Quiz 9: Profit Planning

Managerial Accounting

Business
108
Questions
15
True/False
86
Choices
7
Essay
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Quiz Materials

Use the following to answer questions 37-39:
Home Company will open a new store on January 1. Based on experience from its other retail
outlets, Home Company is making the following sales projections:
Cash Sales Credit Sales
January .................. $60,000 $40,000
February ................ $30,000 $50,000
March .................... $40,000 $60,000
April ...................... $40,000 $80,000
Home Company estimates that 70% of the credit sales will be collected in the month
following the month of sale, with the balance collected in the second month following the
month of sale.


Use the following to answer questions 40-42:
Roberts Company manufactures home cleaning products. One of the products, Quickclean,
requires 2 pounds of Material A and 5 pounds of Material B per unit manufactured. Material
A can be purchased from the supplier for $0.30 per pound and Material B can be purchased
for $0.50 per pound. The finished goods inventory on hand at the end of each month must be
equal to 4,000 units plus 25% of the next month's sales. The raw materials inventory on hand
at the end of each month (for either Material A or Material B) must be equal to 80% of the
following month's production needs.


Use the following to answer questions 43-44:
The TS Company has budgeted sales for the year as follows:
Quarter 1 Quarter 2 Quarter 3 Quarter 4
Sales in units ........... 10,000 12,000 14,000 16,000
The ending inventory of finished goods for each quarter should equal 25% of the next
quarter's budgeted sales in units. The finished goods inventory at the start of the year is 2,500
units. Four pounds of raw materials are required for each unit produced. Raw materials on
hand at the start of the year total 4,200 pounds. The raw materials inventory at the end of each
quarter should equal 10% of the next quarter's production needs in material.


Use the following to answer questions 45-46:
Sarter Corporation is in the process of preparing its annual budget. The following beginning
and ending inventory levels are planned for the year.
Beginning Inventory Ending Inventory
Finished goods (units) ............. 70,000 20,000
Raw material (grams) .............. 50,000 60,000
Each unit of finished goods requires 3 grams of raw material.


Use the following to answer questions 47-49:
The following are budgeted data for the Bingham Company, a merchandising company:
Budgeted Sales (at retail)
January .................. $300,000
February ................ $340,000
March .................... $400,000
April ...................... $350,000
Cost of goods sold as a percentage of sales is 60%. The desired ending inventory is 75% of
next month's sales.


Use the following to answer questions 50-51:
LFM Corporation makes and sells a product called Product WZ. Each unit of Product WZ
requires 3.5 hours of direct labor at the rate of $16.00 per direct labor-hour. Management
would like you to prepare a Direct Labor Budget for June.


Use the following to answer questions 52-53:
Marty's Merchandise has budgeted sales as follows for the second quarter of the year:
April ................ $30,000
May ................. $60,000
June ................. $50,000
Cost of goods sold is equal to 70% of sales. The company wants to maintain a monthly ending
inventory equal to 120% of the cost of goods sold for the following month. The inventory on
March 31 was below this target and was only $22,000. The company is now preparing a
Merchandise Purchases Budget for April, May, and June.


Use the following to answer questions 54-55:
Harris, Inc., has budgeted sales in units for the next five months as follows:
June ........................ 9,400 units
July ........................ 7,800 units
August ................... 7,300 units
September .............. 5,400 units
October .................. 4,100 units
Past experience has shown that the ending inventory for each month should be equal to 20%
of the next month's sales in units. The inventory on May 31 contained 1,880 units. The
company needs to prepare a production budget for the next five months.


Use the following to answer questions 56-57:
Hamway Products, Inc. makes and sells a single product called a Wob. It takes two yards of
material A to make one Wob. Budgeted production of Wobs for the next four months is as
follows:
April ................ 12,000 units
May ................. 13,500 units
June ................. 12,400 units
July .................. 11,200 units
The company wants to maintain monthly ending inventories of material A equal to 10% of the
following month's production needs. On March 31 this target had not been met since only
1,500 yards of material A were on hand. The cost of material A is $.90 per yard.


Use the following to answer questions 58-60:
The Gerald Company makes and sells a single product called a Clop. Each Clop requires the
use of 1.1 hours of direct labor time. The planned cost of direct labor time is $8.20 per hour.
The direct labor workforce is fully adjusted each month to the required workload. The
company wishes to prepare a Direct Labor Budget for the first quarter of the year.


Use the following to answer questions 61-62:
Acmal Manufacturing Company is estimating the following raw material purchases for the
last four months of the year:
September ................. $850,000
October ..................... $900,000
November ................. $810,000
December ................. $780,000
At Acmal, 25% of raw materials purchases are normally paid for in the month of purchase.
The remaining 75% is paid for in the month following the purchase.


Use the following to answer questions 63-64:
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:
August ...................... 24,500 units
September ................. 24,700 units
October ..................... 24,600 units
November ................. 26,400 units
December ................. 24,500 units
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.


Use the following to answer questions 65-68:
The Panza Company makes and sells only one product called a Deb. The company is in the
process of preparing its Selling and Administrative Expense Budget for next year. The
following budget data are available:
Monthly
Fixed Cost
Variable
Cost Per
Deb Sold
Sales commissions .................................... $0.75
Shipping .................................................... $1.30
Advertising ................................................ $30,000 $0.20
Executive salaries ...................................... $25,000
Depreciation on office equipment ............. $15,000
Other .......................................................... $7,000
All of these expenses (except depreciation) are paid in cash in the month they are incurred.


Use the following to answer questions 69-71:
Davey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of
the year. The budgeted variable factory overhead rate is $3.00 per direct labor-hour; the
budgeted fixed factory overhead is $66,000 per month, of which $10,000 is factory
depreciation.


Use the following to answer questions 72-74:
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:
Variable Cost
Per Yute Sold
Monthly
Fixed Cost
Sales commissions ................................. $2.10
Shipping ................................................. $3.90
Advertising ............................................. $7.40 $34,000
Executive salaries ................................... $198,000
Depreciation on office equipment .......... $10,000
Other ....................................................... $0.60 $38,000
All of these expenses (except depreciation) are paid in cash in the month they are incurred.


Use the following to answer questions 75-77:
Sipan Retail Company was recently created with a beginning cash balance of $12,000. The
owner expects the following for the first month of operations:
Cash sales to customers ............................................... $8,000
Sales on account to customers ..................................... $30,000
Cash collected from account customers ...................... $12,000
Cost of merchandise purchased ................................... $35,000
Cash paid for merchandise purchased ......................... $24,500
Cost of merchandise sold ............................................ $26,600
Cash paid for display cases ......................................... $9,600
Selling and administrative expenses ........................... $4,000
The display cases above were purchased at the beginning of the month and are being
depreciated at a rate of $200 per month. This amount is included in the selling and
administrative expenses figure above. All other selling and administrative expenses are paid
as incurred. Sipan wants to maintain a cash balance of $10,000. Any amount below this can
be borrowed from a local bank as needed in increments of $1,000. All borrowings are made at
month end.


Use the following to answer questions 78-79:
The Ellis Company has budgeted its activity for September according to the following
information:
• Sales are budgeted at $392,000 and all sales are for cash.
• All purchases of merchandise inventory are for cash. Merchandise inventory was
$150,000 on August 31 and the planned merchandise inventory on September 30 is
$140,000. All merchandise is sold at 40% above cost.
• The selling and administrative expenses are budgeted at $92,000 for the month. All of
these expenses are paid for in cash except for depreciation of $12,000.


Use the following to answer questions 80-83:
Kelly Company is a retail sporting goods store. Facts regarding Kelly's operations are as
follows:
• Sales are budgeted at $220,000 for November and $200,000 for December.
• Collections are expected to be 60% in the month of sale and 38% in the month following
the sale. 2% of sales are expected to be uncollectible.
• The cost of goods sold is 75% of sales.
• A total of 80% of the merchandise is purchased in the month prior to the month of sale
and 20% is purchased 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 $22,600.
• Monthly depreciation is $18,000.
Kelly Company
Statement of Financial Position
October 31
Assets
Cash ............................................................................... $ 22,000
Accounts receivable
(net of allowance for uncollectible accounts) ............ 76,000
Inventory ....................................................................... 132,000
Property, plant and equipment
(net of $680,000 accumulated depreciation) ............. 870,000
Total assets .................................................................... $1,100,000
Liabilities and Stockholders’ Equity
Accounts payable .......................................................... $ 162,000
Common stock .............................................................. 800,000
Retained earnings .......................................................... 138,000
Total liabilities and stockholders’ equity ...................... $1,100,000


Use the following to answer questions 84-92:
Dilbert 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 80% in the month of sale, 19% in the month following the
sale, and 1% uncollectible.
• The cost of goods sold is 65% of sales.
• The company purchases 60% of its merchandise in the month prior to the month of sale
and 40% 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 $20,300.
• Monthly depreciation is $20,000.
• Ignore taxes.
Statement of Financial Position
October 31
Assets
Cash ............................................................................................ $ 27,000
Accounts receivable
(net of allowance for uncollectible accounts) ......................... 79,000
Inventory .................................................................................... 101,400
Property, plant and equipment
(net of $574,000 accumulated depreciation) .......................... 1,082,000
Total assets ................................................................................. $1,289,400
Liabilities and Stockholders’ Equity
Accounts payable ....................................................................... $ 169,000
Common stock ........................................................................... 740,000
Retained earnings ....................................................................... 380,400
Total liabilities and stockholders’ equity ................................... $1,289,400


Use the following to answer questions 93-96:
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 purchases 70% of its merchandise in the month prior to the month of sale
and 30% 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 $21,800.
• Monthly depreciation is $19,000.
• Ignore taxes.
Statement of Financial Position
October 31
Assets
Cash ............................................................................................ $ 28,000
Accounts receivable
(net of allowance for uncollectible accounts) ......................... 76,000
Inventory .................................................................................... 173,250
Property, plant and equipment
(net of $604,000 accumulated depreciation) .......................... 1,170,000
Total assets ................................................................................. $1,447,250
Liabilities and Stockholders’ Equity
Accounts payable ....................................................................... $ 255,000
Common stock ........................................................................... 840,000
Retained earnings ....................................................................... 352,250
Total liabilities and stockholders’ equity ................................... $1,447,250


Use the following to answer questions 97-101:
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 purchases 80% of its merchandise in the month prior to the month of sale
and 20% 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 $22,000.
• Monthly depreciation is $20,000.
• Ignore taxes.
Statement of Financial Position
October 31
Assets
Cash ............................................................................................ $ 13,000
Accounts receivable
(net of allowance for uncollectible accounts) ......................... 77,000
Inventory .................................................................................... 197,600
Property, plant and equipment
(net of $502,000 accumulated depreciation) .......................... 992,000
Total assets ................................................................................. $1,279,600
Liabilities and Stockholders’ Equity
Accounts payable ....................................................................... $ 240,000
Common stock ........................................................................... 780,000
Retained earnings ....................................................................... 259,600
Total liabilities and stockholders’ equity ................................... $1,279,600


Questions

Q1
Free

Danno Company manufactures two products, Product F and Product G. The company
expects to produce and sell 600 units of Product F and 6,000 units of Product G during
the current year. The company uses activity-based costing to compute unit product
costs for external reports. Data relating to the company's three activity cost pools are
given below for the current year:
Estimated
Overhead Expected Activity
Activity Cost Pool Costs Product F Product G Total
Machine setups ...... $5,250 60 150 210
Purchase orders ...... $74,100 620 1,280 1,900
General factory ...... $89,880 840 12,000 12,840
Required:
Using the activity-based costing approach, determine the overhead cost per unit for
each product.

Essay
expand_more
Answer:
The overhead rates for each activity cost pool are as follows: Estimated Overhead Expected Overhead Activity Cost Pool Costs Activity Rate Machine setups ...... $5,250 210 $25.00 Purchase orders ...... $74,100 1,900 $39.00 General factory ...... $89,880 12,840 $7.00 The overhead cost charged to each product is: Product F Product G Activity Amount Activity Amount Machine setups ............ 60 $ 1,500 150 $ 3,750 Purchase orders ............ 620 24,180 1,280 49,920 General factory ............ 840 5,880 12,000 84,000 Total overhead cost ..... $31,560 $137,670 Overhead cost per unit: Product F: $31,560 ÷ 600 units = $52.60 per unit Product G: $137,670 ÷ 6,000 units = $22.945 per unit
Q2
Free

The sales budget is usually prepared before the production budget.

True/False
expand_more
A) True.
B) False.
Answer:
False
Q3
Free

The cash budget is the starting point in preparing the master budget.

True/False
expand_more
A) True.
B) False.
Answer:
False
Q4

The first budget a company prepares in a master budget is the production budget.

True/False
expand_more
A) True.
B) False.
Answer:

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Q5

One of the weaknesses of budgets is that they are of little value in uncovering potential
bottlenecks in an organization.

True/False
expand_more
A) True.
B) False.
Answer:

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Q6

One of the advantages of a self-imposed budget is that the person directly involved in
an activity is more likely to be in a position to make good budget estimates.

True/False
expand_more
A) True.
B) False.
Answer:

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Q7

The basic idea behind responsibility accounting is that top management is responsible
for preparing detailed budgets by which the performance of middle and lower
management will be evaluated.

True/False
expand_more
A) True.
B) False.
Answer:

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Q8

Budgeting is a trade-off between planning and control in that increased use of
budgeting will usually improve planning but will weaken control.

True/False
expand_more
A) True.
B) False.
Answer:

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Q9

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

True/False
expand_more
A) True.
B) False.
Answer:

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Q10

Uncollectible amounts on credit sales to customers will be listed as cash outflows on
the schedule of expected cash collections.

True/False
expand_more
A) True.
B) False.
Answer:

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Q11

The number of units to be produced in a period can be determined by adding the
expected sales to the desired ending inventory and then deducting the beginning
inventory.

True/False
expand_more
A) True.
B) False.
Answer:

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Q12

When preparing a direct materials budget, beginning inventory for raw materials
should be added to production needs, and desired ending inventory should be
subtracted to determine the amount of raw materials to be purchased.

True/False
expand_more
A) True.
B) False.
Answer:

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Q13

The manufacturing overhead budget provides a schedule of all costs of production
other than direct materials and direct labor.

True/False
expand_more
A) True.
B) False.
Answer:

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Q14

Both variable and fixed manufacturing overhead costs are included in the selling and
administrative expense budget.

True/False
expand_more
A) True.
B) False.
Answer:

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Q15

On a cash budget, the total amount of budgeted cash payments for manufacturing
overhead should not include any amounts for depreciation on factory equipment.

True/False
expand_more
A) True.
B) False.
Answer:

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Q16

In zero-base budgeting, only changes from the prior budget must be justified.

True/False
expand_more
A) True.
B) False.
Answer:

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Q17

Which of the following budgets are prepared before the production budget?
Direct Materials
Budget Sales Budget

Multiple Choice
expand_more
A) Yes Yes
B) Yes No
C) No Yes
D) No No
Answer:

A) You need to subscribe to get the answer.

Q18

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

Multiple Choice
expand_more
A) Sales, Balance Sheet, Income Statement
B) Balance Sheet, Sales, Income Statement
C) Sales, Income Statement, Balance Sheet
D) Income Statement, Sales, Balance Sheet
Answer:

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Q19

The budget method that maintains a constant twelve month planning horizon by
adding a new month on the end as the current month is completed is called:

Multiple Choice
expand_more
A) an operating budget.
B) a capital budget.
C) a continuous budget.
D) a master budget.
Answer:

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Q20

In preparing a master budget, top management is generally best able to:

Multiple Choice
expand_more
A) prepare detailed departmental-level budget figures.
B) provide a perspective on the company as a whole.
C) point out the particular persons who are to blame for inability to meet budget goals.
D) responses a, b, and c are all correct.
Answer:

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Q21

Which of the following benefits could an organization reasonably expect from an
effective budget program?
Increased
employee Exposure of
motivation bottlenecks

Multiple Choice
expand_more
A) Yes Yes
B) Yes No
C) No Yes
D) No No
Answer:

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Q22

Which of the following is an advantage of implementing a self-imposed budgeting
system?

Multiple Choice
expand_more
A) Budgeting is quick and easy because only a few individuals are involved in the budgeting process.
B) Upper level management does not have to review budget estimates.
C) Motivation to meet budget estimates is usually enhanced.
D) All of the above.
Answer:

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Q23

All the following are considered to be benefits of participative budgeting, except for:

Multiple Choice
expand_more
A) Individuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization.
B) The budget estimates are prepared by those in directly involved in activities.
C) When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.
D) Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others.
Answer:

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Q24

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

Multiple Choice
expand_more
A) To communicate management's plans throughout the entire organization.
B) To provide a means of allocating resources to those parts of the organization where they can be used most effectively.
C) To ensure that the company continues to grow.
D) To uncover potential bottlenecks before they occur.
Answer:

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Q25

When preparing a production budget, the required production equals:

Multiple Choice
expand_more
A) budgeted sales + beginning inventory + desired ending inventory.
B) budgeted sales - beginning inventory + desired ending inventory.
C) budgeted sales - beginning inventory - desired ending inventory.
D) budgeted sales + beginning inventory - desired ending inventory.
Answer:

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Q26

The direct labor budget is based on:

Multiple Choice
expand_more
A) the desired ending inventory of finished goods.
B) the beginning inventory of finished goods.
C) the required production for the period.
D) the required materials purchases for the period.
Answer:

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Q27

Which of the following might be included as a disbursement on a cash budget?
Depreciation
on factory Income taxes
equipment to be paid

Multiple Choice
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A) Yes Yes
B) Yes No
C) No Yes
D) No No
Answer:

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Q28

Thirty percent of Sharp Company's sales are for cash and 70% are on account. Sixty
percent of the account sales are collected in the month of sale, 25% in the month
following sale, and 12% in the second month following sale. The remainder is
uncollectible. The following are budgeted sales data for the company:
January February March April
Total sales ............ $50,000 $60,000 $40,000 $30,000
Total cash receipts in April are expected to be:

Multiple Choice
expand_more
A) $24,640
B) $35,200
C) $31,560
D) $33,640
Answer:

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Q29

Razz Company is estimating the following sales:
July ......................... $45,000
August .................... $50,000
September .............. $65,000
October ................... $80,000
November ............... $75,000
December ............... $60,000
Sales at Razz are normally collected as follows: 10% in the month of sale; 60% in the
month following the sale; and the remaining 30% in the second month following the
sale. In Razz's budgeted balance sheet at December 31, at what amount will accounts
receivable be shown?

Multiple Choice
expand_more
A) $49,500
B) $76,500
C) $120,500
D) $135,500
Answer:

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Q30

On January 1, Colver Company has 6,500 units of Product A on hand. During the
year, the company plans to sell 15,000 units of Product A, and plans to have 5,000
units on hand at year end. How many units of Product A must be produced during the
year? A) 13,500

Multiple Choice
expand_more
A) 16,500
B) 15,000
C) 20,000
Answer:

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Q31

Douglas Company plans to sell 24,000 units of Product A during July and 30,000 units
during August. Sales of Product A during June were 25,000 units. Past experience has
shown that end-of-month inventory should equal 3,000 units plus 30% of the next
month's sales. On June 30 this requirement was met. Based on these data, how many
units of Product A must be produced during the month of July?

Multiple Choice
expand_more
A) 28,800
B) 22,200
C) 24,000
D) 25,800
Answer:

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Q32

Villi Manufacturing Corporation's most recent sales budget indicates the following
expected sales (in units):
July August September
Expected unit sales ............ 230,000 275,000 310,000
Villi wants to maintain a finished goods inventory of 20% of the next month's
expected sales. How many units should Villi plan on producing for the month of
August?

Multiple Choice
expand_more
A) 268,000 units
B) 282,000 units
C) 291,000 units
D) 337,000 units
Answer:

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Q33

Sharp Company, a retailer, plans to sell 15,000 units of Product X during the month of
August. If the company has 2,500 units on hand at the start of the month, and plans to
have 2,000 units on hand at the end of the month, how many units of Product X must
be purchased from the supplier during the month?

Multiple Choice
expand_more
A) 14,500
B) 15,500
C) 15,000
D) 17,000
Answer:

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Q34

The following are budgeted data:
January February March
Sales in units ...................... 15,000 20,000 18,000
Production in units ............. 18,000 19,000 16,000
One pound of material is required for each finished unit. The inventory of materials at
the end of each month should equal 20% of the following month's production needs.
Purchases of raw materials for February should be:

Multiple Choice
expand_more
A) 19,600 pounds
B) 20,400 pounds
C) 18,400 pounds
D) 18,600 pounds
Answer:

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Q35

Rhett Company 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:
April May June
Budgeted sales (in units) ................................................. 26,000 28,000 32,000
Budgeted production (in units) ........................................ 28,000 32,000 36,000
Desired ending inventory of cloth (in yards) ................... 2,100 2,800 3,000
How many yards of cloth should Rhett plan on purchasing in May?

Multiple Choice
expand_more
A) 84,700 yards
B) 96,700 yards
C) 98,100 yards
D) 98,800 yards
Answer:

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Q36

Sparks Company has a cash balance of $7,500 on April 1. The company must
maintain a minimum cash balance of $6,000. During April, cash receipts of $48,000
are planned. Cash disbursements during the month are expected to total $52,000.
Ignoring interest payments, during April the company will need to borrow:

Multiple Choice
expand_more
A) $3,500
B) $2,500
C) $6,000
D) $4,000
Answer:

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Q37

For May, Young Company has budgeted its cash receipts at $125,000 and its cash
disbursements at $138,000. The company's cash balance on May 1 is $17,000. If the
desired May 31 cash balance is $20,000, then how much cash must the company
borrow during the month (before considering any interest payments)?

Multiple Choice
expand_more
A) $4,000
B) $8,000
C) $12,000
D) $16,000
Answer:

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Q38

Based on these data, the balance in accounts receivable on January 31 will be:

Multiple Choice
expand_more
A) $40,000
B) $28,000
C) $12,000
D) $58,000
Answer:

A) You need to subscribe to get the answer.

Q39

The March 31 balance in accounts receivable will be:

Multiple Choice
expand_more
A) $100,000
B) $60,000
C) $95,000
D) $75,000
Answer:

A) You need to subscribe to get the answer.

Q40

In a cash budget for the month of April, the total cash receipts will be:

Multiple Choice
expand_more
A) $74,000
B) $57,000
C) $114,000
D) $97,000
Answer:

A) You need to subscribe to get the answer.

Q41

Assume that on January 1 the inventory of Quickclean was 8,000 units. Expected sales
in January are 14,000 units and expected sales in February are 18,000 units. The
number of units needed to be manufactured in January would be:

Multiple Choice
expand_more
A) 10,500
B) 14,000
C) 14,500
D) 15,000
Answer:

A) You need to subscribe to get the answer.

Q42

Assume that the production budget calls for 26,000 units of Quickclean to be
manufactured in June and 32,000 units of Quickclean to be manufactured in July. On
May 31 there will be 41,600 pounds of Material A in inventory. The number of
pounds of Material A needed for production during June would be:

Multiple Choice
expand_more
A) 61,600
B) 51,200
C) 35,600
D) 52,000
Answer:

A) You need to subscribe to get the answer.

Q43

Assume that the production budget calls for 26,000 units of Quickclean to be
manufactured in June and 32,000 units to be manufactured in July. On May 31 there
will be 104,000 pounds of Material B in inventory. The number of pounds of Material
B to be purchased during June would be:

Multiple Choice
expand_more
A) 128,000
B) 130,000
C) 154,000
D) 160,000
Answer:

A) You need to subscribe to get the answer.

Q44

Scheduled production for the third quarter should be:

Multiple Choice
expand_more
A) 14,500 units
B) 18,500 units
C) 15,500 units
D) 13,500 units
Answer:

A) You need to subscribe to get the answer.

Q45

Scheduled purchases of raw materials for the second quarter should be:

Multiple Choice
expand_more
A) 50,000 pounds
B) 55,800 pounds
C) 50,800 pounds
D) 55,000 pounds
Answer:

A) You need to subscribe to get the answer.

Q46

If the company plans to sell 880,000 units during the year, the number of units it
would have to manufacture during the year would be:

Multiple Choice
expand_more
A) 900,000 units
B) 930,000 units
C) 880,000 units
D) 830,000 units
Answer:

A) You need to subscribe to get the answer.

Q47

How much of the raw material should the company purchase during the year?

Multiple Choice
expand_more
A) 2,550,000 grams
B) 2,490,000 grams
C) 2,480,000 grams
D) 2,500,000 grams
Answer:

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Q48

Assuming that the Bingham Company had inventory on hand of $70,000 (at cost) on
January 1, the purchases for January (at cost) would be:

Multiple Choice
expand_more
A) $180,000
B) $250,000
C) $263,000
D) $110,000
Answer:

A) You need to subscribe to get the answer.

Q49

The desired ending inventory (at cost) for the month of February would be:

Multiple Choice
expand_more
A) $180,000
B) $300,000
C) $240,000
D) $160,000
Answer:

A) You need to subscribe to get the answer.

Q50

Assume that all purchases are paid for in the month following the month of purchase.
The cash disbursements for purchases that would appear in the April cash budget
would be:

Multiple Choice
expand_more
A) $180,000
B) $157,500
C) $240,000
D) $217,500
Answer:

A) You need to subscribe to get the answer.

Q51

The budgeted direct labor cost per unit of Product WZ would be:

Multiple Choice
expand_more
A) $4.57
B) $19.50
C) $16.00
D) $56.00
Answer:

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Q52

The company plans to sell 31,000 units of Product WZ in June. The finished goods
inventories on June 1 and June 30 are budgeted to be 100 and 600 units, respectively.
Budgeted direct labor costs for June would be:

Multiple Choice
expand_more
A) $1,764,000
B) $504,000
C) $1,708,000
D) $1,736,000
Answer:

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Q53

The desired beginning inventory for June is:

Multiple Choice
expand_more
A) $42,000
B) $35,000
C) $50,000
D) $38,000
Answer:

A) You need to subscribe to get the answer.

Q54

The budgeted purchases for May are:

Multiple Choice
expand_more
A) $49,400
B) $50,400
C) $60,000
D) $33,600
Answer:

A) You need to subscribe to get the answer.

Q55

The beginning inventory for September should be:

Multiple Choice
expand_more
A) 820 units
B) 1,880 units
C) 1,460 units
D) 1,080 units
Answer:

A) You need to subscribe to get the answer.

Q56

The total number of units produced in July should be:

Multiple Choice
expand_more
A) 9,260 units
B) 7,700 units
C) 7,800 units
D) 7,900 units
Answer:

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Q57

The total cost of material A to be purchased in April is:

Multiple Choice
expand_more
A) $22,680
B) $24,750
C) $26,750
D) $26,780
Answer:

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Q58

The desired ending inventory of material A for the month of June is

Multiple Choice
expand_more
A) 2,480 yards
B) 1,120 yards
C) 1,870 yards
D) 2,240 yards
Answer:

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Q59

If the company has budgeted to produce 20,000 Clops in January, then the budgeted
direct labor cost for January is:

Multiple Choice
expand_more
A) $164,000
B) $180,400
C) $172,200
D) $195,600
Answer:

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Q60

If the budgeted direct labor cost for February is $162,360, then the budgeted
production of Clops for February is:

Multiple Choice
expand_more
A) 23,200 units
B) 21,000 units
C) 19,800 units
D) 18,000 units
Answer:

A) You need to subscribe to get the answer.

Q61

The budgeted direct labor cost per Clop is:

Multiple Choice
expand_more
A) $7.45
B) $8.20
C) $9.02
D) $9.76
Answer:

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Q62

How much cash should Acmal expect to pay out for raw material purchases during the
month of November?

Multiple Choice
expand_more
A) $202,500
B) $832,500
C) $862,500
D) $877,500
Answer:

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Q63

In Acmal's budgeted balance sheet at December 31, at what amount will accounts
payable be shown? (Assume that accounts payable is only used for raw material
purchases.)

Multiple Choice
expand_more
A) $585,000
B) $607,500
C) $780,000
D) $802,500
Answer:

A) You need to subscribe to get the answer.

Q64

The desired ending inventory of Jurislon for the month of September is:

Multiple Choice
expand_more
A) $29,640
B) $29,520
C) $44,460
D) $44,280
Answer:

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Q65

The total cost of Jurislon to be purchased in August is:

Multiple Choice
expand_more
A) $149,860
B) $252,400
C) $191,460
D) $147,000
Answer:

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Q66

If the company has budgeted to sell 18,000 Debs in January, then the total budgeted
variable selling and administrative expenses for January will be:

Multiple Choice
expand_more
A) $13,500
B) $23,400
C) $37,900
D) $40,500
Answer:

A) You need to subscribe to get the answer.

Q67

If the company has budgeted to sell 16,000 Debs in February, then the total budgeted
fixed selling and administrative expenses for February is:

Multiple Choice
expand_more
A) $36,000
B) $77,000
C) $62,000
D) $98,000
E) none of these
Answer:

A) You need to subscribe to get the answer.

Q68

If the company has budgeted to sell 20,000 Debs in March, then the total budgeted
selling and administrative expenses per unit sold for March is:

Multiple Choice
expand_more
A) $2.25
B) $5.35
C) $5.80
D) $6.10
Answer:

A) You need to subscribe to get the answer.

Q69

If the budgeted cash disbursements for selling and administrative expenses for April
total $116,000, then how many Debs does the company plan to sell in April?

Multiple Choice
expand_more
A) 17,333 units
B) 18,250 units
C) 24,000 units
D) 26,800 units
Answer:

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Q70

If the budgeted direct labor time for October is 6,000 hours, then the total budgeted
factory overhead for October is:

Multiple Choice
expand_more
A) $28,000
B) $56,000
C) $74,000
D) $84,000
Answer:

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Q71

If the budgeted direct labor time for November is 9,000 hours, then the total budgeted
cash disbursements for November must be:

Multiple Choice
expand_more
A) $56,000
B) $83,000
C) $37,000
D) $93,000
Answer:

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Q72

If the budgeted direct labor time for December is 4,000 hours, then the predetermined
factory overhead per direct labor-hour for December would be:

Multiple Choice
expand_more
A) $3.00
B) $19.50
C) $5.50
D) $17.00
Answer:

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Q73

If the company has budgeted to sell 19,000 Yutes in November, then the total
budgeted variable selling and administrative expenses for November would be:

Multiple Choice
expand_more
A) $546,000
B) $280,000
C) $266,000
D) $536,000
Answer:

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Q74

If the company has budgeted to sell 16,000 Yutes in December, then the budgeted
total cash disbursements for selling and administrative expenses for December would
be:

Multiple Choice
expand_more
A) $280,000
B) $494,000
C) $224,000
D) $504,000
Answer:

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Q75

If the budgeted cash disbursements for selling and administrative expenses for October
total $459,200, then how many Yutes does the company plan to sell in October?

Multiple Choice
expand_more
A) 13,300 units
B) 12,500 units
C) 13,000 units
D) 12,800 units
Answer:

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Q76

In Sipan's cash budget for this first month, how much money will Sipan need to
borrow at month end?

Multiple Choice
expand_more
A) $7,000
B) $16,000
C) $17,000
D) $28,000
Answer:

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Q77

In Sipan's budgeted income statement for this first month, what will net income (loss)
be for this first month?

Multiple Choice
expand_more
A) $(1,000)
B) $(2,000)
C) $7,400
D) $9,500
Answer:

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Q78

In Sipan's budgeted balance sheet at the end of this first month, at what amount will
accounts receivable be shown?

Multiple Choice
expand_more
A) $0
B) $9,600
C) $18,000
D) $26,000
Answer:

A) You need to subscribe to get the answer.

Q79

The budgeted net income for September is:

Multiple Choice
expand_more
A) $20,000
B) $143,200
C) $112,000
D) $64,800
Answer:

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Q80

The budgeted cash disbursements for September are:

Multiple Choice
expand_more
A) $140,000
B) $270,000
C) $350,000
D) $362,000
Answer:

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Q81

The budgeted cash collections for November are:

Multiple Choice
expand_more
A) $208,000
B) $132,000
C) $203,600
D) $212,000
Answer:

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Q82

The net income for November is:

Multiple Choice
expand_more
A) $32,400
B) $28,000
C) $14,400
D) $10,000
Answer:

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Q83

The projected balance in accounts payable on November 30 is:

Multiple Choice
expand_more
A) $162,000
B) $204,000
C) $153,000
D) $160,000
Answer:

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Q84

The projected balance in inventory on November 30 is:

Multiple Choice
expand_more
A) $160,000
B) $120,000
C) $153,000
D) $150,000
Answer:

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Q85

Expected cash collections in December are:

Multiple Choice
expand_more
A) $230,000
B) $184,000
C) $233,400
D) $49,400
Answer:

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Q86

The cost of December merchandise purchases would be:

Multiple Choice
expand_more
A) $141,700
B) $169,000
C) $81,900
D) $149,500
Answer:

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Q87

December cash disbursements for merchandise purchases would be:

Multiple Choice
expand_more
A) $141,700
B) $149,500
C) $157,300
D) $81,900
Answer:

A) You need to subscribe to get the answer.

Q88

The excess (deficiency) of cash available over disbursements for December would be:

Multiple Choice
expand_more
A) $55,800
B) $37,900
C) $93,700
D) $17,900
Answer:

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Q89

The net income for December would be:

Multiple Choice
expand_more
A) $60,200
B) $37,900
C) $40,200
D) $55,800
Answer:

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Q90

The cash balance at the end of December would be:

Multiple Choice
expand_more
A) $180,500
B) $153,500
C) $82,800
D) $27,000
Answer:

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Q91

The accounts receivable balance, net of uncollectible accounts, at the end of December
would be:

Multiple Choice
expand_more
A) $46,000
B) $93,100
C) $43,700
D) $81,300
Answer:

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Q92

Accounts payable at the end of December would be:

Multiple Choice
expand_more
A) $81,900
B) $141,700
C) $59,800
D) $149,500
Answer:

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Q93

Retained earnings at the end of December would be:

Multiple Choice
expand_more
A) $380,400
B) $418,300
C) $471,300
D) $466,400
Answer:

A) You need to subscribe to get the answer.

Q94

Expected cash collections in December are:

Multiple Choice
expand_more
A) $340,000
B) $328,100
C) $272,000
D) $56,100
Answer:

A) You need to subscribe to get the answer.

Q95

The cost of December merchandise purchases would be:

Multiple Choice
expand_more
A) $225,000
B) $178,500
C) $247,500
D) $255,000
Answer:

A) You need to subscribe to get the answer.

Q96

December cash disbursements for merchandise purchases would be:

Multiple Choice
expand_more
A) $178,500
B) $255,000
C) $225,000
D) $252,750
Answer:

A) You need to subscribe to get the answer.

Q97

The excess (deficiency) of cash available over disbursements for December would be:

Multiple Choice
expand_more
A) $34,000
B) $19,550
C) $87,550
D) $53,550
Answer:

A) You need to subscribe to get the answer.

Q98

The net income for December would be:

Multiple Choice
expand_more
A) $114,500
B) $94,500
C) $101,400
D) $82,800
Answer:

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Q99

The cash balance at the end of December would be:

Multiple Choice
expand_more
A) $182,400
B) $114,400
C) $13,000
D) $195,400
Answer:

A) You need to subscribe to get the answer.

The accounts receivable balance, net of uncollectible accounts, at the end of December
would be:

Multiple Choice
expand_more
A) $105,300
B) $88,700
C) $117,000
D) $207,900
Answer:

A) You need to subscribe to get the answer.

Accounts payable at the end of December would be:

Multiple Choice
expand_more
A) $253,500
B) $50,700
C) $208,000
D) $258,700
Answer:

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Retained earnings at the end of December would be:

Multiple Choice
expand_more
A) $259,600
B) $342,400
C) $422,000
D) $445,100
Answer:

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Mate Boomerang Corporation manufactures and sells plastic boomerangs. Expected
boomerang sales (in units) for the upcoming months are as follows:
July Aug. Sept. Oct. Nov. Dec.
Expected unit sales ......... 12,000 15,000 10,000 8,000 7,000 11,000
Seven ounces of plastic resin are needed to produce every boomerang. Mate likes to
have enough plastic resin on hand at the end of the month to cover 25% of the next
month's production requirements. Mate also likes to maintain a finished goods
inventory equal to 10% of the next month's estimated sales.
Required:
How many ounces of plastic resin should Mate plan on purchasing during the month
of October?

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All sales at Meeks Company, a wholesaler, are made on credit. Experience has shown
that 70% of the accounts receivable are collected in the month of the sale, 26% are
collected in the month following the sale, and the remaining 4% are uncollectible.
Actual sales for March and budgeted sales for the following four months are given
below:
March (actual sales) ........... $200,000
April ................................... $300,000
May .................................... $500,000
June .................................... $700,000
July .................................... $400,000
The company's cost of goods sold is equal to 60% of sales. All purchases of inventory
are made on credit. Meeks Company pays for one half of a month's purchases in the
month of purchase, and the other half in the month following purchase. The company
requires that end-of-month inventories be equal to 25% of the cost of goods sold for
the next month.
Required:
a. Compute the amount of cash, in total, which the company can expect to collect in
May.
b. Compute the budgeted dollar amount of inventory which the company should have
on hand at the end of April.
c. Compute the amount of inventory that the company should purchase during the
months of May and June.
d. Compute the amount of cash payments that will be made to suppliers during June
for purchases of inventory.

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The following information is budgeted for McCracken Plumbing Supply Company for
next quarter:
April May June
Sales ........................................................... $110,000 $130,000 $180,000
Merchandise purchases .............................. $85,000 $92,000 $105,000
Selling and administrative expenses .......... $50,000 $50,000 $50,000
All sales at McCracken are on credit. Forty percent are collected in the month of sale,
58% in the month following the sale, and the remaining 2% are uncollectible.
Merchandise purchases are paid in full the month following the month of purchase.
The selling and administrative expenses above include $8,000 of depreciation on
display fixtures and warehouse equipment. All other selling and administrative
expenses are paid as incurred. McCracken wants to maintain a cash balance of
$15,000. Any amount below this can be borrowed from a local bank as needed in
increments of $1,000. All borrowings are made at month end.
Required:
Prepare McCracken's cash budget for the month of May. Use good form. McCracken
expects to have $24,000 of cash on hand at the beginning of May.

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The Fraley Company, a merchandising firm, has planned the following sales for the
next four months:
March April May June
Total budgeted sales .......... $50,000 $70,000 $90,000 $60,000
Sales are made 40% for cash and 60% on account. From experience, the company has
learned that a month’s sales on account are collected according to the following
pattern:
Month of sale ......................................................... 70%
First month following month of sale ..................... 20%
Second month following month of sale ................. 8%
Uncollectible ......................................................... 2%
The company requires a minimum cash balance of $4,000 to start a month.
Required:
a. Compute the budgeted cash receipts for June.
b. Assume the following budgeted data for June:
Purchases ..................................................... $52,000
Selling and administrative expenses ........... $10,000
Depreciation ................................................ $8,000
Equipment purchases ................................... $15,000
Cash balance, beginning of June ................. $6,000
Using this data, along with your answer to part (1) above, prepare a cash budget in
good form for June. Clearly show any borrowing needed during the month. The
company can borrow in any dollar amount, but will not pay any interest until the
following month.

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Bledso Supply Corporation manufactures and sells cotton gauze. Expected sales of
gauze (in boxes) for upcoming months are as follows:
June ........................ 36,000
July ........................ 40,000
August ................... 50,000
September .............. 38,000
October .................. 30,000
November .............. 24,000
December ............... 35,000
Management likes to maintain a finished goods inventory equal to 25% of the next
month's estimated sales.
Required:
Prepare the company's production budget for the third quarter of this year (the months
of July, August and September) in good form. Include a column for each month and a
total column for the entire quarter.

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Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to
industry. Data regarding the store's operations follow:
• Sales are budgeted at $360,000 for November, $380,000 for December, and
$350,000 for January.
• Collections are expected to be 75% in the month of sale, 20% in the month
following the sale, and 5% uncollectible.
• The cost of goods sold is 65% of sales.
• The company purchases 60% of its merchandise in the month prior to the month
of sale and 40% 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 $21,900.
• Monthly depreciation is $20,000.
• Ignore taxes.
Statement of Financial Position
October 31
Assets
Cash ............................................................................................. $ 16,000
Accounts receivable
(net of allowance for uncollectible accounts) .......................... 74,000
Inventory ..................................................................................... 140,400
Property, plant and equipment
(net of $500,000 accumulated depreciation) ........................... 1,066,000
Total assets .................................................................................. $1,296,400
Liabilities and Stockholders’ Equity
Accounts payable ........................................................................ $ 240,000
Common stock ............................................................................. 640,000
Retained earnings ........................................................................ 416,400
Total liabilities and stockholders’ equity .................................... $1,296,400
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.
c. Prepare Cash Budgets for November and December.
d. Prepare Budgeted Income Statements for November and December.
e. Prepare a Budgeted Balance Sheet for the end of December.

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