162) KAB Inc., a small retail store, had the following results for May. The budgets for June and
July are also given.
May
(actual)
June
(budget)
July
(budget)
Sales
$
42,000
$
$
45,000
Less cost of goods sold
21,000
22,500
Gross margin
21,000
22,500
Less selling and administrative expenses
20,000
20,000
Net operating income
$
1,000
$
$
2,500
–
Sales are collected 80% in the month of the sale and the balance in the month following the sale.
(There are no bad debts.) The goods that are sold are purchased in the month prior to sale.
Suppliers of the goods are paid in the month following the sale. The “selling and administrative
expenses” are paid in the month of the sale.
The amount of cash collected during June should be:
A) $32,000
B) $40,000
C) $40,400
D) $41,000
June
May sales collected in June (20% × $42,000)
$
8,400
June sales collected in June (80% × $40,000)
32,000
Cash collections
$
40,400
–
163) KAB Inc., a small retail store, had the following results for May. The budgets for June and
July are also given.
May
(actual)
June
(budget)
July
(budget)
Sales
$
42,000
$
$
45,000
Less cost of goods sold
21,000
22,500
Gross margin
21,000
22,500
Less selling and administrative expenses
20,000
20,000
Net operating income
$
1,000
$
$
2,500
–
Sales are collected 80% in the month of the sale and the balance in the month following the sale.
(There are no bad debts.) The goods that are sold are purchased in the month prior to sale.
Suppliers of the goods are paid in the month following the sale. The “selling and administrative
expenses” are paid in the month of the sale.
The cash disbursements during June for goods purchased for sale and for selling and
administrative expenses should be:
A) $40,000
B) $41,000
C) $42,500
D) $43,500
June
May cost of goods sold paid for in June
$
21,000
Selling and administrative expenses
20,000
$
41,000
–
164) Roberts Enterprises has budgeted sales in units for the next five months as follows:
June
4,500
units
July
7,100
units
August
5,300
units
September
6,700
units
October
3,700
units
–
Past experience has shown that the ending inventory for each month must be equal to 10% of the
next month’s sales in units. The inventory on May 31 contained 450 units. The company needs to
prepare a production budget for the second quarter of the year.
The beginning inventory in units for September is:
A) 370 units
B) 6,700 units
C) 530 units
D) 670 units
165) Roberts Enterprises has budgeted sales in units for the next five months as follows:
June
4,500
units
July
7,100
units
August
5,300
units
September
6,700
units
October
3,700
units
–
Past experience has shown that the ending inventory for each month must be equal to 10% of the
next month’s sales in units. The inventory on May 31 contained 450 units. The company needs to
prepare a production budget for the second quarter of the year.
The total number of units to be produced in July is:
A) 7,630 units
B) 7,100 units
C) 6,920 units
D) 7,280 units
Budgeted unit sales
Add desired ending finished goods inventory (10% × 5,300)
Total needs
Less beginning finished goods inventory (10% × 7,100)
Required production in units
–
166) Roberts Enterprises has budgeted sales in units for the next five months as follows:
June
4,500
units
July
7,100
units
August
5,300
units
September
6,700
units
October
3,700
units
–
Past experience has shown that the ending inventory for each month must be equal to 10% of the
next month’s sales in units. The inventory on May 31 contained 410 units. The company needs to
prepare a production budget for the second quarter of the year.
The desired ending inventory for August is:
A) 530 units
B) 670 units
C) 710 units
D) 370 units
167) Marty’s Merchandise has budgeted sales as follows for the second quarter of the year:
April
$
30,000
May
$
60,000
June
$
50,000
–
Cost of goods sold is equal to 70% of sales. The company wants to maintain a monthly ending
inventory equal to 120% of the cost of goods sold for the following month. The inventory on
March 31 was below this target and was only $22,000. The company is now preparing a
Merchandise Purchases Budget for April, May, and June.
The desired beginning inventory for June is:
A) $42,000
B) $35,000
C) $50,000
D) $38,000
168) Marty’s Merchandise has budgeted sales as follows for the second quarter of the year:
April
$
30,000
May
$
60,000
June
$
50,000
–
Cost of goods sold is equal to 70% of sales. The company wants to maintain a monthly ending
inventory equal to 120% of the cost of goods sold for the following month. The inventory on
March 31 was below this target and was only $22,000. The company is now preparing a
Merchandise Purchases Budget for April, May, and June.
The budgeted purchases for May are:
A) $49,400
B) $50,400
C) $60,000
D) $33,600
Budgeted cost of goods sold (70% × $60,000)
42,000
(120% × 70% × $50,000)
42,000
Total needs
84,000
(120% × 70% × $60,000)
50,400
Required purchases
33,600
–
169) Harden, Inc., has budgeted sales in units for the next five months as follows:
June
7,000
units
July
5,300
units
August
7,100
units
September
6,800
units
October
4,900
units
–
Past experience has shown that the ending inventory for each month should be equal to 15% of the
next month’s sales in units. The inventory on May 31 contained 1,050 units. The company needs to
prepare a production budget for the next five months.
The beginning inventory for September should be:
A) 1,020 units
B) 1,050 units
C) 1,065 units
D) 735 units
170) Harden, Inc., has budgeted sales in units for the next five months as follows:
June
7,000
units
July
5,300
units
August
7,100
units
September
6,800
units
October
4,900
units
–
Past experience has shown that the ending inventory for each month should be equal to 15% of the
next month’s sales in units. The inventory on May 31 contained 1,050 units. The company needs to
prepare a production budget for the next five months.
The total number of units produced in July should be:
A) 5,300 units
B) 6,365 units
C) 5,570 units
D) 5,030 units
Budgeted unit sales
Add desired ending finished goods inventory (15% × 7,100)
Total needs
Less beginning finished goods inventory (15% × 5,300)
Required production in units
–
171) Sarafiny Corporation is in the process of preparing its annual budget. The following
beginning and ending inventory levels are planned for the year.
Beginning Inventory
Ending Inventory
Finished goods (units)
20,000
30,000
Raw material (grams)
50,000
40,000
–
Each unit of finished goods requires 7 grams of raw material. The company plans to sell 270,000
units during the year.
The number of units the company would have to manufacture during the year would be:
A) 300,000 units
B) 270,000 units
C) 260,000 units
D) 280,000 units
Budgeted unit sales
Add desired ending finished goods inventory
Total needs
Less beginning finished goods inventory
Required production in units
–
172) Sarafiny Corporation is in the process of preparing its annual budget. The following
beginning and ending inventory levels are planned for the year.
Beginning Inventory
Ending Inventory
Finished goods (units)
20,000
30,000
Raw material (grams)
50,000
40,000
Each unit of finished goods requires 7 grams of raw material. The company plans to sell 270,000
units during the year.
How much of the raw material should the company purchase during the year?
A) 1,960,000 grams
B) 1,950,000 grams
C) 1,970,000 grams
D) 2,000,000 grams
Budgeted unit sales
Add desired ending finished goods inventory
Total needs
Less beginning finished goods inventory
Required production in units
Raw materials required per unit (grams)
Raw materials required for production
Add desired ending raw materials inventory
Total raw materials needs
Less beginning raw materials inventory
Required material purchases in grams
173) LBC Corporation makes and sells a product called Product WZ. Each unit of Product WZ
requires 3.5 hours of direct labor at the rate of $14.50 per direct labor-hour. Management would
like you to prepare a Direct Labor Budget for June.
The budgeted direct labor cost per unit of Product WZ would be:
A) $50.75
B) $14.50
C) $4.14
D) $18.00
174) LBC Corporation makes and sells a product called Product WZ. Each unit of Product WZ
requires 3.5 hours of direct labor at the rate of $14.50 per direct labor-hour. Management would
like you to prepare a Direct Labor Budget for June.
The company plans to sell 39,000 units of Product WZ in June. The finished goods inventories on
June 1 and June 30 are budgeted to be 200 and 100 units, respectively. Budgeted direct labor costs
for June would be:
A) $1,984,325
B) $1,974,175
C) $1,979,250
D) $564,050
175) Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires
2.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five
months is as follows:
August
22,600
units
September
21,300
units
October
22,700
units
November
23,900
units
December
23,600
units
–
The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the
following month’s production needs. On July 31, this requirement was not met since only 10,800
kilograms of Jurislon were on hand. The cost of Jurislon is $18.00 per kilogram. The company
wants to prepare a Direct Materials Purchase Budget for the next five months.
The desired ending inventory of Jurislon for September is:
A) $81,720
B) $76,680
C) $191,700
D) $204,300
176) Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires
2.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five
months is as follows:
August
22,600
units
September
21,300
units
October
22,700
units
November
23,900
units
December
23,600
units
The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the
following month’s production needs. On July 31, this requirement was not met since only 10,800
kilograms of Jurislon were on hand. The cost of Jurislon is $18.00 per kilogram. The company
wants to prepare a Direct Materials Purchase Budget for the next five months.
The total cost of Jurislon to be purchased in August is:
A) $1,839,600
B) $1,014,300
C) $1,208,700
D) $1,017,000
Required production in units
Raw materials required per unit (kilograms)
Raw materials needed for production
(20% × 21,300 units × 2.5 kilograms per unit)
Total raw materials needs
Less beginning raw materials inventory
Required purchases of raw material in units
Cost per kilogram
Required purchases
1,014,300
177) Coles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material
K are needed to make one unit of Product R. Budgeted production of Product R for the next five
months is as follows:
August
14,000
units
September
14,500
units
October
15,500
units
November
12,600
units
December
11,900
units
The company wants to maintain monthly ending inventories of Material K equal to 20% of the
following month’s production needs. On July 31, this requirement was not met since only 2,500
yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to
prepare a Direct Materials Purchase Budget for the rest of the year.
The total cost of Material K to be purchased in August is:
A) $40,970
B) $48,200
C) $33,840
D) $42,300
Required production in units of finished goods
Raw materials required per unit of finished goods
3
Raw materials needed to meet the production schedule
(20% × 14,500 units × 3 yards per unit)
Total raw materials needs
Less beginning raw materials inventory
Raw materials to be purchased
Unit cost of raw materials
Cost of raw materials to be purchased
178) Coles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material
K are needed to make one unit of Product R. Budgeted production of Product R for the next five
months is as follows:
August
14,000
units
September
14,500
units
October
15,500
units
November
12,600
units
December
11,900
units
The company wants to maintain monthly ending inventories of Material K equal to 20% of the
following month’s production needs. On July 31, this requirement was not met since only 2,500
yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to
prepare a Direct Materials Purchase Budget for the rest of the year.
The desired ending inventory of Material K for September is:
A) 7,560 yards
B) 8,400 yards
C) 8,700 yards
D) 9,300 yards
179) Coles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material
K are needed to make one unit of Product R. Budgeted production of Product R for the next five
months is as follows:
August
14,000
units
September
14,500
units
October
15,500
units
November
12,600
units
December
11,900
units
The company wants to maintain monthly ending inventories of Material K equal to 20% of the
following month’s production needs. On July 31, this requirement was not met since only 2,500
yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to
prepare a Direct Materials Purchase Budget for the rest of the year.
The total needs (i.e., production requirements plus desired ending inventory) of Material K for
November are:
A) 37,800 yards
B) 44,940 yards
C) 37,380 yards
D) 45,360 yards
Required production in units of finished goods
Raw materials required per unit of finished goods
Raw materials needed to meet the production schedule
(20% × 11,900 units × 3 yards per unit)
Total raw materials needs
180) Acti Manufacturing Corporation is estimating the following raw material purchases for the
final four months of the year:
September
$
830,000
October
$
940,000
November
$
860,000
December
$
780,000
–
At Acti, 40% of raw materials purchases are normally paid for in the month of purchase. The
remaining 60% is paid for in the month following the purchase.
How much cash should Acti expect to pay out for raw material purchases during November?
A) $908,000
B) $438,000
C) $564,000
D) $344,000
October purchases ($940,000 × 60%)
November purchases ($860,000 × 40%)
Total cash disbursements for materials
–
181) Acti Manufacturing Corporation is estimating the following raw material purchases for the
final four months of the year:
September
$
830,000
October
$
940,000
November
$
860,000
December
$
780,000
–
At Acti, 40% of raw materials purchases are normally paid for in the month of purchase. The
remaining 60% is paid for in the month following the purchase.
In Acti’s budgeted balance sheet at December 31, at what amount will accounts payable for raw
materials be shown?
A) $780,000
B) $564,000
C) $468,000
D) $588,000