THÔNG TIN TÀI LIỆU
Chapter Profit Planning True/False F Medium The usual starting point in budgeting is to make a forecast of cash receipts and cash disbursements F Medium Budgets are used for planning rather than for control of operations T Easy A continuous or perpetual budget is one which covers a 12month period but which is constantly adding a new month on the end as the current month is completed F Easy Control involves developing objectives and preparing the various budgets to achieve those objectives T Easy One of the distinct advantages of a budget is that it can help to uncover potential bottlenecks before they occur T Easy A selfimposed budget can be a very effective control device in an organization F Medium Sales forecasts are drawn up after the cash budget has been completed since only then are the funds available for marketing known T Medium A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm F Medium The direct materials to be purchased for a period can be obtained by subtracting the desired ending inventory of direct materials from the total direct materials needed for the period 10 F Hard In companies that have "no layoff" 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 Managerial Accounting, 9/e 65 11 F Medium 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) 12 F Hard The beginning cash balance is not included on the cash budget since the cash budget deals exclusively with cash flows rather than with balance sheet amounts 13 F Easy When using the selfimposed budget approach, it is generally best for top management to accept all budget estimates without question in order to minimize adverse behavioral responses from employees 14 T Medium (Appendix) The economic order quantity is that point where the total costs of ordering inventory just equal the total costs of carrying inventory 15 T Medium (Appendix) As the lead time increases, the safety stock should also increase Multiple Choice 16 B Easy CMA adapted 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 17 B Easy CMA adapted 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 18 C Easy 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 66 Managerial Accounting, 9/e 19 B Easy 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 20 C Easy CMA adapted The master budget process usually begins with the: a. production budget b. operating budget c. sales budget d. cash budget 21 C Easy CMA adapted 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 22 C Medium (Appendix) The economic order quantity (EOQ) in an inventory management system is: a. the order quantity that yields the lowest unit purchase cost b. the order quantity that yields the lowest inventory handling cost c. the order quantity that yields the lowest total cost of ordering and carrying inventory d. the order quantity with the largest purchase discount 23 D Medium CMA adapted (Appendix) The Stewart Company uses the Economic Order Quantity (EOQ) model in its inventory management. A decrease in which of the following variables would increase the company's EOQ? a. Annual sales b. Cost per order c. Safety stock level d. Inventory carrying costs 24 D Medium (Appendix) The level of safety stock depends on all of the following except: a. the level of uncertainty of the sales forecast b. the level of customer dissatisfaction when goods are unavailable c. the level of uncertainty in the lead time for shipments from suppliers d. the ordering cost per order Managerial Accounting, 9/e 67 25 B Easy CMA adapted A method of budgeting in which the cost of each program must be justified every year is called: a. operational budgeting b. zerobased budgeting c. continuous budgeting d. responsibility accounting 26 A Easy CMA adapted 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 27 D Medium Parlee Company's sales are 30% in cash and 70% on credit. Sixty percent 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: January February March April Total sales $60,000 $70,000 $50,000 $30,000 Total cash receipts in April would be budgeted to be: a. $38,900 b. $47,900 c. $27,230 d. $36,230 28 Difficult Budgeted sales in Allen Company over the next four months are given below: September October November December Budgeted sales $100,000 $160,000 $180,000 $120,000 Twentyfive percent of the company's sales are for cash and 75% are on account. Collections for sales on account follow a stable pattern as follows: 50% of a month's sales are collected in the month of sale, 30% are collected in the month following sale, and 15% are collected in the second month following sale The remainder are uncollectible. Given these data, cash collections for December should be: a. $153,000 b. $138,000 c. $120,000 d. $103,500 68 Managerial Accounting, 9/e 29 D Medium 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: Month Sales April $100,000 May 120,000 June 110,000 Cash collections in June would be: a. $113,400 b. $110,000 c. $111,000 d. $115,500 30 D Medium 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: January . $160,000 February 185,000 March . 190,000 April . 170,000 May 200,000 June 180,000 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 Managerial Accounting, 9/e 69 31 A Easy 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 32 C Medium 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: June July August September Budgeted sales in units 30,000 40,000 60,000 50,000 Budgeted production for August would be: a. 62,000 units b. 70,000 units c. 58,000 units d. 50,000 units 33 B Hard Friden Company has budgeted sales and production over the next quarter as follows: April May June Sales in units . 100,000 120,000 ? Production in units 104,000 128,000 156,000 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 34 B Medium Walsh Company expects sales of Product W to be 60,000 units in April, 75,000 units in May and 70,000 units in June. The company desires that the inventory on hand at the end of each month be equal to 40% of the next month's expected unit sales. Due to excessive production during March, on March 31 there were 25,000 units of Product W in the ending inventory. Given this information, Walsh Company's production of Product W for the month of April should be: a. 60,000 units b. 65,000 units c. 75,000 units d. 66,000 units 70 Managerial Accounting, 9/e 35 C Medium CMA adapted Superior Industries' sales budget shows quarterly sales for the next year as follows: Quarter Sales (units) First 10,000 Second 8,000 Third 12,000 Fourth 14,000 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 36 A Medium The Tobler Company has budgeted production for next year as follows: Quarter . First Second Third Fourth Production in units 10,000 12,000 16,000 14,000 Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year totals 4,000 lbs. 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 lbs b. 62,400 lbs c. 56,800 lbs d. 50,400 lbs 37 D Hard Marple Company's budgeted production in units and budgeted raw materials purchases over the next three months are given below: January February March Budgeted production (in units) 60,000 ? 100,000 Budgeted raw materials purchases (in pounds) 129,000 165,000 188,000 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 Managerial Accounting, 9/e 71 38 A Medium The Waverly Company has budgeted sales for next year as follows: Quarter First Second Third Fourth Sales in units 12,000 14,000 18,000 16,000 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 39 A Hard The Willsey Merchandise Company has budgeted $40,000 in sales for the month of December. The company's cost of goods sold is 30% of sales. If the company has budgeted to purchase $18,000 in merchandise during December, then the budgeted change in inventory levels over the month of December is: a. $6,000 increase b. $10,000 decrease c. $22,000 decrease d. $15,000 increase 40 B Easy 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 72 Managerial Accounting, 9/e 41 D Easy Avril Company makes collections on sales according to the following schedule: 30% in the month of sale 60% in the month following sale 8% in the second month following sale The following sales are expected: Expected Sales January . $100,000 February 120,000 March . 110,000 Cash collections in March should be budgeted to be: a. $110,000 b. $110,800 c. $105,000 d. $113,000 42 B Hard 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 43 A Hard CMA adapted (Appendix) Canesco Enterprises uses 84,000 units of Part 256 in its production over a 300day work year. The usual lead time for delivery of the part from the supplier is six days; occasionally, the lead time has been as high as eight days. The company wants to implement a safety stock policy (it presently carries no safety stocks). The safety stock size, the likely effect on stockout costs of implementing the safety stock, and the likely effect on carrying costs of implementing the safety stock, respectively, would be: a. 560 units, decrease, increase b. 560 units, increase, decrease c. 1,680 units, decrease, increase d. 1,680 units, increase, no change Managerial Accounting, 9/e 73 44 B Medium (Appendix) Karpov Enterprises, a wholesaler of electronic instruments, uses the economic order quantity model in its inventory management. Data concerning one product appear below: Total units purchased annually 810 Costs to place one order $10 Selling price per unit $40 Annual cost to carry one unit in stock $ 2 The economic order quantity (EOQ) for this product would be: a. 18 units b. 90 units c. 81 units d. 180 units 45 D Medium CPA adapted (Appendix) The Aron Company requires 40,000 units of Product Q for the year. The units will be used evenly throughout the year. It costs $60 to place an order. It costs $10 to carry a unit in inventory for the year. What is the economic order quantity (EOQ) rounded to the nearest whole unit? a. 400 b. 490 c. 600 d. 693 46 A Medium CPA adapted (Appendix) The following data relate to a part used by the Henry Company: Units required per year 30,000 Cost of placing an order . $ 400 Unit carrying cost per year $ 600 Assuming that the units will be used evenly throughout the year, what is the economic order quantity (EOQ)? a. 200 b. 300 c. 400 d. 500 47 D Hard CPA adapted (Appendix) Politan Company manufactures 4,000 bookcases a year Setup costs are $20 for a production run. Using the economic order quantity (EOQ) approach, the optimal production lot size would be 200 units when the cost of carrying one bookcase in inventory for one year is: a. $0.50 b. $1.00 c. $2.00 d. $4.00 74 Managerial Accounting, 9/e 80 A Medium Refer To: 912 If the company has budgeted to sell 20,000 units of Product SW in October then the total budgeted variable selling and administrative expenses for October will be: a. $45,000 b. $40,000 c. $56,250 d. $78,000 81 B Hard Refer To: 912 If the budgeted cash disbursements for selling and administrative expenses for November total $123,250, then how many units of Product SW does the company plan to sell in November (rounded to the nearest whole unit)? a. 33,444 units b. 25,000 units c. 22,952 units d. 20,111 units 82 D Medium Refer To: 912 If the company has budgeted to sell 24,000 units of Product SW in September, then the total budgeted fixed selling and administrative expenses for September would be: a. $54,000 b. $48,000 c. $67,000 d. $78,000 Reference: 913 The Culver Company is preparing its Manufacturing Overhead Budget for the third quarter of the year. Budgeted variable factory overhead is $3.00 per unit produced; budgeted fixed factory overhead is $75,000 per month, with $16,000 of this amount being factory depreciation 83 D Easy Refer To: 913 If the budgeted production for July is 6,000 units, then the total budgeted factory overhead for July is: a. $77,000 b. $82,000 c. $85,000 d. $93,000 84 B Easy Refer To: 913 If the budgeted production for August is 5,000 units, then the total budgeted factory overhead per unit is: a. $15 b. $18 c. $20 d. $22 84 Managerial Accounting, 9/e 85 D Medium Refer To: 913 If the budgeted cash disbursements for factory overhead for September are $80,000, then the budgeted production for September must be: a. 7,400 units b. 6,200 units c. 6,500 units d. 7,000 units Reference: 914 The Bandeiras Company, a merchandising firm, has budgeted its activity for December according to the following information: I. Sales at $550,000, all for cash II. Merchandise inventory on November 30 was $300,000 III. Budgeted depreciation for December is $35,000 IV. The cash balance at December 1 was $25,000 V. Selling and administrative expenses are budgeted at $60,000 for December and are paid in cash VI. The planned merchandise inventory on December 31 is $270,000 VII. The invoice cost for merchandise purchases represents 75% of the sales price. All purchases are paid for in cash 86 D Easy Refer To: 914 The budgeted cash receipts for December are: a. $412,500 b. $137,500 c. $585,000 d. $550,000 87 B Hard Refer To: 914 The budgeted cash disbursements for December are: a. $382,500 b. $442,500 c. $472,500 d. $477,500 88 C Hard Refer To: 914 The budgeted net income for December is: a. $107,500 b. $137,500 c. $42,500 d. $77,500 Managerial Accounting, 9/e 85 Reference: 915 A cash budget by quarters for the Carney Company is given below (note that some data are missing). Missing data amounts have been keyed with either question marks or lower case letters (a, b, c, etc.); these lower case letters will be referred to in the questions that follow. (It may be necessary to calculate a value for items where a question mark appears.) The company requires a minimum cash balance of at least $10,000 to start a quarter. All data are in thousands Carney Corporation Cash Budget Quarters o 1 2 3 4 Cash balance, beginning $16 $ e $13 $10 Add collections from customers a 70 67 80 Total cash available ? ? 80 90 Less disbursements: Purchase of inventory 31 c 40 35 Operating expenses 35 22 ? 15 Equipment purchases 10 14 19 0 Dividends . 0 6 0 5 Total disbursements . 66 ? f 55 Excess (deficiency) of cash available over disbursements 7 17 (2) 35 Financing: Borrowings b 12 Repayments (including interest) . d (21) Total financing ? ? 12 (21) Cash balance, ending . 10 ? $10 $14 89 C Medium Refer To: 915 The collections from customers during the first quarter (item a) are: a. $50 b. $60 c. $57 d. $73 90 D Easy Refer To: 915 The borrowing required during the first quarter to meet the minimum cash balance (item b) is: a. $0 b. $7 c. $10 d. $3 91 D Hard Refer To: 915 The cash disbursed for purchases during the second quarter (item c) is: a. $13 b. $55 c. $9 d. $21 86 Managerial Accounting, 9/e 92 A Medium Refer To: 915 The repayment (including interest) of financing during the second quarter (item d) is: a. $4 b. $0 c. $17 d. $7 93 A Easy Refer To: 915 The cash balance at the beginning of the second quarter (item e) is: a. $10 b. $14 c. $0 d. $7 94 C Easy Refer To: 915 The total disbursements during the third quarter (item f) is: a. $84 b. $78 c. $82 d. $59 Reference: 916 (Appendix) Ryerson Computer Furniture Inc. (RCF) manufactures a line of office chairs. The annual demand for the chairs is 5,000 units. The annual cost to carry one chair in inventory is $10 and the cost to set up a production run is $1,000. There are no chairs on hand in inventory, and RCF management has scheduled four production runs of chairs for the coming year, the first of which is to be run immediately. A total of 1,250 chairs will be produced in each of the production runs. RCF has 250 business days per year and sales occur uniformly throughout the year 95 C Medium CMA adapted Refer To: 916 If RCF does not maintain a safety stock, the estimated total inventory carrying costs for the chairs for the coming year based on their current production schedule is: a. $4,000 b. $5,000 c. $6,250 d. $12,500 96 D Medium CMA adapted Refer To: 916 The number of production runs per year that would minimize the sum of the inventory carrying costs and setup costs for the coming year is: a. 1 production run b. 2 production runs c. 4 production runs d. 5 production runs Managerial Accounting, 9/e 87 97 C Medium CMA adapted Refer To: 916 A safety stock of a fiveday supply of computer chairs would increase RCF's planned average inventory by: a. 20 units b. 5 units c. 100 units d. 50 units Reference: 917 (Appendix) Cantor Creations, which has 250 business days per year, manufactures desks for desktop workstations. The annual demand for the desks is estimated to be 5,000 units. The annual cost of carrying one unit in inventory is $10, and the cost to set up a production run is $1,000. Cantor has scheduled four equal production runs for the coming year, the first to begin immediately. Currently, there are no desks on hand. Assume that sales occur uniformly throughout the year and that production is instantaneous 98 B Hard CMA adapted Refer To: 917 If Cantor Creations does not maintain a safety stock, the estimated total carrying costs for the desks for the coming year is: a. $5,000 b. $6,250 c. $4,000 d. $10,250 99 A Hard CMA adapted Refer To: 917 If Cantor Creations were to schedule only two equal production runs of the desks for the coming year, the sum of carrying costs and setup costs would increase (decrease) by: a. $4,250 b. $(2,000) c. $6,250 d. $(250) 100 B Hard CMA adapted Refer To: 917 A safety stock of a fiveday supply of desks would increase the number of units in Cantor Creations' planned average inventory by: a. 50 units b. 100 units c. 250 units d. 500 units Reference: 918 (Appendix) The Huron Corporation purchases 60,000 headbands per year. The average purchase lead time is 20 working days. Maximum lead time is 27 working days. The corporation works 240 days per year 101 C Medium CMA adapted Horun Corporation should carry a safety stock of: a. 5,000 units b. 6,750 units c. 1,750 units d. 5,250 units 88 Managerial Accounting, 9/e Refer To: 918 102 B Medium CMA adapted Refer To: 918 Huron Corporation should reorder headbands when the quantity in inventory reaches: a. 5,000 units b. 6,750 units c. 1,750 units d. 5,250 units Essay 103 Medium Clay Company has projected sales and production in units for the second quarter of the coming year as follows: April May June Sales . 50,000 40,000 60,000 Production 60,000 50,000 50,000 Cashrelated 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 the remainder from March) Required: a. Prepare a schedule for each month showing budgeted cash disbursements for the Clay Company b. Prepare a schedule for each month showing budgeted cash receipts for Clay Company Managerial Accounting, 9/e 89 Answer: April May June Production units 60,000 50,000 50,000 Cash required per unit $5 $5 $5 Production costs $300,000 $250,000 $250,000 Cash disbursements: April May June Production this month (40%) $120,000 $100,000 $100,000 Production prior month (60%) . 190,000 180,000 150,000 Selling and administrative . 100,000 100,000 100,000 Total disbursements $410,000 $380,000 $350,000 Payments relating to the prior month (March) in April represent the balance of accounts payable at March 31 April May June Sales units 50,000 40,000 60,000 Sales price X $14 x $14 x $14 Total sales $700,000 $560,000 $840,000 April May June Cash receipts: February sales $ 90,000 March sales 307,500 $102,500 April sales 420,000 210,000 $ 70,000 May sales 336,000 168,000 June sales . 504,000 Total receipts $817,500 $648,500 $742,000 90 Managerial Accounting, 9/e 104 Medium Tilson Company has projected sales and production in units for the second quarter of the coming year as follows: April May June Sales 55,000 45,000 65,000 Production . 65,000 55,000 55,000 Cashrelated production costs are budgeted at $7 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 $110,000 per month. The accounts payable balance on March 31 totals $193,000, which will be paid in April. All units are sold on account for $16 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 $520,000 ($100,000 from February's sales and the remainder from March) Required: a. Prepare a schedule for each month showing budgeted cash disbursements for the Tilson Company b. Prepare a schedule for each month showing budgeted cash receipts for Tilson Company Answer: April May June Production units 65,000 55,000 55,000 Cash required per unit $7 $7 $7 Production costs $455,000 $385,000 $385,000 Cash disbursements: April May June Production this month (40%) $182,000 $154,000 $154,000 Production prior month (60%) . 193,000 273,000 231,000 Selling and administrative . 110,000 110,000 110,000 Total disbursements $485,000 $537,000 $495,000 Managerial Accounting, 9/e 91 Payments relating to the prior month (March) in April represent the balance of accounts payable at March 31 April May June Sales units . 55,000 45,000 65,000 Sales price . X $16 x $16 x $16 Total sales . $880,000 $720,000 $1,040,000 April May June Cash receipts: February sales $100,000 March sales 315,000 $105,000 April sales 528,000 264,000 $ 88,000 May sales . 432,000 216,000 June sales 624,000 Total receipts $943,000 $801,000 $928,000 105 Medium At March 31 Streuling Enterprises, a merchandising firm, had an inventory of 38,000 units, and it had accounts receivable totaling $85,000. Sales, in units, have been budgeted as follows for the next four months: April . 60,000 May . 75,000 June 90,000 July 81,000 Streuling's board of directors has established a policy to commence in April that the inventory at the end of each month should contain 40% of the units required for the following month's budgeted sales The selling price is $2 per unit. Onethird of sales are paid for by customers in the month of the sale, the balance is collected in the following month Required: a. Prepare a merchandise purchases budget showing how many units should be purchased for each of the months April, May, and June b. Prepare a schedule of expected cash collections for each of the months April, May, and June 92 Managerial Accounting, 9/e Answer: a. April May June July Budgeted sales, in units 60,000 75,000 90,000 81,000 Desired ending inventory (40%) 30,000 36,000 32,400 Total needs 90,000 111,000 122,400 Less beginning inventory 38,000 30,000 36,000 Required purchases 52,000 81,000 86,400 b. April May June Budgeted sales, at $2 per unit $120,000 $150,000 $180,000 March 31 Accounts Receivable $85,000 April sales . 40,000 $ 80,000 May sales . 50,000 $100,000 June sales 60,000 Total cash collections $125,000 $130,000 $160,000 106 Hard TabComp Inc. is a retail distributor for MZB33 computer hardware and related software. TabComp prepares annual sales forecasts of which the first six months of the coming year are presented below Hardware Hardware Total Units Dollars Software Sales January . 130 $390,000 $160,000 $550,000 February 120 360,000 140,000 500,000 March . 110 330,000 150,000 480,000 April . 90 270,000 130,000 400,000 May 100 300,000 125,000 425,000 June 125 375,000 225,000 600,000 Cash sales account for 25% of TabComp's total sales, 30% of the total sales are paid by bank credit card, and the remaining 45% are on open account (TabComp's own charge accounts). The cash and bank credit card sale payments are received in the month of the sale. Bank credit card sales are subject to a four percent discount which is deducted immediately. The cash receipts for sales on open account are 70% in the month following the sale, 28% in the second month following the sale, and the remaining are uncollectible TabComp's monthend inventory requirements for computer hardware units are 30% of the next month's sales. The units must be ordered two months in advance due to long lead times quoted by the manufacturer Managerial Accounting, 9/e 93 Required: a. Calculate the cash that TabComp can expect to collect during April. Show all of your calculations b. Determine the number of computer hardware units that should be ordered in January. show all of your calculations Answer: a. The cash that TabComp can expect to collect during April is calculated below April cash receipts: April cash sales ($400,000 x 0.25) $100,000 April credit card sales ($400,000 x 0.30 x 0.96) 115,200 Collections on open account: March ($480,000 x 0.45 x 0.70) . 151,200 February ($500,000 x 0.45 x 0.28) 63,000 January (uncollectible) 0 Total collections $429,400 b. The number of units that TabComp should order in January is calculated as follows March sales 110 units Add desired ending inventory (90 units x 0.30) 27 units Total needs 137 units Less beginning inventory (110 units x 0.30) 33 units Required purchases 104 units 107 Medium The Doley Company has planned the following sales for the next three months: Jan Feb Mar Budgeted sales $40,000 $50,000 $70,000 Sales are made 20% for cash and 80% on account. From experience, the company has learned that a month's sales on account are collected according to the following pattern: Month of sale 60% First month following sale 30% Second month following sale 8% Uncollectible 2% The company requires a minimum cash balance of $5,000 to start a month. The beginning cash balance in March is budgeted to be $6,000 94 Managerial Accounting, 9/e Required: a. Compute the budgeted cash receipts for March b. The following additional information has been provide for March: Inventory purchases (all paid in March) $28,000 Operating expenses (all paid in March) $40,000 Depreciation expense for March $5,000 Dividends paid in March . $4,000 Prepare a cash budget in good form for the month of March, using this information and the budgeted cash receipts you computed for part (1) above. The company can borrow in any dollar amount and will not pay interest until April Answer: a. Cash sales, March: $70,000 x 20% . $14,000 Collections on account: Jan. sales: $40,000 x 80% x 8% 2,560 Feb. sales: $50,000 x 80% x 30% 12,000 Mar. sales: $70,000 x 80% x 60% 33,600 Total cash receipts $62,160 b. Cash balance, beginning . $ 6,000 Add cash receipts from sales 62,160 Total cash available . $68,160 Less disbursements: Inventory purchases 28,000 Operating expenses 40,000 Dividends 4,000 Total disbursements 72,000 Cash excess (deficiency) (3,840) Financing borrowing 8,840 Cash balance, ending $ 5,000 108 Medium CPA adapted Montero Corporation, a merchandising company, has provided the following budget data: Purchases Sales January $42,000 $72,000 February 48,000 66,000 March 36,000 60,000 April 54,000 78,000 May 60,000 66,000 Collections from customers are normally 70% in the month of sale, 20% in the month following the sale, and 9% in the second month following the sale. The balance is expected to be uncollectible. Montero pays for purchases in the month following the purchase. Cash disbursements for expenses other than merchandise purchases are expected to be $14,400 for May. Montero's cash balance at May 1 was $22,000 Managerial Accounting, 9/e 95 Required: a. Compute the expected cash collections during May b. Compute the expected cash balance at May 31 Answer: a. Expected Sales Collections March $60,000 x 9% = $ 5,400 April $78,000 x 20% = $15,600 May $66,000 x 70% = $46,200 Total $67,200 b Balance, May 1 . $22,000 Expected collections . 67,200 Expected disbursements April purchases to be paid in May $54,000 Cash disbursements for expenses 14,400 Total disbursements . 68,400 (1,200) Expected ending balance $20,800 109 Hard A sales budget is given below for one of the products manufactured by the Key Co.: January . 21,000 units February 36,000 units March 61,000 units April 41,000 units May 31,000 units June 25,000 units The inventory of finished goods at the end of each month should equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units Each unit of product requires three specialized electrical switches. Since the production of these specialized switches by Key's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year Required: Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March and in total for the quarter 96 Managerial Accounting, 9/e Answer: January February March April Budgeted sales (units) . 21,000 36,000 61,000 41,000 Add: Desired ending inventory 7,200 12,200 8,200 6,200 Total needs 28,200 48,200 69,200 47,200 Deduct: Beginning inventory. 4,000 7,200 12,200 8,200 Units to be produced . 24,200 41,000 57,000 39,000 January February March Quarter Units to be produced 24,200 41,000 57,000 122,200 Switches per unit x 3 x 3 x 3 x 3 Production needs 72,600 123,000 171,000 366,600 Add: Desired ending inventory 36,900 51,300 35,100 35,100 Total needs . 109,500 174,300 206,100 401,700 Deduct: Beginning inventory. 21,780 36,900 51,300 21,780 Required purchases 87,720 137,400 154,800 379,920 Beginning inventory, January 1: 72,600 x 0.3 = 21,780 Ending inventory, March 30: (39,000 x 3) x 0.3 = 35,100 110 Hard A sales budget is given below for one of the products manufactured by the OMI Co.: January 25,000 units February 40,000 units March 65,000 units April 45,000 units May 35,000 units June . 30,000 units The inventory of finished goods at the end of each month must equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units Each unit of product requires three pounds of specialized material. Since the production of this specialized material by OMI's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year Required: Prepare a budget showing the quantity of material to be purchased each month for January, February, and March and in total for the quarter Managerial Accounting, 9/e 97 Answer: January February March April Budgeted sales (units) 25,000 40,000 65,000 45,000 Add: Desired ending inventory 8,000 13,000 9,000 7,000 Total needs 33,000 53,000 74,000 52,000 Deduct: Beginning inventory 4,000 8,000 13,000 9,000 Units to be produced 29,000 45,000 61,000 43,000 January February March Quarter Units to be produced 29,000 45,000 61,000 135,000 Switches per unit x 3 x 3 x 3 x 3 Production needs . 87,000 135,000 183,000 405,000 Add: Desired ending inventory. 40,500 54,900 38,700 38,700 Total needs 127,500 189,900 221,700 443,700 Deduct: Beginning inventory 26,100 40,500 54,900 26,100 Required purchases . 101,400 149,400 166,800 417,600 Beginning inventory, January 1: 87,000 x 0.3 = 26,100 Ending inventory, March 30: (43,000 x 3) x 0.3 = 38,700 98 Managerial Accounting, 9/e
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