Exam 13: Planning and Budgeting

Lien Company is a merchandising company that sells a single product. The company's inventories, production, and sales in units for the next three months have been forecasted as follows: October November December Beginning inventory 10,000 10,000 10,000 Merchandise purchases 60,000 70,000 35,000 Sales 60,000 70,000 40,000 Ending inventory 10,000 10,000 5,000 Units are sold for $12 each. One fourth of all sales are paid for in the month of sale and the balance is paid for in the following month. Accounts receivable at September 30 totaled $450,000. Merchandise is purchased for $7 per unit. Half of the purchases are paid for in the month of the purchase and the remainder is paid for in the month following purchase. Marketing and administrative expenses are expected to total $120,000 each month. One half of these expenses will be paid in the month in which they are incurred and the balance will be paid in the following month. Accounts payable at September 30 totaled $290,000. Cash at September 30 totaled $80,000. A payment of $300,000 for purchase of equipment is scheduled for November, and a dividend of $200,000 is to be paid in December. Ignore depreciation for purposes of preparing the schedules Required: a. Prepare a schedule of expected cash collections for each month October-December. b. Prepare a schedule showing expected cash disbursements for merchandise purchases and marketing and administrative expenses for each month October-December. c. Prepare a cash budget for each month October--December. There is no minimum required ending cash balance.

Things Inc. is preparing its cash budget for April. The budgeted beginning cash balance is $19,000. Budgeted cash receipts total $105,000 and budgeted cash disbursements total $98,000. The desired ending cash balance is $50,000. The company can borrow up to $120,000 at any time from a local bank, with interest not due until the following month. Required: Prepare the company's cash budget for April in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance.

Atlanta Import Enterprises, a wholesaler of imported goods, expects the following unit sales over the next five months: Month Units April 200,000 May 240,000 June 270,000 July 300,000 August 280,000 Atlanta Import's goal is to maintain an inventory equal to 10% of next month's sales requirements. March 31^st inventory is projected to be 18,000 units. Required: Prepare a purchases budget (in units) for Atlanta Import for as many months as is possible based on data provided. Assume a 30-day month

The production manager of Dame Enterprises plans to have an inventory on hand at the end of each month that will equal 150% of the next month's sales. This requirement was met at the end of February. A sales budget for the four months ending June 30th is as follows: Month Units March 30,000 April 50,000 May 80,000 June 40,000 Required: Prepare a production budget for April and May.

The Molson Company had budgeted production for the year as follows: Quarter 1 2 3 4 Production in units 10,000 12,000 16,000 14,000 Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 lbs. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in materials. Budgeted purchases of raw materials in the second quarter would be:

A master budget:

Why does a service organization not need to prepare a production budget or a cost of goods sold budget?

The manufacturing overhead budget at Rost Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 2,800 direct labor-hours will be required in September. The variable overhead rate is $7.00 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $43,120 per month, which includes depreciation of $3,640. All other fixed manufacturing overhead costs represent current cash flows. The September cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Which of the following budgets is not required in a service organization?

Oregon Inc. has the following information for its first year of operations: Revenues ( 250,000 units) \3 ,730,000 Manufacturing costs: Materials \ 665,000 Variable cash costs 904,000 Fixed cash costs 360,000 Depreciation (fixed) 445,000 Marketing \& administrative costs: Marketing (variable) 475,000 Marketing depreciation 113,000 Administrative (fixed) 450,550 Administrative depreciation 42,000 Total costs \ 3,454,550 Operating profits \ 275,450 All depreciation charges are fixed and are expected to remain the same for year 2. Sales volume is expected to increase by 13%, and sales prices are expected to increase by 4%. Material costs per unit are expected to increase by 8%. Other unit variable manufacturing costs are expected to increase by 10% per unit. Fixed manufacturing costs (other than depreciation) are expected to increase by 6%. Variable marketing costs per unit will remain constant. Administrative costs (other than depreciation) are expected to increase by 12%. Assume there are no inventories. Oregon operates on a cash basis. Required: Prepare a budgeted income statement for year 2.

Riff, Inc. is working on its cash budget for June. The budgeted beginning cash balance is $16,000. Budgeted cash receipts total $188,000 and budgeted cash disbursements total $187,000. The desired ending cash balance is $40,000. The excess (deficiency) of cash available over disbursements for June will be:

The marketing and administrative expense budget of Kimble Corporation is based on the number of units sold, which are budgeted to be 2,500 units in January. The variable marketing and administrative expense is $4.40 per unit. The budgeted fixed marketing and administrative expense is $35,750 per month, which includes depreciation of $4,000. The remainder of the fixed marketing and administrative expense represents current cash flows. Required: Prepare a schedule showing total marketing and administrative expenses for January, as well as the cash disbursements for marketing and administrative expenses.

Pouch Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.84 direct labor-hours. The direct labor rate is $9.40 per direct labor-hour. The production budget calls for producing 2,100 units in June and 1,900 units in July. If the direct labor work force is fully adjusted to the total direct labor-hours needed each month, what would be the total combined direct labor cost for the two months?

Serene Corporation, an auto parts retailer, had 17,000 units of brake calipers on hand at the end of 2019. The company's inventory policy is to maintain an ending inventory equal to 15% of the current year's sales. During 2020, Serene sold 210,000 units of calipers. How many units did Serene purchase in 2020?

Marino Company has projected sales and production in units for the second quarter of the year as follows: April May June Sales 30,000 20,000 25,000 Production 25,000 25,000 30,000 Required: a. Cash production costs are budgeted at $6 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Marketing and administrative expenses (all paid in cash) amount to $60,000 per month. The accounts payable balance on March 31 totals $96,000, all of which will be paid in April. Prepare a schedule for each month showing budgeted cash disbursements for Marino Company. b. Assume that all units will be sold on account for $15 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale and the remaining 10% in the second month following the month of sale. Accounts receivable on March 31 totaled $255,000 ($45,000 from February's sales and the remainder from March.) Prepare a schedule for each month showing budgeted cash receipts for Marino Company.

The manufacturing overhead budget requires that costs be separated into their fixed and variable components. Another budget that has this requirement is the:

A company has the following annual budget data: Beginning finished goods inventory 40,000 units Sales 70,000 units Ending finished goods inventory 30,000 units Direct materials \ 10 per unit Direct labor \ 20 per unit Variable factory overhead \ 5 per unit Selling costs \ 2 per unit Fixed factory overhead \ 80,000 What are total budgeted production costs for the year? (CIA adapted)

The major objectives of any budget system are to: (CIA adapted)

The manufacturing overhead budget at Levetron Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 7,100 direct labor-hours will be required in August. The variable overhead rate is $8.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $132,770 per month, which includes depreciation of $24,850. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for August should be:

Merriweather Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Merriweather, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month's sales are in the finished goods inventory. Merriweather also purchases sufficient raw materials (legs) to ensure that raw materials (legs) inventory is 60% of the following month's scheduled production needs. Merriweather's sales budget in units for the next quarter is as follows: (CMA adapted) July 2,300 August 2,500 September 2,100 Merriweather's ending inventories in units for June 30 are: Finished goods 1,900 Raw materials (legs) 4,000 - Assume the required production for August and September is 1,600 units and 1,800 units, respectively, and the July 31 raw materials (legs) inventory is 4,200 units. The number of table legs to be purchased in August is: