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109.
Sensitivity analysis can best be used in the budgeting process to:
Essay Questions
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110.
Dalley Inc. has the following information for its first year of operations:
Revenues (200,000 units)
$2,900,000
Manufacturing costs:
Materials
$168,000
Variable cash costs
142,400
Fixed cash costs
327,600
Depreciation (fixed)
999,000
Marketing & administrative costs:
Marketing (variable)
422,400
Marketing depreciation
149,600
Administrative (fixed)
509,200
Administrative depreciation
74,800
Total costs
$2,793,000
Operating profits
$107,000
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111.
Oregon Inc. has the following information for its first year of operations:
Revenues (250,000 units)
$3,730,000
Manufacturing costs:
Materials
$665,000
Variable cash costs
904,000
Fixed cash costs
360,000
Depreciation (fixed)
445,000
Marketing & administrative costs:
Marketing (variable)
475,000
Marketing depreciation
113,000
Administrative (fixed)
450,550
Administrative depreciation
42,000
Total costs
$3,454,550
Operating profits
$275,450
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112.
A sales budget is given below for one of the products manufactured by Trumpet, Ltd.
Month
Sales Budget
in Units
July
28,000
August
30,000
September
34,000
October
36,000
November
29,000
December
26,000
The inventory of finished goods at the end of each month must be equal to 20% of the
next month's sales. On June 30, the finished goods inventory totaled 6,800 units.
Each unit of product requires ten ounces of a special chemical known as AQ-12.
Sometimes the chemical is in short supply; for this reason, the company has a policy of
maintaining an inventory at the end of each month equal to 75% of the next month's
production needs. This requirement was met on July 1 of the current year.
Required:
Prepare a budget showing the quantity of AQ-12 to be purchased for October.
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113.
A sales budget is given below for one of the products manufactured by Reyes, Ltd.
Month
Sales Budget
in Units
July
36,000
August
40,000
September
48,000
October
52,000
November
38,000
December
31,000
114.
Flores Corporation is working on its direct labor budget for the next two months. Each unit
of output requires 0.07 direct labor-hours. The direct labor rate is $8.50 per direct labor-
hour. The production budget calls for producing 4,800 units in June and 5,300 units in July.
Required:
Construct the direct labor budget for the next two months, assuming that the direct labor
work force is fully adjusted to the total direct labor-hours needed each month.
115.
Arctic Corporation is working on its direct labor budget for the next two months. Each unit
of output requires 0.41 direct labor-hours. The direct labor rate is $8.50 per direct labor-
hour. The production budget calls for producing 2,300 units in August and 2,200 units in
September. 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 960 hours in total each month
even if there is not enough work to keep them busy.
Required:
Construct the direct labor budget for the next two months.
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116.
Endpoint Inc. bases its manufacturing overhead budget on budgeted direct labor-hours.
The variable overhead rate is $1.30 per direct labor-hour. The company's budgeted fixed
manufacturing overhead is $98,900 per month, which includes depreciation of $19,780. All
other fixed manufacturing overhead costs represent current cash flows. The September
direct labor budget indicates that 8,600 direct labor-hours will be required in that month.
Required:
a. Determine the cash disbursement for manufacturing overhead for September.
b. Determine the predetermined overhead rate for September.
117.
The manufacturing overhead budget of Waverly Corporation is based on budgeted direct
labor-hours. The June direct labor budget indicates that 5,800 direct labor-hours will be
required in that month. The variable overhead rate is $7.70 per direct labor-hour. The
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118.
Ng Inc. bases its marketing and administrative expense budget on the number of units
sold. The variable marketing and administrative expense is $4.30 per unit. The budgeted
fixed marketing and administrative expense is $30,240 per month, which includes
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depreciation of $3,510. The remainder of the fixed marketing and administrative expense
represents current cash flows. The sales budget shows 2,700 units are planned to be sold
in April.
Required:
Prepare a schedule showing total marketing and administrative expenses for April, as well
as the cash disbursements for marketing and administrative expenses.
119.
The marketing and administrative expense budget of Kimble Corporation is based on the
number of units sold, which are budgeted to be 2,500 units in January. The variable
marketing and administrative expense is $4.40 per unit. The budgeted fixed marketing and
administrative expense is $35,750 per month, which includes depreciation of $4,000. The
remainder of the fixed marketing and administrative expense represents current cash
flows.
Required:
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120.
Rocket Plating Company plans to sell 120,000 units of a certain product line at a price of
$6. There are 10,000 units of the product in the inventory at January 1 and the inventory is
to be increased 20% during the year.
Two types of materials are used to make the product. Four units of Material A each
costing 30 cents are required for each unit of product, and two units of Material B each
costing 40 cents are required for each unit of product. On January 1 there are 10,000 units
of Material A in inventory and 5,000 units of Material B. Plans for the year indicate that
12,000 units of Material A and 6,000 units of Material B are to be in the inventory on
December 31.
Each unit of product can be produced in 15 minutes of direct labor time. Direct labor is
paid at the rate of $8.00 an hour. The variable manufacturing overhead varies at the rate
of $0.50 per direct labor hour and the fixed manufacturing overhead for the year is
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121.
A sales budget is given below for one of the products manufactured by Dance, Ltd.
Month
Sales Budget
in Units
July
18,000
August
20,000
September
24,000
October
26,000
November
19,000
December
16,000
122.
The production manager of Dame Enterprises plans to have an inventory on hand at the
end of each month that will equal 150% of the next month's sales. This requirement was
met at the end of February. A sales budget for the four months ending June 30th is as
follows:
Month
Units
March
30,000
April
50,000
May
80,000
June
40,000
Required:
Prepare a production budget for April and May.
123.
Atlanta Import Enterprises expects the following unit sales over the next five months:
Month
Unit Sales
April
200,000
