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Exam 8: Master Budgeting

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Question 1

True/False

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The budgeted income statement is typically prepared before the budgeted balance sheet.

A) True
B) False

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Question 2

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Bonkowski Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected: 30% in the month of the sale 70% in the following month Raw materials purchases are paid: 30% in the month of purchase 70% in the following month The ending finished goods inventory should equal 30% of the following month's sales. The ending raw materials inventory should equal 10% of the following month's raw materials production needs. The estimated net operating income (loss) for February is closest to:

A) $85,000
B) $48,800
C) $118,800
D) $86,000

E) A) and C)
F) C) and D)

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Question 3

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When preparing a direct materials budget, the required purchases of raw materials in units equals:

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget?

LBC Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 3.5 hours of direct labor at the rate of $14.50 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June. The company plans to sell 39,000 units of Product WZ in June. The finished goods inventories on June 1 and June 30 are budgeted to be 200 and 100 units, respectively. Budgeted direct labor costs for June would be:

The production department of Tarre Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year. Each unit requires 0.30 direct labor-hours at $16.00 per hour. Required Prepare a direct labor budget for the upcoming fiscal year, assuming that the direct labor work force is adjusted each quarter to match the number of hours required to produce the budgeted production.

Which of the following budgets are prepared before the sales budget?

Bonkowski Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected: 30% in the month of the sale 70% in the following month Raw materials purchases are paid: 30% in the month of purchase 70% in the following month The ending finished goods inventory should equal 30% of the following month's sales. The ending raw materials inventory should equal 10% of the following month's raw materials production needs. The budgeted sales for February is closest to:

Porter Corporation makes and sells a single product called a Yute. The company is in the process of preparing its Selling and Administrative Expense Budget for the last quarter of the year. The following budget data are available: All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the total budgeted selling and administrative expense for October is $518,520, then how many Yutes does the company plan to sell in October?

Arciba Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 7,400 direct labor-hours will be required in January. The variable overhead rate is $9.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $130,980 per month, which includes depreciation of $10,360. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for January should be:

Michard Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: a. The budgeted selling price per unit is $125. Budgeted unit sales for April, May, June, and July are 7,600, 10,500, 13,800, and 12,900 units, respectively. All sales are on credit. B. Regarding credit sales, 20% are collected in the month of the sale and 80% in the following month. C. The ending finished goods inventory equals 20% of the following month's sales. D. The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.00 per pound. E. Regarding raw materials purchases, 30% are paid for in the month of purchase and 70% in the following month. F. The direct labor wage rate is $25.00 per hour. Each unit of finished goods requires 3.0 direct labor-hours. G.The variable selling and administrative expense per unit sold is $3.40. The fixed selling and administrative expense per month is $80,000. The budgeted sales for May is closest to:

A benefit from budgeting is that it forces managers to think about and plan for the future.

Coles Corporation, Inc. makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows: The company wants to maintain monthly ending inventories of Material K equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 2,500 yards of Material K were on hand. The cost of Material K is $0.85 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year. The total cost of Material K to be purchased in August is:

Brockney Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $8.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $107,970 per month, which includes depreciation of $9,760. All other fixed manufacturing overhead costs represent current cash flows. The July direct labor budget indicates that 6,100 direct labor-hours will be required in that month. Required: a. Determine the cash disbursements for manufacturing overhead for July. b. Determine the predetermined overhead rate for July.

Sevenbergen Corporation makes one product and has provided the following information to help prepare the master budget for the next four months of operations: Credit sales are collected: 40% in the month of the sale 60% in the following month Raw materials purchases are paid: 30% in the month of purchase 70% in the following month The ending finished goods inventory should equal 20% of the following month's sales. The ending raw materials inventory should equal 30% of the following month's raw materials production needs. The estimated selling and administrative expense for August is closest to:

Capes Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow: o Sales are budgeted at $390,000 for November, $360,000 for December, and $340,000 for January. o Collections are expected to be 85% in the month of sale and 15% in the month following the sale. o The cost of goods sold is 80% of sales. o The company desires an ending merchandise inventory equal to 40% of the cost of goods sold in the following month. Payment for merchandise is made in the month following the purchase. o The November beginning balance in the accounts receivable account is $77,000. o The November beginning balance in the accounts payable account is $320,000. Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December.

The manufacturing overhead budget of Reigle Corporation is based on budgeted direct labor-hours. The February direct labor budget indicates that 5,800 direct labor-hours will be required in that month. The variable overhead rate is $4.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $82,360 per month, which includes depreciation of $16,820. All other fixed manufacturing overhead costs represent current cash flows. Required: a. Determine the cash disbursements for manufacturing overhead for February. Show your work! b. Determine the predetermined overhead rate for February. Show your work!

Michard Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations: a. The budgeted selling price per unit is $125. Budgeted unit sales for April, May, June, and July are 7,600, 10,500, 13,800, and 12,900 units, respectively. All sales are on credit. B. Regarding credit sales, 20% are collected in the month of the sale and 80% in the following month. C. The ending finished goods inventory equals 20% of the following month's sales. D. The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 4 pounds of raw materials. The raw materials cost $2.00 per pound. E. Regarding raw materials purchases, 30% are paid for in the month of purchase and 70% in the following month. F. The direct labor wage rate is $25.00 per hour. Each unit of finished goods requires 3.0 direct labor-hours. G. The variable selling and administrative expense per unit sold is $3.40. The fixed selling and administrative expense per month is $80,000. The estimated selling and administrative expense for May is closest to:

Acti Manufacturing Corporation is estimating the following raw material purchases for the final four months of the year: At Acti, 40% of raw materials purchases are normally paid for in the month of purchase. The remaining 60% is paid for in the month following the purchase. How much cash should Acti expect to pay out for raw material purchases during November?

The manufacturing overhead budget at Polich Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 1,600 direct labor-hours will be required in February. The variable overhead rate is $3.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $28,320 per month, which includes depreciation of $3,680. All other fixed manufacturing overhead costs represent current cash flows. The February cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: