Exam 11: Variance Analysis: Revenue and Cost

Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. Beginning Ending inventoy inventory Raw materials* 40,000 50,000 Finished goods 80,000 50,000 * Three pounds of raw materials are needed to produce each unit of finished product. If Paradise Company plans to sell 480,000 units during next year, the number of units it would have to manufacture during the year would be

The following data have been taken from the budget reports of Brandon Company, a merchandising company. Purchases Sales January £160,000 £100,000 February 160,000 200,000 March 160,000 240,000 April 140,000 300,000 May 140,000 260,000 June 120,000 240,000 Forty percent of purchases are paid for in cash at the time of purchase, and 30% are paid for in each of the next two months. Purchases for the previous November and December were £150,000 per month. Employee wages are 10% of sales for the month in which the sales occur. Operating expenses are 20% of the following month's sales. (July sales are budgeted to be £220,000.) Interest payments of £20,000 are paid quarterly in January and April. Brandon's cash disbursements for the month of April would be

Noskey Corporation is a merchandising firm. Information pertaining to the company's sales revenue is presented in the following table. June July August (Actual) (Budged) (Budget) Cash sales. £80,000 £100,000 £60,000 Credit sales. Total sales. Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Purchases of inventory are equal to next month's cost of goods sold. The cost of goods sold is 30% of the selling price. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase. - Noskey Corporation's budgeted total cash receipts in August are

Explain the 6 major functions of budgets

Budgeted production needs are determined by

Both planning and control are needed for an effective budgeting system

Shocker Company's sales budget shows quarterly sales for the next year as follows: Unit sales Quarter 1 10,000 unit Quarter 1 8,000 unit Quarter 1 12,000 unit Quarter 1 14,000 unit Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production for the second quarter of the next year would be

Which of the following represents the normal sequence in which the indicated budgets are prepared

The International Company makes and sells only one product. There are 2 divisions, one in France and one in Newcastle. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: French Division Cost Structure Newcastle Division Cost Structure -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 November total £154,180, how many units does the French Division plan to sell in November (rounded to the nearest whole unit)

If the expected level of activity is appreciably above or below the company's present capacity, it may be desirable to adjust fixed costs in the budget

Prestwich Company has budgeted production for next year as follows Quarter First Second Third Fourh Production in units 60,000 80,000 90,000 70,000 Two pounds of material A are required for each unit produced. The company has a policy of maintaining a stock of material A on hand at the end of each quarter equal to 25% of the next quarter's production needs for materialA. A total of 30,000 pounds of material A are on hand to start the year. Budgeted purchases of material A for the second quarter would be:

Cash Sales Credit Sales July £50,000 £150,000 August. 55,000 170,000 September 45,000 130,000 October 50,000 145,000 November 60,000 200,000 December 80,000 350,000 The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:Collections on credit sales: $60 \%$ in month of sale $30 \%$ in month following sale $10 \%$ in second month following sale - What is the budgeted accounts receivable balance on December 1

Why are people important in budgeting? Explain

Discuss the conflict that exists between the figures used for planning and motivation in budgets. Is there a solution?

Super Drive is a computer hard drive manufacturer. The company's balance sheet for the fiscal year ended on November 30 appears below: Additional information regarding Super Drive's operations appear below:*Sales are budgeted at $£ 520,000$ for December and $£ 500,000$ for the upcoming year. *Collections are expected to be $60 \%$ in the month of sale and $40 \%$ in the month following sale. There are no bad debts. *80\% of the disk drive components are purchased in the month prior to the month of the sale, and $20 \%$ are purchased in the month of the sale. Purchased components comprise $40 \%$ of the cost of goods sold. *Payment for components purchased is made in the month following the purchase. *Assume that the cost of goods sold is $80 \%$ of sales. - The balance in accounts payable on the budgeted balance sheet for December 31 should be

Super Drive is a computer hard drive manufacturer. The company's balance sheet for the fiscal year ended on November 30 appears below: Additional information regarding Super Drive's operations appear below:*Sales are budgeted at $£ 520,000$ for December and $£ 500,000$ for the upcoming year. *Collections are expected to be $60 \%$ in the month of sale and $40 \%$ in the month following sale. There are no bad debts. *80\% of the disk drive components are purchased in the month prior to the month of the sale, and $20 \%$ are purchased in the month of the sale. Purchased components comprise $40 \%$ of the cost of goods sold. *Payment for components purchased is made in the month following the purchase. *Assume that the cost of goods sold is $80 \%$ of sales. - The budgeted cash collections for the upcoming December should be

The International Company makes and sells only one product. There are 2 divisions, one in France and one in Newcastle. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: French Division Cost Structure Newcastle Division Cost Structure - All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the French Division budgeted to sell an additional 2,000 units in July (27,000 in total), then the total budgeted selling and administrative expenses would increase by

The International Company makes and sells only one product. There are 2 divisions, one in France and one in Newcastle. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: French Division Cost Structure Newcastle Division Cost Structure - All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the French Division budgeted to sell an additional 2,000 units in July (27,000 in total), then the total budgeted selling and administrative expenses per unit sold for July is

The International Company makes and sells only one product. There are 2 divisions, one in France and one in Newcastle. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: French Division Cost Structure Newcastle Division Cost Structure - All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the French Division has budgeted to sell 20,000 units in October, then the total budgeted variable selling and administrative expenses for October will be

The International Company makes and sells only one product. There are 2 divisions, one in France and one in Newcastle. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available: French Division Cost Structure Newcastle Division Cost Structure -All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the Newcastle Division budgeted to sell an additional 2,000 units in July (27,000 in total), then the total budgeted selling and administrative expenses per unit sold for July is