Exam 8: Budgeting and Planning

Manufacturing firms prepare a separate raw materials purchases budget for each material used in production

Blue has forecast sales to be $410,000 in February, $540,000 in March, $580,000 in April, and $620,000 in May. The average cost of goods sold is 60% of sales. All sales are made on credit and sales are collected 50% in the month of sale, 30% the month following and the remainder two months after the sale. What are budgeted cash receipts in May?

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). How many total labor hours will be budgeted for September?

The budgeted income statement is a combination of:

Wheat Inc. has forecast its sales for the coming months as follows: Wheat maintains finished goods inventory equal to 20% of the next month's sales requirements. April 1 inventories were 14 standard units and 10 deluxe. Required: Prepare a production schedule for April through June.

Participative budgeting is more likely to motivate people to work toward the organization's goals than is a top-down approach

Which of the following is not a component of the operating budget?

Jared Inc. produces leather handbags. The sales budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jared Inc.'s finished goods inventory policy is 10% of next month's sales needs. Jared Inc.'s leather inventory policy is 30% of next month's production needs. What will leather purchases be in August?

Which of the following sequences is correct?

Edna Inc. has forecast its sales for the coming months as follows: The standard model sells for $28, the economy model sells for $21, and the deluxe model sells for $49. Required: Prepare a sales budget for each of the three months July through September as well as the total for the quarter. Present the budget for each product as well as total sales.

When calculating raw materials purchases, the starting point should be:

Jackson Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jackson Inc.'s leather inventory policy is 30% of next month's production needs. On July 1 leather inventory was expected to be 1,000 square meters. Leather is expected to cost $5.00 per square meter in June, but go up to $6.00 per square meter in July. What is the expected cost of leather purchases in July?

Cedar Co. has forecast purchases to be $330,000 in June, $375,000 in July, $310,000 in August, and $270,000 in September. Purchases average 30% paid in cash, 70% are on credit. Credit purchases are paid 60% in the month of purchase, 30% during the month following, and 10% the second month following the purchase. Cash disbursements in September would be:

Jeremy Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 0.5 square meters of leather. Jeremy Inc.'s leather inventory policy is 30% of next month's production needs. If the leather policy is met, what will the July 1 inventory be?

Bear Corp. sells its product for $120. Forecasted sales are 1,200 units in October, 1,500 in November, and 1,600 in December. Variable costs are based on sales, and consist of commissions (7% of sales), advertising (3%) and shipping (5%). Fixed costs per month are $4,000 sales salaries, $3,300 office salaries, $2,000 depreciation, $1,800 office rent, $750 insurance and $900 utilities. Required: Prepare Bear Corp's selling and administrative expense budget for the period October through December. Present monthly totals as well as a 3-month total.

Heather Products expects the following sales of its single product: Heather desires an ending finished goods inventory to be equal to 20% of the next month's sales needs. Actual May 1 inventory will be 3,300 units. Required: Prepare a production budget for Heather for as many months as is possible.

Parsley Inc., a merchandising firm, has forecasted sales to be $125,000 in February, $135,000 in March, $150,000 in April, and $140,000 in May. The average cost of goods sold is 60% of sales. The merchandise inventory policy is to carry 50% of next month's sales needs. If actual February 1 inventory is $40,000, what will the cost of March purchases be?

Walnut has forecast sales for the next three months as follows: July 4,000 units, August 6,000 units, September 7,500 units. Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand. July 1 inventory is projected to be 1,500 units. Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold. What are budgeted selling and administrative expenses for July?

Jillian Inc. produces leather handbags. The production budget for the next four months is: July 5,000 units, August 7,000, September 7,500, October 8,000. Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour) and 2.2 hours of skilled labor (paid $15 per hour). What will be the total labor cost for the month of August?

Maple Inc. produces wooden boxes. The production budget for the next four months is: July 15,000 units, August 17,000, September 17,500. Each box requires three skill levels: 1.0 hours of unskilled labor (paid $8 per hour), 1.5 hours of semi-skilled labor (paid $10) and 2.0 hours of skilled labor (paid $15 per hour). Required: Prepare a labor budget for the three months July - September. Provide the labor requirements according to skill level in hours and in labor cost as well as in total. Provide the budget monthly as well as a total for the quarter.