to 10% of the next
month’s projected sales in units.
• Purchases are paid 40% in the month acquired and the balance in the month
after.
• All sales are on credit, and 30% are collect in the month of sale and 70% in the
month after sale.
• Budgeted monthly sales in units for the first five months of 2017 are as follows:
o January 6,000 units
o February 5,000 units
o March 7,000 units
o April 9,000 units
o May 8,000 units
• Variable selling and administrative costs are $0.50 per clip.
How much is the budgeted purchase cost of inventory during March?
A. $7,200
B. $8,640
C. $8,400
D. $9,480
141. Maxim Fasteners distributes giant binder clips that sell for $3 each. Maxim pays $1.20
each to buy the clips. The company has $4,000 per month in fixed costs. Policies and
other information follow:
• Inventory is maintained at the end of each month equal to 10% of the next
month’s projected sales in units.
• Purchases are paid 40% in the month acquired and the balance in the month
after.
• All sales are on credit, and 30% are collect in the month of sale and 70% in the
month after sale.
• Budgeted monthly sales in units for the first five months of 2017 are as follows:
o January 6,000 units
o February 5,000 units
o March 7,000 units
o April 9,000 units
o May 8,000 units
• Variable selling and administrative costs are $0.50 per clip and are paid in the
month of incurred.
How much is budgeted net income for March using variable costing?
A. $9,100
B. $5,100
C. $12,600
D. $13,500
Chapter 10 Budgetary Planning and Control
10–33
142. Maxim Fasteners distributes giant binder clips that sell for $3 each. Maxim pays $1.20
each to buy the clips. The company has $4,000 per month in fixed costs. Policies and
other information follow:
• Inventory is maintained at the end of each month equal to 10% of the next
month’s projected sales in units.
• Purchases are paid 40% in the month acquired and the balance in the month
after.
• All sales are on credit, and 30% are collect in the month of sale and 70% in the
month after sale.
• Budgeted monthly sales in units for the first five months of 2017 are as follows:
o January 6,000 units
o February 5,000 units
o March 7,000 units
o April 9,000 units
o May 8,000 units
• Variable selling and administrative costs are $0.50 per clip and are paid in the
month of incurred.
How much are budgeted cash collections during April?
A. $8,100
B. $22,800
C. $25,200
D. $27,000
143. Maxim Fasteners distributes giant binder clips that sell for $3 each. Maxim pays $1.20
each to buy the clips. The company has $4,000 per month in fixed costs. Policies and
other information follow:
• Inventory is maintained at the end of each month equal to 10% of the next
month’s projected sales in units.
• Purchases are paid 40% in the month acquired and the balance in the month
after.
• All sales are on credit, and 30% are collect in the month of sale and 70% in the
month after sale.
• Budgeted monthly sales in units for the first five months of 2017 are as follows:
o January 6,000 units
o February 5,000 units
o March 7,000 units
o April 9,000 units
o May 8,000 units
• Variable selling and administrative costs are $0.50 per clip and are paid in the
month of incurred.
What amount will be reported for budgeted Accounts Receivable at the end of April?
A. $8,100
B. $25,200
C. $6,300
D. $18,900
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–34
144. Maxim Fasteners distributes giant binder clips that sell for $3 each. Maxim pays $1.20
each to buy the clips. The company has $4,000 per month in fixed costs. Policies and
other information follow:
• Inventory is maintained at the end of each month equal to 10% of the next
month’s projected sales in units.
• Purchases are paid 40% in the month acquired and the balance in the month
after.
• All sales are on credit, and 30% are collect in the month of sale and 70% in the
month after sale.
• Budgeted monthly sales in units for the first five months of 2017 are as follows:
o January 6,000 units
o February 5,000 units
o March 7,000 units
o April 9,000 units
o May 8,000 units
• Variable selling and administrative costs are $0.50 per clip and are paid in the
month of incurred.
How much will budgeted contribution margin be for April?
A. $11,700
B. $21,000
C. $12,600
D. $9,100
145. Tee Time manufactures wireless USB ports and sells them for $9 each. The company
recently began marketing and selling the USB ports on the Web, and based on
economic predictions, the company expects sales to increase dramatically. Unit sales in
December, 2017 totaled 18,000 units. Sales for 2018 are expected to increase by 10%
each month for the near future. How much is the sales budget for February?
A. $178,200
B. $21,780
C. $196,020
D. $194,400
146. Hallmart expects to make inventory purchases in the next three months as follows:
April $56,000
May 80,000
June 90,000
Prior experience has shown that 35% of a month’s purchases are paid in the month of
purchase and 65% in the month following purchase. March purchases were $65,000.
How much are cash disbursements for purchases during May?
A. $28,000
B. $86,500
C. $71,600
D. $64,400
Chapter 10 Budgetary Planning and Control
10–35
147. Market Leasing budgeted credit sales in the first quarter of 2018 to be as follows:
January $210,000
February 190,000
March 170,000
The budgeted beginning cash balance at February 1 is expected to be $14,000 and
budgeted monthly cash disbursements are expected to be $198,000. Credit sales in
December, 2017 are expected to be $204,000. The company expects to collect 20% of a
month’s sales in the month of sale and 80% in the following month. How much is the
budgeted cash balance at the end of February?
A. $22,000
B. $206,000
C. $8,000
D. $10,000
148. Hanson Retailers planned to make 280,000 cans of pasta sauce and spend $140,000 on
tomatoes during November. However, demand was weak due to increased competition,
and only 260,000 cans of pasta sauce were produced. The actual cost incurred was
$132,000. Tomato prices were as expected during the period. Which of the following
statements would be a fair statement regarding Hanson’s performance on tomato
usage?
A. Hanson was under budget by $2,000 and did well controlling costs.
B. Hanson was over budget by $2,000.
C. Hanson’s flexible budget for tomatoes for performance evaluation was $132,000.
D. Hanson saved $8,000 in material costs for the period.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–36
149. The results of operations for the Budget Pesticides, for the fourth quarter of 2017 were
as follows:
Sales of bug spray $600,000
Variable cost of goods sold 280,000
Contribution margin 320,000
Fixed production costs $70,000
Fixed selling and administrative expenses 30,000 100,000
Income before taxes 220,000
Income taxes 88,000
Net income $132,000
Budget Pesticide uses the variable costing method. The company’s balance sheet
reported the following amounts as of the end of the fourth quarter of 2017:
Cash
$ 30,000
Accounts payable
$ 44,800
Accounts receivable
300,000
Common stock
140,200
Fixtures and equipment
130,000
Retained earnings
195,000
Accumulated depreciation
80,000
Additional information:
1. Sales and variable costs of sales are expected to increase by 5% in the next
quarter.
2. All sales are on credit with 50% collected in the quarter of sale and 50% collected
in the following quarter.
3. Variable cost of sales consists of 40% materials, 40% direct labor, and 20%
variable overhead.
4. All materials are purchased on credit and 60% are paid for in the quarter of
purchase and the remaining amount is paid for in the quarter after purchase.
There is no beginning or ending inventory.
5. Direct labor and variable overhead are paid in the quarter the expenses are
incurred.
6. Fixed production costs include $3,000 of depreciation. Fixed production costs are
paid in the quarter they are incurred.
7. Fixed selling and administrative costs, other than $4,000 of depreciation
expense, are expected to increase by 2% per quarter. Fixed selling and
administrative costs are paid in the quarter they are incurred.
8. The tax rate is expected to be 40%. All taxes are paid in the quarter they are
incurred.
How much is the budgeted contribution margin for the first quarter of 2018?
A. $266,000
B. $336,000
C. $406,000
D. $250,000
Chapter 10 Budgetary Planning and Control
10–37
150. The results of operations for the Budget Pesticides, for the fourth quarter of 2017 were
as follows:
Sales of bug spray $600,000
Variable cost of goods sold 280,000
Contribution margin 320,000
Fixed production costs $70,000
Fixed selling and administrative expenses 30,000 100,000
Income before taxes 220,000
Income taxes 88,000
Net income $132,000
Budget Pesticide uses the variable costing method. The company’s balance sheet
reported the following amounts as of the end of the fourth quarter of 2017:
Cash
$ 30,000
Accounts payable
$ 44,800
Accounts receivable
300,000
Common stock
140,200
Fixtures and equipment
130,000
Retained earnings
195,000
Accumulated depreciation
80,000
Additional information:
1. Sales and variable costs of sales are expected to increase by 5% in the next
quarter.
2. All sales are on credit with 50% collected in the quarter of sale and 50% collected
in the following quarter.
3. Variable cost of sales consists of 40% materials, 40% direct labor, and 20%
variable overhead.
4. All materials are purchased on credit and 60% are paid for in the quarter of
purchase and the remaining amount is paid for in the quarter after purchase.
There is no beginning or ending inventory.
5. Direct labor and variable overhead are paid in the quarter the expenses are
incurred.
6. Fixed production costs include $3,000 of depreciation. Fixed production costs are
paid in the quarter they are incurred.
7. Fixed selling and administrative costs, other than $4,000 of depreciation
expense, are expected to increase by 2% per quarter. Fixed selling and
administrative costs are paid in the quarter they are incurred.
8. The tax rate is expected to be 40%. All taxes are paid in the quarter they are
incurred.
How much are the total budgeted cash receipts for the first quarter of 2018?
A. $315,000
B. $600,000
C. $615,000
D. $645,750
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–38
151. The results of operations for the Budget Pesticides, for the fourth quarter of 2017 were
as follows:
Sales of bug spray $600,000
Variable cost of goods sold 280,000
Contribution margin 320,000
Fixed production costs $70,000
Fixed selling and administrative expenses 30,000 100,000
Income before taxes 220,000
Income taxes 88,000
Net income $132,000
Budget Pesticide uses the variable costing method. The company’s balance sheet
reported the following amounts as of the end of the fourth quarter of 2017:
Cash
$ 30,000
Accounts payable
$ 44,800
Accounts receivable
300,000
Common stock
140,200
Fixtures and equipment
130,000
Retained earnings
195,000
Accumulated depreciation
80,000
Additional information:
1. Sales and variable costs of sales are expected to increase by 5% in the next
quarter.
2. All sales are on credit with 50% collected in the quarter of sale and 50% collected
in the following quarter.
3. Variable cost of sales consists of 40% materials, 40% direct labor, and 20%
variable overhead.
4. All materials are purchased on credit and 60% are paid for in the quarter of
purchase and the remaining amount is paid for in the quarter after purchase.
There is no beginning or ending inventory.
5. Direct labor and variable overhead are paid in the quarter the expenses are
incurred.
6. Fixed production costs include $3,000 of depreciation. Fixed production costs are
paid in the quarter they are incurred.
7. Fixed selling and administrative costs, other than $4,000 of depreciation
expense, are expected to increase by 2% per quarter. Fixed selling and
administrative costs are paid in the quarter they are incurred.
8. The tax rate is expected to be 40%. All taxes are paid in the quarter they are
incurred.
How much is the budgeted cash disbursements for materials in the first quarter of 2018?
A. $176,400
B. $288,400
C. $70,560
D. $115,360
Chapter 10 Budgetary Planning and Control
10–39
152. The results of operations for the Budget Pesticides, for the fourth quarter of 2017 were
as follows:
Sales of bug spray $600,000
Variable cost of goods sold 280,000
Contribution margin 320,000
Fixed production costs $70,000
Fixed selling and administrative expenses 30,000 100,000
Income before taxes 220,000
Income taxes 88,000
Net income $132,000
Budget Pesticide uses the variable costing method. The company’s balance sheet
reported the following amounts as of the end of the fourth quarter of 2017:
Cash
$ 30,000
Accounts payable
$ 44,800
Accounts receivable
300,000
Common stock
140,200
Fixtures and equipment
130,000
Retained earnings
195,000
Accumulated depreciation
80,000
Additional information:
1. Sales and variable costs of sales are expected to increase by 5% in the next
quarter.
2. All sales are on credit with 50% collected in the quarter of sale and 50% collected
in the following quarter.
3. Variable cost of sales consists of 40% materials, 40% direct labor, and 20%
variable overhead.
4. All materials are purchased on credit and 60% are paid for in the quarter of
purchase and the remaining amount is paid for in the quarter after purchase.
There is no beginning or ending inventory.
5. Direct labor and variable overhead are paid in the quarter the expenses are
incurred.
6. Fixed production costs include $3,000 of depreciation. Fixed production costs are
paid in the quarter they are incurred.
7. Fixed selling and administrative costs, other than $4,000 of depreciation
expense, are expected to increase by 2% per quarter. Fixed selling and
administrative costs are paid in the quarter they are incurred.
8. The tax rate is expected to be 40%. All taxes are paid in the quarter they are
incurred.
If total cash disbursements are budgeted at $479,472, how much is the budgeted cash
at the end of the first quarter of 2018?
A. $615,000
B. $135,600
C. $150,600
D. $165,528
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
10–40
153. The results of operations for the Budget Pesticides, for the fourth quarter of 2017 were
as follows:
Sales of bug spray $600,000
Variable cost of goods sold 280,000
Contribution margin 320,000
Fixed production costs $70,000
Fixed selling and administrative expenses 30,000 100,000
Income before taxes 220,000
Income taxes 88,000
Net income $132,000
Budget Pesticide uses the variable costing method. The company’s balance sheet
reported the following amounts as of the end of the fourth quarter of 2017:
Cash
$ 30,000
Accounts payable
$ 44,800
Accounts receivable
300,000
Common stock
140,200
Fixtures and equipment
130,000
Retained earnings
195,000
Accumulated depreciation
80,000
Additional information:
1. Sales and variable costs of sales are expected to increase by 5% in the next
quarter.
2. All sales are on credit with 50% collected in the quarter of sale and 50% collected
in the following quarter.
3. Variable cost of sales consists of 40% materials, 40% direct labor, and 20%
variable overhead.
4. All materials are purchased on credit and 60% are paid for in the quarter of
purchase and the remaining amount is paid for in the quarter after purchase.
There is no beginning or ending inventory.
5. Direct labor and variable overhead are paid in the quarter the expenses are
incurred.
6. Fixed production costs include $3,000 of depreciation. Fixed production costs are
paid in the quarter they are incurred.
7. Fixed selling and administrative costs, other than $4,000 of depreciation
expense, are expected to increase by 2% per quarter. Fixed selling and
administrative costs are paid in the quarter they are incurred.
8. The tax rate is expected to be 40%. All taxes are paid in the quarter they are
incurred.
How much is the budgeted Accounts Receivable at the end of the first quarter of 2018?
A. $600,000
B. $615,000
C. $315,000
D. $300,000