Exam 8: Flexible Budgets, Standard Costs, and Variance Analysis

The manufacturing overhead budget lists all costs of production other than selling and administrative expenses.

A benefit of self-imposed budgeting is that it may allow lower-level managers to create budgetary slack.

Two yards of a fabric are required for each blouse produced by Northern Shirt Corporation. The cost of the fabric is $4 per yard. Budgeted production of blouses is given below for the fourth quarter and the first month of the following quarter. To prevent against stock outs of the fabric, the company maintains an ending inventory each month equal to 10% of the next month's production needs. The beginning inventory of the fabric in October will be 3,600 yards. Required: Prepare a direct materials budget for the fabric, by month and in total for the fourth quarter. Be sure to include both the quantity to be purchased and its cost for each month.

LFM Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 3.5 hours of direct labor at the rate of $16.00 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June. The company plans to sell 31,000 units of Product WZ in June. The finished goods inventories on June 1 and June 30 are budgeted to be 100 and 600 units, respectively. Budgeted direct labor costs for June would be:

The following are budgeted data for the Bingham Corporation, a merchandising company: Assuming that the Bingham Corporation had inventory on hand of $70,000 (at cost) on January 1, the purchases for January (at cost) would be:

Rogers Corporation is preparing its cash budget for July. The budgeted beginning cash balance is $25,000. Budgeted cash receipts total $141,000 and budgeted cash disbursements total $139,000. The desired ending cash balance is $30,000. The excess (deficiency) of cash available over disbursements for July is:

Adi Manufacturing Corporation is estimating the following raw material purchases for the final four months of the year: At Adi, 30% of raw materials purchases are normally paid for in the month of purchase. The remaining 70% is paid for in the month following the purchase. How much cash should Adi expect to pay out for raw material purchases during November?

Carter Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the store's operations follow: o Sales are budgeted at $380,000 for November, $390,000 for December, and $400,000 for January. O Collections are expected to be 70% in the month of sale, 27% in the month following the sale, and 3% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory equal to 80% of the following month's cost of goods sold. Payment for merchandise is made in the month following the purchase. O Other monthly expenses to be paid in cash are $22,000. O Monthly depreciation is $20,000. O Ignore taxes. The accounts receivable balance, net of uncollectible accounts, at the end of December would be:

Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow: o Sales are budgeted at $360,000 for November, $380,000 for December, and $350,000 for January. o Collections are expected to be 75% in the month of sale, 20% in the month following the sale, and 5% uncollectible. o The cost of goods sold is 65% of sales. o The company desires an ending merchandise inventory equal to 60% of the cost of goods sold in the following month. o Payment for merchandise is made in the month following the purchase. o Other monthly expenses to be paid in cash are $21,900. o Monthly depreciation is $20,000. o Ignore taxes. Required: a. Prepare a Schedule of Expected Cash Collections for November and December. b. Prepare a Merchandise Purchases Budget for November and December. c. Prepare Cash Budgets for November and December. d. Prepare Budgeted Income Statements for November and December. e. Prepare a Budgeted Balance Sheet for the end of December.

Which of the following is NOT an objective of the budgeting process?

The direct labor budget of Faier Corporation for the upcoming year contains the following details concerning budgeted direct labor-hours. The company's variable manufacturing overhead rate is $3.50 per direct labor-hour, and the company's fixed manufacturing overhead is $65,000 per quarter. The only noncash item included in the fixed manufacturing overhead is depreciation which is $22,000 per quarter. Required: Prepare Faier Corporation's manufacturing overhead budget for the upcoming fiscal year. Show both manufacturing overhead expense and cash disbursements for manufacturing overhead.

The budget method that maintains a constant twelve-month planning horizon by adding a new month on the end as the current month is completed is called:

G Products Inc., manufactures garlic gravy. G's production budget indicated the following units (jars) of gravy to be produced for the upcoming months indicated: Five grams of garlic are needed for every jar of gravy. G also likes to have enough garlic on hand at the end of the month to cover 10% of the next month's production requirements for garlic. How many grams of garlic should G plan on purchasing during the month of May?

The Adams Corporation, a merchandising firm, has budgeted its activity for November according to the following information: • Sales at $450,000, all for cash. • Merchandise inventory on October 31 was $200,000. • The cash balance November 1 was $18,000. • Selling and administrative expenses are budgeted at $60,000 for November and are paid for in cash. • Budgeted depreciation for November is $25,000. • The planned merchandise inventory on November 30 is $230,000. • The cost of goods sold is 70% of the selling price. • All purchases are paid for in cash. • There is no interest expense or income tax expense. The budgeted cash receipts for November are:

Home Corporation will open a new store on January 1. Based on experience from its other retail outlets, Home Corporation is making the following sales projections: Home Corporation estimates that 70% of the credit sales will be collected in the month following the month of sale, with the balance collected in the second month following the month of sale. In a cash budget for April, the total cash receipts will be:

Roberts Corporation manufactures home cleaning products. One of the products, Quickclean, requires 2 pounds of Material A and 5 pounds of Material B per unit manufactured. Material A is purchased from the supplier for $0.30 per pound and Material B is purchased for $0.50 per pound. The finished goods inventory on hand at the end of each month should equal 4,000 units plus 25% of the next month's sales. The raw materials inventory on hand at the end of each month (for either Material A or Material B) should equal 80% of the following month's production needs. The production budget calls for 26,000 units of Quickclean to be manufactured in June and 32,000 units of Quickclean to be manufactured in July. On May 31 there will be 41,600 pounds of Material A and 104,000 pounds of Material B in inventory. The number of pounds of Material B to be purchased during June would be:

When preparing a production budget, the required production equals:

A sales budget is given below for one of the products manufactured by the OMI Co.: The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units. Each unit of product requires three pounds of specialized material. Since the production of this specialized material by OMI's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year. Required: a. Prepare a budget showing the required production each month for January, February, March, and April. b. Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March.

Poriss Corporation makes and sells a single product called a Yute. The company is in the process of preparing its Selling and Administrative Expense Budget for the last quarter of the year. The following budget data are available: All of these expenses (except depreciation) are paid in cash in the month they are incurred. If the total budgeted selling and administrative expense for October is $459,200, then how many Yutes does the company plan to sell in October?

Which of the following represents the normal sequence in which the below budgets are prepared?