Exam 8: Profit Planning

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. Retained earnings at the end of December would be:

Budgeted sales in Acer Corporation over the next four months are given below: Twenty-five percent of the company's sales are for cash and 75% are on account.Collections for sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale.The remainder are uncollectible.Given these data, cash collections for December should be:

Roberts Corporation manufactures home cleaning products.One of the products, Quickclean, requires 2 pounds of Material A and 5 pounds of Material B per unit manufactured.Material A is purchased from the supplier for $0.30 per pound and Material B is purchased for $0.50 per pound.The finished goods inventory on hand at the end of each month should equal 4, 000 units plus 25% of the next month's sales.The raw materials inventory on hand at the end of each month (for either Material A or Material B)should equal 80% of the following month's production needs. The production budget calls for 26, 000 units of Quickclean to be manufactured in June and 32, 000 units of Quickclean to be manufactured in July.On May 31 there will be 41, 600 pounds of Material A and 104, 000 pounds of Material B in inventory. The number of pounds of Material A needed for production during June would be:

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. The budgeted direct labor cost per Clop is closest to:

Bracken Corporation is a small wholesaler of gourmet food products.Data regarding the store's operations follow: o Sales are budgeted at $330, 000 for November, $340, 000 for December, and $340, 000 for January. O Collections are expected to be 80% in the month of sale, 17% in the month following the sale, and 3% uncollectible. O The cost of goods sold is 75% of sales. O The company would like to maintain ending merchandise inventories equal to 70% 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 $21, 800. O Monthly depreciation is $19, 000. O Ignore taxes. The difference between cash receipts and cash disbursements for December would be:

Sarter Corporation is in the process of preparing its annual budget.The following beginning and ending inventory levels are planned for the year. Each unit of finished goods requires 3 grams of raw material.The company plans to sell 880, 000 units during the year. How much of the raw material should the company purchase during the year?

Bredder Supply Corporation manufactures and sells cotton gauze.Expected sales of gauze (in boxes)for upcoming months are as follows: Management likes to maintain a finished goods inventory equal to 20% of the next month's estimated sales. Required: Prepare the company's production budget for the third quarter of this year (the months of July, August and September).Include a column for each month and a total column for the entire quarter.

When preparing a production budget, the required production equals:

Cowles Corporation, Inc.makes and sells a single product, Product R.Three yards of Material K are needed to make one unit of Product R.Budgeted production of Product R for the next five months is as follows: The company wants to maintain monthly ending inventories of Material K equal to 30% of the following month's production needs.On July 31, this requirement was not met because only 3, 500 yards of Material K were on hand.The cost of Material K is $0.80 per yard.The company wants to prepare a Direct Materials Purchase Budget for the rest of the year. The total needs (i.e. , production requirements plus desired ending inventory)of Material K for November are:

Arakaki Inc.is working on its cash budget for January.The budgeted beginning cash balance is $41, 000.Budgeted cash receipts total $114, 000 and budgeted cash disbursements total $113, 000.The desired ending cash balance is $60, 000.The excess (deficiency)of cash available over disbursements for January will be:

Mate Boomerang Corporation manufactures and sells plastic boomerangs.Expected boomerang sales (in units)for the upcoming months are as follows: Mate likes to maintain a finished goods inventory equal to 10% of the next month's estimated sales.Seven ounces of plastic resin are needed to produce every boomerang.Mate likes to have enough plastic resin on hand at the end of the month to cover 25% of the next month's production requirements. Required: How many ounces of plastic resin should Mate plan on purchasing during the month of October?

Chow Corporation manufactures children's chairs made of PVS plastic tubing and heavy canvas material.Each chair requires eight feet of the PVC tubing and three yards of material.Budgeted sales are 20, 000 chairs for June, 25, 000 chairs for July and 30, 000 chairs for August.Ending finished goods inventory is budgeted at 10% of the current month's sales.Ending materials inventories are budgeted at 10% of the current month's production. Required: a.Prepare a production budget for each of the months of June, July and August.Assume the beginning inventory of chairs in June will be 2, 500 units. b.Prepare schedules showing purchase requirements for PVC tubing and for material for each of the months of June, July and August.Assume 16, 000 feet of PVC tubing and 6, 000 yards of material are on hand at the beginning of June.

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 desired ending inventory for August is:

Rhett Corporation manufactures and sells dress shirts.Each shirt (unit)requires 3 yards of cloth.Selected data from Rhett's master budget for next quarter are shown below: How many yards of cloth should Rhett plan on purchasing in May?

Caprice Corporation is a wholesaler of industrial goods.Data regarding the store's operations follow: o Sales are budgeted at $350, 000 for November, $320, 000 for December, and $300, 000 for January. o Collections are expected to be 80% in the month of sale, 16% in the month following the sale, and 4% uncollectible. o The cost of goods sold is 70% of sales. o The company desires an ending merchandise inventory equal to 60% of the cost of goods sold in the following month.Payment for merchandise is made in the month following the purchase. o The November beginning balance in the accounts receivable account is $78, 000. o The November beginning balance in the accounts payable account is $254, 000. Required: a.Prepare a Schedule of Expected Cash Collections for November and December. b.Prepare a Merchandise Purchases Budget for November and December.

The following are budgeted data for the Bingham Corporation, a merchandising company: The desired ending inventory (at cost)for February would be:

Milano Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.50 direct labor-hours.The direct labor rate is $9.80 per direct labor-hour.The production budget calls for producing 6, 400 units in October and 6, 300 units in November.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?

The number of units to be produced in a period can be determined by adding the expected sales to the beginning inventory and then deducting the desired ending inventory.

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 company recomputes its predetermined overhead rate every month.The predetermined overhead rate for April should 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. The accounts receivable balance, net of uncollectible accounts, at the end of December would be: