Exam 7: Budgeting

On a budgeted balance sheet, the retained earnings number is the net income number as projected by the budgeted income statement.

The direct materials budget:

Reference: 07-10 The LFM Company makes and sells a single product, Product T. Each unit of Product T requires 1.3 hours of labour at a labour rate of $9.10 per hour. LFM Company needs to prepare a Direct Labour Budget for the second quarter of next year. -The company has budgeted to produce 25,000 units of Product T in June. goods inventories on June 1 and June 30 were budgeted at 500 and 700 units, respectively. Budgeted direct labour costs incurred in June would be:

Reference: 07-10 The LFM Company makes and sells a single product, Product T. Each unit of Product T requires 1.3 hours of labour at a labour rate of $9.10 per hour. LFM Company needs to prepare a Direct Labour Budget for the second quarter of next year. -The budgeted direct labour cost per unit of Product T would be:

In completing the Ending Finished Goods Inventory Budget, the managers of Jimbob Co. have determined that there should be 5,000 units of finished goods inventory on hand at the end of the budgeted period. In preparing other budgets they have used the following estimates of quantities and costs required to complete one unit: Quantity Cost Direct materials 10.0 kilograms \ 1.00 per kilogram Direct labour .50 hours \ 20.00 per hour Manufacturing overhead is allocated at the rate of $5.00 per direct labour hour. Using the above data, the ending finished goods inventory should be:

Marple Company's budgeted production in units and budgeted raw materials purchase? over the next three months are given below: January February March Budgeted production (in units) 60,000 ? 100,000 Budgeted raw materials purchases (in kilograms) 129,000 165,000 188,000 Two kilograms of raw materials are required to produce one unit of product. The company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs. The company is expected to have 36,000 kilograms of raw materials on hand on January 1. Budgeted production in units for February will be?

Reference: 07-14 A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands. Carney Company Cash Budget Quarters 1 2 3 4 Cash balance, beginning \ 16 \ \ 13 \ 10 Add collections from customers a 70 67 80 Total cash available ? ? 80 90 Less disbursements: Purchase of inventory 31 40 35 Operating expenses 35 22 ? 15 Equipment purchases 10 14 19 0 Dividends 0 6 0 5 Total disbursements 66 ? 55 Excess (deficiency) of cash available over disbursements 7 17 (2) 35 Financing: Borrowings - 12 - Repayments (including interest) - - (21) Total financing ? ? 12 (21) Cash balance, ending ? \ 10 \ 14 -The repayment (including interest)of financing during the second quarter (item d in thousands)is:

Avril Company makes collections on sales according to the following schedule: 30% collected in the month of sale 60% collected in the month following sale 8% collected in the second month following sale 2% uncollectible The following sales are expected: Expected Sales January \ 100,000 February 120,000 March 110,000 Cash collections in March should be budgeted to be:

Reference: 07-07 Barley Enterprises has budgeted unit sales for the next four months as follows: October 4,800 units November 5,800 units December 6,400 units January 5,200 units The ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on September 30 was below this level and contained only 600 units. -The total of units to be produced in October is?

The budgeted accounts receivable balance on September 30 is:

The budgeted cash disbursements for December are:

Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000 units in June. The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this information, Walsh Company's production of Product W For the month of April should be how many units:

A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm.

Which of the following is not a benefit of budgeting

Reference: 07-03 Information on the actual sales and inventory purchases of the Law Company for the first quarter follows: Sales Inventory Purchases January \ 120,000 \ 60,000 February \ 100,000 \ 78,000 March \ 130,000 \ 90,000 Collections from Law Company's customers are normally 60% in the month of sale, 30% in the month following sale, and 8% in the second month following sale. The balance is uncollectible. Law Company takes full advantage of the 3% discount allowed on purchases paid for by the end of the following month. The company expects sales in April of $150,000 and inventory purchases of $100,000. Operating expenses for the month of April are expected to be $38,000, of which $15,000 is salaries and $8,000 is depreciation. The remaining operating expenses are variable with respect to the amount of sales in dollars. Those operating expenses requiring a cash outlay are paid for during the month incurred. Law Company's cash balance on March 1 was $43,000, and on April 1 was $35,000. -The expected cash collections from customers during April would be:

The PDQ Company makes collections on credit sales according to the following schedule: 25% in month of sale 70% in month following sale 4% in second month following sale 1% uncollectible The following sales have been budgeted: Month Sales April \ 100,000 May 120,000 June 110,000 The budget for cash collections in June will be:

Reference: 07-04 The LaPann Company has obtained the following sales forecast data: July August September October Cash sales \ 80,000 \ 70,000 \ 50,000 \ 60,000 Credit sales \ 240,000 \ 220,000 \ 180,000 \ 200,000 July The regular pattern of collection of credit sales is 20% in the month of sale, 70% in the month following the month of sale, and the remainder in the second month following the month of sale. There are no bad debts. -The budgeted cash receipts for October are?

In companies that have "no lay-off" policies, the total direct labour cost for a budget period is computed by multiplying the total direct labour hours needed to make the budgeted output of completed units by the direct labour wage rate.

The Tobler Company has budgeted production for next year as follows: Quarter First Second Third Fourth Production in units 10,000 12,000 16,000 14,000 Four kilograms of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 kilograms. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Budgeted purchases of raw materials in kilograms in the third quarter will be?

Reference: 07-01 KAB Inc., a small retail store, had the following results for May. The budgets for June and July are also given. May (actual) June (budget) July (budget) Sales \ 42,000 \ 40,000 \ 45,000 Cost of sales 21,000 20,000 22,500 Gross margin 21,000 20,000 22,500 Operating expenses 20,000 20,000 20,000 Operating income \ 1,000 \ 0 \ 2,500 Sales are collected 80% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to sale. Suppliers of the goods are paid in the month following the sale. The "operating expenses" are paid in the month of the sale. -The cash disbursements during the month of June for goods purchased for resale and for operating expenses should be: