Chapter 21(6): Budgeting
Below is budgeted production and sales information for Bluebird Company for the month of December:
Product XXX
Product ZZZ
Estimated beginning inventory
30,000 units
18,000 units
Desired ending inventory
32,000 units
15,000 units
Anticipated sales
520,000 units
460,000 units
The unit selling price for product XXX is $5 and for product ZZZ is $14.
113.
Budgeted production for product XXX during the month is
a.
522,000 units
b.
552,000 units
c.
518,000 units
d.
520,000 units
114.
Budgeted production for product ZZZ during the month is
a.
460,000 units
b.
475,000 units
c.
457,000 units
d.
463,000 units
115.
Truliant Co. sells a product called Withitall and has predicted the following sales for the first four months of
the
current year:
January
February
March
April
Sales in units
1,700
1,900
2,100
1,600
Ending inventory for each month should be 20% of next month’s sales. How many units should be produced in
February?
a. 1,940
b. 1,800
c. 1,900
d. 1,850
116.
An October sales forecast projects 7,000 units are going to be sold at a price of $11.50 per unit. The desired ending
inventory in units is 15% higher than the beginning inventory of 1,000 units. Total October sales are anticipated to
be
a. $69,000
b. $80,500
c. $70,000
d. $92,000
117.
Production and sales estimates for June are as follows:
Estimated inventory (units), June 1
16,000
Desired inventory (units), June 30
18,000
Expected sales volume (units):
Area X
4,000
Area Y
6,000
Area Z
5,500
Unit sales price
$20
The number of units expected to be manufactured in June is
a. 15,500
b. 17,500
c. 16,500
d. 13,500
Next year’s sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold
for prices of $10 and $12 per unit, respectively. The desired ending inventory of Product A is 20% higher than its
beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
118.
Total budgeted sales of both products for the year would be
a. $42,000
b. $200,000
c. $264,000
d. $464,000
119.
If the expected sales volume for the current period is 9,000 units, the desired ending inventory is 200 units, and
the
beginning inventory is 300 units, the number of units set forth in the production budget, representing total
production
for the current period, is
a. 9,000
b. 8,900
c. 8,700
d. 9,100
Next year’s sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold
for prices of $10 and $12 per unit, respectively. The desired ending inventory of Product A is 20% higher than its
beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
120.
Budgeted production of Product A for the year would be
a.
22,400 units
b.
20,400 units
c.
20,000 units
d.
12,200 units
121.
Consider Derek’s budget information: materials to be used totals $64,750; direct labor totals $198,400;
factory
overhead totals $394,800; work in process inventory January 1, $189,100; and work in progress
inventory on
December 31, $197,600. What is the budgeted cost of goods manufactured for the year?
a. $649,450
b. $657,950
c. $197,600
d. $1,044,650
122.
The budgeted finished goods inventory and cost of goods sold for a manufacturing company for the year are as
follows: January 1 finished goods, $765,000; December 31 finished goods, $540,000; and cost of goods sold for
the
year, $2,560,000. The budgeted costs of goods manufactured for the year is
a. $1,255,000
b. $2,335,000
c. $2,785,000
d. $3,100,000
123.
Heedy Company is trying to decide how many units of merchandise to produce each month. The company policy
is
to have 20% of the next month’s sales in inventory at the end of each month. Projected sales for August,
September, and October are 30,000 units, 20,000 units, and 40,000 units, respectively. How many units must be
produced in September?
a. 24,000
b. 18,000
c. 28,000
d. 22,000
Chapter 21(6): Budgeting
Next year’s sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold
for prices of $10 and $12 per unit, respectively. The desired ending inventory of Product A is 20% higher than its
beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending
inventory of B is 3,000 units.
124.
Budgeted production of Product B for the year would be
a.
24,500 units
b.
22,500 units
c.
26,500 units
d.
23,200 units
125.
Gilbert’s expects its September sales to be 20% higher than its August sales of $150,000. Manufacturing costs
were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected
as follows: 30% in the month of the sale and 70% in the following month. Payments of manufacturing costs are
as
follows: 25% in the month of production and 75% in the following month. The beginning cash balance on
September 1 is $7,500. The ending balance on September 30 would be
a. $61,500
b. $75,000
c. $72,300
d. $71,500
126.
The budgeted finished goods inventory and cost of goods sold for a manufacturing company for the year are
as
follows: January 1 finished goods, $765,000; December 31 finished goods, $640,000; and cost of goods
sold, $2,560,000. The budgeted costs of goods manufactured is
a. $1,405,000
b. $2,560,000
c. $2,435,000
d. $3,965,000
127.
Woodpecker Co. has $296,000 in accounts receivable on January 1. Budgeted sales for January are $860,000.
Woodpecker Co. expects to sell 20% of its merchandise for cash. Of the remaining 80% of sales on account, 75%
are expected to be collected in the month of sale and the remainder the following month. The January cash
collections from sales are
a. $812,000
b. $688,000
c. $468,000
d. $984,000
128.
The budget that summarizes future plans for the acquisition of fixed assets is
a.
direct materials purchases budget
b.
production budget
c.
sales budget
d.
capital expenditures budget
129.
Estimated cash payments are planned reductions in cash from all of the following except
a.
manufacturing and operating expenses
b.
capital expenditures
c.
notes and accounts receivable collections
d.
payments for interest or dividends
Nuthatch Corporation began its operations on September 1 of the current year. Budgeted sales for the first three
months of business are $260,000, $375,000, and $400,000, respectively, for September, October, and
November.
The company expects to sell 30% of its merchandise for cash. Of sales on account, 80% are
expected to be
collected in the month of the sale and 20% in the month following the sale.
130.
The cash collections expected in September from accounts receivable are estimated to be
a. $223,600
b. $145,600
c. $182,000
d. $168,000
131.
The cash collections expected in October from accounts receivable are estimated to be
a. $246,400
b. $262,500
c. $210,000
d. $294,500
132.
The cash collections expected in November from accounts receivable are projected to be
a. $280,000
b. $316,400
c. $295,200
d. $296,250
Finch Company began its operations on March 31 of the current year. Finch has the following projected costs:
April
May
June
Manufacturing costs (1)
$156,800
$195,200
$217,600
Insurance expense (2)
1,000
1,000
1,000
Depreciation expense
2,000
2,000
2,000
Property tax expense (3)
500
500
500
(1)
Of the manufacturing costs, three-fourths are paid for in the month they are incurred; one-fourth is paid in
the
following month.
(2)
Insurance expense is $1,000 a month; however, the insurance is paid four times yearly in the first month of
the
quarter, (i.e., January, April, July, and October).
(3)
Property tax is paid once a year in November.
133.
The cash payments expected for Finch Company in the month of April are
a. $122,600
b. $120,600
c. $123,100
d. $121,100
134.
The cash payments expected for Finch Company in the month of May are
a. $185,600
b. $149,900
c. $187,600
d. $189,100
135.
The cash payments for Finch Company expected in the month of June are
a. $215,500
b. $188,800
c. $214,000
d. $212,000
136.
Planning for capital expenditures is necessary for all of the following reasons except
a.
machinery and other fixed assets wear out
b.
expansion may be necessary to meet increased demand
c.
amounts spent for office equipment may be immaterial
d.
fixed assets may fall below minimum standards of efficiency
137.
As of January 1 of the current year, the Grayson Company had accounts receivables of $40,000. The sales for
January, February, and March were as follows: $120,000, $140,000, and $150,000, respectively. Of each
month’s
sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale,
with the
remaining 40% collected in the following month. What is the total cash collected (both from accounts
receivable
and for cash sales) in the month of January?
a. $64,000
b. $107,000
c. $61,600
d. $121,600
138.
As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for
January, February, and March were as follows: $120,000, $140,000, and $150,000, respectively. Of each
month’s
sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale,
with the
remaining 40% collected in the following month. What is the total cash collected (both from accounts
receivable
and for cash sales) in the month of February?
a. $129,600
b. $62,400
c. $133,600
d. $91,200
139.
As of January 1 of the current year, the Grackle Company had accounts receivables of $50,000. The sales for
January, February, and March were as follows: $120,000, $140,000, and $150,000, respectively. Of each
month’s
sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale,
with the
remaining 40% collected in the following month. What is the total cash collected (both from accounts
receivable
and cash sales) in the month of March?
a. $74,800
b. $146,800
c. $102,000
d. $116,800
140.
As of January 1 of the current year, the Gunner Company had accounts receivables of $50,000. The sales for
January, February, and March were as follows: $120,000, $140,000, and $150,000, respectively. Of each
month’s
sales, 20% are for cash. Of the remaining 80% (the credit sales), 60% are collected in the month of sale,
with the
remaining 40% collected in the following month. What is the accounts receivable balance as of March
31?
a. $72,000
b. $48,000
c. $58,720
d. $60,000
Chapter 21(6): Budgeting
Dove Corporation began its operations on September 1 of the current year. Budgeted sales for the first three
months of business are $250,000, $320,000, and $410,000, respectively, for September, October, and
November.
The company expects to sell 25% of its merchandise for cash. Of sales on account, 70% are
expected to be
collected in the month of the sale and 30% in the month following the sale.
141.
The cash collections expected in October are
a. $320,000
b. $248,000
c. $304,250
d. $382,500
142.
The cash collections in November are
a. $317,750
b. $389,750
c. $490,000
d. $410,000
143.
Fashion Jeans, Inc. sells two lines of jeans; Simple Life and Fancy Life. Simple Life sells for $85, and Fancy Life
sells for $100. The company sells all of its jeans on credit and estimates that 60% is collected in the month of the
sale, 35% is collected in the following month, and the rest is considered to be uncollectible. The estimated sales
for
Simple are: January, 20,000 jeans; February, 27,500 jeans; and March, 25,000 jeans. The estimated sales for
Fancy
are: January, 18,000 jeans; February, 19,000; and March, 20,500 jeans. What are the expected cash receipts
for the
month of March?
a. $3,988,125
b. $2,505,000
c. $2,125,000
d. $4,175,000
A company is preparing its cash budget. Its cash balance on January 1 is $290,000 and it has a minimum cash
requirement of $340,000. The following data has been provided:
January
February
March
Cash receipts
$1,061,200
$1,182,400
$1,091,700
Cash payments
984,500
1,210,000
1,075,000
144.
What is the amount of the deficiency or excess cash (after considering the minimum cash balance required) for
January?
a.
excess of $26,700
b.
deficiency of $136,700
c.
excess of $356,700
d.
excess of $60,000
145.
What is the amount of cash excess or deficiency (after considering the minimum cash balance required)
for
February?
a.
deficiency of $109,100
b.
excess of $10,900
c.
deficiency of $900
d.
excess of $109,100
146.
What is the amount of cash excess or deficiency (after considering the minimum cash balance required)
for
March?
a.
excess of $214,200
b.
excess of $15,800
c.
deficiency of $60,000
d.
excess of $25,300
147.
When preparing the cash budget, all the following should be considered except
a.
cash receipts from customers
b.
depreciation expense
c.
cash payments to suppliers
d.
cash payments for equipment
148.
Which of the following would not be used in preparing a cash budget for October?
a.
beginning cash balance on October 1
b.
budgeted salaries expense for October
c.
estimated depreciation expense for October
d.
budgeted sales and collections for October
149.
Southern Company is preparing a cash budget for April. The company has $12,000 cash at the beginning of April
and anticipates $30,000 in cash receipts and $34,500 in cash disbursements during April. Southern Company has
an
agreement with its bank to maintain a minimum cash balance of $10,000. To maintain the required balance
during
April, the company must
a.
borrow $4,500
b.
borrow $2,500
c.
borrow $7,500
d.
borrow $5,000
150.
Tara Company’s budget shows the following credit sales for the current year: September, $25,000; October, $36,000;
November, $30,000; December, $32,000. Experience has shown that payment for credit sales is received
as follows:
15% in the month of sale, 60% in the first month after sale, 20% in the second month after sale, and 5%
is
uncollectible. How much cash will Tara Company expect to collect in November as a result of current and past
credit sales?
a. $19,700
b. $28,400
c. $30,000
d. $31,100
151.
A company’s history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit
sales are 20% in the month of the sale, 50% in the next month, 25% the following month, and 5% is
uncollectible. Projected sales for December, January, and February are $60,000, $85,000, and $95,000,
respectively. The February expected cash receipts from all current and prior credit sales is
a. $61,200
b. $57,000
c. $66,400
d. $90,250
152.
Describe a master budget and the sequence in which the individual budgets within the master budget are prepared.
153.
Describe at least five benefits of budgeting.
154.
Why is the sales budget usually prepared first?
155.
At the beginning of the period, the Cutting Department budgeted direct labor of $30,000 and supervisor salaries of
$20,000 for 3,000 hours of production. The department actually completed 5,000 hours of production. Determine
the
budget for the department assuming that it uses flexible budgeting.
156.
Doran Technologies produces a single product. Expected manufacturing costs are as follows:
Variable costs
Direct materials $4.00 per unit
Direct labor $1.20 per unit
Manufacturing overhead $0.95 per unit
Fixed costs per month
Depreciation
$ 6,000
Supervisory salaries
13,500
Other fixed costs
3,850
Estimate manufacturing costs for production levels of 25,000 units, 30,000 units, and 35,000 units per month.
157.
Rodger’s Cabinet Manufacturers uses flexible budgets that are based on the following manufacturing data for
the
month of July:
Direct materials $8 per unit
Direct labor $5 per unit
Electric power (variable) $0.30 per unit
Electric power (fixed) $4,000 per month
Supervisor salaries $25,000 per month
Property taxes on factory $4,000 per month
Straight-line depreciation $2,900 per month
Prepare a flexible budget for Rodger’s based on production of 10,000, 15,000, and 20,000 units.