ACCOUNTING 7 MANAGEMENT ACCOUTING 1&2 BUDGETING SCORE NAME SECTIO N

TEST

1)Key Co. manufactures beanies. The budgeted units to be produced and sold are below:
August September Expected Production 3,100 2,800 Expected Sales 2,900 3,900

It takes 24 yards of yarn to produce a beanie. The company's policy is to maintain yarn at the end of each month equal to 5% of next month's production needs and to maintain a finished goods inventory at the end of each month equal to 20% of next month's anticipated production needs. The cost of yarn is P0.20 a yard. At August 1, 3,720 yards of yarn were on hand. Instructions Compute the budgeted cost of purchases.

2) The budget components for McLeod Company for the quarter ended June 30 appear below. McLeod sells trash cans for
P12 each. Budgeted production for the next four months is: April May June 26,000 units 46,000 units 29,000 units

McLeod desires to have trash cans on hand at the end of each month equal to 20 percent of the following months budgeted sales in units. On March 31, McLeod had 4,000 completed units on hand. The number of trash cans to be produced in April and May are 26,000 and 46,000, respectively. Seven pounds of plastic are required for each trash can. At the end of each month, McLeod desires to have 10 percent of the following months production material needs on hand. At March 31, McLeod had 18,200 pounds of plastic on hand. The materials used in production costs P0.60 per pound. Each trash can produced requires 0.10 hours of direct labor. Instructions Compute the cost of the plastic inventory at the end of May.

3) Seas, Inc. makes and sells buckets. Each bucket uses 3/4 pound of plastic. Budgeted production of buckets in units for
the next three months is as follows: Budgeted production April 21,000 May 20,000 June 24,000

The company wants to maintain monthly ending inventories of plastic equal to 25% of the following month's budgeted production needs. The cost of plastic is P2.12 per pound. Instructions Prepare a direct materials purchases budget for the month of May.

4) The budget components for McLeod Company for the quarter ended June 30 appear below. McLeod sells trash cans for
P12 each. Budgeted sales and production for the next three months are: Sales Production April 20,000 units 26,000 units May 50,000 units 46,000 units

June

30,000 units

29,000 units

McLeod desires to have trash cans on hand at the end of each month equal to 20 percent of the following months budgeted sales in units. On March 31, McLeod had 4,000 completed units on hand. Seven pounds of plastic are required for each trash can. At the end of each month, McLeod desires to have 10 percent of the following months production material needs on hand. At March 31, McLeod had 18,200 pounds of plastic on hand. The materials used in production cost P0.60 per pound. Each trash can produced requires 0.10 hours of direct labor. Instructions Determine how much the materials purchases budget will be for the month ending April 30.

5) Salem Company reported the following information for 2008:

Budgeted sales Budgeted purchases October P300,000 P120,000 November P320,000 P128,000 December P360,000 P144,00

All sales are on credit. Customer amounts on account are collected 60% in the month of sale and 40% in the following month.

Instructions Compute the amount of cash Salem will receive during November.

6) Johnson Company budgeted the following information for 2008:

Budgeted purchases May P104,000 June P110,000 July P102,000

Cost of goods sold is 40% of sales. Accounts payable is used only for inventory acquisitions. Johnson purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month. Selling and administrative expenses are budgeted at P40,000 for May and are expected to increase 5% per month. They are paid during the month of acquisition. In addition, budgeted depreciation is P10,000 per month. Income taxes are P38,400 for July and are paid in the month incurred.

Instructions Compute the amount of budgeted cash disbursements for July.

7) Cheney Company has budgeted direct materials purchases of P400,000 in March and P600,000 in April. Past experience
indicates that the company pays for 65% of its purchases in the month of purchase and the remaining 35% in the next month. Other costs are all paid during the month incurred. During April, the following items were budgeted: Wages expense Purchase of office equipment Selling and administrative expenses Depreciation expense Instructions Compute the amount of budgeted cash disbursements for April. P120,000 200,000 126,000 18,000

8) Robinson Inc. provided the following information:

Projected merchandise purchases April P92,000 May P78,000 June P66,000

Robinson pays 40% of merchandise purchases in the month purchased and 60% in the following month. General operating expenses are budgeted to be P31,000 per month of which depreciation is P3,000 of this amount. Robinson pays operating expenses in the month incurred. Robinson makes loan payments of P4,000 per month of which P450 is interest and the remainder is principal.

Instructions Calculate budgeted cash disbursements for May.

9) Sanders, Inc. provided the following information:

Projected merchandise purchases March P76,000 April P65,000 May P70,000

Sanders pays 40% of merchandise purchases in the month purchased and 60% in the following month. General operating expenses are budgeted to be P20,000 per month of which depreciation is P2,000 of this amount. Sanders pays operating expenses in the month incurred.

Instructions Calculate Sanders budgeted cash disbursements for May.

10) The beginning cash balance is P15,000. Sales are forecasted at P600,000 of which 80% will be on credit. 70% of credit
sales are expected to be collected in the year of sale. Cash expenditures for the year are forecasted at P375,000. Accounts Receivable from previous accounting periods totaling P9,000 will be collected in the current year. The company is required to make a P15,000 loan payment and an annual interest payment on the last day of every year. The loan balance as of the beginning of the year is P90,000, and the annual interest rate is 10%. Instructions Compute the excess of cash receipts over cash disbursements.

11) Herron Company has budgeted the following unit sales:

2008 April May June July Units 25,000 50,000 75,000 45,000

Of the units budgeted, 40% are sold by the Southern Division at an average price of P15 per unit and the remainder are sold by the Eastern Division at an average price of P12 per unit. Instructions Prepare separate sales budgets for each division and for the company in total for the second quarter of 2008.

12) Walker, Inc. makes and sells a single product, widgets. Three pounds of wackel are needed to make one widget.
Budgeted production of widgets for the next few months follows: September October 29,000 units 31,000 units

The company wants to maintain monthly ending inventories of wackel equal to 20% of the following month's production needs. On August 31, 9,000 pounds of wackel were on hand. Instructions How much wackel should be purchased in September?

13) Kelso Company manufactures two products, (1) Regular and (2) Deluxe. The budgeted units to be produced are as
follows: 2008 July August September October Units of Product Regular 10,000 6,000 9,000 8,000 Deluxe 15,000 10,000 14,000 12,000 Total 25,000 16,000 23,000 20,000

It takes 3 pounds of direct materials to produce the Regular product and 5 pounds of direct materials to produce the Deluxe product. It is the company's policy to maintain an inventory of direct materials on hand at the end of each month equal to 30% of the next month's production needs for the Regular product and 20% of the next month's production needs for the Deluxe product. Direct materials inventory on hand at June 30 were 9,000 pounds for the Regular product and 15,000 pounds for the Deluxe product. The cost per pound of materials is P5 Regular and P7 Deluxe.

Instructions Prepare separate direct materials budgets for each product for the third quarter of 2008.

14) Yount Company has budgeted the following unit sales:

January February March April May 2009 10,000 8,000 9,000 11,000 15,000 Units

The finished goods units on hand on December 31, 2008, was 1,000 units. Each unit requires 2 pounds of raw materials that are estimated to cost an average of P4 per pound. It is the company's policy to maintain a finished goods inventory at the end of each month equal to 10% of next month's anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 20% of the pounds needed for the following month's production. There were 3,920 pounds of raw materials on hand at December 31, 2008. Instructions For the first quarter of 2009, prepare (1) a production budget and (2) a direct materials budget.

15) Cerner Company has budgeted the following unit sales:

2008 Quarter 1 2 3 4 Units 70,000 40,000 50,000 80,000 Quarter 1 2009 Units 60,000

The finished goods inventory on hand on December 31, 2007 was 14,000 units. It is the company's policy to maintain a finished goods inventory at the end of each quarter equal to 20% of the next quarter's anticipated sales. Instructions Prepare a production budget for 2008.

END OF THE QUIZ