38. Which one of the following budgets would be the last one prepared in the master budget
preparation process?
39. Cash disbursements would
not
include payments for:
40. Which of the following types of accounts would
not
be included on a budgeted balance
sheet?
41. Which of the following budgets is
not
required in a wholesale organization?
42. Which of the following budgets is
not
required in a service organization?
43. Sensitivity analysis can best be used in the budgeting process to:
44. The Sledge Hammer Company manufactures a line of high quality tools. The company sold
1,000,000 hammers at a price of $4 per unit last year. The company estimates that this volume
represents a 20% share of the current hammers market. The market is expected to increase by
5%. Marketing specialists have determined that, as a result of a new advertising campaign and
packaging, the company will increase its share of this larger market to 24%. Due to changes in
prices, the new price for the hammer will be $4.30 per unit. This new price is expected to be in
line with the competition and have no effect on the volume estimates. What are the estimated
sales revenues in the coming year?
45. TRS is a large securities dealer. Last year, the company made 120,000 trades with an
average commission of $120. Because of the general economic climate, TRS expects trade volume
to decline by 20%. Fortunately, the average commission per trade is likely to increase by 10%
because trades are expected to be large in the coming year. What are the estimated commission’s
revenues for TRS in the coming year?
46. TLC Credit, Inc. has $35.0 million in consumer loans with an average interest rate of
12.0%. The bank also has $30.0 million in home equity loans with an average interest rate of 8.0%.
Finally, the bank owns $5.0 million in corporate securities with an average interest rate of 6%.
Next year, consumer loans will increase to $40.0 million because of a rate decrease to 10.0%,
while home equity loans will increase to $32.0 million at an average interest rate of 6.5%.
Unfortunately, the investment in corporate securities will decrease by 20% and the average
interest rate will be only 9.0%. What is TLC’s estimated change in revenues next year?
13–27
47. Hawle Manufacturing Company is in the process of preparing its 2012 budget and is
anticipating the following changes:
30% increase in the number of units sold.
20% increase in the direct material unit cost.
15% increase in the direct labor cost per unit.
10% increase in the manufacturing overhead cost per unit.
14% increase in the marketing price.
7% increase in the administrative expenses.
Hawle does not keep any units in inventory.
The composition of the cost of finished products during 2012 for materials, direct labor, and
factory overhead, respectively, was in the ratio of 3 to 2 to 1. The condensed income statement for
2012 is as follows:
What are estimated net sales for 2012, assuming the sales return/gross sales relationship
remains constant?
13–28
48. Hawle Manufacturing Company is in the process of preparing its 2012 budget and is
anticipating the following changes:
30% increase in the number of units sold.
20% increase in the direct material unit cost.
15% increase in the direct labor cost per unit.
10% increase in the manufacturing overhead cost per unit.
14% increase in the marketing price.
7% increase in the administrative expenses.
Hawle does not keep any units in inventory.
The composition of the cost of finished products during 2012 for materials, direct labor, and
factory overhead, respectively, was in the ratio of 3 to 2 to 1. The condensed income statement for
2012 is as follows:
What is the estimated cost of goods sold for 2012 assuming the number of units sold does not
change?
49. The Waverly Company has budgeted sales for the year as follows:
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)
50. The Waverly Company has budgeted sales for the year as follows:
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):
51. The Tobler Company had budgeted production for the year as follows:
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 (in lbs.):
52. The Tobler Company had budgeted production for the year as follows:
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 (in lbs.):
53. Kaufman 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?
54. The Sun Company manufactures a special line of graphic tubing items. The company
estimates it will sell 75,000 units of this item in 2012. 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 2012?
55. The Sun Company manufactures a special line of graphic tubing items. The company
estimates it will sell 75,000 units of this item in 2012. 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 2012?
56. The following budgeted information is provided:
One pound of material 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 was 3,200 lbs. of materials on hand. Purchases of raw materials for Month 1 would
be (in pounds):
57. Davis Corporation had the following transactions in its first year of operations:
What is the cash balance at year end?
58. The Task Company is to begin operations in April. It has budgeted April sales of $30,000,
May sales of $34,000, June sales of $40,000, July sales of $42,000, and August sales of $38,000.
Note that 10% of each month’s sales will represent cash sales; 75% of the balance will be
collected in the month following the sale, 17% the second month, 6% the third month, and the
balance is bad debts.
What is the amount of cash to be collected in the month of July?
59. The Task Company is to begin operations in April. It has budgeted April sales of $30,000,
May sales of $34,000, June sales of $40,000, July sales of $42,000, and August sales of $38,000.
Note that 10% of each month’s sales will represent cash sales; 75% of the balance will be
collected in the month following the sale, 17% the second month, 6% the third month, and the
balance is bad debts.
What is the amount of cash to be collected in the month of August?
60. Assume the Task Company charges 1 1/2% on any balance that is not collected in the
month following the month of sale. This charge will also change the collection percentages to 15%
cash sales, 80% of the balance collected in the month following the sale, 16% the second month,
and 3% the third month. This stricter credit policy will reduce the estimated sales budgets by 7%
each month. What is the amount of cash to be collected in July?