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

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 net income for December would be:

Harris Inc. ,has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month should be equal to 20% of the next month's sales in units.The inventory on May 31 contained 1,880 units.The company needs to prepare a production budget for the next five months. The beginning inventory for September should be:

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. The March 31 balance in accounts receivable will be:

The TS Corporation has budgeted sales for the year as follows: The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units.The finished goods inventory at the start of the year is 2,500 units.Four pounds of raw materials are required for each unit produced.Raw materials on hand at the start of the year total 4,200 pounds.The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in material. Scheduled production for the third quarter should be:

Axsom Inc.bases its manufacturing overhead budget on budgeted direct labor-hours.The direct labor budget indicates that 1,300 direct labor-hours will be required in March.The variable overhead rate is $8.90 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $20,020 per month,which includes depreciation of $2,600.All other fixed manufacturing overhead costs represent current cash flows.The company recomputes its predetermined overhead rate every month.The predetermined overhead rate for March should be:

The direct labor budget is based on:

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:

Freet Inc.is preparing its cash budget for November.The budgeted beginning cash balance is $11,000.Budgeted cash receipts total $126,000 and budgeted cash disbursements total $130,000.The desired ending cash balance is $20,000.The company can borrow up to $170,000 at any time from a local bank,with interest not due until the following month. Required: Prepare the company's cash budget for November in good form.Make sure to indicate what borrowing,if any,would be needed to attain the desired ending cash balance.

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:

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:

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. Based on these data,the balance in accounts receivable on January 31 will be:

Davey Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year.The budgeted variable manufacturing overhead rate is $3.00 per direct labor-hour;the budgeted fixed manufacturing overhead is $66,000 per month,of which $10,000 is factory depreciation. If the budgeted direct labor time for December is 4,000 hours,then the predetermined manufacturing overhead per direct labor-hour for December would 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 April cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

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.

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

Harris Inc. ,has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month should be equal to 20% of the next month's sales in units.The inventory on May 31 contained 1,880 units.The company needs to prepare a production budget for the next five months. The total number of units produced in July should be:

Sarter Corporation is in the process of preparing its annual budget.The following beginning and ending inventory levels are planned for the year. Each unit of finished goods requires 3 grams of raw material.The company plans to sell 880,000 units during the year. How much of the raw material should the company purchase during the year?

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 budgeted direct labor cost per unit of Product WZ would be:

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.

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: