Question 1

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

Accepted Answer

Budgeted raw materials are needed in preparing a direct materials budget, not a production budget. A production budget requires information such as budgeted unit sales, beginning and ending finished goods units, and desired ending inventory levels.

Question 2

Off-Line Co. has 9000 units in beginning finished goods. The sales budget shows expected sales to be 36000 units. If the production budget shows that 42000 units are required for production what was the desired ending finished goods?

Accepted Answer

Desired ending finished goods = Beginning finished goods + Production - Sales
Desired ending finished goods = 9000 + 42000 - 36000
Desired ending finished goods = 15000 units.

Therefore, the best choice is C (15000).

Question 3

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 4

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 influences all other budgets such as production, purchasing, and personnel. It outlines the projected sales revenue for the upcoming period, which helps determine the company's overall financial plan.

Question 5

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 6

At January 1 2016 Deer Corp. has beginning inventory of 2000 surfboards. Deer estimates it will sell 10000 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

1. First Quarter Sales:
Beginning Inventory: 2000 
Sales: 10,000 
Ending Inventory: (25% of next quarter's sales): 3,000 
Total Units Needed: 10,000 + 3,000 - 2,000 = 11,000 
Total Sales Revenue: 10,000 x $150 = $1,500,000

2. Second Quarter Sales:
Beginning Inventory: 3,000 
Sales: 10,000 x 1.12 = 11,200 
Ending Inventory: (25% of next quarter's sales): 2,800 
Total Units Needed: 11,200 + 2,800 - 3,000 = 10,000 
Total Sales Revenue: 11,200 x $150 = $1,680,000

3. Third Quarter Sales:
Beginning Inventory: 2,800 
Sales: 11,200 x 1.12 = 12,544 
Ending Inventory: (25% of next quarter's sales): 3,136 
Total Units Needed: 12,544 + 3,136 - 2,800 = 13,880 
Total Sales Revenue: 12,544 x $150 = $1,881,600

Therefore, the answer is C, $1,881,600.

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

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. So, the ending inventory for April is 15% of 240 units = 36 units. Therefore, Lorie Nursery should produce 320 units (April sales) + 36 units (ending inventory) = 356 units during April.

Question 8

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: $  \quad \quad \quad \quad \quad \quad \quad{ \text { June 30, } 2017 } \quad \text { June 30, 2016 } $
$\text { Raw Materials } \quad 3,000 \text { kilos } \quad  \quad2,000 \text { kilos }$ Three kilos of raw materials are needed to produce each unit of finished product. If Comma Manufacturing plans to produce 560000 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

To calculate the kilos of materials needed, we need to first determine the total amount of raw materials needed for production. We know that 3 kilos of raw materials are needed to produce one unit of finished product, and Comma Manufacturing plans to produce 560000 units during the fiscal year.

Therefore, the total amount of raw materials needed for production is:

560000 x 3 = 1680000 kilos

Therefore, the company will need to purchase 1,680,000 kilos of materials for its production during the year. The answer is choice A.

Question 9

Lion Industries required production for June is 132000 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 300000 and 330000 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 10

If the required direct materials purchases are 24000 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 = 3 x direct materials purchases = 3 x 24000 = 72000 pounds
Beginning direct materials = 3.5 x direct materials purchases = 3.5 x 24000 = 84000 pounds
To determine desired ending direct materials, we need to use the following formula:
Ending direct materials = Beginning direct materials + Direct materials purchases - Direct materials required for production
Substituting the given values, we get: 
Ending direct materials = 84000 + 24000 - 72000 = 36000 pounds. 
Therefore, the answer is C) 36000.

Question 11

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 3900 pounds of clay mix in beginning inventory and wants to have 4500 pounds in ending inventory. What is the total amount to be budgeted for direct labor for the month?

Accepted Answer

Direct labor cost = (870 boxes x 0.25 hours/box) x $12.00/hour = $2610

Question 12

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 13

The following information is taken from the production budget for the first quarter: $$\begin{array} { l r } 
\text { Beginning inventory in units } & 1,200 \
\text { Sales budgeted for the quarter } & 456,000 \
\text { Production capacity in units } & 472,000
\end{array}$$ How many finished goods units should be produced during the quarter if the company desires 3200 units available to start the next quarter?

Accepted Answer

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

Question 14

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

Accepted Answer

Indirect labor is typically considered a part of manufacturing overhead, not selling and administrative expenses.

Question 15

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 3900 pounds of clay mix in beginning inventory and wants to have 4500 pounds in ending inventory. What is the total amount to be budgeted for manufacturing overhead for the month?

Accepted Answer

Total direct labor cost = 870 boxes * 0.25 hours/box * $12.00/hour = $2610Manufacturing overhead = 110% * $2610 = $2871

Question 16

A company budgeted unit sales of 204000 units for January 2017 and 240000 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 61200 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 17

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 3900 pounds of clay mix in beginning inventory and wants to have 4500 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

First, we need to calculate the total pounds of clay mix required for production:
900 boxes x 44 pounds per box = 39,600 pounds

Next, we need to calculate the amount of clay mix needed for ending inventory:
4,500 pounds - 3,900 pounds = 600 pounds

Total pounds of clay mix needed:
39,600 pounds + 600 pounds = 40,200 pounds

The total amount to be budgeted for direct materials is the total pounds of clay mix needed multiplied by the cost per pound:
40,200 pounds x $0.40 = $16,080

However, the question is asking for the amount in pounds, not dollars, so we need to divide the total budgeted amount by the cost per pound:
$16,080 ÷ $0.40 = 40,200 pounds

Therefore, the answer is choice letter C, 38,880.

Question 18

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: $\begin{array}{lcc}
&\text {Variable Cost Per Unit Sold}&\text {Monthly Fixed Cost}\
\text { Sales commissions } & \$ 0.60 & \$ 6,000 \
\text { Shipping } & 1.20 & \
\text { Advertising } & 0.30 & \
\text { Executive salaries } & &40,000  \
\text { Depreciation on office equipment } & & 8,000\
\text { Other }&0.35 & 28,000
\end{array}$  Expenses are paid in the month incurred. If the company has budgeted to sell 8000 umbrellas in October how much is the total budgeted variable selling and administrative expenses for October?

Accepted Answer

The total budgeted variable selling and administrative expenses for October can be calculated by adding the variable costs per unit sold and multiplying by the number of units (umbrellas) sold. The calculation is as follows: $(\$0.60 + \$1.20 + \$0.30 + \$0.35) \times 8000 = \$2.45 \times 8000 = \$19,600.$

Question 19

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: $\begin{array}{lcc}
&\text {Variable Cost Per Unit Sold}&\text {Monthly Fixed Cost}\
\text { Sales commissions } & \$1& \$10,000 \
\text { Shipping } & \$3 & \
\text { Advertising } &\$4& \
\text { Executive salaries } & &\$120,000  \
\text { Depreciation on office equipment } & & \$4,000\
\text { Other }&\$2& \$6,000
\end{array}$  Expenses are paid in the month incurred. If the company has budgeted to sell 80000 widgets in October how much is the total budgeted selling and administrative expenses for October?

Accepted Answer

Total variable cost per unit sold = $1 + $3 + $4 + $2 = $10Total variable cost for 80,000 units = $10 x 80,000 = $800,000Total fixed cost = $10,000 + $120,000 + $4,000 + $6,000 = $140,000Total budgeted selling and administrative expenses = $800,000 + $140,000 = $940,000

Question 20

Doe Manufacturing plans to sell 6000 purple lawn chairs during May 5700 in June and 6000 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.

Quiz 23: Budgetary Planning