Exam 8: Activity-Based Costing: a Tool to Aid Decision Making

Edgington Inc.bases its manufacturing overhead budget on budgeted direct labor-hours.The variable overhead rate is $4.90 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $39,590 per month,which includes depreciation of $5,920.All other fixed manufacturing overhead costs represent current cash flows.The November direct labor budget indicates that 3,700 direct labor-hours will be required in that month. Required: a.Determine the cash disbursements for manufacturing overhead for November. b.Determine the predetermined overhead rate for November.

The Fraley Corporation,a merchandising firm,has planned the following sales for the next four months: Sales are made 40% for cash and 60% on account.From experience,the company has learned that a month's sales on account are collected according to the following pattern: The company requires a minimum cash balance of $4,000 to start a month. Required: a.Compute the budgeted cash receipts for June. b.Assume the following budgeted data for June: Using this data,along with your answer to part (a)above,prepare a cash budget for June.Clearly show any borrowing needed during the month.The company can borrow in any dollar amount,but will not pay any interest until the following month.

Bredder Supply Corporation manufactures and sells cotton gauze.Expected sales of gauze (in boxes)for upcoming months are as follows: Management likes to maintain a finished goods inventory equal to 20% of the next month's estimated sales. Required: Prepare the company's production budget for the third quarter of this year (the months of July,August and September).Include a column for each month and a total column for the entire quarter.

The budgeted selling and administrative expense is calculated by multiplying the budgeted unit sales by the selling and administrative expense per unit.

Rhett Corporation manufactures and sells dress shirts.Each shirt (unit)requires 3 yards of cloth.Selected data from Rhett's master budget for next quarter are shown below: How many yards of cloth should Rhett plan on purchasing in May?

Budgeted sales in Acer Corporation over the next four months are given below: Twenty-five percent of the company's sales are for cash and 75% are on account.Collections for sales on account follow a stable pattern as follows: 50% of a month's credit sales are collected in the month of sale,30% are collected in the month following sale,and 15% are collected in the second month following sale.The remainder are uncollectible.Given these data,cash collections for December should be:

Bracken Corporation is a small wholesaler of gourmet food products.Data regarding the store's operations follow: o Sales are budgeted at $330,000 for November,$340,000 for December,and $340,000 for January. O Collections are expected to be 80% in the month of sale,17% in the month following the sale,and 3% uncollectible. O The cost of goods sold is 75% of sales. O The company would like to maintain ending merchandise inventories equal to 70% 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 $21,800. O Monthly depreciation is $19,000. O Ignore taxes. December cash disbursements for merchandise purchases would be:

All of Porter Corporation's sales are on account.Sixty percent of the credit sales are collected in the month of sale,25% in the month following sale,and 10% in the second month following sale.The remainder are uncollectible.The following are budgeted sales data for the company: Cash receipts in April are expected to be:

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 company has budgeted to sell 16,000 Yutes in December,then the budgeted total cash disbursements for selling and administrative expenses for 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 difference between cash receipts and cash disbursements for December would be:

May Corporation,a merchandising firm,has budgeted sales as follows for the third quarter of the year: Cost of goods sold is equal to 65% of sales.The company wants to maintain a monthly ending inventory equal to 130% of the Cost of Goods Sold for the following month.The inventory on June 30 is less than this ideal since it is only $65,000.The company is now preparing a Merchandise Purchases Budget. The budgeted purchases for July are:

Paradise Corporation budgets on an annual basis for its fiscal year.The following beginning and ending inventory levels (in units)are planned for next year. *Three pounds of raw material are needed to produce each unit of finished product. If Paradise Corporation plans to sell 480,000 units during next year,the number of units it would have to manufacture during the year would be:

Sioux Corporation is estimating the following sales for the first four months of next year: Sales are normally collected 60% in the month of sale,35% in the month following the sale,and the remaining 5% being uncollectible.Based on this information,how much cash should Sioux expect to collect during the month of April?

Harrti Corporation has budgeted for the following sales: Sales are collected as follows: 10% in the month of sale;60% in the month following the sale;and the remaining 30% in the second month following the sale.In Razz's budgeted balance sheet at December 31,at what amount will accounts receivable be shown?

The first budget a company prepares in a master budget is the production budget.

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.

All the following are considered to be benefits of participative budgeting,except for:

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):

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.

The Gerald Corporation makes and sells a single product called a Clop.Each Clop requires 1.1 direct labor-hours at $8.20 per direct labor-hour.The direct labor workforce is fully adjusted each month to the required workload.The company is preparing a Direct Labor Budget for the first quarter of the year. If the budgeted direct labor cost for February is $162,360,then the budgeted production of Clops for February is: