Question 1

Kent Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales for May.

Accepted Answer

Step 1: Calculate total credit sales for May:
Total sales for May = $900,000
Cash sales = 25% x $900,000 = $225,000
Credit sales = $900,000 - $225,000 = $675,000

Step 2: Calculate the amount of credit sales expected to be collected in May:
30% of credit sales = 30% x $675,000 = $202,500

Step 3: Calculate the amount of credit sales expected to be collected during the first month after the sale:
65% of credit sales = 65% x $675,000 = $438,750

Step 4: Calculate the total cash received from credit sales in May:
Cash received from credit sales = $202,500 + $438,750 = $641,250

Therefore, the answer is D) $592,500.

Question 2

Kent Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from credit sales for June.

Accepted Answer

The answer of Kent Company anticipates total sales for April,...

Question 3

Grafton budgets production of 300 units in June and 310 units in July. Each finished unit requires 4 pounds of raw material K, which costs $5 per pound. Each month's ending inventory of raw materials should be 30% of the following month's budgeted production. The June 1 raw materials inventory has 360 pounds of raw material K. Compute budgeted purchases for raw material K for June.

Accepted Answer

For June, the production needs are 300 units * 4 pounds/unit = 1,200 pounds. The desired ending inventory for June is 30% of July's production needs, which is 310 units * 4 pounds/unit * 30% = 372 pounds. The beginning inventory for June is 360 pounds. The total needed for June is the sum of June's production needs and the desired ending inventory for June, minus the beginning inventory, which is 1,200 + 372 - 360 = 1,212 pounds.

Question 4

Kent Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from total sales for May.

Accepted Answer

The answer of Kent Company anticipates total sales for April,...

Question 5

Kent Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are collected in the second month. Compute the amount of accounts receivable reported on the company's budgeted balance sheet for June 30.

Accepted Answer

The first step is to calculate the expected credit sales for each month:

April credit sales = $600,000 (75% of $800,000) 
May credit sales = $675,000 (75% of $900,000) 
June credit sales = $712,500 (75% of $950,000)

Then, we need to calculate the collections for each month:

April collections = $150,000 (30% of April sales) 
May collections = $318,750 (30% of April sales + 65% of May sales) 
June collections = $668,625 (30% of April sales + 65% of May sales + 5% of June sales)

Finally, we can calculate the accounts receivable balance for June 30:

June 30 accounts receivable = June credit sales - May and June collections = $712,500 - $318,750 - $668,625 = $496,875

Therefore, the answer is D.

Question 6

A plan that states the number of units to be manufactured during each future period covered by the budget, based on the budgeted sales for the period and the levels of inventory needed to support future sales, is the:

Accepted Answer

The plan described in the question is the production budget, which outlines the number of units to be manufactured based on sales forecasts and inventory needs. The sales budget (A) outlines the expected sales revenue for the period, the merchandise purchases budget (B) outlines the amount of inventory to be purchased to meet sales demand, the cash budget (D) outlines expected cash inflows and outflows for the period, and the manufacturing budget (E) is a more detailed version of the production budget specific to manufacturing operations.

Question 7

Describe at least five benefits of budgeting.

Accepted Answer

The answer of Describe at least five benefits of budgeting....

Question 8

Grafton sells a product for $700. Unit sales for May were 400 and a 3% growth in unit sales is forecasted for each month. Compute the total sales to be reported on the sales budget for month ended June 30.

Accepted Answer

Unit sales of Grafton's product for June can be calculated by multiplying the May unit sales by the growth rate (1 + 3%) = 1.03. 
400 units x 1.03 = 412 units 
Total sales for June can be calculated by multiplying the unit sales by the selling price: 
412 units x $700 = $288,400. Therefore, the answer is D.

Question 9

Grafton sells a product for $700. Unit sales for May were 400 and a 3% growth in unit sales is forecasted for each month. Grafton pays a sales manager a monthly salary of $3,000 and a commission of 2% of sales in dollars. Assume 30% of Grafton's sales are for cash. The remaining 70% are credit sales; these customers pay in the month following the sale. Compute the budgeted cash receipts for June.

Accepted Answer

The answer of Grafton sells a product for $700. Unit...

Question 10

Grafton is preparing a cash budget for June. The company has $25,000 cash at the beginning of June and anticipates $95,000 in cash receipts and $111,290 in cash disbursements during June. Compute the amount the company must borrow, if any, to maintain a $20,000 cash balance. The company has no loans outstanding on June 1.

Accepted Answer

The answer of Grafton is preparing a cash budget for...

Question 11

List the three important guidelines that should be followed in the budgeting process.

Accepted Answer

The answer of List the three important guidelines that should...

Question 12

Keegan Company manufactures a single product and has a JIT policy that ending inventory must equal 10% of the next month's sales. It estimates that May's ending inventory will consist of 20,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively. Compute the number of units to be produced that would appear on the company's production budget for the month of June.

Accepted Answer

First, we need to calculate the required ending inventory for June.

10% of June sales = 10% of 280,000 = 28,000

So, the required ending inventory for June is 28,000 units.

Next, we need to calculate the number of units that need to be produced in June to meet this requirement.

May ending inventory = 20,000 units 
Add: June sales = 280,000 units 
Total needed = 300,000 units 
Less: Required June ending inventory = 28,000 units 
Total to be produced in June = 272,000 units

Therefore, the number of units to be produced that would appear on the company's production budget for the month of June is 272,000.

Question 13

What are rolling budgets? Why are rolling budgets prepared?

Accepted Answer

The answer of What are rolling budgets? Why are rolling...

Question 14

Kent Company anticipates total sales for April, May, and June of $800,000, $900,000, and $950,000 respectively. Cash sales are normally 25% of total sales. Of the credit sales, 30% are collected in the same month as the sale, 65% are collected during the first month after the sale, and the remaining 5% are not collected. Compute the amount of cash received from total sales for June.

Accepted Answer

The answer of Kent Company anticipates total sales for April,...

Question 15

Briefly describe the process by which budgets are developed and administered.

Accepted Answer

The answer of Briefly describe the process by which budgets...

Question 16

Kent Company's May sales budget calls for sales of $900,000. The store expects to begin May with $50,000 of inventory and to end the month with $55,000 of inventory. Gross margin is typically 45% of sales. Compute the budgeted cost of merchandise purchases for May.

Accepted Answer

The answer of Kent Company's May sales budget calls for...

Question 17

Use the following information to determine the ending cash balance to be reported on the month ended June 30 cash budget. 
A.Beginning cash balance on June 1, $94,000.
B. Cash receipts from sales, $413,000.
C.Budgeted cash disbursements for purchases, $268,000.
D. Budgeted cash disbursements for salaries, $95,000.
E. Other budgeted expenses, $57,000.
F. Cash repayment of bank loan, $32,000.
G. Budgeted depreciation expense, $34,000.

Accepted Answer

The answer of Use the following information to determine the...

Question 18

Grafton budgets production of 300 units in June and 310 units in July. Each unit requires 1.5 hours of direct labor. The direct labor rate if $14 per hour. The indirect labor rate is $21.00 per hour. Compute the budgeted direct labor cost for July.

Accepted Answer

For July, the budgeted direct labor cost is calculated as follows: 310 units * 1.5 hours/unit * $14/hour = $6,510.

Question 19

Keegan Company manufactures a single product and has a JIT policy that ending inventory must equal 10% of the next month's sales. It estimates that May's ending inventory will consist of 20,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively. Keegan assigns variable overhead at a rate of $1.80 per unit of production. Fixed overhead equals $400,000 per month. Compute the number of units to be produced and use to compute the total budgeted overhead that would appear on the factory overhead budget for month ended June 30.

Accepted Answer

To calculate the number of units to be produced in June, we first determine June's ending inventory requirement, which is 10% of July's sales (290,000 units). Thus, June's ending inventory should be 29,000 units. Given that May's ending inventory (which becomes June's beginning inventory) is 20,000 units and June's sales are estimated at 280,000 units, we can calculate June's production needs as follows:Required for sales in June: 280,000 units+ Required ending inventory for June: 29,000 units- Beginning inventory for June (May's ending inventory): 20,000 units= Total production needed for June: 289,000 unitsThe variable overhead is assigned at $1.80 per unit of production, so the total variable overhead for June is:289,000 units * $1.80/unit = $520,200Adding the fixed overhead of $400,000:$520,200 (variable) + $400,000 (fixed) = $920,200Therefore, the total budgeted overhead for June is $920,200.

Question 20

Grafton sells a product for $700. Unit sales for May were 400 and a 3% growth in unit sales is forecasted for each month. Grafton pays a sales manager a monthly salary of $3,000 and a commission of 2% of sales in dollars. Compute the projected selling expense to be reported on the selling expense budget for the manager for month ended June 30.

Accepted Answer

The answer of Grafton sells a product for $700. Unit...

Quiz 23: Master Budgets and Planning

A plan that states the number of units to be manufactured during each future period covered by the budget, based on the budgeted sales for the period and the levels of inventory needed to support future sales, is the:

Describe at least five benefits of budgeting.

Grafton sells a product for $700. Unit sales for May were 400 and a 3% growth in unit sales is forecasted for each month. Compute the total sales to be reported on the sales budget for month ended June 30.

List the three important guidelines that should be followed in the budgeting process.

What are rolling budgets? Why are rolling budgets prepared?

Briefly describe the process by which budgets are developed and administered.

Kent Company's May sales budget calls for sales of $900,000. The store expects to begin May with $50,000 of inventory and to end the month with $55,000 of inventory. Gross margin is typically 45% of sales. Compute the budgeted cost of merchandise purchases for May.

Grafton budgets production of 300 units in June and 310 units in July. Each unit requires 1.5 hours of direct labor. The direct labor rate if $14 per hour. The indirect labor rate is $21.00 per hour. Compute the budgeted direct labor cost for July.