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

Kouba Corporation is working on its direct labor budget for the next two months.Each unit of output requires 0.23 direct labor-hours.The direct labor rate is $11.20 per direct labor-hour.The production budget calls for producing 4,000 units in April and 3,400 units in May.The company guarantees its direct labor workers a 40-hour paid work week.With the number of workers currently employed,that means that the company is committed to paying its direct labor work force for at least 920 hours in total each month even if there is not enough work to keep them busy. Required: Construct the direct labor budget for the next two months.

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 desired ending inventory of Material K for September is:

The sales budget is usually prepared before the production budget.

The following are budgeted data for the Bingham Corporation,a merchandising company: Assume that all purchases are paid for in the month following the month of purchase.The cash disbursements for purchases that would appear in the April cash budget 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:

Shocker Corporation's sales budget shows quarterly sales for the next year as follows: Unit sales Corporation policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales.Budgeted production for the second quarter of the next year would be:

The WRT Corporation makes collections on sales according to the following schedule: The following sales have been budgeted: Budgeted cash collections in June would be:

The manufacturing overhead budget of Paparella Corporation is based on budgeted direct labor-hours.The November direct labor budget indicates that 6,000 direct labor-hours will be required in that month.The variable overhead rate is $2.00 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $79,200 per month,which includes depreciation of $21,000.All other fixed manufacturing overhead costs represent current cash flows. Required: a.Determine the cash disbursements for manufacturing overhead for November.Show your work! b.Determine the predetermined overhead rate for November.Show your work!

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. Retained earnings at the end of December would be:

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?

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

The following are budgeted data: Two pounds of material are 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 May should be:

The Khaki Corporation has the following budgeted sales data: The regular pattern of collection of credit sales is 40% in the month of sale,50% in the month following sale,and the remainder in the second month following the month of sale.There are no bad debts. The budgeted cash receipts for April would 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. The number of units the company would have to manufacture during the year would be:

The manufacturing overhead budget at Cardera Corporation is based on budgeted direct labor-hours.The direct labor budget indicates that 2,300 direct labor-hours will be required in January.The variable overhead rate is $1.00 per direct labor-hour.The company's budgeted fixed manufacturing overhead is $28,060 per month,which includes depreciation of $4,600.All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

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 net income for November is:

The basic idea underlying responsibility accounting is that each manager should be held responsible for the overall profit of the company to ensure that all managers are acting together.

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.

Which of the following benefits could an organization reasonably expect from an effective budget program?