Chapter 9 – Financial Planning and Analysis: The Master Budget
46. For an airline, which of the following would not be an operational budget?
47. Chong Corporation has a highly automated production facility. Which of the following
correctly shows the two factors that would likely have the most direct influence on the
company’s manufacturing overhead budget?
48. Wu Production Company, which uses activity-based budgeting, is in the process of
preparing a manufacturing overhead budget. Which of the following would likely appear on
that budget?
49. Miracle Enterprises sells electronics in retail outlets and on the Internet. It uses activity-
based budgeting in the preparation of its selling, general, and administrative expense budget.
Which of the following costs would the company likely classify as a unit-level expense on its
budget?
50. Which of the following would have no effect, either direct or indirect, on an organization’s
cash budget?
Use the following information to answer Questions 51-52.
Overton Industries has the following sales forecasts for its hip waders next year:
First Quarter..10,000 pairs
Second Quarter.5% increase over first quarter
Third Quarter3% decrease from second quarter
Fourth Quarter..8% increase over first quarter
51. What is Overton’s estimated sales in units for next year?
52. What is Overton’s estimated sales revenue for next year if each pair sells for an average of
$30?
53. Barre plans to sell 5,000 units each quarter next year. During the first two quarters each
unit will sell for $12; during the last two quarters the sales price will increase $1.50 per unit.
What is Barre’s estimated sales revenue for next year?
54. Cycle Sporting Goods sells bicycles throughout the northeastern United States. The
following data were taken from the most recent quarterly sales forecast:
Expected Sales
End-of Month
55. Maki plans to sell 10,000 units of a particular product during July, and expects sales to
increase at the rate of 10% per month during the remainder of the year. The June 30 and
September 30 ending inventories are anticipated to be 1,100 units and 950 units, respectively.
On the basis of this information, how many units should Maki purchase for the quarter ended
September 30?
56. Terrence Corporation plans to sell 41,000 units of its single product in March. The
company has 2,800 units in its March 1 finished-goods inventory and anticipates having 2,400
completed units in inventory on March 31. On the basis of this information, how many units
does Terrence plan to produce during March?
57. Houseman, Inc. anticipates sales of 50,000 units, 48,000 units, and 51,000 units in July,
August, and September, respectively. Company policy is to maintain an ending finished-
goods inventory equal to 40% of the following month’s sales. On the basis of this information,
how many units would the company plan to produce in July?
58. Houseman, Inc. anticipates sales of 50,000 units, 48,000 units, and 51,000 units in July,
August, and September, respectively. Company policy is to maintain an ending finished-
goods inventory equal to 40% of the following month’s sales. On the basis of this information,
how many units would the company plan to produce in August?
59. Houseman, Inc. anticipates sales of 50,000 units, 48,000 units, 51,000 units and 50,000
units in July, August, September and October, respectively. Company policy is to maintain an
ending finished-goods inventory equal to 40% of the following month’s sales. On the basis of
this information, how many units would the company plan to produce in September?
60. Elon & Company had 3,000 units in finished-goods inventory on December 31. The
following data are available for the upcoming year:
January
February
Units to be produced
9,400
10,200
Desired ending finished-goods inventory
2,500
2,100
61. To derive the raw material to purchase during an accounting period, an accountant would
calculate the raw material required for production and then:
62. Blaylock plans to sell 85,000 units of product no. 794 in May, and each of these units
requires three units of raw material. Pertinent data follow.
Product No. 794
Raw Material
11,000 units
29,000 units
17,000 units
20,000 units
On the basis of the information presented, how many units of raw material should Blaylock
purchase for use in May production?
63. An examination of Hyong Corporation’s inventory accounts revealed the following
information:
Raw materials, June 1: 46,000 units
Raw materials, June 30: 51,000 units
Purchases of raw materials during June: 185,000 units
Hyong’s finished product requires four units of raw materials. On the basis of this
information, how many finished products were manufactured during June?
64. Hsu plans to sell 40,000 units of product no. 75 in June, and each of these units requires
five square feet of raw material. Pertinent data follow.
Product No. 75
Raw Material
5,500
18,000 square feet
4,300
? square feet
If the company purchases 201,000 square feet of raw material during the month, the estimated
raw-material inventory on June 30 would be:
65. Nevis Motors manufactures a product requiring 0.5 ounces of platinum per unit. The cost
of platinum is approximately $360 per ounce; the company maintains an ending platinum
inventory equal to 10% of the following month’s production usage. The following data were
taken from the most recent quarterly production budget:
July
August
September
Planned production in units
1,000
1,100
980
The cost of platinum to be purchased to support August production is:
66. Nevis’ production data for one of its products were taken from the most recent quarterly
production budget:
July
August
September
Planned production in units
1,000
1,100
980
If it takes two direct labor hours to produce each unit and Nevis’ cost per labor hour is $15,
direct labor cost for August would be budgeted at:
67. Nevis’ production data for a new deluxe product were taken from the most recent
quarterly production budget:
July
August
September
1,000
1,100
980
In addition, Nevis produces 5,000 units a month of its standard product. It takes two direct
labor hours to produce each standard unit and 2.25 direct labor hours to produce each deluxe
unit. Nevis’ cost per labor hour is $15. Direct labor cost for July would be budgeted at:
68. Nevis’ production data for a new deluxe product were taken from the most recent
quarterly production budget:
July
August
September
Planned production in units
1,000
1,100
980
In addition, Nevis produces 5,000 units a month of its standard product. It takes two direct
labor hours to produce each standard unit and 2.25 direct labor hours to produce each deluxe
unit. Nevis’ cost per labor hour is $15. Direct labor cost for August would be budgeted at:
69. Nevis’ production data for a new deluxe product were taken from the most recent
quarterly production budget:
July
August
September
1,000
1,100
980
In addition, Nevis produces 5,000 units a month of its standard product. It takes two direct
labor hours to produce each standard unit and 2.25 direct labor hours to produce each deluxe
unit. Nevis’ cost per labor hour is $15. Direct labor cost for September would be budgeted at:
70. Nevis’ production data for a new deluxe product were taken from the most recent
quarterly production budget:
July
August
September
1,000
1,100
980
In addition, Nevis produces 5,000 units a month of its standard product. It takes two direct
labor hours to produce each standard unit and 2.25 direct labor hours to produce each deluxe
unit. Nevis’ cost per labor hour is $15. Direct labor cost for the quarter would be budgeted at:
71. Gallonte Inc. began operations in April of this year. It makes all sales on account, subject
to the following collection pattern: 30% are collected in the month of sale; 60% are collected
in the first month after sale; and 10% are collected in the second month after sale. If sales for
April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the firm’s
budgeted collections for April?
72. Gallonte Inc. began operations in April of this year. It makes all sales on account, subject
to the following collection pattern: 30% are collected in the month of sale; 60% are collected
in the first month after sale; and 10% are collected in the second month after sale. If sales for
April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the firm’s
budgeted collections for May?
73. Gallonte Inc. began operations in April of this year. It makes all sales on account, subject
to the following collection pattern: 30% are collected in the month of sale; 60% are collected
in the first month after sale; and 10% are collected in the second month after sale. If sales for
April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the firm’s
budgeted collections for June?
74. Gallonte Inc. began operations in April of this year. It makes all sales on account, subject
to the following collection pattern: 30% are collected in the month of sale; 60% are collected
in the first month after sale; and 10% are collected in the second month after sale. If sales for
April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the firm’s
budgeted collections for the quarter?