Question 1

Which of the following would not appear as a fixed expense on a selling and administrative expense budget?

Accepted Answer

Freight-out is considered a variable cost because it fluctuates with the level of sales or production volume, not a fixed expense that remains constant regardless of business activity levels. Fixed expenses in a selling and administrative expense budget typically include items like office salaries, property taxes, and depreciation, which do not vary directly with sales volume.

Question 2

Lion Industries required production for June is 132,000 units. To make one unit of finished product, three pounds of direct material Z are required. Actual beginning and desired ending inventories of direct material Z are 300,000 and 330,000 pounds, respectively. How many pounds of direct material Z must be purchased?

Accepted Answer

The answer of Lion Industries required production for June is...

Question 3

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory.
What is the total amount to be budgeted in pounds for direct materials to be purchased for the month?

Accepted Answer

To determine the total amount to be budgeted in pounds for direct materials, we need to first calculate the total pounds of clay mix needed for production:

900 boxes x 44 pounds per box = 39,600 pounds

Then, we need to add the desired ending inventory of clay mix and subtract the beginning inventory:

39,600 pounds + 4,500 pounds - 3,900 pounds = 40,200 pounds

Therefore, the total amount to be budgeted in pounds for direct materials to be purchased for the month is 40,200 pounds.

The correct answer is C.

Question 4

The following information is taken from the production budget for the first quarter:  How many finished goods units should be produced during the quarter if the company desires 3,200 units available to start the next quarter?

Accepted Answer

The answer of The following information is taken from the...

Question 5

At January 1, 2016, Deer Corp. has beginning inventory of 2,000 surfboards. Deer estimates it will sell 10,000 units during the first quarter of 2016 with a 12% increase in sales each quarter. Deer's policy is to maintain an ending inventory equal to 25% of the next quarter's sales. Each surfboard costs $100 and is sold for $150. How much is budgeted sales revenue for the third quarter of 2016?

Accepted Answer

First, we need to calculate the sales for each quarter:

Quarter 1: 10,000 units 
Quarter 2: 10,000 x 1.12 = 11,200 units 
Quarter 3: 11,200 x 1.12 = 12,544 units

Next, we need to calculate the ending inventory for each quarter:

Quarter 1: 10,000 x 25% = 2,500 units 
Quarter 2: 11,200 x 25% = 2,800 units 
Quarter 3: 12,544 x 25% = 3,136 units

Now, we can calculate the required purchases for each quarter:

Quarter 1: 10,000 + 2,500 - 2,000 = 10,500 units 
Quarter 2: 11,200 + 2,800 - 2,800 = 11,200 units 
Quarter 3: 12,544 + 3,136 - 3,136 = 12,544 units

Finally, we can calculate the budgeted sales revenue for Quarter 3:

12,544 units x $150 = $1,881,600

Question 6

Which of the following expenses would not appear on a selling and administrative expense budget?

Accepted Answer

The answer of Which of the following expenses would not...

Question 7

Lorie Nursery plans to sell 320 potted plants during April and 240 units in May. Lorie Nursery keeps 15% of the next month's sales as ending inventory. How many units should Lorie Nursery produce during April?

Accepted Answer

The answer of Lorie Nursery plans to sell 320 potted...

Question 8

A company budgeted unit sales of 204,000 units for January, 2017 and 240,000 units for February 2017. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 61,200 units of inventory on hand on December 31, 2016, how many units should be produced in January, 2017 in order for the company to meet its goals?

Accepted Answer

To meet its goals in January 2017, the company needs to have inventory equal to 30% of February's budgeted sales (240,000 units) at the end of January. This equals 72,000 units (240,000 * 30%). The company already has 61,200 units from December. For January, the company plans to sell 204,000 units and wants to end with 72,000 units in inventory. Therefore, the company needs to produce 214,800 units in January (204,000 units for sales + 72,000 units for ending inventory - 61,200 units beginning inventory).

Question 9

Doe Manufacturing plans to sell 6,000 purple lawn chairs during May, 5,700 in June, and 6,000 during July. The company keeps 15% of the next month's sales as ending inventory. How many units should Doe produce during June?

Accepted Answer

To calculate the production for June, we need to consider the sales forecast for June and July and the ending inventory policy. For June, the sales forecast is 5700 units, and they plan to keep 15% of July's sales (6000 units) as ending inventory, which is 900 units. The total requirement for June is the sum of June sales and the ending inventory for July, which is 5700 + 900 = 6600 units. However, we must also subtract the ending inventory for June, which is 15% of June's sales (5700 units), amounting to 855 units. Therefore, the production for June should be 6600 - 855 = 5745 units.

Question 10

Comma Manufacturing 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:  Three kilos of raw materials are needed to produce each unit of finished product. If Comma Manufacturing plans to produce 560,000 units during the 2016-2017 fiscal year, how many kilos of materials will the company need to purchase for its production during the year?

Accepted Answer

The answer of Comma Manufacturing budgets on an annual basis...

Question 11

Strand Company is planning to sell 400 buckets and produce 380 buckets during March. Each bucket requires 500 grams of plastic and one-half hour of direct labor. Plastic costs $10 per 500 grams and employees of the company are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Strand has 300 kilos of plastic in beginning inventory and wants to have 200 kilos in ending inventory. How much is the total amount of budgeted direct labor for March?

Accepted Answer

First, we need to calculate the budgeted direct labor cost.

Each bucket requires 0.5 hours of direct labor, so 380 buckets will require 190 hours of direct labor. The cost of this direct labor will be:

190 hours x $15 per hour = $2,850

Therefore, the correct answer is C.

Question 12

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory.
What is the total amount to be budgeted for direct labor for the month?

Accepted Answer

The answer of Teller Co. is planning to sell 900...

Question 13

Off-Line Co. has 9,000 units in beginning finished goods. The sales budget shows expected sales to be 36,000 units. If the production budget shows that 42,000 units are required for production, what was the desired ending finished goods?

Accepted Answer

To calculate desired ending finished goods, we need to use the following formula:
Desired Ending Finished Goods = Expected Sales - Units in Beginning Finished Goods + Units Required for Production

Using the figures from the question, we get:
Desired Ending Finished Goods = 36,000 - 9,000 + 42,000
Desired Ending Finished Goods = 69,000 - 9,000
Desired Ending Finished Goods = 60,000

Therefore, the desired ending finished goods is 60,000 units, which corresponds to choice C (15,000) as the best answer.

Question 14

Comma Co. makes and sells widgets. The company is in the process of preparing its selling and administrative expense budget for the month. The following budget data are available:  Expenses are paid in the month incurred. If the company has budgeted to sell 80,000 widgets in October, how much is the total budgeted selling and administrative expenses for October?

Accepted Answer

The answer of Comma Co. makes and sells widgets. The...

Question 15

Which one of the following is not needed in preparing a production budget?

Accepted Answer

The production budget is a financial plan that outlines the expected number of units that a company aims to produce within a given period. It is an essential part of the master budget and serves as a basis for preparing other budgets, such as the direct materials budget, direct labor budget, and manufacturing overhead budget. The production budget requires information such as the expected sales, beginning finished goods units, desired ending finished goods units, and the production required to meet these requirements. Raw materials are not needed in preparing the production budget because the production required to meet the expected sales is calculated first, and then the materials needed to produce this production quantity are determined in the direct materials budget.

Question 16

Dart, Inc. makes and sells umbrellas. The company is in the process of preparing its Selling and Administrative Expense Budget for the last half of the year. The following budget data are available:  Expenses are paid in the month incurred. If the company has budgeted to sell 8,000 umbrellas in October, how much is the total budgeted variable selling and administrative expenses for October?

Accepted Answer

The answer of Dart, Inc. makes and sells umbrellas. The...

Question 17

A master budget consists of

Accepted Answer

A master budget consists of interrelated financial budgets and operating budgets, integrating various components of a business's budgeting process into a comprehensive financial plan.

Question 18

Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory.
What is the total amount to be budgeted for manufacturing overhead for the month?

Accepted Answer

The answer of Teller Co. is planning to sell 900...

Question 19

The starting point in preparing a master budget is the preparation of the

Accepted Answer

The sales budget is the starting point in preparing a master budget because it drives all other budgetary decisions. The other budgets such as production, purchasing, and personnel budgets are all based on the sales budget.

Question 20

If the required direct materials purchases are 24,000 pounds, the direct materials required for production is three times the direct materials purchases, and the beginning direct materials are three and a half times the direct materials purchases, what are the desired ending direct materials in pounds?

Accepted Answer

Direct materials required for production = 24,000 x 3 = 72,000 pounds
Beginning direct materials = 24,000 x 3.5 = 84,000 pounds

To find the desired ending direct materials, we need to use the formula:

Ending Direct Materials = Beginning Direct Materials + Direct Materials Required for Production - Direct Materials Used in Production

Since we do not have information on the direct materials used in production, we cannot use this formula directly. However, we can use the fact that the direct materials used in production is equal to the beginning direct materials minus the ending direct materials:

Direct Materials Used in Production = Beginning Direct Materials - Ending Direct Materials

Therefore, we can substitute this formula into the first formula to get:

Ending Direct Materials = Beginning Direct Materials + Direct Materials Required for Production - (Beginning Direct Materials - Ending Direct Materials)

Simplifying this formula gives:

2 x Ending Direct Materials = Beginning Direct Materials + Direct Materials Required for Production

Plugging in the given values gives:

2 x Ending Direct Materials = 84,000 + 72,000
2 x Ending Direct Materials = 156,000
Ending Direct Materials = 78,000 pounds

Therefore, the desired ending direct materials in pounds is 78,000, which is closest to choice C (36,000).

Quiz 22: Budgetary Planning