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

Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs.Expected mug sales at Fab (in units)for the next three months are as follows: Fab likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales.How many mugs should Fab plan on producing during the month of November?

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 B to be purchased during June 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 cost of Material K to be purchased in August is:

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 difference between cash receipts and cash disbursements for December would be:

Which of the following might be included as a disbursement on a cash budget?

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. Expected cash collections in December are:

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 cash receipts for November are:

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 accounts receivable balance,net of uncollectible accounts,at the end of December would be:

Clay Corporation has projected sales and production in units for the second quarter of the coming year as follows: Cash-related production costs are budgeted at $5 per unit produced.Of these production costs,40% are paid in the month in which they are incurred and the balance in the following month.Selling and administrative expenses will amount to $100,000 per month.The accounts payable balance on March 31 totals $190,000,which will be paid in April. All units are sold on account for $14 each.Cash collections from sales are budgeted at 60% in the month of sale,30% in the month following the month of sale,and the remaining 10% in the second month following the month of sale.Accounts receivable on April 1 totaled $500,000 ($90,000 from February's sales and $410,000 from March's sales). Required: a.Prepare a schedule for each month showing budgeted cash disbursements for Clay Corporation. b.Prepare a schedule for each month showing budgeted cash receipts for Clay Corporation.

Trumbull Corporation budgeted sales on account of $120,000 for July,$211,000 for August,and $198,000 for September.Experience indicates that none of the sales on account will be collected in the month of the sale,60% will be collected the month after the sale,36% in the second month,and 4% will be uncollectible.The cash receipts from accounts receivable that should be budgeted for September would be:

The LFG Corporation makes and sells a single product,Product T.Each unit of Product T requires 1.4 direct labor-hours at a rate of $9.80 per direct labor-hour.The direct labor workforce is fully adjusted each month to the required workload.LFG Corporation needs to prepare a Direct Labor Budget for the second quarter of next year. The company has budgeted to produce 24,000 units of Product T in June.The finished goods inventories on June 1 and June 30 were budgeted at 600 and 800 units,respectively.Budgeted direct labor costs for June would 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 purchases of raw materials for the second quarter should be:

Triste Corporation manufactures and sells women's skirts.Each skirt (unit)requires 2.6 yards of cloth.Selected data from Triste's master budget for next quarter are shown below: Each unit requires 1.6 hours of direct labor,and the average hourly cost of Triste's direct labor is $15.What is the cost of Triste Corporation's direct labor in September?

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. To attain its desired ending cash balance for April,the company needs to borrow:

Both variable and fixed manufacturing overhead costs are included in the selling and administrative expense budget.

Self-imposed budgets prepared by lower-level managers should be scrutinized by higher levels of management.

Noel Enterprises has budgeted sales in units for the next five months as follows: Past experience has shown that the ending inventory for each month must be equal to 10% of the next month's sales in units.The inventory on May 31 contained 400 units.The company needs to prepare a production budget for the second quarter of the year. The desired ending inventory for August is:

Which of the following is NOT an objective of the budgeting process?

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 cost of December merchandise purchases would 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 accounts receivable balance on February 28 would be: