Exam 1: Master Budgeting

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: • Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000 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 equal to 80% of the following 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 $22,000. • Monthly depreciation is $20,000. • Ignore taxes. -Accounts payable at the end of December would be:

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:

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?

Bracken Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow: • Sales are budgeted at $330,000 for November, $340,000 for December, and $340,000 for January. • Collections are expected to be 80% in the month of sale, 17% in the month following the sale, and 3% uncollectible. • The cost of goods sold is 75% 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 $21,800. • Monthly depreciation is $19,000. • Ignore taxes. -The cost of December merchandise purchases would be:

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 budgeted purchases for July are:

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: • Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000 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 equal to 80% of the following 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 $22,000. • Monthly depreciation is $20,000. • Ignore taxes. -The net income for December would be:

Triste Corporation manufactures and sells women's skirts. Each skirt (unit) requires 2.6 yards of cloth. Selected data from Triste's master budget for next quarter are shown below: Each unit requires 1.6 hours of direct labor, and the average hourly cost of Triste's direct labor is $15. What is the cost of Triste Corporation's direct labor in September?

A sales budget is given below for one of the products manufactured by the OMI Co.: The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units. Each unit of product requires three pounds of specialized material. Since the production of this specialized material by OMI's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year. Required: a. Prepare a budget showing the required production each month for January, February, March, and April. b. Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March.

Poriss Corporation makes and sells a single product called a Yute. The company is in the process of preparing its Selling and Administrative Expense Budget for the last quarter of the year. The following budget data are available: All of these expenses (except depreciation) are paid in cash in the month they are incurred. -If the company has budgeted to sell 20,000 Debs in March, then the average budgeted selling and administrative expenses per unit sold for March is closest to:

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?

Trumbull Corporation budgeted sales on account of $120,000 for July, $211,000 for August, and $198,000 for September. Experience indicates that none of the sales on account will be collected in the month of the sale, 60% will be collected the month after the sale, 36% in the second month, and 4% will be uncollectible. The cash receipts from accounts receivable that should be budgeted for September would be:

Freet Inc. is preparing its cash budget for November. The budgeted beginning cash balance is $11,000. Budgeted cash receipts total $126,000 and budgeted cash disbursements total $130,000. The desired ending cash balance is $20,000. The company can borrow up to $170,000 at any time from a local bank, with interest not due until the following month. Required: Prepare the company's cash budget for November in good form. Make sure to indicate what borrowing, if any, would be needed to attain the desired ending cash balance.

In a merchandising company, the required merchandise purchases for a period are determined by subtracting the desired ending inventory from the sum of the units to be sold during the period and the units in beginning inventory.

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

Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: -The accounts receivable balance, net of uncollectible accounts, at the end of December would be:

Poriss Corporation makes and sells a single product called a Yute. The company is in the process of preparing its Selling and Administrative Expense Budget for the last quarter of the year. The following budget data are available: All of these expenses (except depreciation) are paid in cash in the month they are incurred. -If the company has budgeted to sell 17,000 Debs in January, then the total budgeted variable selling and administrative expenses for January will be:

Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: -Accounts payable at the end of December would be:

Rogers Corporation is preparing its cash budget for July. The budgeted beginning cash balance is $25,000. Budgeted cash receipts total $141,000 and budgeted cash disbursements total $139,000. The desired ending cash balance is $30,000. -To attain its desired ending cash balance for April, the company needs to borrow:

Frodic Corporation has budgeted sales and production over the next quarter as follows: The company has 4,000 units of product on hand at July 1. 10% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 71,500 units. Budgeted sales for September would be (in units):

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