Professional Documents
Culture Documents
Budgeting
Budgeting
AND
OPERATING
BUDGET
Past collections experienced by Thor Company indicate 60% of
the net sales billed in a month are collected during the month of
sales, 30% are collected in the following month. And 10% are
collected in the second following month. A record of monthly net
sales of previous month is as follows:
ANSWERS: 1. B 2. D
Washington Company has the following 2012 budget data:
B
Montana Company’s budget contains the following information:
Units
Beginning finished goods inventory 85
Beginning work-in-process in equivalent units 10
Desired ending finished goods inventory 100
Desired ending work-in-process in equivalent units 40
Projected sales 1,800
D
5. Josefina Company expects to manufacture and sell 30,000
baskets in 2012 for P 6 each. There are 3,000 baskets in
beginning finished goods inventory with target ending inventory
of 4,000 baskets. The company keeps no work in process
inventory.
A
6. A company’s product has an expected 4-year life cycle from research, development,
and design through its withdrawal from the market. Budgeted costs are:
The company plans to produce 200,000 units and price the product at 125% of the
whole life unit cost. Thus, the budgeted unit selling price is
a. P 15 c. P 36
b. P 31 d. P 45
D
7. Following is the sales budget of U2 Company for the period January to June 2013:
MONTHS UNITS
January 100,000
February 90,000
March 90,000
April 80,000
May 70,000
June 70,000
The company’s projection is to have inventory on hand at the end of each month
equal to 70% of the sales for the month following. It is assumed that the inventory at
the end of December 2013 will meet this requirement. It is also estimated that the
80,000 units will be sold in July 2013.
What is the total production budget in units for the six months period ending June 30,
2013?
a. 556,000 c. 524,000
b. 486,000 d. 479,000
B
8. Backstreet Girls Corporation plans to sell 200, 000 units of
product XEY in July and anticipated a growth sales of 5% per
month. The target ending inventory in units of the product is
80% of the next month’s estimated sales. There are 150,000
units in inventory as of the end of June.
C
9. Colorado Company desires an ending inventory of P 60,000. It
expects sales of P 120,000 and has a beginning inventory of
P 40,000. Cost of sales is 60% of sales.
C
10. Nebraska Company, a merchandising firm, is preparing its master budget and has
gathered the following data to help budget cash disbursements:
Budgeted data:
Desired decrease in inventories 70,000
Cost of Goods Sold P 1,680,000
Desired decrease in accounts payable 150,000
All of the accounts payables are for inventory purchases and all inventories are
purchased on account. What are the estimated cash disbursements for inventories
for the budget period?
a. P 1,460,000
b. P 1,600,000
c. P 1,900,000
d. P 1,760,000
D
SEATWORK
1. The projected sales price for a new product (which is still
in the development stage of the product life cycle) is P50.
The company has estimated the life-cycle cost to be P30
and the first-year cost to be P60. On this type of product,
the company requires a P12 per unit profit. What is the
target cost of the new product?
a. P60 c. P38
b. P30 d. P43
2. The preparation of an organization's budget
Ivory's expected sales for June are P150,000. What were total
sales for April?
a. P150,000 c. P 70,000
b. P 72,414 d. P140,000
4. Bali Company has a policy of maintaining an inventory of
finished goods equal to 30 percent of the following month's
sales. For the forthcoming month of March, Bali has
budgeted the beginning inventory at 30,000 units and the
ending inventory at 33,000 units. This suggests that
a. 37,000 units
b. 30,000 units
c. 26,000 units
d. 14,000 units
10. New Mexico Company plans to sell 24,000 units of Product
A in July and 30,000 units in August. Sales of Product A during
June were 25,000 units. Past experience has shown that end-of
month inventory must equal 3,000 units plus 30% of the next
month’s sales. On June 30, this requirement was met. Based on
these data, how many units of Product A must be produced
during the month of July?
a. 28,800
b. 22,200
c. 24,000
d. 25,800
11. The cash receipts budget includes
a. Funded depreciation
b. Operating supplies
c. Extinguishment of debt
d. Loan proceeds
12. Which of the following schedules would be the last item to
be prepared in the normal budget preparation process?