Exam 23: Incremental Analysis

For each item given, identify the budget in which it will appear. If an item will appear on more than one budget, then indicate as many budgets as are relevant. Budget Code: DM Direct Materials Budget DL Direct Labor Budget P Production Budget S Sales Budget C Cash Budget BBS Budgeted Balance Sheet BIS Budgeted Income Statement SA Selling and Administrative Expense Budget MOH Manufacturing Overhead Budget 1. Ending cash balance 2. Total selling and administrative expenses 3. Total sales (in dollars) 4. Interest expense 5. Ending raw materials inventory (in dollars) 6. Ending finished goods inventory (in dollars)

In a production budget, total required units are the budgeted sales units plus

A purchases budget is used instead of a production budget by

Berry Company manufactures two products, (1) Regular and (2) Deluxe. The budgeted units to be produced are as follows: It takes 3 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product. It is the company's policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month's production needs for the Regular product and 20% of the next month's production needs for the Deluxe product. Direct materials inventory on hand at June 30 were 9,000 pounds for the Regular product and 15,000 pounds for the Deluxe product. The cost per pound of materials is $5 Regular and $7 Deluxe. Instructions Prepare separate direct materials budgets for each product for the third quarter of 2010.

Long-range plans are used more as a review of progress toward long-term goals rather than an evaluation of specific results to be achieved.

Which of the following does not appear as a separate section on the cash budget?

Molina, Inc. provided the following information: $\bullet$ Molina estimates that it will collect 40% of its sales in the month of sale, 35% in the month after the sale, and 22% in the second month following the sale. Three percent of all sales are estimated to be bad debts. $\bullet$ Molina pays 30% of merchandise purchases in the month purchased and 70% in the following month. $\bullet$ General operating expenses are budgeted to be $20,000 per month of which depreciation is $2,000 of this amount. Molina pays operating expenses in the month incurred. $\bullet$ Molina makes loan payments of $3,000 per month of which $400 is interest and the remainder is principal. Instructions Calculate Molina's budgeted cash disbursements for August.

The budgeted income statement indicates the expected profitability of operations for the next year.

The following credit sales are budgeted by Peckman Company: The company's past experience indicates that 70% of the accounts receivable are collected in the month of sale, 20% in the month following the sale, and 8% in the second month following the sale. The anticipated cash inflow for the month of April is

Which of the following is done to improve the reliability of the sales forecast?

Zimmer Company reported the following information for 2010: $\bullet$ All sales are on credit. $\bullet$ Customer amounts on account are collected 50% in the month of sale and 50% in the following month. $\bullet$ Cost of goods sold is 35% of sales. $\bullet$ Zimmer purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month. $\bullet$ Accounts payable is used only for inventory acquisitions. How much cash will Zimmer receive during November?

Giles Company is preparing its direct labor budget for May. Projections for the month are that 16,700 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $12, what is the total budgeted direct labor cost for May?

SEK Company's budgeted sales and direct materials purchases are as follows. SEK's sales are 40% cash and 60% credit. Credit sales are collected 10% in the month of sale, 50% in the month following sale, and 36% in the second month following sale; 4% are uncollectible. SEK's purchases are 50% cash and 50% on account. Purchases on account are paid 40% in the month of purchase, and 60% in the month following purchase. Instructions (a) Prepare a schedule of expected collections from customers for March. (b) Prepare a schedule of expected payments for direct materials for March.

The budget components for Harper Company for the quarter ended June 30 appear below. Harper sells trash cans for $12 each. Budgeted production for the next four months is: Harper desires to have trash cans on hand at the end of each month equal to 20 percent of the following month's budgeted sales in units. On March 31, Harper had 4,000 completed units on hand. The number of trash cans to be produced in April and May are 26,000 and 46,000, respectively. Seven pounds of plastic are required for each trash can. At the end of each month, Harper desires to have 10 percent of the following month's production material needs on hand. At March 31, Harper had 18,200 pounds of plastic on hand. The materials used in production costs $0.60 per pound. Each trash can produced requires 0.10 hours of direct labor. Instructions Compute the cost of the plastic inventory at the end of May.

Lester Production is planning to sell 600 boxes of ceramic tile, with production estimated at 580 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.50 per pound and employees of the company are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Lester has 2,600 pounds of clay mix in beginning inventory and wants to have 3,000 pounds in ending inventory. What is the total amount to be budgeted for direct labor for the month?

The formula for developing a production budget is ___________________ plus ______________________ minus _______________________.

The master budget reflects management's long-term plans encompassing five years or more.

Garza Company has accumulated the following budget data for the year 2010. 1. Sales: 30,000 units, unit selling price $50. 2. Cost of one unit of finished goods: Direct materials 2 pounds at $5 per pound, direct labor 1.5 hours at $12 per hour, and manufacturing overhead $6 per direct labor hour. 3. Inventories (raw materials only): Beginning, 10,000 pounds; ending, 15,000 pounds. 4. Raw materials cost: $5 per pound. 5. Selling and administrative expenses: $160,000. 6. Income taxes: 30% of income before income taxes. Instructions (a) Prepare a schedule showing the computation of cost of goods sold for 2010. (b) Prepare a budgeted income statement for 2010.

Kirby Company has budgeted sales revenues as follows: Past experience has indicated that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale, 30% in the month following the sale, and 5% in the second month following the sale. The other 5% is uncollectible. Instructions Prepare a schedule which shows expected cash receipts from sales for the months of April, May, and June.

On January 1, Patel Company has a beginning cash balance of $21,000. During the year, the company expects cash disbursements of $170,000 and cash receipts of $145,000. If Patel requires an ending cash balance of $20,000, the company must borrow