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80. Kenner Company produces two products: SR200 and TX500. Budgeted sales for four months are as follows:
SR200 TX500
May 8,000 20,000
June 13,000 32,000
July 11,000 39,000
August 18,000 46,000
Kenner’s ending inventory policy is that SR200 should have 15% of next month’s sales in ending inventory and TX500
should have 40% of next month’s sales in ending inventory. On May 1, there were 1,200 units of SR200 and 9,000 units of
TX500.
TX500 requires 6 units of component A. (SR200 does not use component A.) There were 30,000 units of component A in
inventory on May 1. Kenner wants to have 20% of the following month’s production needs in inventory for Component A.
How many units of TX500 are budgeted for production in June?
a. 47,600
b. 34,800
c. 32,000
d. 45,000
e. 12,800
81. Kenner Company produces two products: SR200 and TX500. Budgeted sales for four months are as follows:
SR200 TX500
May 8,000 20,000
June 13,000 32,000
July 11,000 39,000
August 18,000 46,000
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Kenner’s ending inventory policy is that SR200 should have 15% of next month’s sales in ending inventory and TX500
should have 40% of next month’s sales in ending inventory. On May 1, there were 1,200 units of SR200 and 9,000 units of
TX500.
TX500 requires 6 units of component A. (SR200 does not use component A.) There were 30,000 units of component A in
inventory on May 1. Kenner wants to have 20% of the following month’s production needs in inventory for Component A.
What is the budgeted production of SR200 for May in units?
a. 8,750
b. 9,950
c. 8,000
d. 1,200
e. 10,500
82. Kenner Company produces two products: SR200 and TX500. Budgeted sales for four months are as follows:
SR200 TX500
May 8,000 20,000
June 13,000 32,000
July 11,000 39,000
August 18,000 46,000
Kenner’s ending inventory policy is that SR200 should have 15% of next month’s sales in ending inventory and TX500
should have 40% of next month’s sales in ending inventory. On May 1, there were 1,200 units of SR200 and 9,000 units of
TX500.
TX500 requires 6 units of component A. (SR200 does not use component A.) There were 30,000 units of component A in
inventory on May 1. Kenner wants to have 20% of the following month’s production needs in inventory for Component A.
What is the budgeted amount of component A to be purchased in May?
a. 41,760
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b. 142,800
c. 154,560
d. 164,600
e. 66,600
83. Kenner Company produces two products: SR200 and TX500. Budgeted sales for four months are as follows:
SR200 TX500
May 8,000 20,000
June 13,000 32,000
July 11,000 39,000
August 18,000 46,000
Kenner’s ending inventory policy is that SR200 should have 15% of next month’s sales in ending inventory and TX500
should have 40% of next month’s sales in ending inventory. On May 1, there were 1,200 units of SR200 and 9,000 units of
TX500.
TX500 requires 6 units of component A. (SR200 does not use component A.) There were 30,000 units of component A in
inventory on May 1. Kenner wants to have 20% of the following month’s production needs in inventory for Component A.
What is the desired ending inventory of component A for May?
a. 86,000
b. 180,000
c. 58,500
d. 41,760
e. 30,000
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84. Movers Company manufactures sneakers. The production of their new sneaker for the coming three months is
budgeted as follows:
August 30,000
September 50,000
October 35,000
Each sneaker requires 2 hours of direct labor time. Direct labor wages average $15 per hour. Monthly overhead averages
$10 per direct labor hour plus fixed overhead of $4,500. What is the direct labor cost budgeted for September?
a. $820,000
b. $750,000
c. $1,400,000
d. $1,500,000
e. $625,000
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85. Movers Company manufactures sneakers. Production of their new sneaker for the coming three months is budgeted as
follows:
August 28,000
September 50,000
October 33,000
Each sneaker requires 2.5 hours of direct labor time. Direct labor wages average $16 per hour. Monthly variable overhead
averages $10 per direct labor hour plus fixed overhead of $4,500. What is the total overhead budgeted for the month of
September?
a. $6,800,000
b. $1,254,500
c. $142,100
d. $460,000
e. $362,100
86. Bickford Company plans to sell 135,000 units in November and 180,000 units in December. Bickford’s policy is that
10% of the following month’s sales must be in ending inventory. On November 1, there were 14,000 units in inventory.
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It takes 30 minutes of direct labor time to make one unit. Direct labor wages average $17 per hour. Variable overhead is
applied at the rate of $5 per direct labor hour. Fixed overhead is budgeted at $56,500 per month. What is the direct
labor cost budgeted for November?
a. $1,181,500
b. $950,600
c. $707,600
d. $2,152,000
e. $622,800
87. Atlas Company plans to sell 145,000 units in November and 190,000 units in December. Atlas’s policy is that 15% of
the following month’s sales must be in ending inventory. On November 1, there were 21,750 units in inventory.
It takes 35 minutes of direct labor time to make one unit. Direct labor wages average $19 per hour. Variable overhead is
applied at the rate of $7 per direct labor hour. Fixed overhead is budgeted at $60,500 per month. What is the budgeted
production in units for November?
a. 100,000 units
b. 140,000 units
c. 121,000 units
d. 125,600 units
e. 151,750 units
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88. Bickford Company plans to sell 135,000 units in November and 180,000 units in December. Bickford’s policy is that
10% of the following month’s sales must be in ending inventory. On November 1, there were 14,000 units in inventory.
It takes 30 minutes of direct labor time to make one unit. Direct labor wages average $17 per hour. Variable overhead is
applied at the rate of $5 per direct labor hour. Fixed overhead is budgeted at $56,500 per month. What is the budgeted
overhead for November?
a. $444,500
b. $280,700
c. $404,000
d. $348,420
e. $192,920
89. Sully Company provided the following information for last month.
Production in units 3,000
Direct materials cost $7,000
Direct labor cost $10,000
Overhead cost $9,600
Sales commission per unit sold $4
Price per unit sold $29
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Fixed selling and administrative expense $7,000
There were no beginning and ending inventories. What is Sully’s cost of goods sold per unit?
a. $12.60
b. $8.87
c. $10.00
d. $12.50
e. $16.60
90. Sully Company provided the following information for last month.
Production in units 3,000
Direct materials cost $7,000
Direct labor cost $10,000
Overhead cost $9,600
Sales commission per unit sold $4
Price per unit sold $29
Fixed selling and administrative expense $7,000
There were no beginning and ending inventories. What is gross margin for Sully Company last month?
a. $54,000
b. $64,600
c. $32,400
d. $47,400
e. $60,400
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91. Sully Company provided the following information for last month.
Production in units 3,000
Direct materials cost $7,000
Direct labor cost $10,000
Overhead cost $9,600
Sales commission per unit sold $4
Price per unit sold $29
Fixed selling and administrative expense $7,000
There were no beginning and ending inventories. What is operating income for Sully Company for last month?
a. $24,000
b. $34,600
c. $49,400
d. $27,400
e. $41,400
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92. Connor Company produces speaker systems for cars. Estimated sales (in units) in January are 40,000; in February
37,000; and in March 34,000. Each unit is priced at $60. Connor wants to have 35% of the following month’s sales in
ending inventory. That requirement was met on January 1.
Each speaker system requires 3 boxes and 15 yards of wire. Boxes cost $4 each and wire is $0.60 per yard. Connor wants
to have 20% of the following month’s production needs in ending raw materials inventory. On January 1, Connor had
24,000 boxes and 100,000 yards of wire in inventory. What is Connor’s expected sales revenue for February?
a. $2,020,000
b. $1,900,000
c. $60
d. $1,125,000
e. $2,220,000
93. Connor Company produces speaker systems for cars. Estimated sales (in units) in January are 40,000; in February
37,000; and in March 34,000. Each unit is priced at $60. Connor wants to have 35% of the following month’s sales in
ending inventory. That requirement was met on January 1.
Each speaker system requires 3 boxes and 15 yards of wire. Boxes cost $4 each and wire is $0.60 per yard. Connor wants
to have 20% of the following month’s production needs in ending raw materials inventory. On January 1, Connor had
24,000 boxes and 100,000 yards of wire in inventory. How many units does Connor expect to produce in February?
a. 25,700
b. 30,500
c. 23,750
d. 35,950
e. 25,000
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94. Connor Company produces speaker systems for cars. Estimated sales (in units) in January are 40,000; in February
37,000; and in March 34,000. Each unit is priced at $60. Connor wants to have 35% of the following month’s sales in
ending inventory. That requirement was met on January 1.
Each speaker system requires 3 boxes and 15 yards of wire. Boxes cost $4 each and wire is $0.60 per yard. Connor wants
to have 20% of the following month’s production needs in ending raw materials inventory. On January 1, Connor had
24,000 boxes and 100,000 yards of wire in inventory. How many boxes does Connor expect to purchase in January?
a. 159,650
b. 114,420
c. 214,550
d. 148,500
e. 138,420
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95. Pallen Company estimated sales of 11,000 units at $40 each, unit cost of goods sold of $22, marketing expense of
$65,000 and a 10% commission on each unit sold. Administrative expense is budgeted at $50,000. What is total selling
expense?
a. $65,000
b. $44,000
c. $84,000
d. $109,000
e. $39,000
96. Pallen Company estimated sales of 11,000 units at $40 each, unit cost of goods sold of $22, marketing expense of
$65,000 and a 10% commission on each unit sold. Administrative expense is budgeted at $50,000. What is Pallen’s
budgeted operating income?
a. $281,000
b. $39,000
c. $198,000
d. $83,000
e. $440,000
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97. Budgets are prepared in which of the following orders?
a. production budget, sales budget, direct labor budget
b. production budget, cost of goods sold budget, direct labor budget
c. sales budget, cash budget, production budget
d. sales budget, production budget, direct materials purchases budget
e. production budget, cash budget, direct materials purchases budget
98. Yummy Jams Company produces a line of jams. Yummy’s estimated production of jars of jam for the fourth quarter of
the year is as follows:
October 75,000
November 98,000
December 63,000
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Each jar requires half a pound of berries. Yummy prefers to buy the freshest berries, so its policy is to have just 3% of the
following month’s production needs in ending inventory. On October 1, the company had 1,125 pounds of berries in
inventory. Yummy’s pays $0.60 per pound of berries. It buys all berries on account and typically pays 40% of a month’s
purchases in that month, and the remaining 60% the following month. How many pounds of berries will be purchased
during the month of November?
a. 23,375
b. 48,475
c. 39,925
d. 41,950
e. 49,945
99. The following forecasted sales pertain to Micah Company:
Month Sales
April $200,000
May 250,000
June 150,000
July 100,000
Collection pattern:
60% in month of sale
40% in month following the sale
Accounts receivable as of March 31 $35,000
Finished goods inventory as of March 31 4,000 units
The company has a selling price of $10 per unit and expects to maintain ending inventories equal to 20% of the next
month’s sales. How many units are expected to be produced in April?
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a. 21,000 units
b. 19,000 units
c. 25,000 units
d. 20,000 units
100. Yummy Jams Company produces a line of jams. Yummy’s estimated production of jars of jam for the fourth quarter
of the year is as follows:
October 75,000
November 98,000
December 63,000
Each jar requires half a pound of berries. Yummy prefers to buy the freshest berries, so its policy is to have just 3% of the
following month’s production needs in ending inventory. On October 1, the company had 1,125 pounds of berries in
inventory. Yummy’s pays $0.60 per pound of berries. It buys all berries on account and typically pays 40% of a month’s
purchases in that month, and the remaining 60% the following month. What is the dollar cost of purchases for October?
a. $19,925
b. $22,707
c. $18,450
d. $23,300
e. $33,320
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101. Yummy Jams Company produces a line of jams. Yummy’s estimated production of jars of jam for the fourth quarter
of the year is as follows:
October 75,000
November 98,000
December 63,000
Each jar requires half a pound of berries. Yummy prefers to buy the freshest berries, so its policy is to have just 3% of the
following month’s production needs in ending inventory. On October 1, the company had 1,125 pounds of berries in
inventory. Yummy’s pays $0.60 per pound of berries. It buys all berries on account and typically pays 40% of a month’s
purchases in that month, and the remaining 60% the following month. How much cash is paid in November for berry
purchases (rounded to the nearest dollar)?
a. $25,258
b. $21,088
c. $28,900
d. $19,963
e. $32,212
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102. Bank loan officers would find which of the following budgets to be one of the most important in determining
whether or not to give a company a loan?
a. Sales budget
b. Production budget
c. Budgeted income statement
d. Budgeted balance sheet
e. Cash budget
103. Which of the following statements is true?
a. The production budget is the first budget to be prepared in the master budget.
b. The cash budget is prepared before the direct materials purchases budget.
c. The budgeted balance sheet is prepared after the cash budget.
d. Service firms need not prepare a master budget.
e. The cost of goods sold budget is prepared before the direct labor and overhead budgets.
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104. A company anticipates selling $200,000 of goods, of which $15,000 will probably be uncollectible. Which of the
following statements is true?
a. $15,000 does not appear on the cash budget.
b. $215,000 is added to the cash budget.
c. $15,000 is subtracted from the cash budget.
d. $185,000 appears as a disbursement on the cash budget.
e. None of these.
105. Suppose that a company has the following accounts receivable collection pattern:
Paid in the month of sale 25%
Paid in the month following sale 75%
All sales are on credit. If credit sales for January and February are $250,000 and $120,000 respectively, the cash
collection for February is:
a. $210,000.
b. $100,000.
c. $130,000.
d. $140,000.
e. $217,500.
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106. A company’s planned borrowings and repayments appear on the
a. production budget.
b. selling and administrative expenses budget.
c. interest income budget.
d. cash budget.
e. operating budget.
107. The planned ending cash balance for the year appears on which of the following statements?
a. Budgeted income statement
b. Budgeted balance sheet
c. Production budget
d. Budgeted cash receipts
e. Budgeted cash disbursements
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108. Planet Company purchased goods worth $50,000 in July and expects to purchase goods worth $70,000 in August.
Planet typically pays for 35% of purchases in the month of purchase and 65% in the following month. What are Planet
Company’s total expected cash disbursements for purchases in the month of August?
a. $65,000
b. $40,000
c. $57,000
d. $60,000
e. $100,000
109. Which of the following appears on a budgeted balance sheet?
a. Estimated operating income
b. Estimated gross margin
c. Estimated finished goods inventory
d. Estimated selling and administrative expenses
e. Estimated fixed factory overhead