Exam 7: Profit Planning

Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared?

The production budget is typically prepared prior to the sales budget.

Hagos Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.84 direct labor-hours.The direct labor rate is $9.40 per direct labor-hour.The production budget calls for producing 2,100 units in June and 1,900 units in July.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 selling and administrative expense budget of Fenley Corporation is based on the number of units sold,which are budgeted to be 2,500 units in January.The variable selling and administrative expense is $4.40 per unit.The budgeted fixed selling and administrative expense is $35,750 per month,which includes depreciation of $4,000.The remainder of the fixed selling and administrative expense represents current cash flows. Required: Prepare the selling and administrative expense budget for January.

Lunderville Inc.bases its selling and administrative expense budget on budgeted unit sales.The sales budget shows 3,200 units are planned to be sold in December.The variable selling and administrative expense is $3.10 per unit.The budgeted fixed selling and administrative expense is $60,800 per month,which includes depreciation of $6,720 per month.The remainder of the fixed selling and administrative expense represents current cash flows.The cash disbursements for selling and administrative expenses on the December selling and administrative expense budget should be:

Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: • Sales are budgeted at $340,000 for November, $360,000 for December, and $350,000 for January. • Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible. • The cost of goods sold is 80% of sales. • 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. • Other monthly expenses to be paid in cash are $23,100. • Monthly depreciation is $21,000. • Ignore taxes. -Expected cash collections in December are:

Mosbey Inc.is working on its cash budget for June.The budgeted beginning cash balance is $16,000.Budgeted cash receipts total $188,000 and budgeted cash disbursements total $187,000.The desired ending cash balance is $40,000.The excess (deficiency)of cash available over disbursements for June will be:

Carpon Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: • Sales are budgeted at $340,000 for November, $350,000 for December, and $370,000 for January. • Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible. • The cost of goods sold is 75% of sales. • The company desires to have an ending merchandise inventory equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. • Other monthly expenses to be paid in cash are $21,100. • Monthly depreciation is $19,000. • Ignore taxes. -The net income for December would be:

Carpon Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: • Sales are budgeted at $340,000 for November, $350,000 for December, and $370,000 for January. • Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible. • The cost of goods sold is 75% of sales. • The company desires to have an ending merchandise inventory equal to 60% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. • Other monthly expenses to be paid in cash are $21,100. • Monthly depreciation is $19,000. • Ignore taxes. -Retained earnings at the end of December would be:

Diltex Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: • Sales are budgeted at $220,000 for November, $200,000 for December, and $210,000 for January. • Collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 3% uncollectible. • The cost of goods sold is 65% of sales. • The company desires to have an ending merchandise inventory at the end of each month equal to 50% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase. • Other monthly expenses to be paid in cash are $22,500. • Monthly depreciation is $19,000. • Ignore taxes. -Retained earnings at the end of December would be:

Davol Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $6.80 per direct labor-hour; the budgeted fixed manufacturing overhead is $72,000 per month, of which $20,000 is factory depreciation. -If the budgeted direct labor time for November is 5,000 hours,then the total budgeted cash disbursements for November must be:

Kindschuh Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.07 direct labor-hours.The direct labor rate is $8.50 per direct labor-hour.The production budget calls for producing 4,800 units in June and 5,300 units in July. Required: Construct the direct labor budget for the next two months,assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month.

Brarin Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: • Sales are budgeted at $340,000 for November, $360,000 for December, and $350,000 for January. • Collections are expected to be 55% in the month of sale, 44% in the month following the sale, and 1% uncollectible. • The cost of goods sold is 80% of sales. • 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. • Other monthly expenses to be paid in cash are $23,100. • Monthly depreciation is $21,000. • Ignore taxes. -The difference between cash receipts and cash disbursements in December would be:

Casper Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 3.5 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 10% of the following month's production needs. On July 31, this requirement was not met since only 6,900 kilograms of Jurislon were on hand. The cost of Jurislon is $3.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months. -The desired ending inventory of Jurislon for the month of September is:

In the selling and administrative budget,the non-cash charges (such as depreciation)are added to the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses.

The Gomez Company, a merchandising firm, has budgeted its activity for December according to the following information: • Sales at $500,000, all for cash. • Merchandise Inventory on November 30 was $250,000. • The cash balance at December 1 was $20,000. • Selling and administrative expenses are budgeted at $50,000 for December and are paid for in cash. • Budgeted depreciation for December is $30,000. • The planned merchandise inventory on December 31 is $260,000. • The cost of goods sold represents 75% of the selling price. • All purchases are paid for in cash. -The budgeted cash disbursements for December are:

Deshaies Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $10,000. Budgeted cash receipts total $100,000 and budgeted cash disbursements total $104,000. The desired ending cash balance is $30,000. -To attain its desired ending cash balance for November,the company should borrow:

Young Enterprises has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month should be equal to 10% of the next month's sales in units. The inventory on May 31 fell short of this goal since it contained only 400 units. The company needs to prepare a Production Budget for the next five months. -The beginning inventory in units for September should be:

The manufacturing overhead budget at Latronica Corporation is based on budgeted direct labor-hours.The direct labor budget indicates that 7,100 direct labor-hours will be required in August.The variable overhead rate is $8.60 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $132,770 per month,which includes depreciation of $24,850.All other fixed manufacturing overhead costs represent current cash flows.The company recomputes its predetermined overhead rate every month.The predetermined overhead rate for August should be:

Both planning and control are needed for an effective budgeting system.