Response to the following multiple choice questions:
1. Grason Corporation is preparing a budgeted balance sheet for 2018. The retained earnings balance at December 31, 2017 was $543,500. The 2018 budgeted income statement shows expected net income of $117,000. The company expects to declare dividends during 2018 amounting to $45,000. The expected balance in retained earnings on the 2018 budgeted balance sheet is:
• $615,500.
• $705,500.
• $660,500.
• $543,500.
• $498,500.
2. Webster Corporation's monthly projected general and administrative expenses include $4,400 administrative salaries, $1,800 of other cash administrative expenses, $2,150 of depreciation expense on the administrative equipment, and .5% monthly interest on an outstanding bank loan of $26,000. Compute the total general and administrative expenses to be reported on the general and administrative expense budget per month.
• $6,200.
• $8,350
• $32,200.
• $4,530.
• $8,480.
3. Wichita Industries' sales are 10% for cash and 90% on credit. Credit sales are collected as follows: 40% in the month of sale, 50% in the next month, and 10% in the following month. On December 31, the accounts receivable balance includes $26,000 from November sales and $45,000 from December sales. Assume that total sales for January and February are budgeted to be $64,000 and $128,000, respectively. What are the expected cash receipts for February from current and past sales?
• $36,300.
• $95,180.
• $41,600.
• $51,700.
• $62,300.
4. A sporting goods manufacturer budgets production of 47,000 pairs of ski boots in the first quarter and 38,000 pairs in the second quarter of the upcoming year. Each pair of boots require 2 kg of a key raw material. The company aims to end each quarter with ending raw materials inventory equal to 30% of the following quarter's material needs. Beginning inventory for this material is 28,200 kg and the cost per kg is $8. What is the budgeted materials need in kg. in the first quarter?
• 116,800 kg.
• 145,000 kg.
• 88,600 kg.
• 94,000 kg.
• 122,200 kg.
5. Calgary Industries is preparing a budgeted income statement for 2018 and has accumulated the following information. Predicted sales for the year are $680,000 and cost of goods sold is 40% of sales. The expected selling expenses are $76,000 and the expected general and administrative expenses are $85,000, which includes $18,000 of depreciation. The company's income tax rate is 30%. The budgeted net income for 2018 is:
• $74,100.
• $84,700.
• $247,000.
• $172,900.
• $408,000.
6. Wichita Industries' sales are 10% cash and 90% on credit. Credit sales are collected as follows: 30% in the month of sale, 60% in the next month, and 10% in the following month. On December 31, the accounts receivable balance includes $28,000 from November sales and $49,000 from December sales. Assume that total sales for January are budgeted to be $66,000. What are the expected cash receipts for January from the current and past sales?
• $94,420.
• $81,820.
• $87,820.
• $69,220.
• $24,420.
7. Alliance Company's budgets production of 33,000 units in January and 37,000 units in the February. Each finished unit requires 4 pounds of raw material K that costs $2.50 per pound. Each month's ending raw materials inventory should equal 35% of the following month's budgeted materials. The January 1 inventory for this material is 46,200 pounds. What is the budgeted materials need in pounds for January?
• 132,000 pounds.
• 98,000 pounds.
• 85,800 pounds.
• 183,800 pounds.
• 137,600 pounds.
8. Memphis Company's May sales budget calls for sales of $1,000,000. The store expects to begin May with $60,000 of inventory and to end the month with $65,000 of inventory. Gross margin is typically 40% of sales. Compute the budgeted cost of merchandise purchases for May.
• $400,000.
• $600,000.
• $405,000.
• $605,000.
• $595,000.
9. Ratchet Manufacturing anticipates total sales for August, September, and October of $110,000, $120,000, and $130,500 respectively. Cash sales are normally 20% of total sales and the remaining sales are on credit. All credit sales are collected in the first month after the sale. Compute the amount of accounts receivable to be reported on the company's budgeted balance sheet for August.
• $88,000.
• $24,000.
• $96,000.
• $110,000.
• $22,000.
10. Cameroon Corp. manufactures and sells electric staplers for $16.30 each. If 10,000 units were sold in December, and management forecasts 4% growth in sales each month, the dollar amount of electric stapler sales budgeted for February should be:
• $163,000
• $183,353
• $169,520
• $190,687
• $176,301
11. Zhang Industries is preparing a cash budget for June. The company has $31,000 cash at the beginning of June and anticipates $101,000 in cash receipts and $126,290 in cash disbursements during June. The company has no loans outstanding on June 1. Compute the amount the company must borrow, if any, to maintain a $23,000 cash balance.
• $28,710.
• $9,290.
• $17,290.
• $18,290.
• $25,290.
12. The Gardner Company expects sales for October of $247,000. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 50% of its credit sales in the month of sale and 50% in the month following sale. Budgeted Accounts Receivable on September 30 is $67,500. What is the amount of cash expected to be collected in October?
• $240,400.
• $123,500.
• $98,800.
• $172,900.
• $166,300.
13. Aloan Co. provides the following sales forecast for the next three months:
|
|
January
|
February
|
March
|
|
Sales units
|
2,900
|
4,000
|
5,000
|
The company wants to end each month with ending finished goods inventory equal to 10% of the next month's sales. Finished goods inventory on December 31 is 290 units. The budgeted production units for February are:
• 3,900 units.
• 4,500 units.
• 5,000 units.
• 4,100 units.
• 4,000 units.
14. Western Company is preparing a cash budget for June. The company has $10,800 cash at the beginning of June and anticipates $31,200 in cash receipts and $36,900 in cash disbursements during June. Western Company has an agreement with its bank to maintain a minimum cash balance of $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:
• Borrow $10,000.
• Repay $4,900.
• Repay $5,100.
• Borrow $4,900.
• Borrow $5,700.
15. Ratchet Manufacturing anticipates total sales for August, September, and October of $260,000, $240,000, and $250,500 respectively. Cash sales are normally 30% of total sales and the remaining sales are on credit. All credit sales are collected in the first month after the sale. Compute the amount of cash received for September.
• $168,000.
• $182,000.
• $350,000.
• $254,000.
• $150,000.
16. Boulware Company's budgeted production calls for 6,700 units in October and 9,700 units in November. Each unit requires 8 pounds (lbs.) of raw material A. Each month's ending inventory of raw materials should equal 30% of the following month's budgeted materials requirements. The October 1 inventory for this material is 16,080 pounds. What is the budgeted materials purchases for this key material in pounds for October?
• 48,190 lbs.
• 60,800 lbs.
• 53,600 lbs.
• 92,960 lbs.
• 76,880 lbs.
17. Zhang Industries sells a product for $750. Unit sales for May were 300 and each month's sales are expected to exceed the prior month's results by 3%. Zhang pays a sales manager a monthly salary of $5,000 and a commission of 2% of sales in dollars. Assume 20% of Zhang's sales are for cash. The remaining 80% are credit sales; these customers pay in the month following the sale. Compute the budgeted cash receipts for June.
• $226,350.
• $231,450.
• $225,000.
• $180,000.
• $185,400.
18. Zhang Industries budgets production of 300 units in June and 310 units in July. Each finished unit requires 5 pounds (lbs.) of raw material K, which costs $6 per pound. Each month's ending inventory of raw materials should be 30% of the following month's budgeted production. The June 1 raw materials inventory has 450 pounds of raw material K. Compute budgeted purchases for raw material K in pounds for June.
• 1,550 lbs.
• 1,520 lbs.
• 1,100 lbs.
• 1,515 lbs.
• 1,500 lbs.
19. Ratchet Manufacturing's August sales budget calls for sales of 6,500 units. Each month's sales are expected to exceed the prior month's results by 5%. The product selling price is $20 per unit. The expected total sales dollars for September's sales budget are:
• $6,825.
• $143,000.
• $136,500.
• $123,500.
• $130,000.
20. Flagstaff Company has budgeted production units for July of 8,100 units. Variable factory overhead is $1.3 per unit. Budgeted fixed factory overhead is $20,000, which includes $3,200 of factory equipment depreciation. Compute the total budgeted overhead to be reported on the factory overhead budget for the month.
• $10,530.
• $30,530.
• $27,330.
• $24,900.
• $20,000.
21. Bengal Co. provides the following sales forecast for the next three months:
July August September
Sales units 5,700 6,400 6,260
The company wants to end each month with ending finished goods inventory equal to 20% of the next month's sales. Finished goods inventory on June 30 is 1,140 units. The budgeted production units for July are:
• 6,840 units.
• 4,560 units.
• 2,280 units.
• 6,980 units.
• 5,840 units.
22. Charm Enterprises' production budget shows the following units to be produced for the coming three months:
April May June
Units to be produced 2,810 3,130 3,010
A finished unit requires four ounces of a key direct material. The March 31 Raw Materials Inventory has 4,382 ounces (oz.) of the material. Each month's ending Raw Materials Inventory should be 35% of the following month's production needs. The materials to be purchased during May should be:
• 16,734 oz.
• 8,306 oz.
• 8,138 oz.
• 12,520 oz.
• 12,352 oz.
23. Flagstaff Company has budgeted production units of 9,100 for July and 9,300 for August. The direct materials requirement per unit is 2 ounces (oz.). The company has determined that it wants to have safety stock of direct materials on hand at the end of each month to complete 20% of the units budgeted in the following month. There was 3,640 ounces of direct material in inventory at the start of July. The total amount of direct materials in ounces, to be purchased in July is:
• 18,600.
• 18,200.
• 21,920.
• 18,120.
• 18,280.
24. Schrank Company is trying to decide how many units of merchandise to order each month. The company's policy is to have 30% of the next month's sales in inventory at the end of each month. Projected sales for August, September, and October are 35,000 units, 25,000 units, and 45,000 units, respectively. How many units must be purchased in September?
• 38,500.
• 25,000.
• 14,500.
• 28,000.
• 31,000.
25. Bengal Co. provides the following sales forecast for the next three months:
July August September
Sales units 8,500 9,200 5,950
The company wants to end each month with ending finished goods inventory equal to 20% of the next month's sales. Finished goods inventory on June 30 is 1,700 units. The budgeted production units for August are:
• 10,900 units.
• 7,870 units.
• 8,550 units.
• 10,390 units.
• 8,010 units.
26
Cahuilla Corporation predicts the following sales in units for the coming four months:
April May June July
Sales in Units 320 360 380 320
Each month's ending Finished Goods Inventory should be 40% of the next month's sales. March 31 Finished Goods inventory is 128 units. A finished unit requires 5 pounds of direct material B at a cost of $2.00 per pound. The March 31 Raw Materials Inventory has 280 pounds of B. Each month's ending Raw Materials Inventory should be 30% of the following month's production needs. The budgeted purchases of pounds of direct material B during May should be:
• 356 lbs.
• 368 lbs.
• 2,374 lbs.
• 1,288 lbs.
• 1,822 lbs.
27. Webster Corporation is preparing its cash budget for April. The March 31 cash balance is $37,000. Cash receipts are expected to be $647,000 and cash payments for purchases are expected to be $614,500. Other cash expenses expected are $27,600 selling and $34,100 general and administrative. The company desires a minimum cash balance at the end of each month of $36,000. If necessary, the company borrows enough cash to meet the minimum using a short-term note. Webster's preliminary cash balance before loan activity for April is expected to be:
• ($29,200).
• $7,800.
• $36,000.
• $28,200.
• $69,500.
28. Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months:
January February March
Material purchases $ 12,100 14,210 11,030
Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $6,100. The budgeted cash payments for materials in January are:
• $13,155.
• $6,100.
• $9,100.
• $12,150.
• $18,200.
29. If budgeted beginning inventory is $9,100, budgeted ending inventory is $10,360, and budgeted cost of goods sold is $11,060, budgeted purchases should be:
• $9,800
• $700
• $1,260
• $1,960
• $12,320
30. Coomb's Fashions forecasts sales of $128,000 for the quarter ended December 31. Its gross profit rate is 10% of sales, and its September 30 inventory is $34,000. If the December 31 inventory is targeted at $43,000, budgeted purchases for the fourth quarter should be:
• $137,000.
• $106,200.
• $124,200.
• $106,700.
• $12,800.
31. The sales budget for Modesto Corp. shows that 21,000 units of Product A and 23,000 units of Product B are going to be sold for prices of $11 and $13, respectively. The desired ending inventory of Product A is 25% higher than its beginning inventory of 2,100 units. The beginning inventory of Product B is 2,600 units. The desired ending inventory of B is 3,100 units. Total budgeted sales of both products for the year would be:
• $299,000.
• $231,000.
• $44,000.
• $530,000.
• $570,300.
32. A company's history indicates that 30% of its sales are for cash and the rest are on credit. Collections on credit sales are 30% in the month of the sale, 40% in the next month, and 25% the following month. Projected sales for January, February, and March are $62,000, $87,000 and $97,000, respectively. The March expected cash receipts from all current and prior credit sales is:
• $60,430
• $79,400
• $55,580
• $50,730
• $73,600
33. Cameroon Corp. manufactures and sells electric staplers for $17 each. If 10,000 units were sold in December, and management forecasts 5% growth in sales each month, the number of electric stapler sales budgeted for February should be:
• 11,576
• 11,025
• 10,000
• 10,500
• 11,000
34. Webster Corporation is preparing its cash budget for April. The March 31 cash balance is $39,000. Cash receipts are expected to be $654,000 and cash payments for purchases are expected to be $615,000. Other cash expenses expected are $28,300 selling and $34,800 general and administrative. The company desires a minimum cash balance at the end of each month of $27,000. If necessary, the company borrows enough cash to meet the minimum using a short-term note. The amount Webster must borrow during April is:
• $105,000.
• $78,000.
• $12,100.
• $0.
• $14,900.
35. Frankie's Chocolate Co. reports the following information from its sales budget:
Expected Sales: July $ 95,000
August 115,000
September 125,000
Cash sales are normally 20% of total sales and all credit sales are expected to be collected in the month following the date of sale. The total amount of cash expected to be received from customers in September is:
• $125,000.
• $25,000.
• $92,000.
• $217,000.
• $117,000.
36. Memphis Company anticipates total sales for April, May, and June of $940,000, $1,040,000, and $1,090,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 40% are collected in the same month as the sale, 55% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales during the month of June.
• $699,750.
• $664,500.
• $756,000.
• $959,750.
• $1,028,500.
37. A company's history indicates that 25% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, 20% the following month, and 10% is uncollectible. Projected sales for December, January, and February are $79,000, $104,000 and $114,000, respectively. The February expected cash receipts from all current and prior credit sales is:
• $109,000
• $67,950
• $79,350
• $56,550
• $28,050
38. A sporting equipment store expects to purchase $8,900 of ski boots in October. The store had $2,100 of ski boots in merchandise inventory at the beginning of October, and expects to have $1,100 of ski boots in merchandise inventory at the end of October to cover part of anticipated November sales. What is the budgeted cost of goods sold for October?
• $11,000.
• $9,900.
• $3,200.
• $8,900.
• $10,000.
39. Webster Corporation is preparing a master budget for the first quarter of the year. The company budgets production of 2,780 units in January, 2,650 units in February and 2,990 units in March. Each unit requires 0.6 hours of direct labor. The direct labor rate is $14 per hour. Compute the budgeted direct labor cost for the first quarter budget.
• $111,300.
• $50,520.
• $70,728.
• $66,780.
• $117,880.
40. The Ballentine Company expects sales for June, July, and August of $58,000, $64,000, and $54,000, respectively. Experience suggests that 40% of sales are for cash and 60% are on credit. The company collects 55% of its credit sales in the month following sale, 40% in the second month following sale, and 5% are not collected. What are the company's expected cash receipts for August from its current and past sales?
• $80,000.
• $73,200.
• $56,640.
• $35,040.
• $105,600.
41. Southland Company is preparing a cash budget for August. The company has $17,500 cash at the beginning of August and anticipates $121,800 in cash receipts and $135,500 in cash disbursements during August. Southland Company wants to maintain a minimum cash balance of $10,000. To maintain the minimum cash balance of $10,000, the company must borrow:
• $7,500.
• $6,200.
• $27,500.
• $0.
• $10,000.
42. The sales budget for Modesto Corp. shows that 20,400 units of Product A and 22,400 units of Product B are going to be sold for prices of $10.40 and $12.40, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,400 units. The beginning inventory of Product B is 2,900 units. The desired ending inventory of B is 3,400 units. Budgeted purchases of Product A for the year would be:
• 20,880 units.
• 12,680 units.
• 20,400 units.
• 23,280 units.
• 19,900 units.
43. Funcycle Manufacturing's budget includes the following credit sales for the current year: September, $156,000; October, $147,000; November, $131,000; December, $168,000. Experience has shown that payment for the credit sales is received as follows: 15% in the month of sale, 55% in the first month after sale, and 30% in the second month after sale. What are the cash collections of credit sales in the month of December?
• $97,250.
• $25,200.
• $116,150.
• $141,350.
• $168,000.
44. Trago Company manufactures a single product and has a JIT policy that ending inventory must equal 30% of the next month's sales. It estimates that May's ending inventory will consist of 84,300 units. June and July sales are estimated to be 281,000 and 291,000 units, respectively. Compute the number of units to be produced that would appear on the company's production budget for the month of June.
• 368,300 units.
• 196,700 units.
• 284,000 units.
• 265,710 units.
• 281,000 units.
45. A department store has budgeted sales of 12,800 men's suits in September. Management wants to have 6,800 suits in inventory at the end of the month to prepare for the winter season. Beginning inventory for September is expected to be 4,800 suits. What is the dollar amount of the purchase of suits if each suit has a cost of $83.
• $1,228,400.
• $896,400.
• $1,460,800.
• $1,626,800.
• $1,062,400.
46. Memphis Company anticipates total sales for April, May, and June of $920,000, $1,020,000, and $1,070,000 respectively. Cash sales are normally 30% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from total sales during the month of June.
• $688,800.
• $632,800.
• $600,600.
• $1,009,800.
• $938,800.
47. Masterson Company's budgeted production calls for 70,000 liters in April and 66,000 liters in May of a key raw material that costs $1.80 per liter. Each month's ending raw materials inventory should equal 20% of the following month's budgeted materials. The April 1 inventory for this material is 14,000 liters. What is the budgeted materials purchases for April?
• $126,000.
• $100,800.
• $124,560.
• $130,320.
• $149,760.
48. A July sales forecast projects that 6,900 units are going to be sold at a price of $11.40 per unit. The management forecasts 15% growth in sales each month. Total July sales are anticipated to be:
• $81,909.
• $57,000.
• $78,660.
• $100,320.
• $75,411.
49. Fortune Company's direct materials budget shows the following cost of materials to be purchased for the coming three months:
January February March
Material purchases $ 12,160 14,270 11,090
Payments for purchases are expected to be made 50% in the month of purchase and 50% in the month following purchase. The December Accounts Payable balance is $6,200. The expected January 31 Accounts Payable balance is:
• $6,200.
• $9,180.
• $6,080.
• $12,160.
• $7,135.
50. Zhang Industries sells a product for $790. Unit sales for May were 700 and each month's sales are expected to exceed the prior month's results by 3%. Compute the total sales dollars to be reported on the sales budget for month ended June 30.
• $553,000.
• $560,990.
• $569,590.
• $536,410.
• $718,900.