Question 1

The following information is taken from the production budget for the first quarter: $$\begin{array} { l r } 
\text { Beginning inventory in units } & 300 \
\text { Sales budgeted for the quarter } & 114,000 \
\text { Capacity in units of production facility } & 118,000
\end{array}$$ How many finished goods units should be produced during the quarter if the company desires 800 units available to start the next quarter?
A)114,500
B)113,500
C)118,500
D)114,800

Accepted Answer

The company desires 800 units available to start the next quarter, so the ending inventory should be 800 units. The beginning inventory is 300 units, and the sales budgeted for the quarter are 114,000 units. Therefore, the number of finished goods units that should be produced during the quarter is 114,000 + 800 - 300 = 114,500 units.

Question 2

Nextel Company showed the following on its direct materials budget for June: $\begin{array}{lr}
\text { Units to be produced } & 25,000 \
\text { Total kilograms needed for production } & 10,000 \
\text { Total kilograms of materials to be purchased } & 9,000
\end{array}$ The materials cost $2 per kilogram.How much is the cost of direct materials per unit?
A)$0.80
B)$0.72
C)$1.52
D)$5.00

Accepted Answer

The cost of direct materials per unit is calculated by dividing the total cost of materials needed for production by the number of units to be produced: $(10,000 \text{ kg} \times \$2/\text{kg}) / 25,000 \text{ units} = \$0.80$ per unit.

Question 3

Why might the number of units in the sales budget and the production budget differ?
A)The finished goods inventory levels changed.
B)The direct material inventory levels changed.
C)Excess overhead costs were incurred.
D)Customers returned merchandise.

Accepted Answer

The number of units in the sales budget and the production budget may differ if there were changes in finished goods inventory levels. If, for example, the company has excess inventory on hand at the end of the previous period, it may reduce the production budget for the next period despite expecting higher sales volume. On the other hand, if the company expects higher demand than what it currently has in inventory, it may increase the production budget to meet the expected sell-through.

Question 4

The production budget shows expected unit sales are 1,800.The required production units are 1,700.Which of the following represents possible inventory balances? $\begin{array}{l}
\underline{\text { Beginning Units} } & \underline{\text { Ending Units }} \
\end{array}$

a)$\quad $$\quad $$\quad $200$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $100
b)$\quad $$\quad $$\quad $100$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $200
c)$\quad $$\quad $$\quad $200$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $200
d)$\quad $$\quad $$\quad $$\quad $0$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $100

Accepted Answer

The answer of The production budget shows expected unit sales...

Question 5

Drive, Inc.determined its estimated production for the month is 300,000 units.Each unit requires 2 kilograms of material.The beginning direct materials are 1% of the current months expected needs.Ending inventory desired is 7,500 kilograms.How much are estimated direct materials purchases in kilograms?
A)601,500 kilograms
B)607,500 kilograms
C)301,500 kilograms
D)598,500 kilograms

Accepted Answer

The answer of Drive, Inc.determined its estimated production for the...

Question 6

Of the following items, which one is found as the bottom amount on an individual budget?
A)total variable costs
B)required production units
C)cost of production
D)financing needed

Accepted Answer

The answer of Of the following items, which one is...

Question 7

The production budget shows that expected unit sales are 86,000 for May and 87,000 for June.The company desires to have units on hand at the end of the month equal to 10% of next month's sales.How many units should the company produce during May?
A)86,100
B)94,600
C)85,900
D)94,700

Accepted Answer

The answer of The production budget shows that expected unit...

Question 8

Why is the sales budget the single most important source in preparing budgets?
A)All the other budgets depend on it.
B)It enables the company to determine the unit cost of products.
C)It is the best determination of profitability of a company.
D)It is the only budget that requires estimates.

Accepted Answer

The sales budget is considered the most important source in preparing budgets because all the other budgets are dependent on it. Without an accurate sales budget, the production, purchasing, and other budgets will not be able to properly plan and allocate resources. The sales budget provides the foundation for the entire budgeting process.

Question 9

Spirit, Inc.budgeted sales are 433,000 units for January and 420,000 units for February.The company's policy requires maintaining units on hand at the end of each month equal to 8% of next month's budgeted unit sales.How many units should the company produce in January?
A)442,700 units
B)423,300 units
C)466,600 units
D)431,960 units

Accepted Answer

Step 1: Calculate the units to be kept on hand at the end of January
8% of February's budgeted sales = 0.08 x 420,000 = 33,600 units

Step 2: Calculate the total units needed in January
Total units needed in February = Budgeted sales in February + units on hand in February
Total units needed in February = 420,000 + 33,600 = 453,600 units

Step 3: Calculate the units to be produced in January
Units to be produced in January = Total units needed in February - units on hand in January
Units to be produced in January = 453,600 - (0.08 x 433,000) = 431,960 units

Therefore, the best choice is D: 431,960 units.

Question 10

Which of the following is needed to prepare a sales budget?
A)the sales forecast
B)number of units of finished goods in inventory
C)the production capacity of the organization
D)estimated cost of goods sold

Accepted Answer

The sales forecast is essential in preparing the sales budget because it provides an estimate of the total sales revenue that the organization anticipates generating during a specific period. The budget will help the organization to allocate resources, plan purchases, and ensure that there is sufficient cash flow to meet its obligations. The other options, such as the number of units in inventory, production capacity, and estimated cost of goods sold may be useful in other budgets, such as the production budget and the cost of goods sold budget, but they are not essential in preparing the sales budget.

Question 11

Sargent.Com plans to sell 2,000 purple lawn chairs during May, 1,900 in June, and 2,000 during July.The company keeps 15% of the next month's sales as ending inventory.How many units should Sargent.Com produce during June?
A)1,915
B)2,200
C)1,885
D)not enough information to determine

Accepted Answer

For June, Sargent.Com plans to sell 1,900 units but also needs to keep 15% of July's sales (2,000 units) as ending inventory, which is 300 units (15% of 2,000). Therefore, they need to have 1,900 + 300 = 2,200 units available in June. However, they already plan to have 15% of June's sales (1,900 units) as ending inventory for May, which is 285 units. So, the total production for June should be 2,200 - 285 = 1,915 units.

Question 12

Which of the following is correct regarding the manufacturing overhead budget?
A)The manufacturing overhead budget should include all costs of marketing and advertising.
B)The budget should show only indirect materials and indirect labour.
C)Manufacturing overhead costs should be broken down by cost behaviour.
D)Total budgeted manufacturing overhead should be calculated using a predetermined overhead rate.

Accepted Answer

The answer of Which of the following is correct regarding...

Question 13

Jason Company determined that the budgeted cost of producing a product is $1.20 per unit.On June 1, there were 11,000 units on hand.The sales department budgeted sales of 320,000 units in June.The company desires to have 8,000 units on hand on June 30.How much is the budgeted cost of goods manufactured for June?
A)$380,400
B)$317,000
C)$323,000
D)$387,600

Accepted Answer

The budgeted cost of goods manufactured for June can be calculated as follows: Budgeted production = (Budgeted sales + Desired ending inventory) - Beginning inventory = (320,000 + 8,000) - 11,000 = 317,000 units. Then, the budgeted cost of goods manufactured = Budgeted production * Budgeted cost per unit = 317,000 units * $1.20/unit = $380,400.

Question 14

Sudler Production is planning to sell 600 boxes of ceramic tile, with production estimated at 580 boxes during May.Each box of tile requires 44 kilograms of clay mix and a quarter hour of direct labour.Clay mix costs $0.50 per kilogram and employees of the company are paid $15.00 per hour.Manufacturing overhead is applied at a rate of 110% of direct labour costs.Sudler has 2,600 kilograms of clay mix in beginning inventory and wants to have 3,000 kilograms in ending inventory.What is the total amount to be budgeted in kilograms for direct materials to be purchased for the month?
A)25,520
B)25,120
C)25,920
D)26,800

Accepted Answer

First, we need to determine the total amount of clay mix needed for production:
600 boxes x 44 kg per box = 26,400 kg

Then, we need to account for the clay mix in beginning and ending inventory:
Beginning Inventory = 2,600 kg
Ending Inventory = 3,000 kg

Total clay mix needed for production = 26,400 kg + 400 kg (ending inventory - beginning inventory)

Total clay mix needed to be purchased = 26,800 kg

Therefore, the answer is (C) 25,920 kg.

Question 15

At January 1, 2016, Ceatric, Inc.has beginning inventory of 10,000 boogie boards.Ceatric estimates it will sell 7,000 units during the first quarter of 2016 with a 7% increase in sales each quarter.Ceatric's policy is to maintain an ending inventory equal to 14% of the next quarter's sales.Each surfboard costs $95 and is sold for $130.How much is budgeted sales revenue for the third quarter of 2016?
A)$80,143
B)$910,000
C)$1,041,859
D)$280,500.50

Accepted Answer

First, let's calculate the number of boogie boards that Ceatric expects to sell in each quarter:

- Q1: 7,000 units
- Q2: 7,490 units (7% increase from Q1)
- Q3: 8,011 units (7% increase from Q2)
- Q4: 8,564 units (7% increase from Q3)

Now, let's calculate the ending inventory for each quarter:

- Q1: 14% of Q2 sales = 1,048 units
- Q2: 14% of Q3 sales = 1,122 units
- Q3: 14% of Q4 sales = 1,198 units
- Q4: no ending inventory, as this is the last quarter

Using this information, we can calculate the number of units Ceatric needs to produce (i.e. the number of units they need to sell plus the ending inventory):

- Q1: 7,000 + 1,048 - 10,000 = -1,952 units (negative means they have excess inventory)
- Q2: 7,490 + 1,122 - 1,048 = 7,564 units
- Q3: 8,011 + 1,198 - 1,122 = 8,087 units
- Q4: 8,564 - 1,198 = 7,366 units

Since Ceatric has excess inventory in Q1, they will not produce any additional units in that quarter. Therefore, we only need to calculate the cost of producing and selling units in Q2, Q3, and Q4:

- Q2: 7,564 units * $95 = $717,980 (cost of goods sold)
       7,564 units * $130 = $983,320 (revenue)
       $983,320 - $717,980 = $265,340 (gross profit)
- Q3: 8,087 units * $95 = $768,065 (cost of goods sold)
       8,087 units * $130 = $1,050,310 (revenue)
       $1,050,310 - $768,065 = $282,245 (gross profit)
- Q4: 7,366 units * $95 = $699,670 (cost of goods sold)
       7,366 units * $130 = $959,580 (revenue)
       $959,580 - $699,670 = $259,910 (gross profit)

Finally, we can add up the revenue from each quarter to get the total budgeted sales revenue for the third quarter of 2016:

$983,320 (Q2 revenue) + $1,050,310 (Q3 revenue) + $959,580 (Q4 revenue) = $2,993,210

Therefore, the correct answer is C) $1,041,859.

Question 16

Tripod Exports, Inc.budgets on an annual basis for its fiscal year.The following beginning and ending inventory levels are planned for the fiscal year of July 1, 2016 to June 30, 2017: $\begin{array}{llcc}
&  \underline {  \text { June } 30,2017} &  \underline {  \text { June } 30,2016} \
\text { Raw Materials } & 3,000 \text { kilos } & 2,000 \text { kilos }
\end{array}$
 Three kilos of raw materials are needed to produce each unit of finished product.If Tripod Exports plans to produce 280,000 units during the 2016-2017 fiscal year, how many kilos of materials will the company need to purchase for its production during the year?
A)841,000
B)843,000
C)840,000
D)839,000

Accepted Answer

To produce 280,000 units, Tripod Exports will need 280,000 * 3 = 840,000 kilos of raw materials. Since the company has 3,000 kilos of raw materials at the beginning of the year and plans to have 2,000 kilos at the end of the year, it will need to purchase 840,000 - 3,000 + 2,000 = 841,000 kilos of raw materials during the year.

Question 17

The direct materials budget shows: $\begin{array}{ll}
\text { Desired ending direct materials } & 2,000 \text { kilograms } \
\text { Materials purchased } & 51,400 \text { kilograms } \
\text { Beginning inventory on hand } & 1,200 \text { kilograms }
\end{array}$ How much are the total direct materials needed for production?
A)50,600 kilograms
B)52,600 kilograms
C)52,200 kilograms
D)51,400 kilograms

Accepted Answer

Total direct materials needed for production = Materials purchased + Desired ending inventory - Beginning inventory = 51,400 + 2,000 - 1,200 = 52,200 kilograms.

Question 18

Skate Rink Company revised its sales budget to show a 15% increase in sales.As a result of this change, which other budgets would change?
A)all of its other budgets
B)only its selling and administrative expenses budget
C)its marketing budget only
D)only its production budget

Accepted Answer

If the sales budget is revised, it is likely that production, purchasing, and other budgets will need to be adjusted accordingly to meet the new sales goals. Additionally, changes in sales could affect cash flow and financing budgets as well. Therefore, all of Skate Rink Company's other budgets would need to be revisited and revised to reflect the 15% increase in sales.

Question 19

Green Plants plans to sell 160 potted plants during April and 120 units in May.Green Plants keeps 15% of the next month's sales as ending inventory.How many units should Green Plants produce during April?
A)154
B)166
C)160
D)178

Accepted Answer

The answer of Green Plants plans to sell 160 potted...

Question 20

In what order are the following budgets prepared? IS.budgeted income statement
P.production budget
SA.selling and administrative budget
MP.materials purchases budget
A)SA, P, MP, IS
B)P, MP, IS, SA
C)P, MP, SA, IS
D)MP, P, SA, IS

Accepted Answer

The production budget is prepared first as it outlines the production goals for the period. Next, the materials purchases budget is prepared as it is dependent on the production budget. The selling and administrative budget is then prepared to determine the expected costs related to selling and administrative activities. Finally, the budgeted income statement is prepared using the information from the previous budgets to project the expected financial performance. Therefore, the correct order is P, MP, SA, IS.

Quiz 10: Budgetary Planning

Why might the number of units in the sales budget and the production budget differ?

Of the following items, which one is found as the bottom amount on an individual budget?

The production budget shows that expected unit sales are 86,000 for May and 87,000 for June.The company desires to have units on hand at the end of the month equal to 10% of next month's sales.How many units should the company produce during May?

Why is the sales budget the single most important source in preparing budgets?

Spirit, Inc.budgeted sales are 433,000 units for January and 420,000 units for February.The company's policy requires maintaining units on hand at the end of each month equal to 8% of next month's budgeted unit sales.How many units should the company produce in January?

Which of the following is needed to prepare a sales budget?

Sargent.Com plans to sell 2,000 purple lawn chairs during May, 1,900 in June, and 2,000 during July.The company keeps 15% of the next month's sales as ending inventory.How many units should Sargent.Com produce during June?

Which of the following is correct regarding the manufacturing overhead budget?

Skate Rink Company revised its sales budget to show a 15% increase in sales.As a result of this change, which other budgets would change?

Green Plants plans to sell 160 potted plants during April and 120 units in May.Green Plants keeps 15% of the next month's sales as ending inventory.How many units should Green Plants produce during April?

In what order are the following budgets prepared? IS.budgeted income statement P.production budget SA.selling and administrative budget MP.materials purchases budget