Deck 9: Profit Planning

Question 1

If the expected level of activity is appreciably above or below the company's present capacity, it may be desirable to adjust fixed costs in the budget.

Answer 1

True

Question 2

A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm.

Answer 2

True

Question 3

Which of the following is not a benefit of budgeting?

A) It uncovers potential bottlenecks before they occur.
B) It coordinates the activities of the entire organization by integrating the plans and objectives of the various parts.
C) It ensures that accounting records comply with generally accepted accounting principles.
D) It provides benchmarks for evaluating subsequent performance.

Answer 3

C

Question 4

When preparing a materials purchase budget, desired ending inventory is deducted from total needs of the period to arrive at materials to be purchased.

Question 5

Budgets are used for planning rather than for control of operations.

Question 6

In the manufacturing overhead budget, the non-cash charges (such as depreciation) are added to the total budgeted manufacturing overhead to determine the expected cash disbursements for manufacturing overhead.

Question 7

In companies that 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.

Question 8

A self-imposed budget can be a very effective control device in an organization.

Question 9

The cash budget must be prepared before you can complete the:

A) production budget.
B) budgeted balance sheet.
C) raw materials purchases budget.
D) schedule of cash disbursements.

Question 10

The beginning cash balance is not included on the cash budget because the cash budget deals exclusively with cash flows rather than with balance sheet amounts.

Question 11

The materials purchase budget:

A) is the beginning point in the budget process.
B) must provide for desired ending inventory as well as for production.
C) is accompanied by a schedule of cash collections.
D) is completed after the cash budget.

Question 12

The cash budget is developed from the budgeted income statement.

Question 13

The budget or schedule that provides necessary input data for the direct labor budget is the:

A) raw materials purchases budget.
B) production budget.
C) schedule of cash collections.
D) cash budget.

Question 14

In the selling and administrative budget, the non-cash charges (such as depreciation) are deducted from the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses.

Question 15

The master budget process usually begins with the:

A) production budget.
B) operating budget.
C) sales budget.
D) cash budget.

Question 16

The usual starting point in budgeting is to make a forecast of cash receipts and cash disbursements.

Question 17

One of the distinct advantages of a budget is that it can help to uncover potential bottlenecks before they occur.

Question 18

Self-imposed budgets are those that are prepared by top management and then assigned to other managers within the organization.

Question 19

In the merchandise purchases budget, the required purchases (in units) for a period can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units).

Question 20

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

A) Choice A
B) Choice B
C) Choice C
D) Choice D

Question 21

The excess or deficiency of cash available over disbursements on the cash budget is calculated as follows:

A) The beginning balance less the expected cash receipts less the expected cash disbursements.
B) The cash available less the expected cash receipts plus the expected cash disbursements.
C) The beginning balance plus the expected cash receipts less the expected cash disbursements.
D) None of these.

Question 22

Brummitt Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.05 direct labor-hours. The direct labor rate is $7.50 per direct labor-hour. The production budget calls for producing 9,100 units in May and 8,800 units in June. 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?

A) $3,300.00
B) $3,412.50
C) $6,712.50
D) $3,356.25

Question 23

The concept of responsibility accounting means that:

A) Budgetary data should be reviewed and approved by the budget committee.
B) Budgetary data should be reviewed and approved by all levels of management.
C) An employee's performance should be evaluated only on those items under his or her control.
D) An employee's performance should be evaluated only by his or her immediate supervisor.

Question 24

Superior Industries' sales budget shows quarterly sales for the next year as follows:
Company 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 should be:

A) 7,200 units
B) 8,000 units
C) 8,800 units
D) 8,400 units

Question 25

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget?

A) It details the required direct labor hours.
B) It details the required raw materials purchases.
C) It is calculated based on the sales budget and the desired ending inventory.
D) It summarizes the costs of producing units for the budget period.

Question 26

The Waverly Company has budgeted sales for next 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 3,000 units. Scheduled production for the third quarter should be:

A) 17,500
B) 18,500
C) 22,000
D) 13,500

Question 27

The PDQ Company makes collections on credit sales according to the following schedule:
25% in month of sale
70% in month following sale
4% in second month following sale
1% uncollectible
The following sales have been budgeted:
Cash collections in June would be:

A) $113,400
B) $110,000
C) $111,000
D) $115,500

Question 28

The Tobler Company has budgeted production for next year as follows:
Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 pounds. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Budgeted purchases of raw materials in the third quarter would be:

A) 63,200 pounds
B) 62,400 pounds
C) 56,800 pounds
D) 50,400 pounds

Question 29

A self-imposed budget or ________________ budget is a budget that is prepared with the full cooperation of managers at all levels.

A) perpetual
B) master
C) participative
D) responsibility

Question 30

Fairmont Inc. uses an accounting system that charges costs to the manager who has been delegated the authority to make decisions concerning the costs. For example, if the sales manager accepts a rush order that will result in higher than normal manufacturing costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as:

A) responsibility accounting.
B) contribution accounting.
C) absorption accounting.
D) operational budgeting.

Question 31

Modesto Company produces and sells Product AlphaB. To guard against stockouts, the company requires that 20% of the next month's sales be on hand at the end of each month. Budgeted sales of Product AlphaB over the next four months are:
Budgeted production for August would be:

A) 62,000 units
B) 70,000 units
C) 58,000 units
D) 50,000 units

Question 32

Orion Corporation is preparing a cash budget for the six months beginning January 1. Shown below are the company's expected collection pattern and the budgeted sales for the period.
Expected collection pattern:
65% collected in the month of sale
20% collected in the month after sale
10% collected in the second month after sale
4% collected in the third month after sale
1% uncollectible
Budgeted sales:
The estimated total cash collections during April from sales and accounts receivables would be:

A) $155,900
B) $167,000
C) $171,666
D) $173,400

Question 33

Parlee Company's sales are 30% in cash and 70% on credit. Sixty % of the credit sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder are uncollectible. The following are budgeted sales data:
Total cash receipts in April would be budgeted to be:

A) $38,900
B) $47,900
C) $27,230
D) $36,230

Question 34

Yumm Dairy Corporation manufactures carrot-flavored ice cream. Yumm's production budget indicated the following units to be produced for the upcoming months:
Four (4) ounces of carrots are needed for each gallon of ice cream. Yumm also likes to have enough carrots on hand to cover 5% of the next month's production needs for carrots. How many ounces of carrots should Yumm plan on purchasing during the month of February?

A) 474,000 ounces
B) 486,000 ounces
C) 490,000 ounces
D) 510,000 ounces

Question 35

Friden Company has budgeted sales and production over the next quarter as follows:
The company has 20,000 units of product on hand at April 1. A minimum of 20% of the next month's sales needs in units must be on hand at the end of each month. July sales are expected to be 140,000 units. Budgeted sales for June would be (in units):

A) 188,000
B) 160,000
C) 128,000
D) 184,000

Question 36

Pardee Company plans to sell 12,000 units during the month of August. If the company has 2,500 units on hand at the start of the month, and plans to have 2,000 units on hand at the end of the month, how many units must be produced during the month?

A) 11,500
B) 12,500
C) 12,000
D) 14,000

Question 37

Marple Company's budgeted production in units and budgeted raw materials purchases over the next three months are given below:
Two pounds of raw materials are required to produce one unit of product. The company wants raw materials on hand at the end of each month equal to 30% of the following month's production needs. The company is expected to have 36,000 pounds of raw materials on hand on January 1. Budgeted production for February should be:

A) 105,000 units
B) 82,500 units
C) 150,000 units
D) 75,000 units

Question 38

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?

A) 23,200 mugs
B) 26,800 mugs
C) 25,900 mugs
D) 34,300 mugs

Question 39

Tolla Company is estimating the following sales for the first six months of next year:
Sales at Tolla are normally collected as 70% in the month of sale, 25% in the month following the sale, and the remaining 5% being uncollectible. Also, those customers paying in the month of sale are given a 2% discount. Based on this information, how much cash should Tolla expect to collect during the month of April?

A) $281,260
B) $361,260
C) $366,010
D) $393,760

Question 40

The following are budgeted data:
Each unit requires 0.75 hours of direct labor at a cost of $6.50 per hour. What is the cost of direct labor for May?

A) $73,125
B) $82,875
C) $63,375
D) $78,000

Question 41

ABC Company has a cash balance of $9,000 on April 1. The company must maintain a minimum cash balance of $6,000. During April expected cash receipts are $45,000. Expected cash disbursements during the month total $52,000. During April the company will need to borrow:

A) $2,000
B) $4,000
C) $6,000
D) $8,000

Question 42

Guthridge Inc. is working on its cash budget for February. The budgeted beginning cash balance is $26,000. Budgeted cash receipts total $104,000 and budgeted cash disbursements total $100,000. The desired ending cash balance is $40,000. To attain its desired ending cash balance for February, the company needs to borrow:

A) $0
B) $10,000
C) $40,000
D) $70,000

Question 43

Mouw Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 5,400 direct labor-hours will be required in January. The variable overhead rate is $4.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $77,220 per month, which includes depreciation of $9,720. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A) $67,500
B) $91,260
C) $100,980
D) $23,760

Question 44

Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable selling and administrative expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable selling and administrative expenses are made during the month the expenses are incurred.
The Accounts Receivable balance that would appear in the March 31 budgeted balance sheet would be:

A) $15,000
B) $16,000
C) $8,800
D) $12,400

Question 45

Noskey Corporation is a merchandising firm. Information pertaining to the company's sales revenue is presented in the following table. Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Purchases of inventory are equal to next month's cost of goods sold. The cost of goods sold is 70% of the selling price. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.
Noskey Corporation's budgeted total cash payments in July for inventory purchases are:

A) $405,000
B) $283,500
C) $240,000
D) $168,000

Question 46

Golebiewski Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 4,900 direct labor-hours will be required in November. The variable overhead rate is $8.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $78,400 per month, which includes depreciation of $10,290. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for November should be:

A) $22.30
B) $16.00
C) $24.40
D) $8.40

Question 47

Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable selling and administrative expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable selling and administrative expenses are made during the month the expenses are incurred.
In a budgeted income statement for the month of February, net income would be:

A) $9,000
B) $1,800
C) $0
D) $4,200

Question 48

Roufs Inc. bases its selling and administrative expense budget on budgeted unit sales. The sales budget shows 7,800 units are planned to be sold in April. The variable selling and administrative expense is $3.20 per unit. The budgeted fixed selling and administrative expense is $95,160 per month, which includes depreciation of $9,360 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 April selling and administrative expense budget should be:

A) $85,800
B) $24,960
C) $120,120
D) $110,760

Question 49

Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable selling and administrative expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable selling and administrative expenses are made during the month the expenses are incurred.
In a cash budget for March, the total cash disbursements would be:

A) $11,200
B) $13,900
C) $22,300
D) $16,900

Question 50

The Stacy Company makes and sells a single product, Product R. Budgeted sales for April are $300,000. Gross Margin is budgeted at 30% of sales dollars. If the net income for April is budgeted at $40,000, the budgeted selling and administrative expenses are:

A) $133,333
B) $50,000
C) $102,000
D) $78,000

Question 51

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.

-Expected cash collections in December are:

A) $126,500
B) $230,500
C) $104,000
D) $230,000

Question 52

Noskey Corporation is a merchandising firm. Information pertaining to the company's sales revenue is presented in the following table. Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Purchases of inventory are equal to next month's cost of goods sold. The cost of goods sold is 70% of the selling price. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.
Noskey Corporation's budgeted cash collections in July from June credit sales are:

A) $144,000
B) $136,800
C) $96,000
D) $91,200

Question 53

The selling and administrative expense budget of Spurlock Corporation is based on budgeted unit sales, which are 6,300 units for February. The variable selling and administrative expense is $9.30 per unit. The budgeted fixed selling and administrative expense is $118,440 per month, which includes depreciation of $19,530 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:

A) $98,910
B) $157,500
C) $58,590
D) $177,030

Question 54

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.

-The cost of December merchandise purchases would be:

A) $176,000
B) $208,000
C) $184,000
D) $84,000

Question 55

Noskey Corporation is a merchandising firm. Information pertaining to the company's sales revenue is presented in the following table. Management estimates that 5% of credit sales are uncollectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Purchases of inventory are equal to next month's cost of goods sold. The cost of goods sold is 70% of the selling price. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase.
Noskey Corporation's budgeted total cash receipts in August are:

A) $240,000
B) $294,000
C) $299,400
D) $239,400

Question 56

The manufacturing overhead budget at Ferrucci Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 1,600 direct labor-hours will be required in December. The variable overhead rate is $4.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $25,120 per month, which includes depreciation of $5,440. All other fixed manufacturing overhead costs represent current cash flows. The December cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:

A) $7,040
B) $19,680
C) $26,720
D) $32,160

Question 57

Thiel Inc. is working on its cash budget for October. The budgeted beginning cash balance is $35,000. Budgeted cash receipts total $166,000 and budgeted cash disbursements total $162,000. The desired ending cash balance is $50,000. The excess (deficiency) of cash available over disbursements for October will be:

A) $31,000
B) $39,000
C) $4,000
D) $201,000

Question 58

Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable selling and administrative expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable selling and administrative expenses are made during the month the expenses are incurred.
In a cash budget for March, the total cash receipts would be:

A) $17,800
B) $8,200
C) $20,200
D) $16,000

Question 59

The manufacturing overhead budget at Formica Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 4,400 direct labor-hours will be required in October. The variable overhead rate is $8.90 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $86,680 per month, which includes depreciation of $16,280. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for October should be:

A) $19.70
B) $24.90
C) $8.90
D) $28.60

Question 60

Justin's Plant Store, a retailer, started operations on January 1. On that date, the only assets were $16,000 in cash and $3,500 in merchandise inventory. For purposes of budget preparation, assume that the company's cost of goods sold is 60% of sales. Expected sales for the first four months appear below. The company desires that the merchandise inventory on hand at the end of each month be equal to 50% of the next month's merchandise sales (stated at cost). All purchases of merchandise inventory must be paid in the month of purchase. Sixty percent of all sales should be for cash; the balance will be on credit. Seventy-five percent of the credit sales should be collected in the month following the month of sale, with the balance collected in the following month. Variable selling and administrative expenses should be 10% of sales and fixed expenses (all depreciation) should be $3,000 per month. Cash payments for the variable selling and administrative expenses are made during the month the expenses are incurred.
In a budgeted balance sheet, the Merchandise Inventory on February 28:

A) $4,800
B) $7,500
C) $9,600
D) $3,200

Question 61

Pardise Company plans the following beginning and ending inventory levels (in units) for July:

Two units of raw material are needed to produce each unit of finished product.



-If Pardise Company plans to sell 480,000 units during July, the number of units it would have to manufacture during July would be:

A) 440,000 units
B) 480,000 units
C) 510,000 units
D) 450,000 units

Question 62

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.

-The net income (loss) for December would be:

A) $24,300
B) $12,800
C) ($4,200)
D) $7,300

Question 63

Braston Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:
Sales are budgeted at $350,000 for November, $330,000 for December, and $340,000 for January.
Collections are expected to be 70% in the month of sale, 26% in the month following the sale, and 4% uncollectible.
The cost of goods sold is 70% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $20,100.
Monthly depreciation is $22,000.
Ignore taxes.

-Expected cash collections in December are:

A) $91,000
B) $330,000
C) $322,000
D) $231,000

Question 64

Richards Company has the following budgeted sales for the first half of next year: The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:
Collections on credit sales:
60% in month of sale
30% in month following sale
10% in second month following sale
What is the budgeted accounts receivable balance on May 31?

A) $81,000
B) $68,000
C) $60,000
D) $141,000

Question 65

Richards Company has the following budgeted sales for the first half of next year: The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:
Collections on credit sales:
60% in month of sale
30% in month following sale
10% in second month following sale
Assume that the accounts receivable balance on January 1 is $70,000. Of this amount, $60,000 represents uncollected December sales and $10,000 represents uncollected November sales. Given these data, the total cash collected during January would be:

A) $270,000
B) $420,000
C) $345,000
D) $360,000

Question 66

The LaGrange Company had the following budgeted sales for the first half of the current year: The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:
Collections on sales: 60% in month of sale
30% in month following sale
10% in second month following sale
The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000 represents uncollected December sales and $20,000 represents uncollected November sales.
The total cash collected during January by LaGrange Company would be:

A) $410,000
B) $254,000
C) $344,000
D) $331,500

Question 67

Braston Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:
Sales are budgeted at $350,000 for November, $330,000 for December, and $340,000 for January.
Collections are expected to be 70% in the month of sale, 26% in the month following the sale, and 4% uncollectible.
The cost of goods sold is 70% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $20,100.
Monthly depreciation is $22,000.
Ignore taxes.

-The excess (deficiency) of cash available over disbursements for December would be:

A) $20,200
B) $107,600
C) $43,700
D) $63,900

Question 68

Super Drive is a computer hard drive manufacturer. The company's balance sheet for the fiscal year ended on November 30 appears below:

Additional information regarding Super Drive's operations appear below:
• Sales are budgeted at $520,000 for December and $500,000 for January.
• Collections are expected to be 60% in the month of sale and 40% in the month following sale. There are no bad debts.
• 80% of the disk drive components are purchased in the month prior to the month of the sale, and 20% are purchased in the month of the sale. Purchased components comprise 40% of the cost of goods sold.
• Payment for components purchased is made in the month following the purchase.
• Assume that the cost of goods sold is 80% of sales.



-The budgeted gross margin for the month ending December 31 would be:

A) $416,000
B) $104,000
C) $134,000
D) $536,000

Question 69

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.

-Accounts payable at the end of December would be:

A) $84,000
B) $92,000
C) $184,000
D) $176,000

Question 70

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.

-December cash disbursements for merchandise purchases would be:

A) $184,000
B) $196,000
C) $176,000
D) $84,000

Question 71

Super Drive is a computer hard drive manufacturer. The company's balance sheet for the fiscal year ended on November 30 appears below:

Additional information regarding Super Drive's operations appear below:
• Sales are budgeted at $520,000 for December and $500,000 for January.
• Collections are expected to be 60% in the month of sale and 40% in the month following sale. There are no bad debts.
• 80% of the disk drive components are purchased in the month prior to the month of the sale, and 20% are purchased in the month of the sale. Purchased components comprise 40% of the cost of goods sold.
• Payment for components purchased is made in the month following the purchase.
• Assume that the cost of goods sold is 80% of sales.



-The balance in accounts payable on the budgeted balance sheet for December 31 should be:

A) $161,280
B) $326,400
C) $165,120
D) $403,200

Question 72

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.

-The cash balance at the end of December would be:

A) $40,100
B) $28,000
C) $12,100
D) $40,800

Question 73

Pardise Company plans the following beginning and ending inventory levels (in units) for July:

Two units of raw material are needed to produce each unit of finished product.



-If 500,000 finished units were to be manufactured during July, the units of raw material needed to be purchased would be:

A) 1,000,000 units
B) 1,020,000 units
C) 1,010,000 units
D) 990,000 units

Question 74

Braston Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:
Sales are budgeted at $350,000 for November, $330,000 for December, and $340,000 for January.
Collections are expected to be 70% in the month of sale, 26% in the month following the sale, and 4% uncollectible.
The cost of goods sold is 70% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $20,100.
Monthly depreciation is $22,000.
Ignore taxes.

-December cash disbursements for merchandise purchases would be:

A) $119,000
B) $234,500
C) $231,000
D) $238,000

Question 75

Super Drive is a computer hard drive manufacturer. The company's balance sheet for the fiscal year ended on November 30 appears below:

Additional information regarding Super Drive's operations appear below:
• Sales are budgeted at $520,000 for December and $500,000 for January.
• Collections are expected to be 60% in the month of sale and 40% in the month following sale. There are no bad debts.
• 80% of the disk drive components are purchased in the month prior to the month of the sale, and 20% are purchased in the month of the sale. Purchased components comprise 40% of the cost of goods sold.
• Payment for components purchased is made in the month following the purchase.
• Assume that the cost of goods sold is 80% of sales.



-The budgeted cash collections for the upcoming December should be:

A) $208,000
B) $520,000
C) $402,000
D) $462,000

Question 76

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.

-Retained earnings at the end of December would be:

A) $342,000
B) $362,600
C) $337,800
D) $338,100

Question 77

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.

-The excess (deficiency) of cash available over disbursements for December would be:

A) $12,800
B) $8,600
C) $17,000
D) $4,200

Question 78

Braston Corporation is a small wholesaler of gourmet food products. Data regarding the store's operations follow:
Sales are budgeted at $350,000 for November, $330,000 for December, and $340,000 for January.
Collections are expected to be 70% in the month of sale, 26% in the month following the sale, and 4% uncollectible.
The cost of goods sold is 70% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $20,100.
Monthly depreciation is $22,000.
Ignore taxes.

-The cost of December merchandise purchases would be:

A) $231,000
B) $119,000
C) $245,000
D) $234,500

Question 79

Dilom Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $260,000 for November, $230,000 for December, and $210,000 for January.
Collections are expected to be 55% in the month of sale, 40% in the month following the sale, and 5% uncollectible.
The cost of goods sold is 80% of sales.
The company purchases 50% of its merchandise in the month prior to the month of sale and 50% in the month of sale. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $21,700.
Monthly depreciation is $17,000.
Ignore taxes.

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

A) $89,500
B) $92,000
C) $103,500
D) $196,000

Question 80

The LaGrange Company had the following budgeted sales for the first half of the current year: The company is in the process of preparing a cash budget and must determine the expected cash collections by month. To this end, the following information has been assembled:
Collections on sales: 60% in month of sale
30% in month following sale
10% in second month following sale
The accounts receivable balance on January 1 of the current year was $70,000, of which $50,000 represents uncollected December sales and $20,000 represents uncollected November sales.
What is the budgeted accounts receivable balance on June 1 of the current year?

A) $56,000
B) $64,000
C) $76,000
D) $132,000