36. In going from the sales budget to the production budget, adjustments to the sales budget need to be
made for
a.
finished goods inventories.
b.
cash receipts.
c.
factory overhead costs.
d.
selling expenses.
37. Watson Corporation manufactures boxes. The estimated numbers of boxes sold for the first three
months of 2014 are as follows:
Month
Sales
January
3,000
February
4,200
March
3,900
Finished goods inventory at the end of December was 600 units. Ending finished goods inventory is
equal to 20% of the next month’s sales. Watson Corporation expects to sell the boxes for $5 each.
April 2014 sales are projected at 4,500 boxes. How many boxes should be produced in February?
a.
4,140 boxes
b.
4,200 boxes
c.
4,260 boxes
d.
3,900 boxes
Figure 9-1.
Saphire Company budgeted the following production in units for the second quarter of the year:
April
45,000
May
38,000
June
42,000
Each unit requires four pounds of raw material. Saphire’s policy is to have 30% of the following
month’s production needs for materials in inventory. This policy was met in March.
38. Refer to Figure 9-1. Raw materials purchases budgeted for May in pounds equal:
a.
156,800
b.
202,400
c.
45,600
d.
171,600
e.
225,600
39. Refer to Figure 9-1. Desired ending inventory for April in pounds equals:
a.
45,600
b.
11,400
c.
10.500
d.
38,300
e.
54,000
Figure 9-2.
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.
40. Refer to Figure 9-2. 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
41. Refer to Figure 9-2. 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
42. Refer to Figure 9-2. What is the budgeted amount of component A to be purchased in May?
a.
41,760
b.
142,800
c.
154,560
d.
164,600
e.
66,600
43. Refer to Figure 9-2. 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
Figure 9-3.
Zion Company manufactures sneakers. Production of their new sneaker for the coming three months is
budgeted as follows:
August
26,000
September
48,000
October
31,000
Each sneaker requires 1.5 hours of direct labor time. Direct labor wages average $13 per hour.
Monthly overhead averages $8 per direct labor hour plus fixed overhead of $4,300.
44. Refer to Figure 9-3. What is the direct labor cost budgeted for September?
a.
$820,000
b.
$750,000
c.
$140,000
d.
$936,000
e.
$625,000
45. Refer to Figure 9-3. What is the total overhead budgeted for the month of September?
a.
$680,000
b.
$580,300
c.
$142,100
d.
$460,000
e.
$362,100
Figure 9-4.
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.
46. Refer to Figure 9-4. 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
47. Refer to Figure 9-4. What is the budgeted production in units for November?
a.
100,000
b.
140,000
c.
121,000
d.
125,600
e.
139,000
48. Refer to Figure 9-4. What is the budgeted overhead for November?
a.
$444,500
b.
$280,700
c.
$404,000
d.
$348,420
e.
$192,920
Figure 9-5.
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.
49. Refer to Figure 9-5. 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
50. Refer to Figure 9-5. What is gross margin for Sully Company last month?
a.
$54,000
b.
$64,600
c.
$32,400
d.
$47,400
e.
$60,400
51. Refer to Figure 9-5. 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
Figure 9-10.
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.
52. Refer to Figure 9-10. 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
53. Refer to Figure 9-10. 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
54. Refer to Figure 9-10. 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
Figure 9-11.
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.
55. Refer to Figure 9-11. What is total selling expense?
a.
$65,000
b.
$44,000
c.
$84,000
d.
$109,000
e.
$39,000
56. Refer to Figure 9-11. What is Pallen’s budgeted operating income?
a.
$281,000
b.
$39,000
c.
$198,000
d.
$83,000
e.
$440,000
57. 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
58. Suppose that a company has the following accounts receivable collection pattern:
Paid in the month of sale
30%
Paid in the month following sale
70%
All sales are on credit. If credit sales for January and February are $200,000 and $100,000
respectively, the cash collection for February is
a.
$210,000
b.
$100,000
c.
$130,000
d.
$140,000
e.
$170,000
Cash from January sales (0.7)($200,000)
59. 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.
Figure 9-9.
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.
60. Refer to Figure 9-9. 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
Cash from February sales (0.3)($100,000)
Cash received in February
61. Refer to Figure 9-9. What is the dollar cost of purchases for October?
a.
$19,925
b.
$22,707
c.
$18,450
d.
$23,300
e.
$33,320
62. Refer to Figure 9-9. 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
63. 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
64. 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.
65. 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.
66. 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
67. Gilbert Company purchased $40,000 of goods in July and expects to purchase $60,000 of goods in
August. Gilbert typically pays for 25% of purchases in the month of purchase and 75% in the
following month. What are Gilbert Company‘s total expected cash disbursements for purchases in the
month of August?
a.
$65,000
b.
$40,000
c.
$45,000
d.
$60,000
e.
$100,000
68. Which of the following appears on the budgeted balance sheet?
a.
Estimated sales
b.
Estimated cost of goods sold
c.
Estimated ending accounts receivable
d.
Estimated fixed selling expense
e.
Estimated fixed factory overhead
69. Cash budgeting is important to which of the following?
a.
retail stores
b.
manufacturing firms
c.
not-for-profit agencies
d.
local government agencies
e.
all of these
70. Ressen Company finds that typically 30% of a month’s sales are for cash. Payments on accounts
receivable are 60% in the month of sale and 38% in the month following sale. Budgeted sales for June
are $100,000, for July $140,000, and for August $120,000. What are the total cash receipts budgeted
for July?
a.
$127,400
b.
$85,400
c.
$122,000
d.
$262,000
e.
$140,000
71. Schrandt Company, an importer and retailer of Polish pottery and kitchenware, prepares a monthly
master budget. Data for the July master budget are given below:
The June 30th balance sheet follows:
Cash
$ 25,000
Accounts payable
$ 45,000
Accounts receivable
110,000
Capital stock
300,000
Inventory
54,000
Retained earnings
94,000
Building and equipment (net)
250,000
Actual sales for June and budgeted sales for July, August, and September are given below:
June
$137,500
July
360,000
August
400,000
September
320,000
Sales are 20% for cash and 80% on credit. All credit sales are collected in the month following the
sale. There are no bad debts.
The gross margin percentage is 40% of sales. The desired ending inventory is equal to 25% of the
following month’s sales. One fourth of the purchases are paid for in the month of purchase and the
others are purchased on account and paid in full the following month.
The monthly cash operating expenses are $43,000, and the monthly depreciation expenses are $7,000.
What is the balance of the accounts receivable at the end of July?
a.
$110,000
b.
$288,000
c.
$360,000
d.
$398,000
72. June Corporation has the following sales forecasts for the first three months of the current year:
Month
Sales
January
$36,000
February
24,000
March
40,000
75% of sales are collected in the month of the sale and the remainder is collected in the following
month.
Accounts receivable balance (January 1)
$22,800
Cash balance (January 1)
22,000
Minimum cash balance needed
20,000
What is the cash balance at the end of January, assuming that cash is received only from customers and
that $48,000 is paid out during January?
a.
$19,400
b.
$23,800
c.
$20,600
d.
$21,000
Figure 9-6.
Toscano Company makes all its sales on account. Accounts receivable payment experience is as
follows:
Percent paid in the month of sale
25%
Percent paid in the month after the sale
64%
Percent paid in the second month after the sale
5%
Toscano provided information on sales as follows:
May
$140,000
June
$115,000
July
$126,000
August (expected)
$132,000
73. Refer to Figure 9-6. How much of May’s sales are expected to be uncollectible?
a.
$8,400
b.
$5,000
c.
$2,500
d.
$7,200
e.
$0
74. Refer to Figure 9-6. How much of June credit sales are expected to be collected in the month of July?
a.
$30,000
b.
$60,000
c.
$36,000
d.
$73,600
e.
$80,000
75. Refer to Figure 9-6. What is budgeted cash to be collected on account for the month of August?
a.
$45,000
b.
$132,000
c.
$119,390
d.
$150,000
e.
$154,600
Figure 9-7.
Lambert Company purchased $140,000 of goods in September and expects to purchase $130,000 of
goods in October. Lambert typically pays for 20% of purchases in the month of purchase and 80% in
the following month.
Every month, Lambert must make the following payments:
Rent
$ 5,000
Wages
$14,000
Utilities
$ 3,000
Telephone
$ 400
Loan on equipment
$ 1,200
In mid-October, Lambert expects to buy a new computer for $4,500 using the company credit card.
Typically, the credit card bill is paid in full in the following month. September credit card purchases
totaled $6,000.
76. Refer to Figure 9-7. What is Lambert’s expected cash disbursement in October for purchases of goods?
a.
$140,000
b.
$130,000
c.
$112,000
d.
$138,000
e.
$26,000
77. Refer to Figure 9-7. What are the total cash disbursements expected by Lambert during the month of
October?
a.
$167,600
b.
$172,100
c.
$161,600
d.
$55,600
e.
$60,100
Rent
Wages
Utilities
Telephone
Loan on equipment
Payments for goods $140,000(0.8) + $130,000(0.2)
Payment for September credit card purchases
Total cash disbursements in October
$167,600
Figure 9-8.
Cohlmia Company makes all its sales on account. Cohlmia’s accounts receivable payment experience
is as follows:
Percent paid in the month of sale
20%
Percent paid in the month after the sale
75%
Percent paid in the second month after the sale
2%
Cohlmia provided information on sales as follows:
September
$100,000
October
$120,000
November
$200,000
December (expected)
$250,000
78. Refer to Figure 9-8. What are the expected cash receipts in the month of November?
a.
$200,000
b.
$40,000
c.
$190,000
d.
$132,000
e.
$114,000
79. Refer to Figure 9-8. What are the expected cash receipts in December?
a.
$202,400
b.
$210,400
c.
$50,000
d.
$250,000
e.
$179,000
80. 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?
a.
21,000 units
b.
19,000 units
c.
25,000 units
d.
20,000 units
81. The alignment of managerial and organizational goals is referred to as goal
a.
congruence.
b.
participation.
c.
pseudoparticipation.
d.
feedback.
e.
incentives.
82. Traditional organization theory uses which of the following to motivate workers?
a.
Bonuses
b.
Self-esteem
c.
Nature of the work itself
d.
Increased responsibility
e.
Job satisfaction
83. ____ occurs when a manager deliberately underestimates revenues or overestimates costs.
a.
Budgetary slack
b.
Pseudoparticipation
c.
Goal congruence
d.
Setting standards too high
e.
None of these
84. Which of the following is true of the master budget?
a.
Monthly budgets are derived by dividing the master budget by 12.
b.
Fixed costs cannot change from one month to another.
c.
Variable costs cannot change from one month to another.
d.
The master budget can reflect seasonal effects.
e.
None of these.
85. Which of the following is not an advantage of participative budgeting?
a.
It fosters a sense of creativity in managers.
b.
It encourages the introduction of budgetary slack.
c.
It encourages greater goal congruence.
d.
It encourages a higher level of performance.