Garrison (Asian Edition) Practice Exam Chapter 10

Print these pages. Answer each of the following questions, explaining your answers or showing your work, as appropriate, and then compare your solutions to those provided at the end of the practice exam. 1. Fifty percent of the sales of Hanson Company sales are for cash; the rest are on credit. Seventy percent of the credit sales are collected in the month of sale, twenty percent in the month following sale, and five percent in the second month following sale. The remainder is expected to be uncollectible. Monthly sales are budgeted as follows: $280,000 for January, $240,000 for February, and $320,000 for March. Prepare a schedule of expected cash collections for the month of March.

2. Paragon Picture Gallery manufactures picture frames. Management believes that an ending inventory equal to 20% of the next month's sales strikes the appropriate balance between excessive and insufficient inventories. Each picture frame requires 1.5 direct labor hours. The average direct labor rate is $10.00 per hour. Budgeted sales of picture frames are 3,200 units in January, 4,800 units in February, and 4,000 in March. Part (a) Prepare a production budget for February.

Part (b) Prepare a direct labor budget for February.

3. Master Manufacturing Company has budgeted production for next year as follows: First Quarter 80,000 Second Quarter 96,000 Third Quarter 128,000 Fourth Quarter 112,000

Production in units

Ten pounds of raw materials are required for each unit produced. Raw materials on hand at the beginning of the year total 20,000 lbs. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Prepare a direct materials budget for the second quarter.

GNBCY Practice Exam Solutions Chapter 10

1. Solution: Collected during March $112,000 160,000 272,000 24,000 7,000 $303,000

Month of Sale March: Credit Cash February January Total cash collections

Calculations ($320,000 x .50 x .70) ($320,000 x .50) ($240,000 x .50 x .20) ($280,000 x .50 x .05)

2. Part (a) Solution: Budgeted production for February would be determined as follows: Sales Plus planned ending inventory (4,000 x .20) Less beginning inventory (4,800 x .20) Units to be produced Part (b) Solution: Required production in frames Direct labor hours required per frame Total direct labor hours needed Direct labor cost per hour Total direct labor cost 3. Solution: Required for: Second quarter production (96,000 x 10 lbs.) Planned ending inventory (128,000 x .10 x 10 lbs.) Less planned beginning inventory (96,000 x .10 x 10 lbs.) Raw materials to be purchased (pounds) 960,000 128,000 (96,000) 992,000 4,800 800 (960) 4,640 4,640 1.5 6,960 $10.00 $69,600