86) A sporting equipment store expects to purchase $8,000 of ski boots in October. The store had
$2,000 of ski boots in merchandise inventory at the beginning of October, and expects to have
$3,000 of ski boots in merchandise inventory at the end of October to cover part of anticipated
November sales. What is the budgeted cost of goods sold for October?
A) $5,000. B) $9,000. C) $10,000. D) $8,000. E) $7,000.
87) Masterson Company’s budgeted production calls for 56,000 liters in April and 52,000 liters in May
of a key raw material that costs $1.85 per liter. Each month’s ending raw materials inventory
should equal 30% of the following month’s budgeted materials. The April 1 inventory for this
material is 16,800 liters. What is the budgeted materials need in liters for April?
A) 39,200 liters.
B) 71,600 liters.
C) 57,600 liters.
D) 56,000 liters.
E) 54,800 liters.
88) A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter
and 30,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a
key raw material. The company aims to end each quarter with ending raw materials inventory equal
to 20% of the following quarter’s material needs. Beginning inventory for this material is 18,000 kg
and the cost per kg is $8. What is the budgeted materials need in kg. in the first quarter?
A) 84,000 kg.
B) 90,000 kg.
C) 102,000 kg.
D) 120,000 kg.
E) 108,000 kg.
89) A sporting goods manufacturer budgets production of 45,000 pairs of ski boots in the first quarter
and 30,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a
key raw material. The company aims to end each quarter with ending raw materials inventory equal
to 20% of the following quarter’s material needs. Beginning inventory for this material is 18,000 kg
and the cost per kg is $8. What is the budgeted materials purchases cost for the first quarter?
A) $729,600. B) $864,000. C) $672,000. D) $576,000. E) $720,000.
90) A quantity of inventory that provides protection against lost sales caused by unfulfilled demands
from customers is called:
A) Budgeted stock.
B) Just-in-time inventory.
C) Capital stock.
D) Continuous inventory.
E) Safety stock.
91) Alliance Company’s budgets production of 24,000 units in January and 28,000 units in the
February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each
month’s ending raw materials inventory should equal 40% of the following month’s budgeted
materials. The January 1 inventory for this material is 38,400 pounds. What is the budgeted
materials need in pounds for January?
A) 96,000 pounds.
B) 140,800 pounds.
C) 57,600 pounds.
D) 83,200 pounds.
E) 102,400 pounds.
92) Alliance Company’s budgets production of 24,000 units in January and 28,000 units in the
February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each
month’s ending raw materials inventory should equal 40% of the following month’s budgeted
materials. The January 1 inventory for this material is 38,400 pounds. What is the budgeted
materials cost for January?
A) $240,000. B) $352,000. C) $256,000. D) $208,000. E) $144,000.
93) Schrank Company is trying to decide how many units of merchandise to order each month. The
company’s policy is to have 20% of the next month’s sales in inventory at the end of each month.
Projected sales for August, September, and October are 30,000 units, 20,000 units, and 40,000
units, respectively. How many units must be purchased in September?
A) 20,000. B) 28,000. C) 24,000. D) 22,000. E) 14,000.
94) Masterson Company’s budgeted production calls for 56,000 liters in April and 52,000 liters in May
of a key raw material that costs $1.85 per liter. Each month’s ending raw materials inventory
should equal 30% of the following month’s budgeted materials. The April 1 inventory for this
material is 16,800 liters. What is the budgeted materials purchases for April?
A) $103,600. B) $132,460. C) $106,560. D) $101,380. E) $72,520.
95) Boulware Company’s budgeted production calls for 5,000 units in October and 8,000 units in
November. Each unit requires 8 pounds (lbs.) of raw material A. Each month’s ending inventory of
raw materials should equal 20% of the following month’s budgeted materials requirements. The
October 1 inventory for this material is 8,000 pounds. What is the budgeted materials purchases for
this key material in pounds for October?
A) 40,000 lbs. B) 35,200 lbs. C) 52,800 lbs. D) 44,800 lbs. E) 60,800 lbs.
Jan.
Feb.
March
April
1,800
2,000
2,100
1,600
96) When preparing the cash budget, all of the following should be considered except:
A) Cash payments for income taxes.
B) Cash payments for capital expenditures.
C) Depreciation expense.
D) Cash payments for merchandise.
E) Cash receipts from customers.
97) Bioclean Co., a merchandiser, sells a biodegradable cleaning product and has predicted the following
sales for the first four months of the current year:
Sales in Units
Ending inventory for each month should be 20% of the next month’s sales, and the December 31
inventory is consistent with that policy. How many units should be purchased in February?
A) 1,600. B) 2,000. C) 2,820. D) 2,420. E) 2,020.
51
98) Garcia Corporation’s April sales forecast projects that 5,000 units will sell at a price of $10.50 per
unit. The desired ending inventory is 30% higher than the beginning inventory, which was 1,000
units. Budgeted purchases of units in April would be:
A) 6,000 units.
B) 6,300 units.
C) 5,300 units.
D) 5,000 units.
E) None of the choices are correct.
99) The sales budget for Modesto Corp. shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12, respectively. The desired ending
inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning
inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted
purchases of Product A for the year would be:
A) 19,500 units.
B) 20,400 units.
C) 22,400 units.
D) 12,200 units.
E) 20,000 units.
100) The sales budget for Modesto Corp. shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12, respectively. The desired ending
inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning
inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Budgeted
purchases of Product B for the year would be:
A) 26,500 units.
B) 20,500 units.
C) 16,500 units.
D) 22,500 units.
E) 24,500 units.
101) The sales budget for Modesto Corp. shows that 20,000 units of Product A and 22,000 units of
Product B are going to be sold for prices of $10 and $12, respectively. The desired ending
inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning
inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. Total
budgeted sales of both products for the year would be:
A) $264,000. B) $500,000. C) $464,000. D) $42,000. E) $200,000.
102) If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and budgeted cost
of goods sold is $10,260, budgeted purchases should be:
A) $11,360 B) $1,100 C) $9,160 D) $1,960 E) $860
103) Coomb’s Fashions forecasts sales of $125,000 for the quarter ended December 31. Its gross profit
rate is 20% of sales, and its September 30 inventory is $32,500. If the December 31 inventory is
targeted at $41,500, budgeted purchases for the fourth quarter should be:
A) $109,000. B) $25,000. C) $91,000. D) $134,000. E) $91,500.
104) A plan that shows the expected cash inflows and cash outflows during the budget period, including
receipts from loans needed to maintain a minimum cash balance and repayments of such loans, is
called a(n):
A) Cash budget.
B) Rolling budget.
C) Operating budget.
D) Income statement.
E) Capital expenditures budget.
105) Which of the following accounts would appear on a budgeted balance sheet?
A) Income tax expense.
B) Depreciation expense.
C) Sales commissions.
D) Accounts receivable.
E) All of the choices are correct.
57
106) Which of the following budgets is not completed before a cash budget is prepared?
A) Budgeted income statement.
B) Sales budget.
C) General and administrative expense budget.
D) Merchandise purchases budget.
E) Capital expenditures budget.
107) Which of the following would not be used in preparing a cash budget for October?
A) Budgeted capital equipment purchases for October.
B) Beginning cash balance on October 1.
C) Budgeted sales and collections for October.
D) Budgeted salaries expense for October.
E) Estimated depreciation expense for October.
108) Western Company is preparing a cash budget for June. The company has $12,000 cash at the
beginning of June and anticipates $30,000 in cash receipts and $34,500 in cash disbursements
during June. Western Company has an agreement with its bank to maintain a minimum cash
balance of $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the
$10,000 required balance, during June the company must:
A) Repay $2,500.
B) Borrow $4,500.
C) Repay $7,500.
D) Borrow $2,500.
E) Borrow $10,000.
109) A managerial accounting report that presents predicted amounts of the company’s assets, liabilities,
and equity as of the end of the budget period is called a(n):
A) Cash balance sheet.
B) Continuous balance sheet.
C) Operating balance sheet.
D) Budgeted balance sheet.
E) Rolling balance sheet.
110) Southland Company is preparing a cash budget for August. The company has $17,000 cash at the
beginning of August and anticipates $120,800 in cash receipts and $134,500 in cash disbursements
during August. Southland Company wants to maintain a minimum cash balance of $10,000. The
preliminary cash balance at the end of August before any loan activity is:
A) $27,000. B) $3,300. C) $13,300. D) $137,800. E) ($13,700).
