Exam 8: Profit Planning

Budgets are used to plan and to control operations.

Cashan Corporation makes and sells a product called a Miniwarp.One Miniwarp requires 1.5 kilograms of the raw material Jurislon.Budgeted production of Miniwarps for the next five months is as follows: The company wants to maintain monthly ending inventories of Jurislon equal to 30% of the following month's production needs.On July 31, this requirement was not met since only 10, 400 kilograms of Jurislon were on hand.The cost of Jurislon is $4.00 per kilogram.The company wants to prepare a Direct Materials Purchase Budget for the next five months. The total cost of Jurislon to be purchased in August is:

Which of the following benefits could an organization reasonably expect from an effective budget program?

Muecke Inc.is working on its cash budget for April.The budgeted beginning cash balance is $40, 000.Budgeted cash receipts total $150, 000 and budgeted cash disbursements total $158, 000.The desired ending cash balance is $50, 000. The excess (deficiency)of cash available over disbursements for April will be:

Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows: Cash-related production costs are budgeted at $5 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.Selling and administrative expenses will amount to $100, 000 per month.The accounts payable balance on March 31 totals $190, 000, which will be paid in April. All units are sold on account for $14 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 April 1 totaled $500, 000 ($90, 000 from February's sales and $410, 000 from March's sales). Required: a.Prepare a schedule for each month showing budgeted cash disbursements for Clay Corporation. b.Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation.

Kouba Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.23 direct labor-hours.The direct labor rate is $11.20 per direct labor-hour.The production budget calls for producing 4, 000 units in April and 3, 400 units in May.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 920 hours in total each month even if there is not enough work to keep them busy. Required: Construct the direct labor budget for the next two months.

Which of the following is NOT an objective of the budgeting process?

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 desired beginning inventory for September is:

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

On November 1, Barnes Corporation has 8, 000 units of Product A on hand.During the month, the company plans to sell 30, 000 units of Product A, and plans to have 6, 500 units on hand at end of the month.How many units of Product A must be produced during the month?

The sales budget often includes a schedule of expected cash collections.

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 direct labor time for December is 4, 000 hours, then the average budgeted manufacturing overhead per direct labor-hour is: