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179. forces managers to plan
180. improves communication and coordination
181. leads to budgetary slack
182. provides standard for performance evaluation
183. beginning inventory of materials
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184. sales in units
185. units of raw materials needed for each unit of product
186. ending inventory of product
187. production budget
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188. sales budget
189. cash budget
190. ending finished goods inventory budget
191. budgeted balance sheet
192. budgeted capital expenditures
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193. Performance report
194. Static budget
195. Flexible budget
196. Varney Company makes rolling suitcases. Its sales budget for four months is:
Month Unit Sales
March 15,000
April 20,000
May 40,000
June 60,000
Varney’s policy is that ending inventory of finished suitcases should equal 30% of the next month’s sales. Beginning
inventory (March 1) is 5,300 suitcases.
Each suitcase required 1.5 yards of ballistic nylon. The ending inventory policy for nylon is that 20% of the following
month’s production needs must be on hand. On March 1, Varney had 10,450 yards of nylon in inventory.
A. What is the desired ending inventory of suitcases for April?
B. What is the budgeted production of suitcases for April?
C. What is the desired ending inventory of nylon for March?
D. What are the budgeted yards of nylon to be purchased in March?
E. Assuming each suitcase required two yards of ballistic nylon, what is the desired ending inventory of nylon for
March?
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197. Borland Company makes backpacks. Its production budget for two months is:
Month Budgeted production in units
June 35,000
July 50,000
Borland uses two types of labor to make the backpacks: cutting labor and sewing labor. Each backpack requires 6
minutes, on average, of cutting labor. Each backpack requires 24 minutes of sewing labor.
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Borland has fixed overhead of $4,400 per month and variable overhead of $3 per direct labor hour.
A. How many hours of cutting labor are budgeted for July?
B. How many hours of sewing labor are budgeted for July?
C. What is the total amount of budgeted direct labor hours for July?
D. What is the budgeted total overhead for the month of July?
198. Abrams Bottling Company sells fruit-flavored colas. Estimated sales in cartons for May, June, and July are 1,000,
3,000 and 5,000 respectively. The price is forecast at $5 per carton. Abrams requires that finished goods ending inventory
be 20% of the next month’s sales. Inventory was 500 units on May 1. Each carton requires 12 oz of fruit syrup and 130 oz
of carbonated water. Materials ending inventory is 10% of the next month’s production needs. May 1 inventory met that
requirement.
A. Budgeted revenue for May is $__________________.
B. Budgeted revenue for July is $__________________.
C. Production in May is __________________ cartons.
D. Production in June is __________________ cartons.
E. Purchases of syrup in May is __________________ ounces.
F. Purchases of carbonated water in May is __________________ ounces.
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199. Karam Inc. has compiled the following data in order to put together their first quarter operating budget for 20XX:
January February March April
Sales (units) 35,000 31,000 38,000 29,000
Additional information:
Karam sells each unit for $95.
Company policy is to have 30% of next month’s sales (in units) in ending finished goods inventory. This policy was met
in December.
Company policy is to have 40% of next month’s production needs in ending raw materials inventory. The production
needs for April is 95,500. This policy was met in December.
It takes three pounds of material to produce each unit and the cost is $2.75/pound.
Required:
A. Prepare a sales budget for the January, February and March and for the first quarter in total.
B. Prepare a production budget for January, February and March and for the first quarter in total.
C. Prepare a direct materials purchases budget for January, February and March and for the first quarter in total.
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200. Boyle Company has put together the following data in order to complete their operating budget for the second
quarter in 20XX:
April May June July
Sales (units) 73,200 68,900 65,400 67,300
Additional information:
Company policy requires 60% of next month’s sales (in units) be in ending inventory. This policy was met in March.
It takes 2.5 hours of direct labor to produce one unit.
The average wage cost is $14.
Variable overhead rate is $6 per direct labor hour and fixed overhead is $15,000 per month.
Required:
A. Prepare a production budget for April, May, June and the quarter in total.
B. Prepare a direct labor budget for April, May, June and the quarter in total.
C. Prepare an overhead budget for April, May, June and the quarter in total.
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201. Jones Corporation has the following budgeted sales for the selected four-month period:
Month Unit Sales
July 20,000
August 35,000
September 25,000
October 30,000
Sales price per unit is $180
Plans are to have an inventory of finished product equal to 20% of the unit sales for the next month. There was 4,000
units in beginning inventory on July 1st.
Three pounds of materials are required for each unit produced. Each pound of material costs $20. Inventory levels
for materials equal 30% of the needs for the next month.
Desired ending inventory for September is 25,200 pounds of material. Beginning inventory for July was 20,700
pounds of material.
Each unit requires 0.6 hours of direct labor and the average wage rate is $16 per hour.
Variable overhead rate is $3.50 per direct labor hour. There is also fixed overhead of $22,000 per month.
The company pays a 3% commission on sales.
Company has fixed selling and administrative expenses as follows:
Rent $6,000/month
Utilities $1,200/month
Advertising $400/month
Office Salaries $35,000/month
Required:
A. Prepare a sales budget for July, August, and September and in total for the quarter.
B. Prepare production budgets for July, August, and September and in total for the quarter.
C. Prepare a direct materials purchases budget in pounds and dollars for July, August, and September and in total for
the quarter.
D. Prepare a direct labor budget in hours and total cost for July, August and September and in total for the quarter.
E. Prepare an overhead budget for July, August and September and in total for the quarter.
F. Prepare a selling and administrative expenses budget for July, August and September and in total for the quarter.
G. Prepare an ending finished goods inventory budget for the quarter (Hint: You have already calculated the desired
ending finished goods inventory quantity. Assume a stable per unit rate and round the per unit fixed factory overhead rate
to two decimal places.)
H. Prepare a cost of goods sold budget for the quarter
I. Prepare a budged income statement for the quarter-the company falls into the 35% tax bracket for income taxes.
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202. Rapid-Lube provides oil changes and lubes. The estimated number of oil changes for April and May are 3,600 and
4,000. Each oil change takes 12 minutes of direct labor. The wage rate is $10 per hour. Overhead is $3,700 per month and
$2 per oil change.
A. Budgeted direct labor for April is $__________________.
B. Budgeted direct labor for May is $__________________.
C. Budgeted overhead for April is $__________________.
D. Budgeted overhead for May is $__________________.
203. Terrill Company makes and sells two types of shaving cream: foamy, and gel. Last year, Foamy sold for $2.30 per
can, and Gel sold for $3.15 per can. Sales volume was as follows:
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Foamy $76,000 $80,000 $82,000 $70,000
Gel $50,000 $80,000 $90,000 $60,000
Terrill expects sales for Foamy to increase by 5% over the same quarter last year. The Gel price will increase to $3.50, but
aggressive advertising is expected to raise volume by 5% in quarters 1 and 4 and by 10% in quarters 2 and 3.
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Prepare a sales budget for the coming year.
204. Allison Company makes luggage. One popular model is the Traveler (a 21″ wheeled carry-on). Budgeted sales for
this model are:
Month Unit Sales
March 25,000
April 34,000
May 50,000
June 70,000
Desired ending inventory is 20% of the next month’s sales. Inventory on March 1 is 3,100 units. Prepare a production
budget for as many months as possible.
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205. CutMaster Salons anticipates giving 100 permanents in May, 130 in June, and 120 in July. CutMaster needs one
permanent wave kit for each perm, along with two boxes of wave tissues. Its inventory policy is to have 10% of the
following month’s materials needs on hand. On May 1, there were 15 wave kits and four boxes of wave tissues on hand.
(Round any fractions of a unit to the nearest whole unit.)
A. The wave kits to be purchased in May equal __________________.
B. The wave kits to be purchased in June equal __________________.
C. The boxes of tissues to be purchased in May equal __________________.
D. The boxes of tissues to be purchased in June equal __________________.
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206. Foster Company makes power tools. The sales budget for drills for the first four months of the year is:
Month Unit Sales
January 20,000
February 15,000
March 22,000
April 25,000
Foster has taken a just-in-time approach to production and wants only 5% of the next month’s sales needs in ending
inventory. January 1 inventory of drills was zero. Each drill takes 15 minutes of direct labor at $18 per hour. The factory
overhead formula is $27,000 + $1.20 per direct labor hour.
A. Budgeted production for January is __________________.
B. Budgeted production for February is __________________.
C. Budgeted production for the entire first quarter of the year is __________________.
D. Budgeted direct labor cost for January is $__________________.
E. Budgeted direct labor cost for February is $__________________.
F. Budgeted variable overhead for March is $__________________.
G. Budgeted total overhead for March is $__________________.
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207. Uma Company production has variable overhead costs of $8 per direct labor hour and fixed overhead costs of
$56,000 per month. Budgeted production for the next three months is as follows:
Month Production
October 6,000
November 5,500
December 8,000
Each unit requires three hours of direct labor.
A. Uma’s total variable overhead for October is $__________________.
B. Uma’s total overhead for October is $__________________.
C. Uma’s total variable overhead for November is $__________________.
D. Uma’s total fixed overhead for December is $__________________.
E. Uma’s total budgeted overhead for the last three months of the year equals $__________________.
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208. Kanban Company estimated sales of 40,000 units at $6 each. Budgeted cost of goods sold per unit includes $1.20 of
direct materials, six minutes of direct labor time at $15 per hour, and unit overhead cost of $1.30. Kanban pays a sales
commission of 10% of sales revenue. Fixed selling and administrative expenses are budgeted at $25,000. Prepare a
statement of operating income.
A. Budgeted variable marketing expense is $__________________.
B. Budgeted operating income is $__________________.
C. Recalculate budgeted operating income assuming fixed selling and administrative expenses double and the selling
price per unit increases 10%.