46) The Pizza Merchandise Company has budgeted $40,000 in sales for the month of December.
The company’s cost of goods sold is 30% of sales. If the company has budgeted to purchase
$18,000 in merchandise during December, then the budgeted change in inventory levels over the
month of December is:
A) $6,000 increase.
B) $10,000 decrease.
C) $22,000 decrease.
D) $15,000 increase.
47) Pablo Company has budgeted production for next year as follows:
Quarter
First Second Third Fourth
Production in units 60,000 80,000 90,000 70,000
Two pounds of material A are required for each unit produced. The company has a policy of
maintaining a stock of material A on hand at the end of each quarter equal to 25% of the next
quarter’s production needs for material A. A total of 30,000 pounds of material A are on hand to
start the year. Budgeted purchases of material A for the second quarter would be:
A) 82,500 pounds.
B) 165,000 pounds.
C) 200,000 pounds.
D) 205,000 pounds.
48) Vargas 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.
49) Pouch 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.
50) Trini 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.
51) The manufacturing overhead budget at Levetron Corporation is based on budgeted direct
labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in
August. The variable overhead rate is $8.60 per direct labor-hour. The company’s budgeted fixed
manufacturing overhead is $132,770 per month, which includes depreciation of $24,850. All
other fixed manufacturing overhead costs represent current cash flows. The company recomputes
its predetermined overhead rate every month. The predetermined overhead rate for August
should be:
A) $8.60.
B) $27.30.
C) $23.80.
D) $18.70.
52) Rack Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The
direct labor budget indicates that 3,700 direct labor-hours will be required in September. The
variable overhead rate is $5.70 per direct labor-hour. The company’s budgeted fixed
manufacturing overhead is $48,100 per month, which includes depreciation of $5,550. All other
fixed manufacturing overhead costs represent current cash flows. The company recomputes its
predetermined overhead rate every month. The predetermined overhead rate for September
should be:
A) $5.70.
B) $13.00.
C) $18.70.
D) $17.20.
53) The manufacturing overhead budget at Rost 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.
54) The marketing and administrative expense budget of Frazier Corporation is based on
budgeted unit sales, which are 5,500 units for June. The variable marketing and administrative
expense is $1.00 per unit. The budgeted fixed marketing and administrative expense is $101,200
per month, which includes depreciation of $6,050 per month. The remainder of the fixed
marketing and administrative expense represents current cash flows. The cash disbursements for
marketing and administrative expenses on the June marketing and administrative expense budget
should be:
A) $100,650.
B) $106,700.
C) $5,500.
D) $95,150.
55) Bentonville Inc. bases its marketing and administrative expense budget on budgeted unit
sales. The sales budget shows 3,200 units are planned to be sold in December. The variable
marketing and administrative expense is $3.10 per unit. The budgeted fixed marketing and
administrative expense is $60,800 per month, which includes depreciation of $6,720 per month.
The remainder of the fixed marketing and administrative expense represents current cash flows.
The cash disbursements for marketing and administrative expenses on the December marketing
and administrative expense budget should be:
A) $70,720.
B) $54,080.
C) $64,000.
D) $9,920.
56) The Colson Company has budgeted sales for the year as follows:
Quarter 1 2 3 4
Sales in units 12,000 14,000 18,000 16,000
The ending inventory of finished goods for each quarter should equal 25% of the next quarter’s
budgeted sales in units. The finished goods inventory at the start of the year is 3,000 units.
Scheduled production for the third quarter is (in units)
A) 17,500 units.
B) 18,500 units.
C) 18,000 units.
D) 16,500 units.
57) The Colson Company has budgeted sales for the year as follows:
Quarter 1 2 3 4
Sales in units 12,000 14,000 18,000 16,000
The ending inventory of finished goods for each quarter should equal 25% of the next quarter’s
budgeted sales in units. The finished goods inventory at the start of the year is 3,000 units.
Scheduled production for the second quarter is (in units):
A) 17,500 units.
B) 16,500 units.
C) 15,000 units.
D) 13,000 units.
58) The Tori Company had budgeted production for the year as follows:
Quarter 1 2 3 4
Production in units 10,000 12,000 16,000 14,000
Four pounds of raw materials are required for each unit produced. Raw materials on hand at the
start of the year total 4,000 lbs. The raw materials inventory at the end of each quarter should
equal 10% of the next quarter’s production needs in materials. Budgeted purchases of raw
materials in the third quarter would be:
A) 63,200 lbs.
B) 62,400 lbs.
C) 56,800 lbs.
D) 50,400 lbs.
59) The Molson Company had budgeted production for the year as follows:
Quarter 1 2 3 4
Production in units 10,000 12,000 16,000 14,000
Four pounds of raw materials are required for each unit produced. Raw materials on hand at the
start of the year total 4,000 lbs. The raw materials inventory at the end of each quarter should
equal 10% of the next quarter’s production needs in materials. Budgeted purchases of raw
materials in the second quarter would be:
A) 48,000 lbs.
B) 46,400 lbs.
C) 49,600 lbs.
D) 54,400 lbs.
60) Krier Industries has just completed its sales forecasts and its marketing department estimates
that the company will sell 36,000 units during the upcoming year. In the past, management has
maintained inventories of finished goods at approximately three months’ sales. However, the
estimated inventory at the start of the year of the budget period is only 6,000 units. Sales occur
evenly throughout the year. What is the estimated production level (units) for the first month of
the upcoming budget year?
A) 12,000.
B) 9,000.
C) 6,000.
D) 3,000.
61) The Ralston Company manufactures a special line of graphic tubing items. The company
estimates it will sell 75,000 units of this item in 2020. The beginning finished goods inventory
contains 20,000 units. The target for each year’s ending inventory is 10,000 units.
Each unit requires five feet of plastic tubing. The tubing inventory currently includes 70,000 feet
of the required tubing. Materials on hand are targeted to equal three months’ production. Any
shortage in materials will be made up by the immediate purchase of materials. Sales take place
evenly throughout the year.
What is the production budget (in units) for 2020?
A) 60,000.
B) 65,000.
C) 75,000.
D) 85,000.
62) The Ralston Company manufactures a special line of graphic tubing items. The company
estimates it will sell 75,000 units of this item in 2020. The beginning finished goods inventory
contains 20,000 units. The target for each year’s ending inventory is 10,000 units.
Each unit requires five feet of plastic tubing. The tubing inventory currently includes 70,000 feet
of the required tubing. Materials on hand are targeted to equal three months’ production. Any
shortage in materials will be made up by the immediate purchase of materials. Sales take place
evenly throughout the year.
What are the materials requirements (in feet) for 2020?
A) 313,750.
B) 336,250.
C) 363,750.
D) 386,250.
63) The following budgeted information is provided:
Month 1 2 3
Sales in units 15,000 20,000 18,000
Production in units 16,000 22,000 15,000
One pound of materials is required for each finished unit. The inventory of materials at the end
of each month should equal 20% of the following month’s production needs. At the beginning of
Month 1, there were 3,200 lbs. of materials on hand. Purchases of raw materials for Month 1
would be (in pounds):
A) 25,000.
B) 23,400.
C) 17,200.
D) 22,000.
64) Which of the following represents the correct order in which the indicated 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) Marketing and administrative expense budget, budgeted income statement, cash budget,
budgeted balance sheet.
65) The starting point in preparing a comprehensive budget for a manufacturing company limited
by its ability to produce and not by its ability to sell is
A) a sales forecast.
B) an estimate of production capacity.
C) an estimate of cash receipts and disbursements.
D) a projection of fixed asset acquisitions.
66) Merriweather Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and
other institutions. The table tops are manufactured by Merriweather, but the table legs are
purchased from an outside supplier. The Assembly Department takes a manufactured table top
and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The
company follows a policy of producing enough tables to ensure that 40% of next month’s sales
are in the finished goods inventory. Merriweather also purchases sufficient raw materials (legs)
to ensure that raw materials (legs) inventory is 60% of the following month’s scheduled
production needs. Merriweather’s sales budget in units for the next quarter is as follows: (CMA
adapted)
July 2,300
August 2,500
September 2,100
Merriweather’s ending inventories in units for June 30 are:
Finished goods 1,900
Raw materials (legs) 4,000
The number of tables to be produced during August is:
A) 1,400 tables.
B) 2,340 tables.
C) 1,440 tables.
D) 1,900 tables.
67) Merriweather Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and
other institutions. The table tops are manufactured by Merriweather, but the table legs are
purchased from an outside supplier. The Assembly Department takes a manufactured table top
and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The
company follows a policy of producing enough tables to ensure that 40% of next month’s sales
are in the finished goods inventory. Merriweather also purchases sufficient raw materials (legs)
to ensure that raw materials (legs) inventory is 60% of the following month’s scheduled
production needs. Merriweather’s sales budget in units for the next quarter is as follows: (CMA
adapted)
July 2,300
August 2,500
September 2,100
Merriweather’s ending inventories in units for June 30 are:
Finished goods 1,900
Raw materials (legs) 4,000
Assume the required production for August and September is 1,600 units and 1,800 units,
respectively, and the July 31 raw materials (legs) inventory is 4,200 units. The number of table
legs to be purchased in August is:
A) 6,520 legs.
B) 9,400 legs.
C) 6,280 legs.
D) 6,400 legs.
68) Budgeted production needs are determined by:
A) adding budgeted sales in units to the desired ending inventory in units and deducting the
beginning inventory in units from this total.
B) adding budgeted sales in units to the beginning inventory in units and deducting the desired
ending inventory in units from this total.
C) adding budgeted sales in units to the desired ending inventory in units.
D) deducting the beginning inventory in units from budgeted sales in units.
69) Which of the following is not correct regarding the manufacturing overhead budget?
A) Total budgeted cash disbursements for 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 production other
than direct materials and direct labor.
D) Budgeting overhead requires the use of many factors including production levels,
management discretion, corporate policies, and external factors.