Exam 9: Profit Planning

The LFM Company makes and sells a single product, Product T. Each unit of Product T requires 1.3 hours of direct labor at a rate of $9.10 per direct labor-hour. LFM Company needs to prepare a Direct Labor Budget for the second quarter of next year. -The company has budgeted to produce 25,000 units of Product T in June. The finished goods inventories on June 1 and June 30 were budgeted at 500 and 700 units, respectively. Budgeted direct labor costs for June would be:

Castil Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 2.5 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 20% of the following month's production needs. On July 31, this requirement was not met since only 9,700 kilograms of Jurislon were on hand. The cost of Jurislon is $5.00 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:

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 January. • 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. -December cash disbursements for merchandise purchases would be:

Palmerin Corporation is preparing its cash budget for November. The budgeted beginning cash balance is $30,000. Budgeted cash receipts total $167,000 and budgeted cash disbursements total $171,000. The desired ending cash balance is $50,000. -The excess (deficiency) of cash available over disbursements for November is:

Golebiewski Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 4,900 direct labor-hours will be required in November. The variable overhead rate is $8.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $78,400 per month, which includes depreciation of $10,290. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for November should be:

Guthridge Inc. is working on its cash budget for February. The budgeted beginning cash balance is $26,000. Budgeted cash receipts total $104,000 and budgeted cash disbursements total $100,000. The desired ending cash balance is $40,000. To attain its desired ending cash balance for February, the company needs to borrow:

Brummitt Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.05 direct labor-hours. The direct labor rate is $7.50 per direct labor-hour. The production budget calls for producing 9,100 units in May and 8,800 units in June. 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 manufacturing overhead budget at Formica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 4,400 direct labor-hours will be required in October. The variable overhead rate is $8.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $86,680 per month, which includes depreciation of $16,280. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for October should be:

Superior Industries' sales budget shows quarterly sales for the next year as follows: 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 should be:

Smith Company makes and sells a single product called a Pod. Each Pod requires 1.4 hours of labor at a labor rate of $9.60 per hour. Smith Company needs to prepare a Direct Labor Budget for the second quarter of the year. -The budgeted direct labor cost per Pod would be:

A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm.

Carner Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: $\bullet$ Sales are budgeted at $370,000 for November, $360,000 for December, and $340,000 for January. $\bullet$ Collections are expected to be 85% in the month of sale, 13% in the month following the sale, and 2% uncollectible. $\bullet$ The cost of goods sold is 70% of sales. $\bullet$ The company purchases 30% of its merchandise in the month prior to the month of sale and 70% in the month of sale. Payment for merchandise is made in the month following the purchase. $\bullet$ Other monthly expenses to be paid in cash are $24,600. $\bullet$ Monthly depreciation is $17,000. $\bullet$ Ignore taxes. -The net income for December would be:

Hardin, Inc, 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 15% of the next month's sales in units. The inventory on May 31 contained 1,020 units. The company needs to prepare a production budget for the next five months. -The beginning inventory for September should be:

Sarrazin 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 8 grams of raw material. -How much of the raw material should the company purchase during the year?

When preparing a materials purchase budget, desired ending inventory is deducted from total needs of the period to arrive at materials to be purchased.

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January. Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible. The cost of goods sold is 80% of sales. The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase. Other monthly expenses to be paid in cash are $21,700. Monthly depreciation is $17,000. Ignore taxes. -Expected cash collections in December are:

Smith Company makes and sells a single product called a Pod. Each Pod requires 1.4 hours of labor at a labor rate of $9.60 per hour. Smith Company needs to prepare a Direct Labor Budget for the second quarter of the year. -In June the company has budgeted to produce 22,000 Pods. The finished goods inventory on June 1 and June 30 were budgeted at 500 and 800 units, respectively. Budgeted direct labor costs incurred in June would be:

Carter Company has projected sales and production in units for the second quarter of next year as follows: Required: a. Cash production costs are budgeted at $6 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 (all of which are paid in cash) amount to $120,000 per month. The accounts payable balance on March 31 totals $192,000, all of which will be paid in April. Prepare a schedule for each month showing budgeted cash disbursements for Carter Company. b. Assume that all units will be sold on account for $15 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 March 31 totaled $510,000 $(90,000 from February's sales and the remainder from March). Prepare a schedule for each month showing budgeted cash receipts for Carter Company.

Deviney Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.86 direct labor-hours. The direct labor rate is $8.20 per direct labor-hour. The production budget calls for producing 6,500 units in July and 6,000 units in August. 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 5,600 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.

Noskey Corporation is a merchandising firm. Information pertaining to the company's sales revenue is presented in the following table. 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 70% 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 cash collections in July from June credit sales are: