60.
Mario’s Record Shop, a retail store, has an average gross profit ratio of 30 percent. The
sales forecast for the next four months follows:
14–36
September
$65,000
October
$82,000
November
$96,000
December
$102,000
Mario’s inventory policy is to have ending inventory equal to 1.25 times the cost of sales
for the subsequent month, although it is estimated that the cost of inventory at August 31
will be $85,000.
Calculate the purchases budget, in dollars, for the months of September, October, and
November.
61.
Danzi, Inc., has budgeted sales for the month of July and estimated cost behavior patterns
for a number of its expenses listed below. From this information prepare an operating
forecast
Inv
available
14–37
expense budget for the month of July.
Budgeted sales revenue
$230,000
Budgeted sales
4,600 units
Budgeted production
4,900 units
(Partial listing of expense
items):
Sales commission
5% of sales
Sales salaries
$6,800
Production supervisor salaries
7,600
Administrative salaries
9,400
Administrative expense
8,000
Marketing promotions
$0.75 per unit
Depreciation on plant equipment
$5,000
Depreciation on office
equipment
2,500
Raw materials used
$7.50 per unit
Advertising
$4,200
Delivery expense
$0.50 per unit
Bad debt expense
1% of sales
Property taxes on plant
$5,000
Property taxes on office
3,000
Selling expenses:
Variable selling expenses:
Sales commission (5% *
Marketing promotions ($0.75
per unit * 4,600 units)
unit * 4,600 units)
14–39
62.
Sunset Center’s sales are all made on account. The firm’s collection experience has been
that 25 percent of a month’s sales are collected in the month of sale, 65 percent are
collected in the month following the sale, and 8 percent are collected in the second month
following the sale. The sales forecast for the months of May through August is:
May
$240,000
June
$280,000
July
$300,000
August
$350,000
Calculate the cash collections that would be included in the cash budgets for July and
August.
63.
Dominic’s, Inc. had actual sales for January and February and forecasted sales for March,
April, May, and June as follows:
Actual:
forecast
month
sales
14–40
January
$192,000
February
$218,000
Forecast:
March
$225,000
April
$202,000
May
$234,000
June
$250,000
Based on company experience, it is estimated that 35 percent of a month’s sales are
collected in the month of sale, 48 percent in the month following the sale, and 16 percent
in the second month following the sale.
Calculate the estimated cash collections for March, April, and May.
64.
The following information for the month of May has been provided for Bowser Company:
May 1, cash balance
$56,000
Cash collections anticipated in May
68,000
Sales
$192,000
$225,000
$202,000
$234,000
14–41
Expected May cash expenditures for
operating expenses
22,600
Inventory purchases to be paid in
May
54,200
Cash dividends declared in May and
to be paid in June
18,000
May depreciation expense
9,600
Interest income to be received from
investments
4,200
Production equipment purchase 50%
of which will be paid in May and the
balance will be paid in June
66,000
(a.) Prepare a cash budget for May.
65.
Peachtree’s Siding and Window Co. is a custom home improvement company. All sales are
made on account: 30 percent of a month’s sales are collected in the month of sale, 60
percent are collected in the month following the sale, and 8 percent are collected in the
Beginning cash balance
Cash collections
Interest from investments
Total cash available
Inventory purchases
Operating expenses
Production equipment
Total cash disbursements
Ending cash balance
14–42
second month following the sale. Cash on hand on October 1 is estimated to be $32,000.
Merchandise purchases and operating expenses are paid as follows:
In the month during which the
merchandise is purchased or the
cost is incurred
80%
In the subsequent month
20%
Peachtree’s Siding and Window Co.’s budgeted income statement for each of the next
three months is as follows:
August
September
October
Sales
$140,000
$169,000
$181,000
Cost of goods sold:
Beginning inventory
$16,400
$28,900
$25,600
Purchases
135,300
141,500
$149,700
Goods available
$151,700
$170,400
$175,300
Less: End. inventory
(28,900)
(25,600)
(21,200)
Cost of goods sold
$122,800
$144,800
$154,100
Gross profit
$17,200
$24,200
$26,900
Operating expenses
(11,400)
(15,100)
(14,300)
Operating income
$5,800
$9,100
$12,600
Prepare a cash budget for the month of October.
Cash receipts:
From August sales (8% * $140,000)
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66.
The monthly cash budgets for the first quarter of 2016 are shown below ($000 omitted) for
XYZ Company. A minimum cash balance of $40,000 is required. A line of credit has been
established with ABC’s bank at a 7.5% interest rate. Calculate the missing amounts:
January
February
March
Q1
Total
Cash balance,
beginning
$52
$?
$?
$52
Add collections
from customers
?
214
?
?
Total cash
available
188
?
312
674
Less
disbursements:
Purchase of
inventory
?
120
96
?
Operating
expenses
60
?
?
?
Capital
additions
68
16
?
88
Payment of
dividends
–
–
?
18
Total
disbursements
?
214
166
608
Excess
(deficiency) of
cash available
over
disbursements
(40)
?
146
?
Borrowings
?
–
–
?
Repayments
(including
interest)
–
–
?
?
Cash balance,
ending
$?
$40
$?
$65
14–46
AICPA: FN Measurement
Blooms: Create
Difficulty: 3 Hard
Learning Objective: 14-08 Prepare a cash budget.
Topic: The Cash Budget
67
.
XYZ Company produces high quality widgets. Three raw materials are converted into the
finished product by two labor groups. Manufacturing overhead is applied to finished units
based on direct labor hours. The following standards have been established for each widget
produced:
Raw material #1
50 lbs. @ $6.50/lb
Raw material #2
24 ft. @ $4.75/ft
Raw material #3
1 container @ $16.00
Labor group #1
3 hrs @ $20.00/hr
Labor group #2
1.5 hrs @ $30.00/hr
Manufacturing overhead
$20.00/dhr
a) Calculate the standard cost of producing 400 high quality widgets.
Raw material #1
Raw material #2
Raw material #3
Labor group #1
3 hrs @ $20.00/hr =
Labor group #2
1.5 hrs @ $30.00/hr =
Manufacturing overhead
Standard cost per widget
Standard cost for 400 widgets
68.
XYZ, Inc., processes soy beans into Product A and Product B and the company’s
productivity and cost standards follow:
• From every bushel of beans processed, 6 pounds of Product A and 4 pounds of Product B
should be produced.
• Standard direct labor and variable overhead total $0.85 per bushel of beans processed.
• Standard fixed overhead (the predetermined fixed overhead application rate) is $0.70 per
bushel processed.
Calculate the standard absorption cost per pound for Product A and Product B produced
from the processing of 24,000 bushels of beans if the average cost per bushel is $3.75.