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

Parliman Corporation is preparing its cash budget for August.The budgeted beginning cash balance is $12,000.Budgeted cash receipts total $159,000 and budgeted cash disbursements total $162,000.The desired ending cash balance is $20,000.The company can borrow up to $160,000 at any time from a local bank,with interest not due until the following month. Required: Prepare the company's cash budget for August in good form.

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 November is 9,000 hours,then the total budgeted cash disbursements for manufacturing overhead for November must be:

In a merchandising company,the required merchandise purchases for a period are determined by subtracting the desired ending inventory from the sum of the units to be sold during the period and the units in beginning inventory.

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 desired beginning inventory for September is:

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

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

The selling and administrative expense budget of Ruffing Corporation is based on budgeted unit sales,which are 4,800 units for February.The variable selling and administrative expense is $8.10 per unit.The budgeted fixed selling and administrative expense is $71,520 per month,which includes depreciation of $16,800 per month.The remainder of the fixed selling and administrative expense represents current cash flows.The cash disbursements for selling and administrative expenses on the February selling and administrative expense budget should be:

Only variable manufacturing overhead costs are included in the manufacturing overhead budget.

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 A needed for production during June 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 cash balance at the end of December would be:

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?

Morrish Inc.bases its manufacturing overhead budget on budgeted direct labor-hours.The direct labor budget indicates that 7,100 direct labor-hours will be required in January.The variable overhead rate is $1.80 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $102,950 per month,which includes depreciation of $19,880.All other fixed manufacturing overhead costs represent current cash flows.The January cash disbursements for manufacturing overhead on the manufacturing overhead budget 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. The cost of December merchandise purchases would be:

In business,a budget is a method for putting a limit on spending.

The following are budgeted data: One pound of material is required for each finished unit.The inventory of materials at the end of each month should equal 20% of the following month's production needs.Purchases of raw materials for February would be budgeted to be:

In companies that do not have "no lay-off" policies,the total direct labor cost for a budget period is computed by multiplying the total direct labor hours needed to make the budgeted output of completed units by the direct labor wage rate.

Caprice Corporation is a wholesaler of industrial goods.Data regarding the store's operations follow: o Sales are budgeted at $350,000 for November,$320,000 for December,and $300,000 for January. o Collections are expected to be 80% in the month of sale,16% in the month following the sale,and 4% uncollectible. o The cost of goods sold is 70% of sales. o The company desires an ending merchandise inventory equal to 60% of the cost of goods sold in the following month.Payment for merchandise is made in the month following the purchase. o The November beginning balance in the accounts receivable account is $78,000. o The November beginning balance in the accounts payable account is $254,000. Required: a.Prepare a Schedule of Expected Cash Collections for November and December. b.Prepare a Merchandise Purchases Budget for November and December.

For May,Young Corporation has budgeted its cash receipts at $125,000 and its cash disbursements at $138,000.The company's cash balance on May 1 is $17,000.If the desired May 31 cash balance is $20,000,then how much cash must the company borrow during the month (before considering any interest payments)?

Milano Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.50 direct labor-hours.The direct labor rate is $9.80 per direct labor-hour.The production budget calls for producing 6,400 units in October and 6,300 units in November.If the direct labor work force is fully adjusted to the total direct labor-hours needed each month,what would be the total combined direct labor cost for the two months?

Budgets are used to plan and to control operations.