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Exam 8: Master Budgeting

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Question 1

Multiple Choice

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The LFH Corporation makes and sells a single product, Product T. Each unit of Product T requires 1.5 direct labor-hours at a rate of $10.50 per direct labor-hour. The direct labor workforce is fully adjusted each month to the required workload. LFH Corporation needs to prepare a Direct Labor Budget for the second quarter of next year.The company has budgeted to produce 28,000 units of Product T in June. The finished goods inventories on June 1 and June 30 were budgeted at 800 and 600 units, respectively. Budgeted direct labor costs for June would be:

A) $294,000
B) $441,000
C) $444,150
D) $437,850

E) All of the above
F) A) and D)

Correct Answer

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B

Question 2

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The Charade Corporation is preparing its Manufacturing Overhead budget for the fourth quarter of the year. The budgeted variable manufacturing overhead is $5.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $75,000 per month, of which $15,000 is factory depreciation.If the budgeted direct labor time for November is 7,000 hours, then the total budgeted manufacturing overhead for November is:

A) $95,000
B) $110,000
C) $75,000
D) $125,000

E) B) and C)
F) All of the above

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Question 3

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Varughese Incorporated is working on its cash budget for March. The budgeted beginning cash balance is $33,000. Budgeted cash receipts total $182,000 and budgeted cash disbursements total $191,000. The desired ending cash balance is $40,000.To attain its desired ending cash balance for March, the company needs to borrow:

One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks.

Rokosz Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:The budgeted selling price per unit is $104. Budgeted unit sales for October, November, December, and January are 6,900, 7,100, 11,300, and 15,300 units, respectively. All sales are on credit.Regarding credit sales, 30% are collected in the month of the sale and 70% in the following month.The ending finished goods inventory equals 20% of the following month's sales.The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.00 per pound.The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.5 direct labor-hours.The estimated direct labor cost for November is closest to:

Rokosz Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:The budgeted selling price per unit is $104. Budgeted unit sales for October, November, December, and January are 6,900, 7,100, 11,300, and 15,300 units, respectively. All sales are on credit.Regarding credit sales, 30% are collected in the month of the sale and 70% in the following month.The ending finished goods inventory equals 20% of the following month's sales.The ending raw materials inventory equals 30% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $2.00 per pound.The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.5 direct labor-hours.The expected cash collections for November is closest to:

Carver Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow:Sales are budgeted at $350,000 for November, $320,000 for December, and $300,000 for January.Collections are expected to be 90% in the month of sale and 10% in the month following the sale.The cost of goods sold is 75% of sales.The company desires to have an ending merchandise inventory equal to 60% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase.Other monthly expenses to be paid in cash are $24,700.Monthly depreciation is $16,000.Ignore taxes. Accounts payable at the end of December would be:

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 company has budgeted to sell 12,000 Yutes in December, then the budgeted total cash disbursements for selling and administrative expenses for December would be:

Petrini Corporation makes one product and it provided the following information to help prepare the master budget for the next four months of operations:The budgeted selling price per unit is $110. Budgeted unit sales for January, February, March, and April are 7,500, 10,600, 12,000, and 11,700 units, respectively. All sales are on credit.Regarding credit sales, 30% are collected in the month of the sale and 70% in the following month.The ending finished goods inventory equals 30% of the following month's sales.The ending raw materials inventory equals 10% of the following month's raw materials production needs. Each unit of finished goods requires 5 pounds of raw materials. The raw materials cost $4.00 per pound.Regarding raw materials purchases, 40% are paid for in the month of purchase and 60% in the following month.The direct labor wage rate is $23.00 per hour. Each unit of finished goods requires 2.6 direct labor-hours.Manufacturing overhead is entirely variable and is $8.00 per direct labor-hour.The variable selling and administrative expense per unit sold is $1.70. The fixed selling and administrative expense per month is $70,000.The expected cash collections for February is closest to:

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 sale60% in the following monthRaw materials purchases are paid:30% in the month of purchase70% in the following monthThe 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 expected cash collections for August is closest to:

Stut Corporation, a retailer, plans to sell 28,000 units of Product X during the month of August. If the company has 6,000 units on hand at the start of the month, and plans to have 9,000 units on hand at the end of the month, how many units of Product X must be purchased from the supplier during the month?

One disadvantage of budgeting is that budgeting makes it more difficult to coordinate the plans and activities of departmental managers.

Bramble Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:Sales are budgeted at $450,000 for November, $430,000 for December, and $420,000 for January.Collections are expected to be 40% in the month of sale and 60% in the month following the sale.The cost of goods sold is 75% of sales.The company would like to maintain ending merchandise inventories equal to 65% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.Other monthly expenses to be paid in cash are $25,100.Monthly depreciation is $16,100.Ignore taxes. The cost of December merchandise purchases would be:

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 sale70% in the following monthRaw materials purchases are paid:30% in the month of purchase70% in the following monthThe 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 unit product cost is closest to:

Cash collections in a schedule of cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period.

The LFH Corporation makes and sells a single product, Product T. Each unit of Product T requires 1.5 direct labor-hours at a rate of $10.50 per direct labor-hour. The direct labor workforce is fully adjusted each month to the required workload. LFH Corporation needs to prepare a Direct Labor Budget for the second quarter of next year.The budgeted direct labor cost per unit of Product T is closest to:

Caspion Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 2.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: The company wants to maintain monthly ending inventories of Jurislon equal to 20% of the following month's production needs. On July 31, this requirement was not met since only 10,800 kilograms of Jurislon were on hand. The cost of Jurislon is $18.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months.The desired ending inventory of Jurislon for September is:

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.In Acti's budgeted balance sheet at December 31, at what amount will accounts payable for raw materials be shown?

The Bandeiras Corporation, a merchandising firm, has budgeted its activity for December according to the following information:Sales at $550,000, all for cash.Merchandise inventory on November 30 was $300,000.The cash balance at December 1 was $25,000.Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash.Budgeted depreciation for December is $35,000.The planned merchandise inventory on December 31 is $270,000.The cost of goods sold is 75% of the sales price.All purchases are paid for in cash.There is no interest expense or income tax expense.The budgeted cash disbursements for December are:

Hesterman 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 sale60% in the following monthThe ending finished goods inventory should equal 40% of the following month's sales. The ending raw materials inventory should equal 20% of the following month's raw materials production needs.If 39,720 pounds of raw materials are required for production in June, then the budgeted cost of raw material purchases for May is closest to: