Question 1

Bigelow Company budgets payroll at $4,000 per month plus a percentage of monthly sales.The June operating expense budget includes total payroll of $12,000 with budgeted sales of $160,000.Sales for July are budgeted at $180,000 while purchases of inventory for July are budgeted at $95,000.Depreciation and insurance for July are estimated at $1,000 and $600,respectively.Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month.The purchase of $2,500 in equipment and $1,500 in furniture is expected in July.
- If the percentage of monthly sales used in budgeting payroll increases 25%,what would the total payroll budgeted for July be?

Accepted Answer

The percentage of monthly sales used in budgeting payroll increases 25%, so the new percentage is 125% of the original percentage. The original percentage can be calculated as follows:Payroll = $4,000 + (percentage of sales * sales)$12,000 = $4,000 + (percentage of sales * $160,000)percentage of sales = 5%The new percentage is 125% of 5%, which is 6.25%. The total payroll budgeted for July is:Payroll = $4,000 + (6.25% * $180,000)Payroll = $15,250

Question 2

Artwell Company wants to have an ending inventory of 7,000 units.Artwell Company has beginning inventory of 8,000 units and expects to sell 33,000 units.How many units should Artwell Company produce?

Accepted Answer

The answer of  Artwell Company wants to have an...

Question 3

Lacy's Department Store has budgeted cost of goods sold of $42,000 for its men's suits in March.Management also wants to have $7,500 of men's suits in inventory at the end of March to prepare for the summer season.Beginning inventory of men's suits for March is expected to be $5,500.What dollar amount of men's suits should be purchased in March?

Accepted Answer

To find the dollar amount of men's suits to be purchased, use the formula: Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory. So, Purchases = $42,000 + $7,500 - $5,500 = $44,000.

Question 4

Clark Company has beginning inventory of 16,000 units and expected sales of 23,000 units.If the desired ending inventory is 18,000 units,how many units should be produced?

Accepted Answer

To find the number of units to be produced, use the formula: Beginning Inventory + Production - Sales = Ending Inventory. Plugging in the numbers: 16,000 + Production - 23,000 = 18,000. Solving for Production gives 25,000 units.

Question 5

Bigelow Company budgets payroll at $4,000 per month plus a percentage of monthly sales.The June operating expense budget includes total payroll of $12,000 with budgeted sales of $160,000.Sales for July are budgeted at $180,000 while purchases of inventory for July are budgeted at $95,000.Depreciation and insurance for July are estimated at $1,000 and $600,respectively.Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month.The purchase of $2,500 in equipment and $1,500 in furniture is expected in July.
- The total operating expenses budgeted for July are:

Accepted Answer

The payroll for July is $4,000 plus 5% of sales ($180,000), which is $13,000. Office and administrative expenses are 10% of purchases ($95,000), which is $9,500. Adding depreciation ($1,000) and insurance ($600), the total is $24,100.

Question 6

A tire store purchased $3,800 of tires in September.The store had $1,500 of tires on hand at the beginning of September,and expected to have $1,300 of tires at the end of September to cover part of anticipated October sales.What is the budgeted cost of goods sold for September?

Accepted Answer

The budgeted cost of goods sold is the cost of the tires that were sold during the month. This is calculated by adding the beginning inventory to the purchases and then subtracting the ending inventory. In this case, the beginning inventory was $1,500, the purchases were $3,800, and the ending inventory is expected to be $1,300. Therefore, the budgeted cost of goods sold is $1,500 + $3,800 - $1,300 = $4,000.

Question 7

Stuart Corporation recorded sales of $200,000 during March.Management expects sales to increase 5% in April,another 4% in May,and another 10% in June.Cost of goods sold is expected to be 80% of sales.What is the budgeted gross profit for June?

Accepted Answer

1. Calculate the expected sales for April: $200,000 x 1.05 = $210,000
2. Calculate the expected sales for May: $210,000 x 1.04 = $218,400
3. Calculate the expected sales for June: $218,400 x 1.10 = $240,240

4. Calculate the cost of goods sold for June: $240,240 x 0.80 = $192,192

5. Calculate the budgeted gross profit for June: $240,240 - $192,192 = $48,048

Therefore, the correct choice is B.

Question 8

Peabody Enterprises prepared the following sales budget: $$\begin{array} { | l | r | } 
\hline { \text { Month } } & \text { Budgeted Sales } \
\hline \text { March } & \$ 6,000 \
\hline \text { April } & \$ 13,000 \
\hline \text { May } & \$ 12,000 \
\hline \text { June } & \$ 14,000 \
\hline
\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $10,000.Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.
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What is the desired beginning inventory on June 1?

Accepted Answer

To determine the desired beginning inventory on June 1, we need to first calculate the cost of goods sold for May.

May cost of goods sold = May sales x Gross profit rate
May cost of goods sold = $150,000 x 40% = $60,000

Next, we need to determine the desired inventory level for June.

June desired inventory = 20% of June cost of goods sold
June desired inventory = 20% of ($200,000 x 60%)
June desired inventory = $24,000

Now we can determine the desired ending inventory for May.

May desired ending inventory = June desired inventory / 1.2
May desired ending inventory = $24,000 / 1.2
May desired ending inventory = $20,000

Finally, we can use the desired ending inventory for May and the information given about ending inventory for February to calculate the desired beginning inventory for June.

May ending inventory = $10,000
May ending inventory = May beginning inventory + May purchases - May cost of goods sold
$10,000 = May beginning inventory + ($200,000 x 60%) - $60,000
May beginning inventory = $1,680

Therefore, the desired beginning inventory on June 1 is $1,680.

Question 9

Peabody Enterprises prepared the following sales budget: $$\begin{array} { | l | r | } 
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 6,000 \
\hline \text { April } & \$ 13,000 \
\hline \text { May } & \$ 12,000 \
\hline \text { June } & \$ 14,000 \
\hline
\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $10,000.Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.
-
What are the total purchases budgeted for April?

Accepted Answer

The correct answer is A.The budgeted cost of goods sold for April is $13,000 * 60% = $7,800. The desired ending inventory for April is $7,800 * 20% = $1,560. The total purchases budgeted for April is $7,800 + $1,560 - $10,000 = $7,680.

Question 10

Peabody Enterprises prepared the following sales budget: $$\begin{array} { | l | r | } 
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 6,000 \
\hline \text { April } & \$ 13,000 \
\hline \text { May } & \$ 12,000 \
\hline \text { June } & \$ 14,000 \
\hline
\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $10,000.Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.
-
What is the desired ending inventory on May 31?

Accepted Answer

To calculate the desired ending inventory on May 31, we need to first calculate the cost of goods sold for June.

Cost of goods sold for June = June sales * (1 - gross profit rate)
= $100,000 * (1 - 0.4)
= $60,000

Next, we need to calculate the desired ending inventory for June, which is 20% of the cost of goods sold for June:

Desired ending inventory for June = 20% * $60,000
= $12,000

Since the inventory at the end of February was $10,000, we need to adjust this number to the end of May using the cost of goods sold and inventory turnover rate:

Desired ending inventory on May 31 = $10,000 + (Mar-Apr-May inventory turnover) - $12,000
= $10,000 + ($30,000 / 3) - $12,000
= $10,000 + $10,000 - $12,000
= $8,000

Therefore, the best choice is C) $1,680.

Question 11

Bigelow Company budgets payroll at $4,000 per month plus a percentage of monthly sales.The June operating expense budget includes total payroll of $12,000 with budgeted sales of $160,000.Sales for July are budgeted at $180,000 while purchases of inventory for July are budgeted at $95,000.Depreciation and insurance for July are estimated at $1,000 and $600,respectively.Office and administrative expenses related to purchasing inventory are budgeted at 10% of purchases for the month.The purchase of $2,500 in equipment and $1,500 in furniture is expected in July. 
-The July payroll should be budgeted at:

Accepted Answer

To calculate the budgeted payroll for July, we need to first determine how much of the payroll is based on sales:

Percentage of payroll based on sales = Total payroll - Fixed payroll / Total sales
Percentage of payroll based on sales = $12,000 - $4,000 / $160,000
Percentage of payroll based on sales = 5%

Now we need to use this percentage to calculate the payroll for July:

Payroll based on sales = Total sales * Percentage of payroll based on sales
Payroll based on sales = $180,000 * 5%
Payroll based on sales = $9,000

We also need to add in the fixed payroll of $4,000:

Total payroll for July = Payroll based on sales + Fixed payroll
Total payroll for July = $9,000 + $4,000
Total payroll for July = $13,000

Therefore, the budgeted payroll for July should be $13,000, so the best answer is B.

Question 12

Kayla's Toys budgeted sales of $300,000 for the month of November and cost of goods sold equal to 70% of sales.Beginning inventory for November was $50,000 and ending inventory for November is estimated at $55,000.How much are the budgeted purchases for November?

Accepted Answer

Step 1: Calculate the cost of goods sold (COGS)
COGS = 70% x $300,000
COGS = $210,000

Step 2: Calculate the cost of goods available for sale
Beginning inventory + Purchases = Cost of goods available for sale
$50,000 + Purchases = Cost of goods available for sale

Step 3: Calculate the estimated purchases
Cost of goods available for sale - Ending inventory = Estimated purchases
$50,000 + Purchases - $55,000 = Estimated purchases
$-5,000 + Purchases = Estimated purchases
Purchases = $5,000 (since ending inventory is more than beginning inventory, this means that there was less sold and more left in stock. Therefore, purchases are less than COGS)
Estimated purchases = $210,000 - $5,000 = $215,000

Therefore, the budgeted purchases for November are $215,000, which corresponds to choice letter C.

Question 13

MedSupplies Company has budgeted purchases of inventory for December of $140,000.Expected beginning inventory on December 1 and ending inventory on December 31 are $90,000 and $120,000,respectively.If cost of goods sold averages 80% of sales,what are budgeted sales for December?

Accepted Answer

The formula to calculate budgeted sales is:

Budgeted sales = Cost of goods sold / (1 - Gross profit rate)

We know that the budgeted purchases of inventory for December are $140,000 and the expected beginning inventory is $90,000. Therefore, the cost of goods available for sale in December is:

Cost of goods available for sale = Beginning inventory + Purchases
Cost of goods available for sale = $90,000 + $140,000
Cost of goods available for sale = $230,000

The expected ending inventory is $120,000. Therefore, the cost of goods sold is:

Cost of goods sold = Cost of goods available for sale - Ending inventory
Cost of goods sold = $230,000 - $120,000
Cost of goods sold = $110,000

We also know that the cost of goods sold averages 80% of sales. Therefore, the gross profit rate is:

Gross profit rate = 1 - Cost of goods sold / Sales
Gross profit rate = 1 - 0.8
Gross profit rate = 0.2

Now we can use the formula above to calculate the budgeted sales:

Budgeted sales = Cost of goods sold / (1 - Gross profit rate)
Budgeted sales = $110,000 / (1 - 0.2)
Budgeted sales = $110,000 / 0.8
Budgeted sales = $137,500

Therefore, the answer is C) $137,500.

Question 14

Horvath Corporation had beginning inventory of 22,000 units and expects sales of 76,500 units during the year.Desired ending inventory is 19,500 units.How many units should Horvath Corporation produce?

Accepted Answer

Horvath Corporation should produce enough units to cover the expected sales and achieve the desired ending inventory. The formula is: Beginning Inventory + Production - Sales = Ending Inventory. Solving for Production: Production = Sales + Ending Inventory - Beginning Inventory = 76,500 + 19,500 - 22,000 = 74,000 units.

Question 15

Peabody Enterprises prepared the following sales budget: $$\begin{array} { | l | r | } 
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 6,000 \
\hline \text { April } & \$ 13,000 \
\hline \text { May } & \$ 12,000 \
\hline \text { Jure } & \$ 14,000 \
\hline
\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $10,000.Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.
-
What is the budgeted cost of goods sold for May?

Accepted Answer

The budgeted cost of goods sold for May is $7,200. This is calculated as follows:Budgeted sales for May = $12,000Gross profit rate = 40%Cost of goods sold = Budgeted sales / Gross profit rateCost of goods sold = $12,000 / 0.40Cost of goods sold = $30,000Desired ending inventory for May = 20% of June's cost of goods soldJune's budgeted sales = $14,000Gross profit rate = 40%June's cost of goods sold = June's budgeted sales / Gross profit rateJune's cost of goods sold = $14,000 / 0.40June's cost of goods sold = $35,000Desired ending inventory for May = 20% x $35,000 = $7,000Budgeted cost of goods sold for May = Beginning inventory + Purchases - Ending inventoryBeginning inventory = $10,000Purchases = Budgeted cost of goods sold - Desired ending inventoryPurchases = $30,000 - $7,000 = $23,000Budgeted cost of goods sold for May = $10,000 + $23,000 - $7,000Budgeted cost of goods sold for May = $7,200

Question 16

Lawrence Corporation desires a December 31 ending inventory of 900 units.Budgeted sales for December are 2,650 units.The November 30 inventory was 750 units.What are budgeted purchases in units?

Accepted Answer

To calculate the budgeted purchases, we need to use the following formula:

Budgeted Purchases = Desired ending inventory + Budgeted sales - Beginning inventory

Substituting the values, we get:

Budgeted Purchases = 900 + 2,650 - 750 = 2,800 units

Therefore, the correct answer is B) 2,800.

Question 17

Benson Stores wants to have 500 flashlights in ending inventory on December 31.Budgeted sales for December are 1,950 flashlights.The November 30 inventory was 300 flashlights.How many flashlights should Benson Stores purchase for December?

Accepted Answer

Benson Stores wants to have 500 flashlights in ending inventory on December 31.

Budgeted sales for December are 1,950 flashlights.

Therefore, Benson Stores needs a total of 2,450 flashlights (500 ending inventory + 1,950 budgeted sales).

The November 30 inventory was 300 flashlights.

Hence, 2,150 flashlights should be purchased for December (2,450 needed - 300 on hand).

Therefore, the best choice is C) 2,150.

Question 18

Bright Lights Company produces and sells a lantern for $20 each.The beginning inventory is 2,000 lanterns,and the desired ending inventory is 2,200 lanterns.If budgeted production is 12,500 lanterns,what is the forecasted sales revenue from the lanterns?

Accepted Answer

The forecasted sales revenue is calculated by determining the number of lanterns expected to be sold and multiplying by the selling price. The expected sales are beginning inventory + production - ending inventory = 2,000 + 12,500 - 2,200 = 12,300 lanterns. The sales revenue is 12,300 lanterns * $20 = $246,000.

Question 19

At the beginning of the year,Outdoor Living Corporation has 500 umbrellas in inventory.The company plans to sell 5,200 umbrellas during the year and wants to have 1,200 umbrellas in inventory at the end of the year.How many umbrellas must Outdoor Living Corporation produce during the year?

Accepted Answer

To find out how many umbrellas Outdoor Living Corporation must produce during the year, we need to calculate the total number of umbrellas the company will need to have (500 starting inventory + 5,200 planned sales + 1,200 desired ending inventory). 
This gives us a total of 6,900 umbrellas needed. Therefore, the company must produce 6,900 - 500 = 6,400 umbrellas during the year. 
Therefore, the best choice is B (5,900 umbrellas).

Question 20

Peabody Enterprises prepared the following sales budget: $$\begin{array} { | l | r | } 
\hline \text { Month } & \text { Budgeted Sales } \
\hline \text { March } & \$ 6,000 \
\hline \text { April } & \$ 13,000 \
\hline \text { May } & \$ 12,000 \
\hline \text { June } & \$ 14,000 \
\hline
\end{array}$$ The expected gross profit rate is 40% and the inventory at the end of February was $10,000.Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.
-
What are the total purchases budgeted for May?

Accepted Answer

The answer of  Peabody Enterprises prepared the following sales...

Quiz 9: The Master Budget and Responsibility Accounting