Question 1:
Garza and Neely, CPAs, are preparing their service revenue (sales) budget for the coming year (2014). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below.
| Department |
|
Quarter 1 |
|
Quarter 2 |
|
Quarter 3 |
|
Quarter 4 |
| Auditing |
|
2,590 |
|
1,830 |
|
2,370 |
|
2,580 |
| Tax |
|
3,140 |
|
2,520 |
|
2,300 |
|
2,650 |
| Consulting |
|
1,610 |
|
1,610 |
|
1,610 |
|
1,610 |
Average hourly billing rates are auditing $82, tax $93, and consulting $101.
Prepare the service revenue (sales) budget for 2014 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue.
Question 2:
Turney Company produces and sells automobile batteries, the heavy-duty HD-240. The 2014 sales forecast is as follows.
| Quarter |
|
HD-240 |
| 1 |
|
5,300 |
| 2 |
|
7,370 |
| 3 |
|
8,400 |
| 4 |
|
10,200 |
The January 1, 2014, inventory of HD-240 is 2,120 units. Management desires an ending inventory each quarter equal to 40% of the next quarter's sales. Sales in the first quarter of 2015 are expected to be 25% higher than sales in the same quarter in 2014.
Prepare quarterly production budgets for each quarter and in total for 2014.
Question 3:
Chandler Ltd. estimates sales for the second quarter of 2014 will be as follows.
| Month |
|
Units |
| April |
|
2,530 |
| May |
|
2,420 |
| June |
|
2,360 |
The target ending inventory of finished products is as follows.
March 31 2,050
April 30 2,220
May 31 2,150
June 30 2,360
2 units of material are required for each unit of finished product. Production for July is estimated at 2,720 units to start building inventory for the fall sales period. Chandler's policy is to have an inventory of raw materials at the end of each month equal to 50% of the following month's production requirements.
Raw materials are expected to cost $4 per unit throughout the period.
Calculate the May raw materials purchases in dollars.
Question 4:
Donnegal Company makes and sells artistic frames for pictures. The controller is responsible for preparing the master budget and has accumulated the following information for 2014.
|
|
January |
|
February |
|
March |
|
April |
|
May |
| Estimated unit sales |
|
10,300 |
|
11,900 |
|
8,900 |
|
8,900 |
|
8,200 |
| Sales price per unit |
|
$50.2 |
|
$47.5 |
|
$47.5 |
|
$47.5 |
|
$47.5 |
| Direct labor hours per unit |
|
2.3 |
|
2.3 |
|
1.6 |
|
1.6 |
|
1.6 |
| Wage per direct labor hour |
|
$8 |
|
$8 |
|
$8 |
|
$9 |
|
$9 |
Donnegal has a labor contract that calls for a wage increase to $9 per hour on April 1. New labor-saving machinery has been installed and will be fully operational by March 1.
Donnegal expects to begin the year with 15,060 frames on hand and has a policy of carrying an end-of-month inventory of 100% of the following month's sales, plus 40% of the second following month's sales.
(a) Prepare a production budget for Donnegal Company by month and for the first quarter of the year.
(b) Prepare a direct labor budget for Donnegal Company by month and for the first quarter of the year. The direct labor budget should include direct labor hours.
Question 5:
Dalby Company has accumulated the following budget data for the year 2014.
1. Sales: 31,280 units, unit selling price $90.
2. Cost of one unit of finished goods: Direct materials 2 pounds at $5 per pound, direct labor 3 hours at $12 per hour, and manufacturing overhead $6 per direct labor hour.
3. Inventories (raw materials only): Beginning, 10,150 pounds; ending, 15,450 pounds.
4. Selling and administrative expenses: $201,370.
5. Income taxes: 30% of income before income taxes.
(a) Prepare a schedule showing the computation of cost of goods sold for 2014.
(b) Prepare a budgeted income statement for 2014.
Question 6:
Danner Company expects to have a cash balance of $48,576 on January 1, 2014. Relevant monthly budget data for the first 2 months of 2014 are as follows.
Collections from customers: January $89,760, February $158,400.
Payments for direct materials: January $52,800, February $73,920.
Direct labor: January $31,680, February $47,520. Wages are paid in the month they are incurred.
Manufacturing overhead: January $22,176, February $26,400. These costs include depreciation of $1,056 per month. All other overhead costs are paid as incurred.
Selling and administrative expenses: January $15,840, February $21,120. These costs are exclusive of depreciation. They are paid as incurred.
Sales of marketable securities in January are expected to realize $10,560 in cash. Danner Company has a line of credit at a local bank that enables it to borrow up to $26,400. The company wants to maintain a minimum monthly cash balance of $21,120.
Prepare a cash budget for January and February.