Exam 8: Profit Planning

May Corporation, a merchandising firm, has budgeted sales as follows for the third quarter of the year: Cost of goods sold is equal to 65% of sales.The company wants to maintain a monthly ending inventory equal to 130% of the Cost of Goods Sold for the following month.The inventory on June 30 is less than this ideal since it is only $65, 000.The company is now preparing a Merchandise Purchases Budget. The budgeted purchases for July are:

Noel Enterprises has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units.The inventory on May 31 contained 400 units.The company needs to prepare a production budget for the second quarter of the year. The beginning inventory in units for September is:

In business, a budget is a method for putting a limit on spending.

A benefit of self-imposed budgeting is that it may allow lower-level managers to create budgetary slack.

Cartier Inc.bases its manufacturing overhead budget on budgeted direct labor-hours.The variable overhead rate is $5.80 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $39, 930 per month, which includes depreciation of $12, 870.All other fixed manufacturing overhead costs represent current cash flows.The direct labor budget indicates that 3, 300 direct labor-hours will be required in April. The April cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

Morie Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.75 direct labor-hours.The direct labor rate is $8.10 per direct labor-hour.The production budget calls for producing 2, 000 units in March and 2, 300 units in April.The company guarantees its direct labor workers a 40-hour paid work week.With the number of workers currently employed, that means that the company is committed to paying its direct labor work force for at least 1, 760 hours in total each month even if there is not enough work to keep them busy.What would be the total combined direct labor cost for the two months?

Dilbert Farm Supply is located in a small town in the rural west.Data regarding the store's operations follow: o Sales are budgeted at $260, 000 for November, $230, 000 for December, and $210, 000 for January. O Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold.Payment for merchandise is made in the month following the purchase. O Other monthly expenses to be paid in cash are $20, 300. O Monthly depreciation is $20, 000. O Ignore taxes. The cost of December merchandise purchases would be:

The direct materials budget is typically prepared before the production budget.

The following are budgeted data for the Bingham Corporation, a merchandising company: Assuming that the Bingham Corporation had inventory on hand of $70, 000 (at cost)on January 1, the purchases for January (at cost)would be:

Dilbert Farm Supply is located in a small town in the rural west.Data regarding the store's operations follow: o Sales are budgeted at $260, 000 for November, $230, 000 for December, and $210, 000 for January. O Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold.Payment for merchandise is made in the month following the purchase. O Other monthly expenses to be paid in cash are $20, 300. O Monthly depreciation is $20, 000. O Ignore taxes. The net income for December would be:

Poriss 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 16, 000 Yutes in December, then the budgeted total cash disbursements for selling and administrative expenses for December would be:

Dilbert Farm Supply is located in a small town in the rural west.Data regarding the store's operations follow: o Sales are budgeted at $260, 000 for November, $230, 000 for December, and $210, 000 for January. O Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next month's cost of goods sold.Payment for merchandise is made in the month following the purchase. O Other monthly expenses to be paid in cash are $20, 300. O Monthly depreciation is $20, 000. O Ignore taxes. December cash disbursements for merchandise purchases would be:

Carter Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana.Data regarding the store's operations follow: o Sales are budgeted at $380, 000 for November, $390, 000 for December, and $400, 000 for January. O Collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 3% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory equal to 80% of the following month's cost of goods sold.Payment for merchandise is made in the month following the purchase. O Other monthly expenses to be paid in cash are $22, 000. O Monthly depreciation is $20, 000. O Ignore taxes. Retained earnings at the end of December would be:

A sales budget is given below for one of the products manufactured by the OMI Co.: The inventory of finished goods at the end of each month must equal 20% of the next month's sales.However, on December 31 the finished goods inventory totaled only 4, 000 units. Each unit of product requires three pounds of specialized material.Since the production of this specialized material by OMI's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs.This requirement had been met on January 1 of the current year. Required: a.Prepare a budget showing the required production each month for January, February, March, and April. b.Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March.

The Gerald Corporation makes and sells a single product called a Clop.Each Clop requires 1.1 direct labor-hours at $8.20 per direct labor-hour.The direct labor workforce is fully adjusted each month to the required workload.The company is preparing a Direct Labor Budget for the first quarter of the year. If the company has budgeted to produce 20, 000 Clops in January, then the budgeted direct labor cost for January is:

Carter Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana.Data regarding the store's operations follow: o Sales are budgeted at $380, 000 for November, $390, 000 for December, and $400, 000 for January. O Collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 3% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory equal to 80% of the following month's cost of goods sold.Payment for merchandise is made in the month following the purchase. O Other monthly expenses to be paid in cash are $22, 000. O Monthly depreciation is $20, 000. O Ignore taxes. The cash balance at the end of December would be:

One disadvantage of a self-imposed budget is that budget estimates prepared by front-line managers are often less accurate and reliable than estimates prepared by top managers.

Home Corporation will open a new store on January 1.Based on experience from its other retail outlets, Home Corporation is making the following sales projections: Home Corporation estimates that 70% of the credit sales will be collected in the month following the month of sale, with the balance collected in the second month following the month of sale. The March 31 balance in accounts receivable will be:

The Covey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year.The budgeted variable manufacturing overhead rate is $4.00 per direct labor-hour;the budgeted fixed manufacturing overhead is $64, 000 per month, of which $18, 000 is factory depreciation. If the budgeted cash disbursements for manufacturing overhead for November are $90, 000, then the budgeted direct labor-hours for November must be:

The Prattle Corporation makes and sells only one product called a Deb.The company is in the process of preparing its Selling and Administrative Expense Budget for next 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 budgeted cash disbursements for selling and administrative expenses for April total $144, 390, then how many Debs does the company plan to sell in April?