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

Rehmer Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.61 direct labor-hours. The direct labor rate is $8.90 per direct labor-hour. The production budget calls for producing 2,600 units in June and 2,100 units in July. Required: Construct the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month.

Cashan Corporation makes and sells a product called a Miniwarp. One Miniwarp requires 1.5 kilograms of the raw material Jurislon. Budgeted production of Miniwarps for the next five months is as follows: The company wants to maintain monthly ending inventories of Jurislon equal to 30% of the following month's production needs. On July 31, this requirement was not met since only 10,400 kilograms of Jurislon were on hand. The cost of Jurislon is $4.00 per kilogram. The company wants to prepare a Direct Materials Purchase Budget for the next five months. The total cost of Jurislon to be purchased in August is:

Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: o Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January. O Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next 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 $20,300. O Monthly depreciation is $20,000. O Ignore taxes. December cash disbursements for merchandise purchases would be:

The Covey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $4.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $64,000 per month, of which $18,000 is factory depreciation. If the budgeted direct labor time for December is 4,000 hours, then the average budgeted manufacturing overhead per direct labor-hour is:

A continuous or perpetual budget is a budget that almost never needs to be revised.

Marst Corporation's budgeted production in units and budgeted raw materials purchases over the next three months are given below: Two pounds of raw materials are required to produce one unit of product. The company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs. The company is expected to have 30,000 pounds of raw materials on hand on January 1. Budgeted production for February should be:

The manufacturing overhead budget is typically prepared before the production budget.

When preparing a direct materials budget, the units of raw material needed to meet production should be added to desired ending inventory and the beginning inventory for raw materials should be subtracted to determine the amount of raw materials to be purchased.

The production department of Tadris Corporation has submitted the following forecast of units to be produced by quarter for the upcoming fiscal year. Each unit requires 0.25 direct labor-hours at $18.00 per hour. Required: Prepare a direct labor budget for the upcoming fiscal year, assuming that the direct labor work force is adjusted each quarter to match the number of hours required to produce the budgeted production.

Frodic Corporation has budgeted sales and production over the next quarter as follows: The company has 4,000 units of product on hand at July 1. 10% of the next month's sales in units should be on hand at the end of each month. October sales are expected to be 71,500 units. Budgeted sales for September would be (in units):

The Covey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable manufacturing overhead rate is $4.00 per direct labor-hour; the budgeted fixed manufacturing overhead is $64,000 per month, of which $18,000 is factory depreciation. If the budgeted cash disbursements for manufacturing overhead for November are $90,000, then the budgeted direct labor-hours for November must be:

Cartier Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $5.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $39,930 per month, which includes depreciation of $12,870. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 3,300 direct labor-hours will be required in April. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for April should be:

Arakaki Inc. is working on its cash budget for January. The budgeted beginning cash balance is $41,000. Budgeted cash receipts total $114,000 and budgeted cash disbursements total $113,000. The desired ending cash balance is $60,000. The excess (deficiency) of cash available over disbursements for January will be:

The Prattle Corporation makes and sells only one product called a Deb. The company is in the process of preparing its Selling and Administrative Expense Budget for next 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 company has budgeted to sell 17,000 Debs in January, then the total budgeted variable selling and administrative expenses for January will be:

Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: o Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January. O Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next 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 $20,300. O Monthly depreciation is $20,000. O Ignore taxes. Accounts payable at the end of December would be:

Dilbert Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow: o Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January. O Collections are expected to be 80% in the month of sale, 19% in the month following the sale, and 1% uncollectible. O The cost of goods sold is 65% of sales. O The company desires to have an ending merchandise inventory at the end of each month equal to 60% of the next 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 $20,300. O Monthly depreciation is $20,000. O Ignore taxes. The net income for December would be:

Cowles Corporation Inc., makes and sells a single product, Product R. Three yards of Material K are needed to make one unit of Product R. Budgeted production of Product R for the next five months is as follows: The company wants to maintain monthly ending inventories of Material K equal to 30% of the following month's production needs. On July 31, this requirement was not met because only 3,500 yards of Material K were on hand. The cost of Material K is $0.80 per yard. The company wants to prepare a Direct Materials Purchase Budget for the rest of the year. The total needs (i.e., production requirements plus desired ending inventory) of Material K for November are:

The Prattle Corporation makes and sells only one product called a Deb. The company is in the process of preparing its Selling and Administrative Expense Budget for next 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 budgeted cash disbursements for selling and administrative expenses for April total $144,390, then how many Debs does the company plan to sell in April?

The number of units to be produced in a period can be determined by adding the expected sales to the beginning inventory and then deducting the desired ending inventory.

The cash budget is typically prepared before the direct materials budget.