Question 1

Tough Jeans Company produces two different styles of jeans: Working Life and Social Life. The company sales budget estimates that 400,000 of the Working Life jeans and 250,000 of the Social Life jeans will be sold during the year. The company begins with 9,000 pairs of Working Life and 18,000 pairs of Social Life. The company desires ending inventory of 7,500 of Working Life and 10,000 Social Life. Prepare a production budget for the year.

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Question 2

Flanders Industries collects 35% of its sales on account in the month of the sale and 65% in the month following the sale. Sales on account are budgeted to be $175,000 for May and $225,000 for June. What are the budgeted cash receipts from sales on account for June?

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Question 3

Purple Co.'s production budget for Product X for the year ending December 31 is as follows:  In Purple's production operations, Materials A, B, and C are required to make Product X. The quantities of direct materials expected to be used for each unit of product are as follows:  Prepare a direct materials purchases budget for Product X, assuming that there are no beginning or ending inventories for direct materials (all units purchased are used in production).

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Question 4

Big Wheel, Inc., collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. Sales on account are budgeted to be $225,000 for March and $250,000 for April. What are the budgeted cash receipts from sales on account for April?

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Question 5

Star Co. was organized on August 1 of the current year. Projected sales for the next three months are as follows:  The company expects to sell 50% of its merchandise for cash. Of the sales on account, 30% are expected to be collected in the month of the sale and the remainder in the following month.Prepare a schedule indicating cash collections for August, September, and October.

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Question 6

Ruff Jeans Company produces two different types of jeans: Simple Life and Fancy Life. The company sales budget estimates that 350,000 of the Simple Life jeans and 200,000 of the Fancy Life jeans will be sold during the current year. The production budget requires 353,500 units of Simple Life and 196,000 units of Fancy Life to be manufactured. The Simple Life jeans require 3 yards of denim material, a zipper, and 25 yards of thread. The Fancy Life jeans require 4.5 yards of denim material, a zipper, and 40 yards of thread. Each yard of denim material costs $3.25, the zippers cost $0.75 each, and the thread is $0.02 per yard. There is enough material to make 2,000 jeans of each type at the beginning of the year. The desired ending inventory is to have enough materials to manufacture 3,500 jeans of each type. Prepare a direct materials purchases budget.

Accepted Answer

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Question 7

Future Technologies projected sales of 35,000 computers for this year. The estimated January 1 inventory is 3,000 units, and the desired December 31 inventory is 9,000 units. What is the budgeted production (in units) for the year?

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Question 8

Diamond Company manufactures two models of cassette recorders: VCH and MTV. Based on the following production data for April, prepare a production budget.

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Question 9

What is a cash budget? How does management use a cash budget?

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Question 10

Big Wheel, Inc., collects 25% of its sales on account in the month of the sale and 75% in the month following the sale. Sales on account are budgeted to be $150,000 for March and receipts from sales on account total $162,500 in April. What are the budgeted sales on account for April?

Accepted Answer

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Question 11

The treasurer of Calico Dreams Company has accumulated the following budget information for the first two months of the coming fiscal year:  The company expects to sell about 35% of its merchandise for cash. Of sales on account, 80% are collected in full in the month of the sale, and the remainder in the month following the sale. One-fourth of the manufacturing costs are paid in the month in which they are incurred, and the other three-fourths in the following month. Depreciation, insurance, and property taxes represent $6,400 of the monthly selling and administrative expenses. Insurance is paid in February, and property taxes are paid yearly in September. A $40,000 installment on income taxes is to be paid in April. Of the remainder of the selling and administrative expenses, one-half are to be paid in the month in which they are incurred and the balance in the following month. Capital additions of $250,000 are paid in March.Current assets as of March 1 are composed of cash of $45,000 and accounts receivable of $51,000. Current liabilities as of March 1 are accounts payable of $121,500 ($102,000 for materials purchases and $19,500 for operating expenses). Management desires to maintain a minimum cash balance of $25,000.Prepare a monthly cash budget for March and April.

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Question 12

Kid's World Industries has projected sales of 67,000 machines for the current year. The estimated January 1 inventory is 6,000 units, and the desired December 31 inventory is 15,000 units. What is the budgeted production (in units) for the year?

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Question 13

What is a capital expenditures budget?

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Question 14

Good Eats Inc. manufactures flatware sets. The budgeted production is for 80,000 sets this year. Each set requires 2.5 hours to polish the material. If polishing labor costs $15 per hour, determine the direct labor cost budget for polishing for the year.

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Question 15

Based on the following production and sales data of Frixion Co. for March of the current year, prepare (a) a sales budget and (b) a production budget.

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Question 16

Prepare a monthly flexible selling expense budget for Cottonwood Company for sales volumes of $300,000, $350,000, and $400,000, based on the following data:
Sales commissions
6% of sales
Sales manager's salary
$120,000 per month
Advertising expense
$90,000 per month
Shipping expense
1% of sales
Miscellaneous selling expense
$6,000 per month plus 1.5% of sales

Accepted Answer

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Question 17

Sleep Tight, Inc., manufactures comforters. The estimated inventories on January 1 for finished goods, work in process, and materials were $39,000, $33,000, and $27,000, respectively. The desired inventories on December 31 for finished goods, work in process, and materials were $42,000, $35,000, and $21,000, respectively. Direct materials purchases were $575,000, direct labor was $212,000 for the year, and factory overhead was $156,000. Prepare a cost of goods sold budget for Sleep Tight, Inc.

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Quiz 22: Budgeting