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159. The Fraley Corporation, a merchandising firm, has planned the following sales for the next
four months:
March April May June
Total budgeted sales $50,000 $70,000 $90,000 $60,000
Sales are made 40% for cash and 60% on account. From experience, the company has learned that
a month's sales on account are collected according to the following pattern:
Month of sale 70%
First month following month of sale 20%
Second month following month of sale 8%
Uncollectible 2%
The company requires a minimum cash balance of $4,000 to start a month.
Required:
a. Compute the budgeted cash receipts for June.
b. Assume the following budgeted data for June:
Purchases $52,000
Selling and administrative expenses $10,000
Depreciation $8,000
Equipment purchases $15,000
Beginning cash balance of June $6,000
Using this data, along with your answer to part (a) above, prepare a cash budget for June. Clearly
show any borrowing needed during the month. The company can borrow in any dollar amount, but
will not pay any interest until the following month.
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160. Bredder Supply Corporation manufactures and sells cotton gauze. Expected sales of gauze
(in boxes) for upcoming months are as follows:
June 35,000
July 39,000
August 41,000
September 37,000
October 34,000
November 33,000
December 36,000
Management likes to maintain a finished goods inventory equal to 20% of the next month's estimated
sales.
Required:
Prepare the company's production budget for the third quarter of this year (the months of July,
August and September). Include a column for each month and a total column for the entire quarter.
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161. A sales budget is given below for one of the products manufactured by the OMI Co.:
January 25,000 units
February 40,000 units
March 65,000 units
April 45,000 units
May 35,000 units
June 30,000 units
The inventory of finished goods at the end of each month must equal 20% of the next month's sales.
However, on December 31 the finished goods inventory totaled only 4,000 units.
Each unit of product requires three pounds of specialized material. Since the production of this
specialized material by OMI's suppliers is sometimes irregular, the company has a policy of
maintaining an ending inventory at the end of each month equal to 30% of the next month's
production needs. This requirement had been met on January 1 of the current year.
Required:
a. Prepare a budget showing the required production each month for January, February, March, and
April.
b. Prepare a budget showing the quantity of switches to be purchased each month for January,
February, and March.
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162. Chow Corporation manufactures children's chairs made of PVS plastic tubing and heavy
canvas material. Each chair requires eight feet of the PVC tubing and three yards of material.
Budgeted sales are 20,000 chairs for June, 25,000 chairs for July and 30,000 chairs for August.
Ending finished goods inventory is budgeted at 10% of the current month's sales. Ending materials
inventories are budgeted at 10% of the current month's production.
Required:
a. Prepare a production budget for each of the months of June, July and August. Assume the
beginning inventory of chairs in June will be 2,500 units.
b. Prepare schedules showing purchase requirements for PVC tubing and for material for each of the
months of June, July and August. Assume 16,000 feet of PVC tubing and 6,000 yards of material are
on hand at the beginning of June.
163. Two yards of a fabric are required for each blouse produced by Northern Shirt Corporation.
The cost of the fabric is $4 per yard. Budgeted production of blouses is given below for the fourth
quarter and the first month of the following quarter.
October November December January
Required production blouses 18,000 16,000 15,000 12,000
To prevent against stock outs of the fabric, the company maintains an ending inventory each month
equal to 10% of the next month's production needs. The beginning inventory of the fabric in October
will be 3,600 yards.
Required:
Prepare a direct materials budget for the fabric, by month and in total for the fourth quarter. Be sure
to include both the quantity to be purchased and its cost for each month.
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164. The production department of Tadris Corporation has submitted the following forecast of units
to be produced by quarter for the upcoming fiscal year.
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Units to be produced 12,000 11,500 11,000 10,500
Each unit requires 0.25 direct labor-hours at $18.00 per hour.
Required:
Prepare a direct labor budget for the upcoming fiscal year, assuming that the direct labor work force
is adjusted each quarter to match the number of hours required to produce the budgeted production.
165. Rehmer Corporation is working on its direct labor budget for the next two months. Each unit
of output requires 0.61 direct labor-hours. The direct labor rate is $8.90 per direct labor-hour. The
production budget calls for producing 2,600 units in June and 2,100 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.
166. Kouba Corporation is working on its direct labor budget for the next two months. Each unit of
output requires 0.23 direct labor-hours. The direct labor rate is $11.20 per direct labor-hour. The
production budget calls for producing 4,000 units in April and 3,400 units in May. 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
920 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.
167. The direct labor budget of Faier Corporation for the upcoming year contains the following
details concerning budgeted direct labor-hours.
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
Budgeted direct labor-hours 8,000 8,200 8,500 8,800
The company's variable manufacturing overhead rate is $3.50 per direct labor-hour, and the
company's fixed manufacturing overhead is $65,000 per quarter. The only noncash item included in
the fixed manufacturing overhead is depreciation which is $22,000 per quarter.
Required:
Prepare Faier Corporation's manufacturing overhead budget for the upcoming fiscal year. Show both
manufacturing overhead expense and cash disbursements for manufacturing overhead.
168. Edgington Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The
variable overhead rate is $4.90 per direct labor-hour. The company's budgeted fixed manufacturing
overhead is $39,590 per month, which includes depreciation of $5,920. All other fixed manufacturing
overhead costs represent current cash flows. The November direct labor budget indicates that 3,700
direct labor-hours will be required in that month.
Required:
a. Determine the cash disbursements for manufacturing overhead for November.
b. Determine the predetermined overhead rate for November.
169. The manufacturing overhead budget of Paparella Corporation is based on budgeted direct
labor-hours. The November direct labor budget indicates that 6,000 direct labor-hours will be required
in that month. The variable overhead rate is $2.00 per direct labor-hour. The company's budgeted
fixed manufacturing overhead is $79,200 per month, which includes depreciation of $21,000. All other
fixed manufacturing overhead costs represent current cash flows.
Required:
a. Determine the cash disbursements for manufacturing overhead for November. Show your work!
b. Determine the predetermined overhead rate for November. Show your work!
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170. The selling and administrative expense budget of Gullette Corporation is based on the
number of units sold, which are budgeted to be 2,700 units in April. The variable selling and
administrative expense is $1.90 per unit. The budgeted fixed selling and administrative expense is
$35,640 per month, which includes depreciation of $7,290. The remainder of the fixed selling and
administrative expense represents current cash flows.
Required:
Prepare the selling and administrative expense budget for April.
171. Skeete Inc. bases its selling and administrative expense budget on the number of units sold.
The variable selling and administrative expense is $1.70 per unit. The budgeted fixed selling and
administrative expense is $57,720 per month, which includes depreciation of $9,360. The remainder
of the fixed selling and administrative expense represents current cash flows. The sales budget
shows 3,900 units are planned to be sold in November.
Required:
Prepare the selling and administrative expense budget for November.
172. Parliman Corporation is preparing its cash budget for August. The budgeted beginning cash
balance is $12,000. Budgeted cash receipts total $159,000 and budgeted cash disbursements total
$162,000. The desired ending cash balance is $20,000. The company can borrow up to $160,000 at
any time from a local bank, with interest not due until the following month.
Required:
Prepare the company's cash budget for August in good form.
173. Freet Inc. is preparing its cash budget for November. The budgeted beginning cash balance
is $11,000. Budgeted cash receipts total $126,000 and budgeted cash disbursements total $130,000.
The desired ending cash balance is $20,000. The company can borrow up to $170,000 at any time
from a local bank, with interest not due until the following month.
Required:
Prepare the company's cash budget for November in good form. Make sure to indicate what
borrowing, if any, would be needed to attain the desired ending cash balance.
