Chapter 21(6): Budgeting
158.
Prepare a flexible budget for Cedar Jeans Company using production levels of 16,000, 18,000, and 20,000
units
produced. The following is additional information necessary to complete the budget:
Variable costs:
Direct labor ($6.00 per unit)
Direct materials ($8.00 per unit)
Variable manufacturing costs ($2.50 per unit)
Fixed costs:
Supervisor’s salaries $80,000
Rent 12,000
Depreciation on equipment 24,000
159.
At the beginning of the period, the Molding Department budgeted direct labor of $33,000 and supervisor salaries
of $24,000 for 3,000 hours of production. The department actually completed 2,500 hours of production.
Determine the
budget for the department assuming that it uses flexible budgeting?
160.
Osprey Cycles, Inc. projected sales of 75,000 bicycles for the year. The estimated January 1 inventory is 5,000
units, and the desired December 31 inventory is 8,000 units. What is the budgeted production (in units) for the
year?
161.
To meet projected annual sales, Bluegill Manufacturers, Inc. needs to produce 75,000 machines for the year.
The
estimated January 1 inventory is 7,000 units, and the desired December 31 inventory is 12,000 units. What
are
projected sales units for the year?
162.
Magnolia, Inc. manufactures bedding sets. The budgeted production is for 55,000 comforters this year. Each
comforter requires 7 yards of material. The estimated January 1 beginning inventory is 31,000 yards with the
desired ending balance of 30,000 yards of material. If the material costs $4.00 per yard, determine the
materials
budget for the year.
163.
Sleep Tight, Inc. manufactures bedding sets. The budgeted production is for 52,000 comforters this year. Each
comforter requires 1.5 hours to cut and sew the material. The cost of cutting and sewing labor is $12.50 per hour.
Determine the direct labor budget for this year.
Chapter 21(6): Budgeting
164.
Good Night manufactures comforters. The estimated inventories on January 1 for finished goods, work in
process,
and materials were $51,000, $28,000, and $33,000, respectively. The desired inventories on December
31 for
finished goods, work in process, and materials were $48,000, $35,000, and $29,000, respectively. Direct
material
purchases were $555,000. Direct labor was $252,000 for the year. Factory overhead was $176,000.
Prepare a cost
of goods sold budget for Good Night, Inc.
165.
Sleep Tight manufactures comforters. The estimated inventories on January 1 for finished goods, work in
process,
and materials were $39,000, $33,000, and $27,000, respectively. The desired inventories on December
31 for
finished goods, work in process, and materials were $42,000, $35,000, and $21,000, respectively. Direct
material
purchases were $575,000, direct labor was $212,000 for the year, and factory overhead was $156,000.
Prepare a
cost of goods sold budget for Sleep Tight, Inc.
166.
Kid’s World Industries has projected sales of 67,000 machines for the current year. The estimated January 1
inventory is 6,000 units, and the desired December 31 inventory is 15,000 units. What is the budgeted production
(in
units) for the year?
167.
Future Technologies projected sales of 35,000 computers for this year. The estimated January 1 inventory is 3,000
units, and the desired December 31 inventory is 9,000 units. What is the budgeted production (in units) for the
year?
168.
Prepare a monthly flexible selling expense budget for Cottonwood Company for sales volumes of $300,000,
$350,000, and $400,000, based on the following data
Sales commissions
Sales manager’s salary
Advertising expense
Shipping expense
Miscellaneous selling expense
6% of sales
$120,000 per month
$90,000 per month
1% of sales
$6,000 per month plus 1.5% of sales
169.
Based on the following production and sales data of Frixion Co. for March of the current year, prepare (a) a
sales
budget and (b) a production budget.
Product T
Product X
Estimated inventory, March 1
28,000 units
20,000 units
Desired inventory, March 31
32,000 units
15,000 units
Expected sales volume:
Area I
320,000 units
260,000 units
Area II
190,000 units
130,000 units
Unit sales price
$6
$14
Product T:
Area I
Area II
Product X:
Area I
Area II
Total revenue from sales
Sales (units)
Plus desired inventory, March 31
Total (units)
Less estimated inventory, March 1
Total production (units)
170.
The Tough Jeans Company produces two different styles of jeans, Working Life and Social Life. The company
sales budget estimates that 400,000 of the Working Life jeans and 250,000 of the Social Life jeans will be sold
during the year. The company begins with 9,000 pairs of Working Life and 18,000 pairs of Social Life. The
company desires ending inventory of 7,500 of Working Life and 10,000 Social Life. Prepare a production budget
for
the year.
171.
Diamond Company manufactures two models of cassette recorders, VCH and MTV. Based on the following
production data for April, prepare a production budget.
VCH
MTV
Estimated inventory (units), April 1
2,900
4,000
Desired inventory (units), April 30
6,900
5,250
Expected sales volume (units):
Eastern zone
12,500
12,960
Midwest zone
19,000
19,800
Western zone
14,500
9,840
172.
Purple Co.’s production budget for Product X for the year ended December 31 is as follows:
Product X
Sales (in units)
640,000
Plus desired ending inventory
85,000
Total
725,000
Less estimated beginning inventory, Jan. 1
90,000
Total production
635,000
In Purple’s production operations, Materials A, B, and C are required to make Product X. The quantities of
direct
materials expected to be used for each unit of product are as follows:
Product X
Material A 0.50 pound per unit
Material B 1.00 pound per unit
Material C 1.20 pound per unit
The prices of direct materials are as follows:
Material A $0.60 per pound
Material B $1.70 per pound
Material C $1.00 per pound
Prepare a direct materials purchases budget for Product X, assuming that there are no beginning or ending
inventories for direct materials (all units purchased are used in production).
173.
The Ruff Jeans Company produces two different types of jeans, Simple Life, and Fancy Life. The company sales
budget estimates that 350,000 of the Simple Life jeans and 200,000 of the Fancy Life jeans will be sold during the
current year. The production budget requires 353,500 units of Simple Life and 196,000 Fancy Life be
manufactured. The Simple Life jeans require 3 yards of denim material, a zipper, and 25 yards of thread. The
Fancy Life jeans require 4.5 yards of denim material, a zipper, and 40 yards of thread. Each yard of denim
material
costs $3.25, the zipper costs $0.75 each, and the thread is $0.02 per yard. There is enough material to
make 2,000
jeans of each type at the beginning of the year. The desired amount of materials left in ending
inventory is to have
enough to manufacture 3,500 jeans of each type. Prepare a direct materials purchases budget.
174.
Good Eats Inc. manufactures flatware sets. The budgeted production is for 80,000 sets this year. Each set requires
2.5 hours to polish the material. If polishing labor costs $15.00 per hour, determine the direct labor cost budget
for
polishing for the year.
175.
Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following the
sale. Sales on account are budgeted to be $225,000 for March and $250,000 for April. What are the budgeted
cash
receipts from sales on account for April?
176.
Big Wheel, Inc. collects 25% of its sales on account in the month of the sale and 75% in the month following the
sale. Sales on account are budgeted to be $150,000 for March and receipts from sales on account total $162,500
in
April. What are budgeted sales on account for April?
177.
Flanders Industries collects 35% of its sales on account in the month of the sale, and 65% in the month
following
the sale. Sales on account are budgeted to be $175,000 for May and $225,000 for June. What are the
budgeted
cash receipts from sales on account for June?
178.
The treasurer of Calico Dreams Company has accumulated the following budget information for the first
two
months of the coming fiscal year:
March
April
Sales.
$450,000
$520,000
Manufacturing costs
290,000
350,000
Selling and administrative expenses
41,400
46,400
Capital additions
250,000
—
The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are collected in full
in the month of the sale, and the remainder in the month following the sale. One-fourth of the manufacturing costs
are paid in the month in which they are incurred, and the other three-fourths in the following month. Depreciation,
insurance, and property taxes represent $6,400 of the monthly selling and administrative expenses. Insurance is
paid
in February, and property taxes are paid yearly in September. A $40,000 installment on income taxes is to be
paid in
April. Of the remainder of the selling and administrative expenses, one-half are to be paid in the month in
which
they are incurred and the balance in the following month. Capital additions of $250,000 are paid in March.
Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current
liabilities as of March 1 are accounts payable of $121,500 ($102,000 for materials purchases and $19,500
for
operating expenses). Management desires to maintain a minimum cash balance of $25,000.
Prepare a monthly cash budget for March and April.
179.
Star Co. was organized on August 1 of the current year. Projected sales for the next three months are as follows:
August
$250,000
September
200,000
October
275,000
The company expects to sell 50% of its merchandise for cash. Of the sales on account, 30% are expected to be
collected in the month of the sale and the remainder in the following month.
Prepare a schedule indicating cash collections for August, September, and October.
180.
What is a capital expenditures budget?
181.
What is a cash budget? How does management use a cash budget?
182.
actions to achieve budgeted goals
183.
setting goals
184.
occurs when budgets are too loose
185.
occurs when employee self-interests are different from company goals
186.
compares actual performance against budgeted goals
ANSWER: c
Match the phrase that follows with the term (a-e) it describes.
a.
static budget
b.
flexible budget
c.
master budget
d.
sales budget
e.
production budget
DIFFICULTY: Easy
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.22-02 – 22–02
ACCT.WARD.16.22-03 – 22–03
ACCT.WARD.16.22-04 – 22–04
ACCREDITING STANDARDS: ACCT.ACBSP.APC.36 – Budgeting and Responsibility
ACCT.IMA.06 – Budget Preparation
BUSPROG: Analytic
187.
integrated set of operating and financing budgets for a period of time
188.
begins by estimating the quantity of sales
189.
shows expected results at several activity levels
190.
estimates the number of units to be manufactured to meet sales and inventory levels
191.
shows expected results at only one activity level
Chapter 21(6): Budgeting
Match each phrase that follows with the term (a-f) it describes..
a.
budget
b.
capital expenditures budget
c.
sales budget
d.
production budget
e.
cash budget
f.
budgeted balance sheet
DIFFICULTY: Moderate
Bloom’s: Remembering
LEARNING OBJECTIVES: ACCT.WARD.16.22-01 – 22–01
ACCT.WARD.16.22-04 – 22–04
ACCT.WARD.16.22-05 – 22–05
ACCREDITING STANDARDS: ACCT.ACBSP.APC.36 – Budgeting and Responsibility
ACCT.IMA.06 – Budget Preparation
BUSPROG: Analytic
192.
an accounting report that presents predicted amounts of the company’s assets, liabilities, and equity as of the end of
the budget period
193.
plans an important role for organizations in planning, directing, and controlling a company’s future goals
194.
a plan showing the units of goods to be sold and the sales to be derived; usually the starting point in the
budgeting
process
195.
a plan that lists dollar amounts to be both spent on purchasing additional pant assets to carry out the
budgeted
business activities
196.
a plan showing the number of units to be produced each month
197.
a plan that shows the expected cash inflows and outflows during the budget period, including receipts from
loans
needed to maintain a minimum cash balance and repayments of such loans