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. Retained earnings at the end of December would be:

Weldon Industrial Gas Corporation supplies acetylene and other compressed gases to industry.Data regarding the store's operations follow: o Sales are budgeted at $360,000 for November,$380,000 for December,and $350,000 for January. o Collections are expected to be 75% in the month of sale,20% in the month following the sale,and 5% uncollectible. o The cost of goods sold is 65% of sales. o The company desires an ending merchandise inventory equal to 60% of the cost of goods sold in the following month. o Payment for merchandise is made in the month following the purchase. o Other monthly expenses to be paid in cash are $21,900. o Monthly depreciation is $20,000. o Ignore taxes. Required: a.Prepare a Schedule of Expected Cash Collections for November and December. b.Prepare a Merchandise Purchases Budget for November and December. c.Prepare Cash Budgets for November and December. d.Prepare Budgeted Income Statements for November and December. e.Prepare a Budgeted Balance Sheet for the end of December.

The following information is budgeted for McCracken Plumbing Supply Corporation for next quarter: All sales at McCracken are on credit.Forty percent are collected in the month of sale,58% in the month following the sale,and the remaining 2% are uncollectible.Merchandise purchases are paid in full the month following the month of purchase.The selling and administrative expenses above include $8,000 of depreciation on display fixtures and warehouse equipment.All other selling and administrative expenses are paid as incurred.McCracken wants to maintain a cash balance of $15,000.Any amount below this can be borrowed from a local bank as needed in increments of $1,000.All borrowings are made at month end. Required: Prepare McCracken's cash budget for May.McCracken expects to have $24,000 of cash on hand at the beginning of May.

On a cash budget,the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment.

One disadvantage of a self-imposed budget is that budget estimates prepared by front-line managers are often less accurate and reliable than estimates prepared by top managers.

Muecke Inc.is working on its cash budget for April.The budgeted beginning cash balance is $40,000.Budgeted cash receipts total $150,000 and budgeted cash disbursements total $158,000.The desired ending cash balance is $50,000. The excess (deficiency)of cash available over disbursements for April will be:

Which of the following budgets are prepared before the production budget?

JT Department Store expects to generate the following sales for the next three months: JT's cost of gods sold is 60% of sales dollars.At the end of each month,JT wants a merchandise inventory balance equal to 20% of the following month's expected cost of goods sold.What dollar amount of merchandise inventory should JT plan to purchase in August?

Seventy percent of Parlee Corporation's sales are collected in the month of sale,25% in the month following sale,and 5% in the second month following sale.The following are budgeted sales data for the company: Total budgeted cash collections in April would be:

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. Accounts payable at the end of December would 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:

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. In Adi's budgeted balance sheet at December 31,at what amount will accounts payable for raw materials be shown?

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 total budgeted selling and administrative expense for October is $459,200,then how many Yutes does the company plan to sell in October?

Starg Corporation,a retailer,plans to sell 25,000 units of Product X during the month of August.If the company has 9,000 units on hand at the start of the month,and plans to have 7,000 units on hand at the end of the month,how many units of Product X must be purchased from the supplier during the month?

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 20,000 Debs in March,then the average budgeted selling and administrative expenses per unit sold for March is closest to:

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 October is 8,000 hours,then the total budgeted manufacturing overhead for October 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. Accounts payable at the end of December 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 cash disbursements for manufacturing overhead for November are $90,000,then the budgeted direct labor-hours for November must 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:

Chow Corporation manufactures children's chairs made of PVS plastic tubing and heavy canvas material.Each chair requires eight feet of the PVC tubing and three yards of material.Budgeted sales are 20,000 chairs for June,25,000 chairs for July and 30,000 chairs for August.Ending finished goods inventory is budgeted at 10% of the current month's sales.Ending materials inventories are budgeted at 10% of the current month's production. Required: a.Prepare a production budget for each of the months of June,July and August.Assume the beginning inventory of chairs in June will be 2,500 units. b.Prepare schedules showing purchase requirements for PVC tubing and for material for each of the months of June,July and August.Assume 16,000 feet of PVC tubing and 6,000 yards of material are on hand at the beginning of June.