Managerial accounting, 5th by jiambalvo test bank ch10

Of the credit sales, 40% of credit sales are collected in the month of sale, 45% in the month following the sale, and 15% is collected two months after.. Of the credit sales, 40% of cred

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Budgetary Planning and Control Summary of Questions by Objectives and Bloom’s Taxonomy

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1 A budget is a formal document that quantifies a company’s plans for achieving its goals

2 Budgets are useful in the control process because they provide a basis for evaluating

performance

3 A bottom-up approach to budgeting involves substantial input from lower-level managers

4 Most managers believe that budgeting is more successful when a bottom-up approach rather than

a top-down approach is used

5 Generally, budgets that span longer time periods provide less detail than those spanning shorter

time periods

6 A zero-based budgeting is easier to prepare because it is based on prior period’s activity levels

7 Only manufacturing firms need to prepare a production budget

8 Changes in economic conditions can be one of the causes for significant deviations from the

planned performance

9 The first step in the budget process is preparing the sales forecast

10 If the number of units produced equals the number of units sold, the number of units in ending

inventory will equal the number of units in beginning inventory on the production budget

11 The sales budget is constructed after the production budget is finalized based on a company’s

capacity

12 All of the dollar amounts in the cash receipts budget represent revenues earned in the current

period

13 The costs of acquisitions in the material purchases budget appear on the budgeted income

statement as part of cost of goods sold

14 The amount and timing of cash flows is the focus of the cash receipts and disbursements budget

15 A company will often have cash flow problems ahead of a period of increasing sales

16 A company that utilizes just-in-time inventory eliminates the need for budgeting

17 The budgeted balance sheet is also called a pro-forma balance sheet

18 One way a company can perform “what if” budget analysis is by preparing a flexible budget

19 The selling and administrative expense budget is based on the numbers in the production budget

20 Differences between budgeted and actual amounts are referred to as flexible budgets

21 A static budget is prepared for a single anticipated level of production

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22 If the actual activity level differs from the budgeted activity level on the flexible budget, it is

unfair to evaluate cost performance against that budget

23 A master budget is a set of budget relationships that can be adjusted to various activity levels

24 In a management by exception approach, only large, unfavorable variances are investigated

25 Managers may be tempted to pad the budget to meet performance targets

26 Generally, it is best to evaluate managers against a static budget since the volume used on a static

budget is used to generate expected results for the period

27 Waiting until January 1 to ship an order and recognizing its revenue that was ready on December

29 is an example of income shifting

28 When a static budget is used for planning and control, managers may be tempted to build slack

into their budgets

29 There is an inherent conflict when budgets are used for both planning and control

30 Budgeting often involves both monetary and nonmonetary measures of performance

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MULTIPLE CHOICE

31 Which of the following is correct concerning a budget?

A It is a formal document that quantifies a company’s plans for achieving its goals

B It is prepared by the budget committee

C It identifies the causes of significant deviations from expected performance

D All of the answer choices are correct

32 The formal documents that quantify a company’s plans for achieving its goals are called

A variance reports

B budgets

C cost sheets

D production reports

33 A budget is useful in the planning process because it

A determines who is to blame for poor operations

B forces managers to think about goals and objectives and means of achieving them

C identifies budget padding

D creates budget slack

34 Which statement is not true concerning the development of a budget?

A It is a means of planning for management

B It often involves communication with and input from department managers

C It enhances communication and coordination among managers

D It is created by the budget committee

35 Which of the following is not a reason that actual results may deviate from planned performance?

A A bottom-up approach to budgeting was used

B Managers have done a particularly good or particularly poor job of managing operations

C Conditions have changed since the budget was developed

D The budget was poorly conceived and constructed

36 The person evaluating a manager should consider

A any deviation from budgeted amounts as an item that should be investigated

B all favorable variances as indications of good performance

C that managers will focus their attention on those measures that they know will be part of

their evaluation

D that all unfavorable variances indicate poor performance

37 Who is responsible for the approval of the master budget?

A The budget committee

B The company’s cost accountant

C The company’s auditors

D The company’s board of directors

38 The budget committee consists of

A senior managers, including the CEO and CFO

B representatives from the stockholders and suppliers

C a company’s stockholders

D all employees interested in providing input to the budgeting process

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39 In a top-down approach to budgeting, what occurs?

A The upper-level managers impose a budget without soliciting input from department

managers

B Lower-level managers are the primary source of information used in setting the budget

C The production budget is developed before the sales budget

D Each budget amount projected by upper-level managers is approved or disapproved by

lower-level managers

40 In a bottom-up approach to budgeting, the primary source of information used in setting the

budget is

A based on forecasted economic conditions

B based on industry forecasts

C provided by the controller

D provided by lower-level managers

41 Which of the following statements regarding approaches to budgeting is(are) true?

I Most managers believe that successful budgeting requires a bottom-up approach

II A top-down approach involves substantial input from lower-level managers

43 A method of budget preparation that requires all budgeted amounts to be justified, even if the

amounts were supported in prior periods, is called

A variance budgeting

B flexible budgeting

C justified budgeting

D zero-based budgeting

44 Which of the following is a characteristic of zero-based budgeting?

A It uses the same level of activity as the prior budget period

B It is relatively inexpensive to implement

C It is used mostly by manufacturing companies

D It results in a fresh consideration of the validity of budget amounts

45 Which of the following is the comprehensive planning document that incorporates a number of

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46 Which of the following is not typically a part of the master budget?

A Direct material purchases budget

B Performance report budget

C Projected cash receipts and disbursements

D Budgeted balance sheet

47 The master budget incorporates individual budgets including those for

A direct materials, direct labor, and selling and administrative expenses

B multiple levels of sales volume

C past and future accounting periods

D each employee in the company

48 Which of the following is the correct order for the preparation of the listed budgets?

A Budgeted income statement, sales budget, cash budget

B Cash budget, capital acquisitions budget, direct labor budget

C Sales budget, production budget, direct material purchases budget

D Direct labor budget, sales budget, budgeted income statement

49 Which of the following budgets is prepared last?

A Sales budget

B Capital acquisitions budget

C Budgeted income statement

50 Which of the following budgets is prepared first?

A Cash budget

B Sales budget

C Production budget

51 Which of the following contains at least one item that is not a common method companies use to

estimate sales?

A Economic models, and estimates from a company’s own sales force

B Trends in a company’s own sales data, and estimates from a company’s own sales force

C Estimates from a company’s own sales force, and expected production levels

D Economic models, and trends in a company’s own sales data

52 Which of the following is not a method that can reasonably be used to forecast sales?

A Trends in the company’s sales data

B Production capacity

C Estimates from the company’s salespersons

D Mathematical models adjusted by an experienced manager using professional judgment

53 Which of the following assumptions is made while preparing a sales budget?

A The number of units to be sold and selling price per unit

B The cash to be received from units sold

C The contribution margin per unit and the number of units to be sold

D The number of units the manufacturing facility is able to produce

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54 Why is setting the sales budget very important?

A The rest of the master budget is driven by the sales budget

B It is based on the production targets set by the production department

C It establishes the actual profits that will be earned by a company

D None of the answer choices are correct

55 Which of the following is not used in deciding how many units to produce in a period?

A The desired number of units in ending finished goods inventory

B The expected sales in units

C The number of units in beginning finished goods inventory

D The number of units of raw material needed for production

56 Concerning relationship between beginning finished goods inventory, ending finished goods

inventory, production, and sales, which of the following is true?

A Production = Beginning Inventory + Sales – Ending Inventory

B Production = Sales + Ending Inventory – Beginning Inventory

C Production = Beginning Inventory + Ending Inventory – Sales

D Production = Beginning Inventory – Ending Inventory + Sales

57 Ace Ladders has fewer units in beginning finished goods inventory than in ending finished goods

inventory The number of units sold is

A less than the number of units produced

B greater than the number of units produced

C less than the number of units in beginning finished goods inventory

D greater than the number of units in ending finished goods inventory

58 While preparing the production budget, the desired ending finished goods inventory for the first

period is

A the same as the beginning inventory for the second period

B often expressed as a percentage of the first period’s sales

C generally more than the beginning finished goods inventory for the first period

D always zero

59 Which of the following items affect the amount of direct material that must be purchased during a

period?

I The amount of raw material in beginning inventory

II The amount of raw material in ending inventory

A Only I

B Only II

C Both I and II

D Neither I nor II

60 A significant difference between the direct material purchases budget and the direct labor budget

is that the direct material purchases budget

A is based on units sold, while the direct labor budget is based on units produced

B considers beginning and ending inventory amounts, which are not part of the direct labor

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61 Which of the following is likely to increase the amount budgeted for depreciation in the

manufacturing overhead budget?

A Sale of production equipment at a loss

B Increased variable costs related to estimated increases in sales

C Planned acquisitions of new equipment

D A decrease in the number of units to be produced

62 Which of the following is a reason the amount of cash paid out for manufacturing overhead each

period does not equal the total overhead incurred?

A Depreciation is an overhead expense that does not require the use of cash

B Overhead expenses are only estimates, and they do not require cash

C Cash is only paid out for variable manufacturing overhead expenses

D The amount of cash paid out is adjusted for the number of units sold

63 A significant difference between the direct material purchases budget and the production budget

is that the production budget considers

A units to be produced, while the direct material purchases budget is based on units to be

sold

B beginning and ending finished goods inventory amounts, which are not part of a direct

material purchases budget

C finished goods inventory levels, while the material purchases budget considers raw

material inventory levels

D the capacity of the factory, while the direct material purchases budget does not

64 Which of the following is not required to calculate cost of goods sold in the budgeted income

statement?

A Number of units to be sold

B Direct material costs to be used and direct labor costs to be incurred

C Manufacturing overhead costs incurred

D Direct material purchases expected during the period

65 If budgeted net income is projected to be less than the company’s goal, the company should try to

A increase revenues and decrease expenses

B incur more fixed costs and less variable costs

C increase the collection of cash receipts

D finance operations with a loan

66 Which of the following statements is true concerning the capital acquisitions budget?

A It consists of a plan to acquire long-lived assets

B It is constructed directly from the values in the sales budget

C It is the same as the capital budgeting process

D It is dependent upon plant capacity

67 Which of the following does not appear on the cash budget?

A Beginning cash balance

B Purchase of long-lived assets

C Cost of goods sold

D Collection of credit sales

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68 Which of the following transactions will affect the cash budget for a particular month in which

each transaction occurs?

A Sale of a product when payment will be received in 60 days

B Payment for direct labor

C Amortization of prepaid insurance

D Depreciation of a piece of equipment that was purchased last year

69 A cash budget fails to alert the management for:

A low projected cash balance

B low profit levels

C availability of excess cash for investment purposes

D availability of sufficient cash for loan repayments

70 Which of the following is least likely to produce a need for temporary financing to bridge a cash

shortfall?

A Building up inventory in anticipation of increased sales in the months ahead

B Allowing customers to purchase on credit

C Paying insurance policies in advance of the period insured

D Purchasing materials on a just-in-time inventory basis

71 Winslow Inc determined it had sold products during the month but not collected all of the

amounts owed Where will this amount owed be reflected in the master budget for the month?

A On the budgeted balance sheet in the assets section

B On the budgeted income statement

C As part of the cash receipts section of the cash budget

D As a reduction of inventory to be produced in the production budget

72 When using a computer program to do budgeting, which one of the following is not true?

A A company can easily run “what if” analysis if the spreadsheet is well designed

B Cash flow problems generally erupt since cash is difficult to track and predict

C Worksheets should be formula driven so that a change in sales will update all schedules

D A change in the sales budget should carry throughout all the individual budgets

73 SalaRita’s sales are 32% cash and 68% credit Of the credit sales, 40% of credit sales are

collected in the month of sale, 45% in the month following the sale, and 15% is collected two months after Budgeted sales data is as follows:

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74 Budgeted sales (in units) for the Rockwall Energy Drink Company are as follows:

September 45,000 units

November 40,000 unitsDecember 75,000 unitsThe company wishes to have 10% of the next month’s sales on hand at the end of each month How much is budgeted production for November?

A 43,500 units

B 40,000 units

C 47,500 units

D 36,000 units

75 SalaRita’s sales are 32% cash and 68% credit Of the credit sales, 40% of credit sales are

collected in the month of sale, 45% in the month following the sale, and 15% is collected two months after Budgeted sales data is as follows:

76 Wisdom Toys has budgeted sales and production over the next quarter as follows:

Unit Sales Production

77 Washam Company must maintain a minimum cash balance of $25,000 At the beginning of June

the company’s cash balance was $17,000 Budgeted cash receipts for June are $150,000 and budgeted cash disbursements are $201,000 Budgeted net income for July totals $11,000 How much will Washam Company need to borrow by the end of June?

A $43,000

B $34,000

C $9,000

D $59,000

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78 Alpha Caps Company has budgeted production of 14,000 units and sales of 16,500 units in

January Each unit requires 12 minutes of labor The standard labor rate is $13.00 per hour How much are total budgeted direct labor costs for January?

A $36,400

B $21,840

C $42,900

D $2,184,000

79 Each unit produced by Terra Electronics requires 4 pounds of raw materials The raw materials

inventory must be equal to 10% of the next month’s production Each pound of raw materials costs $2.00 Budgeted production information follows

80 Shorstein Manufacturing Company purchases raw materials on account each month Purchases

are paid for according to the following schedule:

30% is paid in the month of the purchase60% is paid in the month following the purchase10% is paid in the second month following the purchaseBudgeted purchases are as follows:

81 Sultan Sundries must maintain a minimum cash balance of $34,000 At the beginning of February

the company’s cash balance was $60,000 The budget for February is as follows:

Total cash receipts $250,000Total cash disbursements $245,000

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82 DynaCare Products’ sales are all on account History indicates that sales will be collected as

follows:

Month following the sale 65%

Second month following the sale 8%

on hand The plastic costs $0.40 per pound How many buckets should Hanover produce duringMay?

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85 Samson Company has budgeted production for the next two months as follows:

Each unit requires 5 pounds of material Raw materials at the end of each month should equal 10% of the next month’s production requirements How many pounds will be budgeted for purchases of raw materials for July?

A 83,000 pounds

B 66,200 pounds

C 80,600 pounds

D 79,400 pounds

86 Green Company’s sales are 20% cash and 80% credit Of the credit sales, 60% are collected in the

month of sale and 30% in the month following the sale The balance is collected during the following month Budgeted sales data is as follows:

September $310,000How much is total Accounts Receivable at the end of August?

A $224,400

B $89,600

C $137,000

D $109,600

87 Kitchen Stuff produces spatulas made out of acrylic The company has estimated sales for June at

12,000, July at 12,800, August at 15,000, and September at 16,000 spatulas The company plans

to have 15% of the next month’s anticipated unit spatula sales and 22% of the next month’s acrylic needed for production on hand at the end of each month Each spatula uses 7 ounces of acrylic, which is purchased at a cost of $0.22 per ounce How much is budgeted production for July?

A 12,470 units

B 13,130 units

C 15,050 units

88 Teva Sandals’ sales for the next three months are as follows:

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89 When budgets are used for evaluation, what is the difference between budgeted and actual

90 The main difference between a static budget and a flexible budget is that the static budget is

A constructed using a top-down approach, while the flexible budget uses a bottom-up

approach

B based on units produced, while a flexible budget is based on units sold

C for a single level of activity, while a flexible budget can be adjusted for different activity

levels

D used only for selling and administrative costs, while the flexible budget is used for

manufacturing costs

91 Wilson, Inc created a spreadsheet that utilized a set of budget relationships that could be adjusted

for various activity levels What did Wilson create?

A A capital budget

B A static budget

C A standard budget

D A flexible budget

92 Which of the following assumptions is made while preparing a flexible manufacturing overhead

budget, when production levels change?

A Total fixed costs remain the same

B The variable cost per unit changes

C Fixed costs per unit remain the same

D Total overhead costs remain the same when sales remain the same

93 Exclusive Decor’s budgeted income statement for 2014 follows:

How much income before taxes will appear on a flexible budget for 11,000 units?

A $35,860

B $40,140

C $85,140

D $40,360

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94 Yemesi, Inc.’s budgeted income statement for 2014 follows:

Fixed selling & admin expenses 12,000 218,000

How much income before taxes would appear on a flexible budget for 84,000 units?

How much would be reported as income before taxes on a flexible budget for 5,000 units?

How much would be reported for total variable costs on a flexible budget at 75,000 units?

A $75,000

B $300,000

C $225,000

97 Managers can create budget slack by

A understating their actual level of sales

B reducing their sales forecasts

C understating expected expenses

D shifting income into another accounting period

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98 Which of the following are problem behaviors that may occur when budgets are used for both

planning and control?

A Shift discretionary expenses to the next period

B Encourage customers to take shipments at the end of the period even though they do not

want the products until the next period

C Fraudulently recognize the next period’s sales in the current period

D Understate budgeted expenses

100 Management by exception refers to the practice of only investigating variances

A in product costs

B in which the actual cost exceeds the budget

C that are material in dollar amounts relative to budgeted amounts

D in areas of the company that have been performing poorly

101 Under what circumstances may a manager be motivated to defer a shipment until the next period?

A When budgeted costs have been overstated for the current year

B When revenue for the current year is less than expected

C When this year’s budgeted income is less than expected

D When the budgeted income for the current year has already been attained

102 Workman Company had sales of 15,000 units of its only product in the first quarter of 2013 In

the first quarter of 2014, Workman anticipates selling 20% more units than it sold in the first quarter of 2013, with a selling price of $68 per unit What is the amount of sales revenue that will appear in the budgeted income statement for the first quarter of 2014?

A $1,224,000

B $1,020,000

C $1,468,800

D $816,000

103 Hanson Meters had sales of 4,000, 4,500, 6,000, and 5,000 water meters during each of the four

quarters of 2013 Hanson expects sales in each quarter of 2014 to be 10% more than the

respective quarter of 2013 Each meter sells for $150 What amount will appear as budgeted total sales revenue for 2014?

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104 Bombay Cabinet Store’s policy is to keep 25% of the next month’s sales in ending inventory If

sales are expected to be 5,000 units in March, 5,800 units in April, and 6,000 units in May, how many units should be produced in April?

A 7,300 units

B 5,750 units

C 6,050 units

D 5,850 units

105 Cross Country Apparel plans to sell 22,000 ladders in May and 34,000 ladders in June Cross

Country keeps 10% of the next month’s sales as ending inventory If April’s ending inventory reflects this policy, how many ladders should be produced in May?

A 23,200 ladders

B 20,800 ladders

C 25,400 ladders

D 19,800 ladders

106 Marks Company produces staplers Its sales are projected to be 26,000 in June, 28,000 in July,

and 30,000 in August The company plans to have 15% of the next month’s sales in inventory at the end of each month How many staplers must Marks produce in July?

A 28,300 units

B 28,600 units

C 28,000 units

D 32,500 units

107 RasDyne Chemicals has 40,000 pounds of krypton in inventory at the beginning of August The

company plans to produce 6,000 rack joints made out of krypton in August If each rack joint requires 30 pounds of krypton and RasDyne wants 50,000 pounds of krypton in inventory at the end of August, how many pounds of krypton should the company plan to purchase during August?

A 170,000 pounds

B 180,000 pounds

C 190,000 pounds

D 210,000 pounds

108 Budget Electronics is planning to sell 2,200 and produce 2,000 wicker baskets during June Each

unit requires 120 linear feet of wicker and 0.70 hours of direct labor Wicker costs $0.35 per linear foot and employees of the company are paid $13.00 per hour Manufacturing overhead is applied at a rate of 140% of direct labor costs The company wants to have 10% of the wicker needed for the next month’s production available at the end of each month The expected

production in July is 1,800 baskets How many linear feet of wicker should the company plan to buy during June?

A 807,840 feet

B 237,600 feet

C 239,980 feet

D 242,400 feet

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production in July is 1,800 baskets What is the total amount that will be budgeted for direct laborfor June?

A $18,200

B $26,000

C $20,020

D $28,600

production in July is 1,800 baskets How much manufacturing overhead will be charged to each basket sold during June?

A $12.74

B $9.10

C $18.20

D $11.58

production in July is 1,800 baskets What is the unit cost of each basket produced in June?

A $51.66

B $47.34

C $52.08

112 Walker Entertainment is a distributor of video games and expects its video game sales to be as

follows for the first 4 months of 2014:

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113 Walker Entertainment is a distributor of video games and expects its video game sales to be as

follows for the first 4 months of 2014:

A $20,000

B $83,000

C $71,000

D $81,000

115 Forever 39 has found that 30% of its sales are collected in the month of the sale and the

remainder of the sales is collected in the next month If sales are expected to be $100,000 in April, $120,000 in May, and $80,000 in June, what is the estimated amount of cash receipts for May?

A $114,000

B $106,000

C $92,000

D $108,000

116 In recent years, Sands Retro Clothing has collected 45% of its sales in the month of the sale, 53%

in the month that follows the sale The other 2% is not collected During the first five months of

2014, Sands is anticipating sales of $330,000, $415,000, $540,000, $260,000, and $370,000, respectively What is the amount of cash receipts budgeted for March?

A $472,950

B $380,800

C $473,750

D $462,950

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117 Haverti Auto Mart has budgeted the following amounts for auto part sales in 2014:

119 Jazzy Janitors has found that only 10% of its invoiced amounts are paid in the same month that

the work is completed 60% are paid in the month after the work is completed and 30% are paid

in the second month after the work is completed During December, 2013, Jazzy Janitors’

invoiced $200,000 to clients Projected revenues for the first six months of 2014 are given below:

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the work is completed Sixty percent are paid in the month after the work is completed and 30% are paid in the second month after the work is completed During December 2013, Jazzy Janitors’ invoiced $200,000 to clients Projected revenues for the first six months of 2014 are given below:

A $95,000

B $100,000

C $85,000

D $115,000

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123 DuraBlend First Aid started operations on January 1, 2014 On that date, the only assets were

cash of $13,000, and inventory of $600 consisting of direct materials The company sells first aid kits for $18 each Additional information concerning the company’s operations follows:

• Variable costs of production are $5 for each kit consisting of direct materials of $2.00, direct labor totaling $1.80, and $1.20 per unit in variable overhead

• Other expenses include $1 per first aid kit in variable selling expenses, $22,000 per month in fixed production costs, and $14,000 per month in fixed selling and administration costs

• Sales are collected 40% in the month of sales and 60% in the month after the sale

• All expenses are paid in the month they are incurred except materials that are paid in the month following purchase

• The company plans its ending inventory of first aid kits to be 20% of the units to be sold during the next month Direct material inventory is budgeted to be equal to 10% of the next month’s production requirements

• Sales in units are forecasted as follows:

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127 Bake Time makes and sells baking pans Each pan uses 0.70 pounds of aluminum Budgeted

production and sales of pans in units for the next five months is as follows:

June July August September OctoberBudgeted production 22,180 21,940 24,940 26,240 23,720

Budgeted sales 22,400 21,300 24,500 26,700 24,400

The company wants to maintain monthly ending inventories of aluminum equal to 15% of the following month's budgeted production needs, and monthly inventories of pans equal to 20% of the number needed for next month’s sales The cost of aluminum is $0.85 per pound.How much

is the cost of budgeted material purchases for August?

A $14,693

B $17,595

C $14,955

128 Bake Time makes and sells baking pans Each pan uses 0.70 pounds of aluminum Budgeted

production and sales of pans in units for the next five months is as follows:

June July August September OctoberBudgeted production 22,180 21,940 24,940 26,240 23,720

Budgeted sales 22,400 21,300 24,500 26,700 24,400

The company wants to maintain monthly ending inventories of aluminum equal to 15% of the following month's budgeted production needs, and monthly inventories of pans equal to 20% of the number needed for next month’s sales The cost of aluminum is $0.85 per pound How much

is budgeted raw materials to be reported on the company’s balance sheet at August 31?

A $2,342

B $3,936

C $2,755

D $3,346

129 Harkin Products expects to make purchases of $65,000 in January; $80,000 in February; $50,000

in March; and $90,000 in April Purchases are paid 30% in the month of purchase and 70% in the month after purchase How much is budgeted accounts payable at March 31?

A $35,000

B $71,000

C $59,000

130 Sharone Janitorial Supplies expects to make purchases of $100,000 in January; $240,000 in

February; $350,000 in March; and $230,000 in April Purchases are paid 30% in the month of purchase and 70% in the month after purchase How much is budgeted accounts payable at the end of February?

A $70,000

B $168,000

C $142,000

D $72,000

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131 Milkway Dairy Blend buys and resells 5 gallons containers of Greek yogurt for $38 per container.

Milkway pays $20 per container to buy the yogurt Additionally, Milkway has the following information:

• Production fixed costs are $95,000 per month and office furniture depreciation is $7,000 per month

• Inventory at the end of each month is maintained at 30% of the next month's projected cost ofsales

• All sales are on credit Collections are made 40% in the month of sale and 60% in the month after sale

• All selling and administrative expenses are paid in the month after they are incurred

• Inventory purchases are paid 30% in the month of purchase and 70% in the month after purchase

• Budgeted monthly unit sales for the first five months of 2014 are as follows:

January 11,000 containersFebruary 13,000 containers

132 Milkway Dairy Blend buys and resells 5 gallons containers of Greek yogurt for $38 per container

• Inventory at the end of each month is maintained at 30% of the next month's projected sales

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133 Milkway Dairy Blend buys and resells 5 gallons containers of Greek yogurt for $38 per container.

134 Milkway Dairy Blend buys and resells 5 gallons containers of Greek yogurt for $38 per container

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135 Tiny Toons distributes cartoon DVDs that sell for $12 each Tiny Toons pays $7 per DVD to buy

the product Selling costs of $1 per unit are incurred to deliver the DVDs to the customer This is paid in cash when the product is sold Tiny Toons has $50,000 per month in fixed selling and administrative expenses (including $3,000 in depreciation), which are paid half in the month incurred and half in the next month It is Tiny’s policy to maintain an inventory at the end of each month equal to 30% of the next month’s projected unit sales

Tiny Toons makes 30% of sales in cash, and the remainder are on credit Credit sales are collected in the month after sale Budgeted monthly sales for the first five months of 2014 are:

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139 History Entertainment distributes a DVD that sells for $12 per unit History pays $7 per unit to

buy the product Selling cost of $1 per unit is incurred to deliver the product to the customer This

is paid in cash when the product is sold History has $50,000 per month in fixed selling and administrative expenses (including $3,000 in depreciation), which are paid half in the month incurred and half in the next month It is History’s policy to maintain an inventory at the end of each month equal to 30% of the next month’s projected cost of sales History makes 30% of sales

in cash, and the rest are on credit Credit sales are collected in the month after sale Budgeted monthly sales for the first five months of 2014 are as follows:

140 Maxim Fasteners distributes giant binder clips that sell for $3 each Maxim pays $1.20 to buy

each clip The company has $4,000 per month in fixed costs Policies and other information follow:

• Inventory is maintained at the end of each month equal to 10% of the next month's projected sales in units

• Purchases are paid 40% in the month acquired and the balance in the month after

• All sales are on credit, and 30% are collect in the month of sale and 70% in the month after sale

• Budgeted monthly sales in units for the first five months of 2014 are as follows:

• Variable selling and administrative costs are $0.50 per clip

How much is the budgeted purchase cost of inventory during March?

A $7,200

B $8,640

C $8,400

D $9,480

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