Cost Exam 3 | Cost Accounting

A significant advantage of using either an activity-based budgeting (ABB) or a time-driven activity-based budgeting (TDABB) system is:

Estimation of the cost of unused capacity, as a by-product of the budgeting process.

Which of the following five steps (out of six) of cost estimation is out of order?

Step 4: Evaluate the accuracy of the cost estimate.

Data collected on the cost objects and cost drivers for cost estimation must be:

Consistent and accurate.

The objective of the fourth step in cost estimation, graphing the data, is intended to:

Identify unusual patterns.

Selection and employment of the correct estimation method is:

Dependent on the accuracy/cost tradeoff for the estimation objectives.

When there are two or more cost drivers, regression is termed:

Multiple.

The independent variable in regression analysis is:

The cost driver used to estimate the value of the dependent variable.

A data point that is outside the normal distribution of data is called an "outlier," which is often removed from the data before analysis because it:

Can distort the results of the data analysis.

A variable used in regression analysis that represents the presence or absence of a condition, e.g., seasonality, is called a(n):

Dummy variable.

An R-squared value that approaches one (1.0) would indicate:

A high degree of explanatory power.

Extending the length of a time period in cost estimation will result in:

Fewer recording lags or cut-off errors.

Which one of the following cost estimation methods is the most accurate?

Regression analysis.

In least squares regression analysis, the cost to be estimated is the:

Dependent variable.

Felinas Inc. produces floor mats for cars and trucks. The owner, Kenneth Felinas, asked you to assist him in estimating his maintenance costs. Together, Mr. Felinas and you determined that the single best cost driver for maintenance costs was machine hour

$1.20

Felinas Inc. produces floor mats for cars and trucks. The owner, Kenneth Felinas, asked you to assist him in estimating his maintenance costs. Together, Mr. Felinas and you determined that the single best cost driver for maintenance costs was machine hour

$752
High and low points are months 6 and 11.
Unit variable cost = ($3,680 ? $2,780)/(2,440 ? 1,690) = $1.20
Fixed cost = $3,680 ? ($1.20 � 2,440) = $752
or Fixed cost = $2,780 ? ($1.20 � 1,690) = $752

Audio Zone Co. needs to prepare pro forma financial statements for the next fiscal year. To do so, the company must forecast its total overhead cost. The actual machine hours and total overhead cost are presented below for the past six months.
MonthTotal

$1.70

Audio Zone Co. needs to prepare pro forma financial statements for the next fiscal year. To do so, the company must forecast its total overhead cost. The actual machine hours and total overhead cost are presented below for the past six months.
Using the h

$2,907.
Unit variable cost = ($6,460 ? $5,559)/(2,090 ? 1,560) = $1.70
Fixed overhead cost = $6,460 ? ($1.70 � 2,090) = $2,907 or 5,559 ? ($1.70 � 1,560) = $2,907

Thompson Refrigerators Inc. needs to prepare pro forma financial statements for the next fiscal year. To do so, the company must forecast its total overhead cost. The actual machine hours and total overhead cost are presented below for the past six months

$1.35

Thompson Refrigerators Inc. needs to prepare pro forma financial statements for the next fiscal year. To do so, the company must forecast its total overhead cost. The actual machine hours and total overhead cost are presented below for the past six months

$5,095.10
Unit variable cost = ($8,921 ? $7,841)/(2,834 ? 2,034) = $1.35
Fixed overhead cost = $8,921 ? (1.35 � 2,834) = $5,095.10 or $7,841 ? ($1.35 � 2,034) = $5,095.10

Home Remodeling Inc. recently obtained a short-term bank loan from City National Bank. The bank required that certain credit information and pro forma financial statements be maintained through the life of the loan. In order to prepare the pro forma state

$2.00

CalcuCo hired Effner & Associates to design a new computer-aided manufacturing facility. The new facility was designed to produce 300 computers per month. The variable costs for each computer are $660 and the fixed costs total $74,700 per month. The avera

$952.94.
$660 + [$74,700/(300 � 0.85)] = $952.94

Nellibell's Caf� bakes croissants that are sold to local restaurants and grocery stores in the Columbia, South Carolina area. When 600 croissants are baked, the average cost is $0.70. When 720 croissants are baked, the average cost is $0.65. What is the t

$448.
(720 � $0.65) ? (600 � $0.70)/(720 ? 600) = $0.40
Fixed cost = 720 � ($0.65 ? 0.40) = 180; 600 � ($0.70 ? $0.40) = $180
at 670; $180 + ($0.40 � 670) = $448

The following costs were for Optimal View Inc., a contact lens manufacturer:
OutputFixed CostVariable CostTotal Costs300$5,200$12,000$17,200350 5,200 14,000 19,200400 5,200 16,000 21,200450 5,200 18,000 23,200
At an output level of 425 lenses, per unit va

$40
Unit variable cost = ($23,200 ? $17,200)/(450 ? 300) = $40

The following costs were for Optimal View Inc., a contact lens manufacturer:
OutputFixed CostVariable CostTotal Costs300$5,200$12,000$17,200350 5,200 14,000 19,200400 5,200 16,000 21,200450 5,200 18,000 23,200
At an output level of 500 lenses, per unit to

$50.40
Use high-low method:
Unit variable cost = ($23,200 ? $17,200)/(450 ? 300) =$40
Fixed cost = $23,200 ? ($40 � 450) = $5,200
Total cost = $5,200 + ($40 � 500) = $25,200
Total cost per unit = $25,200/500 = $50.40
Note this figure is only a projection,

Midgett Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff suggested that linear regression be employed to derive an equati

$6.78
High-low points are August and April
Unit variable cost = ($5,365 ? $3,331)/(690 ? 390) = $6.78

Midgett Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff suggested that linear regression be employed to derive an equati

$687
High-low points are August and April
Unit variable cost = ($5,365 ? $3,331)/(690 ? 390) = $6.78
FC = $5,365 ? ($6.78 � 690) = $686.80; $3,331 ? ($6.78 � 390) = $686.80 rounded to $687.

Midgett Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff suggested that linear regression be employed to derive an equati

99.780%.
=R^2

Marshall Co. produced a pilot run of fifty units of a recently developed piston used in one of its products. Marshall expected to produce and sell 1,950 units annually. The pilot run required an average of.55 direct labor hours per piston for 50 pistons.

180.22.
The total time is 180.22
Batch Size Average Time Total Time
800 .22528 180.224 `

Maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget. Examination of past records disclosed the following costs and volume measures:
HighestLowestCost per month$42,000 $34,000 Machine hours 46,000 30,000
Usin

$228,000.
Unit variable cost = ($42,000 ? $34,000)/(46,000 ? 30,000) = $0.50
� Fixed cost = ($42,000 � 12 months) ? [(46,000 � $0.50) � 12] = $228,000 or
� Fixed cost = ($34,000 � 12 months) ? [(30,000 � $0.50) � 12] = $228,000

Maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget. Examination of past records disclosed the following costs and volume measures:
HighestLowestCost per month$86,000 $74,000 Machine hours 96,000 66,000
Usin

$.40
Unit variable cost = ($86,000 ? $74,000)/(96,000 ? 66,000) = $0.40

Maintenance expenses of a company are to be analyzed for purposes of constructing a flexible budget. Examination of past records disclosed the following costs and volume measures:
HighestLowestCost per month$86,000 $74,000 Machine hours 96,000 66,000
Usin

$571,200.
Unit variable cost = ($86,000 ? $74,000)/(96,000 ? 66,000) = $0.40
� Fixed cost = ($86,000 � 12 months) ? [(96,000 � $0.40) � 12] = $571,200 or
� Fixed cost = ($74,000 � 12 months) ? [(66,000 � $0.40) � 12] = $571,200

Which of the following is not a correct pairing of estimated costs and its related cost driver?

Sustainability cost in a manufacturing plant; machine-hours.

Which of the following is not a step in the typical cost estimation process?

Determine the time required for building the model.

The high-low method:

Chooses the data points that are likely to produce a line that is representative of the data.

Jackson, Inc. is preparing a budget for the coming year and requires a breakdown of the cost of electrical power used in its factory into the fixed and variable elements. The following data on the cost of power used and direct labor hours worked are avail

$4.00
Unit variable cost = ($19,800 ? $13,400)/(3,650 ? 2,050) = $4.00

A company allocates its variable factory overhead based on direct labor hours. During the past three months, the actual direct labor hours and the total factory overhead allocated were as follows:
Jan.Feb.Mar.Direct labor hours 1,000 3,000 5,000 Total ove

$50,000.
Using January and March� Unit variable cost = ($200,000 - $80,000)/(5,000 ? 1,000) = $30� Fixed cost = $200,000 ? (5,000 � $30) = $50,000� = $80,000 ? (1,000 � $30) = $50,000

Multiple regression analysis:

Measures the change in one variable associated with the change in more than one other variable.

Simple regression analysis involves the use of:
Dependent Variables Independent Variables
One None
One One
One Two
None Two

Option B

A company using regression analysis to correlate income to a variety of sales indicators found that the relationship between the number of sales managers in a territory and net income for the territory had a correlation coefficient of -1. Which is the bes

Perfect inverse correlation.

For a simple regression analysis model that is used to allocate factory overhead, an internal auditor finds that the intersection of the line of best fit for the overhead allocation with the y-axis is $5,000. The slope of the line is .20. The independent

$185,000.
(0.2 � $900,000) + $5,000 = $185,000

A retailer, in business for over 50 years, has developed the following regression model from the past 60 months of operating data:
Monthly sales dollars = $50,000 + $4.70A + $30B ? $1,000X
Where:
A = number of customers
B = advertising dollars per month
X

Within the relevant range, each additional customer will make an average purchase of $4.70 per month.

A manager uses regression to express sales as a function of advertising expenditures (X1), and per capita income (X2) in your sales area. The following multiple linear regression equation is developed:
Y = 10 + 0.51X1 + 0.45X2
The coefficient of determina

96% of sales variations are explained by the equation.

A manager uses regression to express sales as a function of advertising expenditures (X1), and per capita income (X2) in your sales area. The following multiple linear regression equation is developed:
Y = 10 + 0.51X1 + 0.45X2
The coefficient of determina

The regression line fits the data used in the sample very well. There is a strong indication of the relationship of the two variables with sales.

Based on analyzing the relationship of total factory overhead (Y) to direct labor hours (X). The following relationship was found:
Y = $1,000 + $2X
The relationship is:

Linear.

Based on analyzing the relationship of total factory overhead (Y) to direct labor hours (X). The following relationship was found:
Y = $1,000 + $2X
The variable Y in the equation is an estimate of:

Total factory overhead.

The use of a relationship of total factory overhead to direct labor hours is said to be valid only within the relevant range, which means:

Within the range of observations of the cost driver

As a preliminary step in the selection of variables to use in a statistical-forecasting model, the management accountant has calculated the coefficient of correlation between the firm's sales and three economic indexes. The results were as follows:
IndexC

Include only index C in the model because its coefficient of correlation is relatively high and therefore probably statistically significant, while the coefficients of indexes A and B are likely to be insignificant.

Bradford Company derived the following cost relationship from a regression analysis of its monthly manufacturing overhead cost:
C = $80,000 + $12M
where:
C = monthly manufacturing overhead cost, and
M = machine hours
The standard error of estimate of the

$120,000.
$12 � 5,000 � 2 hours = $120,000 (note: variable cost only)

If the coefficient of correlation between two variables is nearly zero, how might a graph of these variables appear?

Random points.

Which of the following is required for multiple regression?

The use of more than one cost driver.

Sterling Glass Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year.
MonthCostHoursJanuary$4,515300February$4,825400March$5,540550April$4,485200May$5,685800J

Y = $4,085 + $2.00H.
� Unit variable cost = ($5,685 ? $4,485)/(800 - 200) = $2.00
� Fixed cost = $5,685 ? (800 � $2.00) = $4,085 or $4,485 ? (200 � $2.00) = $4,085

Sterling Glass Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year.
MonthCostHoursJanuary$4,515300February$4,825400March$5,540550April$4,485200May$5,685800J

$5,885.
Unit variable cost = ($5,685 ? $4,485)/(800 ? 200) = $2.00
Fixed cost = $5,685 ? (800 � $2.00) = $4,085 or $4,485 ? (200 � $2.00) = $4,085
Total cost = $4,085 + ($2.00 � 900) = $5,885

Sterling Glass Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year.
MonthCostHoursJanuary$4,515300February$4,825400March$5,540550April$4,485200May$5,685800J

$4,385.00.
Unit variable cost = ($5,685 ? $4,485)/(800 ? 200) = $2.00
Fixed cost = $5,685 ? (800 � $2.00) = $4,085 or $4,485 ? (200 � $2.00) = $4,085
TC = $4,085 + ($2.00 � 150) = $4,385

Pearson Electric Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year.
MonthCost(Y)Hours(H)January$7,300260February$9,125730March$7,540410April$7,485330May$9

Y = $6,520 + $3.00H.
� Unit variable cost = ($9,460 ? $7,300)/(980 ? 260) = $3.00
� Fixed cost = $9,460 ? (980 � $3.00) = $6,520 or $7,300 ? (260 � $3.00) = $6,520

Georgia Meadows Company uses the high-low method to analyze production costs. The following information relates to the production data for the first six months of the year.
MonthCost(Y)Hours(H)January$8,5426,530February$7,7505,950March$9,7007,500April$7,4

Using March and May
� Unit variable cost = ($9,700 ? $7,200)/(7,500 ? 5,500) = $1.25
� Fixed cost = $9,700 ? (7,500 � $1.25) = $325
� = $7,200 ? (5,500 � $1.25) = $325

Georgia Meadows Company uses the high-low method to analyze production costs. The following information relates to the production data for the first six months of the year.
MonthCost(Y)Hours(H)January$8,5426,530February$7,7505,950March$9,7007,500April$7,4

$10,325.
Using March and May
Unit variable cost = ($9,700 ? $7,200)/(7,500 ? 5,500) = $1.25
Fixed cost = $9,700 ? (7,500 � $1.25) = $325
= $7,200 ? (5,500 � $1.25) = $325
TC = $325 + (8,000 � $1.25) = $10,325

The R-squared in a satisfactory regression should be:

greater than 0.7

The standard error of the estimate (SE) in a regression analysis is:

A measure of the accuracy of the regression's estimates.

A range around the regression line within which the management accountant can rely that the actual value of the predicted cost will fall is referred to as:

A confidence interval.

Cost estimation includes all of the following steps except:

Calculating the multiple regression coefficient.

Place the six cost estimation steps into the correct order:
Determine the cost drivers
Graph the data
Select and employ the appropriate estimation method
Define the cost object for which the related costs are to be estimated
Evaluate the accuracy of the c

4,1,6,2,3,5.

Burmer Co. has accumulated data to use in preparing its annual profit plan for the upcoming year. The cost behavior pattern of the maintenance costs must be determined. Data regarding the machine hours and maintenance costs for the last year and the resul

Is statistically significant at less than 5% risk
The t statistic is 52.78, and is considerably larger than the desired level of 2.0; the p-value or risk level is 0.000000000000144 which is significantly less than the desired risk level of 5%.

The 95% confidence range for a prediction of monthly manufacturing cost using the model is:

The range of +/- $47.06 � 2 = $94.12 around the predicted amount
The standard error of the estimate is the basis for assessing the confidence range around the predicted amount; for 95% confidence, the range is equal to two multiplied times SE.

The p-value is a measure of:

The reliability of the independent variable.

A key statistic that indicates reliability of the regression is:

0.9964.
The R-squared value is a key measure of reliability.

Using regression analysis, what is the estimated maintenance expense for a month that the firm expects to operate 600 machine hours (round to nearest whole dollar)?

$4,850.
$783.778 + ($6.777 � 600) = $4,850

A measure of the statistical reliability of each independent variable is:

t-value.

Which of the following means that two or more independent variables are highly correlated with each other?

Multicollinearity.

Which of the following is not used for evaluating a regression analysis?

Correspondence.

Accurate cost estimates are required by strategic management for all except:

Accounting internal control.

The following costs were for Bikeway Inc., a bicycle manufacturer that uses the high-low method:
OutputFixed CostsVariable CostsTotal Costs800$25,000 $80,000 $105,000 850$25,000 $85,000 $110,000 900$25,000 $90,000 $115,000 950$25,000 $95,000 $120,000
At a

$100.00.
Variable costs are $100 per bicycle; $80,000/800.

The following costs were for Bikeway Inc., a bicycle manufacturer that uses the high-low method:
OutputFixed CostsVariable CostsTotal Costs800$25,000 $80,000 $105,000 850$25,000 $85,000 $110,000 900$25,000 $90,000 $115,000 950$25,000 $95,000 $120,000
At a

$125.00.
Variable costs are $100 per bicycle; $80,000/800.
Total Cost of 1,000 bicycles: $25,000 + (1,000 � $100)
Total Cost per unit: $125,000/1,000 = $125.00

__________ is a statistical method for obtaining the unique cost-estimating equation that best fits a set of data points.

Regression analysis

A p-value of less than _______ is typically considered statistically significant.

0.05

Armer Company is accumulating data to use in preparing its annual profit plan for the coming year. The cost behavior pattern of the maintenance costs must be determined. The accounting staff has suggested the use of linear regression to derive an equation

0.99724.

The percent of the total variance that can be explained by the regression equation is

99.724%.

The master budget for a given accounting period has all of the following except:

It is based on the actual level of sales activity for the period.

The successful use of a budgeting system generally involves all of the following except:

Inclusion of "budgetary slack" in most budgets.

All of the following are ways of setting the budget, except:

Two-stage budgeting.

Revision of a completed and approved budget:

Should be conducted whenever actual events differ significantly from those envisioned when the budget was prepared.

The process of planning business actions in the near future and expressing them as formal plans of action is called:

Budgeting.

A plan of dollar amounts to be spent on long-term projects is called a:

Capital budget.

A plan that shows the cash balance on hand at the beginning of a budget period, expected cash flow from operations, cash flows from investing activities, cash flows from financing activities, and an ending cash balance is called a(n):

Cash budget.

A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise (or materials) to be purchased, the manufacturing, selling, administrative, and general expense to

Master budget.

A plan that states the units or cost of merchandise to be purchased by a retailer or wholesaler during the budget period is called a:

Merchandise purchases budget.

A plan showing the units of goods expected to be sold and the expected revenue from sales is called the:

Sales budget.

An accounting statement that presents predicted amounts of the company's assets, liabilities, and stockholders' equity as of the end of the budget period is called a(n):

Pro forma balance sheet.

Which of the following is not a potential benefit of having a sound budgeting process?

Lower acceptance rate for capital budgeting projects.

Which of the following budgets must be completed before preparing a cash budget?

Cash receipts budget.

Which of the following statements about budgeting is not true?

Budgeting eliminates the need for day-to-day monitoring of operations.

A sales forecast is the first step in the budgeting process of a merchandising firm because:

Almost all activities of a firm emanate from (i.e., are linked to) estimated sales demand.

Sales forecasting by its nature is:

Somewhat subjective.

Budgeting for production (i.e., units to be produced in an upcoming budget period):

Involves the sales budget and both beginning and ending finished goods inventory amounts.

Maintaining a constant production level in a firm has the advantage of:

Allowing a stable employment level.

The focal point in budgeting for a service organization is likely to be:

Human resource (i.e., personnel) planning.

Which of the following is not an alternative approach to traditional budgeting practices?

Operations budgeting.

A "participative" budget is a(n):

Good two-way communication device.

Unless properly controlled, a "bottom-up" budgeting process can lead to:

Easy budget targets.

Budgeting provides all of the following except:

An ethical framework for decision-making.

Financial budgets include the:

Pro forma balance sheet.

The authorization function of budgets is especially important for government and not-for-profit (NFP) entities, where budgeted amounts often serve both as approvals of planned activities (or programs) and as:

Ceilings for expenditures.q

Which one of the following is a plan that will allow a manufacturing firm to satisfy its sales goals and have on hand the desired amount of inventory at the end of the budget period?

Production budget.

Which one of the following shows the raw materials required for production and their budgeted cost?

Direct materials usage budget.

Which of the following is not an advantage of using a "highly achievable target" when constructing budgets?

Increasing the risk that managers will engage in "earnings management" behavior.

Which one of the following is a budgeting process that requires managers to prepare budgets based on in-depth reviews of all budget items?

Zero-base budgeting (ZBB).

Which one of the following is a budgeting approach that explicitly demands continuous improvement and that incorporates expected improvements in the resultant budget?

Kaizen budgeting.

Zero-base budgeting (ZBB):

Involves rigorous review of each cost item before inclusion in the budget.

Wild West Fashion expects the total costs of goods sold to be $30,000 in November and $60,000 in December for one of its young adult suits. Management also wants to have on hand at the end of each month 10 percent of the expected total cost of sales for t

$33,000.
Required Purchases = Budgeted Sales + Desired Ending Inventory ? Beginning Inventory
Therefore, Required Purchases = $30,000 + ($60,000 � 0.1) ? ($30,000 � 0.1) = $33,000

ACEM Hardware purchased 5,000 gallons of paint in March. The store had 1,500 gallons on hand at the beginning of March, and expects to have 1,000 gallons on hand at the end of March. What is the budgeted number of gallons to be sold during March?

5,500.
Budgeted sales (units) = Beginning inventory (units) + Purchases during the month (units) ? Expected ending inventory (units)= 1,500 units + 5,000 units ? 1,000 units = 5,500 units

Joe's Mart policy is to have 20% of the next month's sales on hand at the end of the current month. Projected sales for August, September, and October are 25,000 units, 20,000 units, and 30,000 units, respectively. How many units must be purchased in Sept

22,000.
Required purchases (units) = Budgeted sales (units) + desired ending inventory (units) ? beginning inventory (units)= 20,000 + (30,000 � 0.2) ? (20,000 � 0.2) = 20,000 units + 6,000 units ? 4,000 units= 22,000 units

Cripe Corporation maintains ending inventory for each month at 5% of the following month's sales. It predicted the following sales (in units) for the first four months of the coming year:
JanuaryFebruaryMarchAprilSales (units)2,0002,4003,0002,800
How many

2,990.
Required production = Estimated sales + Desired ending inventory ? Beginning inventory = 3,000 + (2,800 � 0.05) ? (3,000 � 0.05) = 3,000 units + 140 units ? 150 units = 2,990 units

LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May $40,000. Experience has shown that payment for the credit sales is received as follows: 60%

$31,000.
Estimated collections in March = Estimated collections from credit sales in March + Estimated collections in March from credit sales made in February + Estimated collections in March from credit sales made in January = ($30,000 � 0.6) + ($40,000

Gorberchev Food Processing expects to have 20,000 units of finished goods inventory on hand on March 31 and reports the following expected sales (in units) for the months of April through July:
April120,000May140,000June150,000July120,000
At the end of ea

128,000.
Budgeted production (units) = Estimated sales (units) + Desired ending inventory (units) ? Beginning inventory (units) = 120,000 units + (140,000 � 0.2) units ? 20,000 units = 128,000 units.

Gorberchev Food Processing expects to have 20,000 units of finished goods inventory on hand on March 31 and reports the following expected sales (in units) for the months of April through July:
April120,000May130,000June140,000July120,000
At the end of ea

132,000.
Budgeted production (units) = Estimated sales (units) + Desired ending inventory (units) ? Beginning inventory (units) = 130,000 units + (140,000 units � 0.2) ? (130,000 units � 0.2) = 132,000 units.

Doanne Food Processing expects to have 36,000 pounds of raw materials inventory on hand on March 31, the end of the current year. The company budgets the following production (in units) for April through July, inclusive:
April120,000May130,000June140,000J

363,000.
Budgeted materials (lbs.) for April's production = (120,000 units � 3 pounds/unit) = 360,000 pounds
Desired April ending inventory of raw materials = 10% of May's production needs = (10% � 130,000 units � 3 pounds/unit) = 39,000 pounds.
Budgeted

Doanne Food Processing expects to have 36,000 pounds of raw materials inventory on hand on March 31, the end of the current year. The company budgets the following production (in units) for April through July, inclusive:
April120,000May130,000June140,000J

414,000.

Oracle Supply Co. supply forecasts purchases of 15,000 widgets in June. It sells the widget at $12.00 per unit. The company has 1,000 units on hand on June 1. The desired ending inventory of widgets on June 30 is to be 20% lower than the beginning invento

$182,400.
Desired June 30th ending inventory of widgets = [(1 ? 0.2) � 1,000 units] = 800 units
Budgeted sales (in units), June = Beginning-of-month inventory + Budgeted purchases, June - Desired end-of month inventory = 1,000 units + 15,000 units ? 800 u

Salich Manufacturing Corporation has provided the following sales budget information:
July$45,000 August$55,000 September$60,000
Cash sales are normally 40% of total sales; credit sales are expected to be collected in their entirety in the month following

$57,000.
August credit sales = [$55,000 � (1 ? 0.4)] = $33,000
September cash sales = ($60,000 � 0.4) = $24,000
Total cash expected to be received from customers in September = Collection of August credit sales + September cash sales = $33,000 + $24,000 =

Boone Co.'s sales, based on past experience, are 20% cash and 80% credit. Credit sales are typically collected as follows: 40% in the month of sale, 50% in the month after the sale, and 10% in the second month following month of sale. On December 31, the

$99,000.
January budgeted cash receipts from November credit sales = $12,000 (given)
December 31 accounts receivable balance from December sales = ($54,000 ? $12,000) = $42,000
December credit sales = (42,000/0.6) = $70,000
Portion of December credit sale

Boone Co.'s sales, based on past experience, are 20% cash and 80% credit. Credit sales are typically collected as follows: 40% in the month of sale, 50% in the month after the sale, and 10% in the second month following month of sale. On December 31, the

$109,400.
Cash sales in February = $120,000 � 0.20 = $24,000
Collection in February of a portion of February's credit sales = ($120,000 � 0.80) � 0.40 = $38,400
Collection in February of a portion of January's credit sales = ($100,000 � 0.80) � 0.50 = $40

Ardel Co. budgeted to sell 200,000 units of Zbox in September. Production of one unit of Zbox requires two pounds of aluminum and five pounds of steel powder. The beginning inventory and the desired ending inventory are as follows:
Beginning Inventory Des

293,000 pounds.
1 unit of output (Zbox) = 2 lbs. aluminum
Aluminum requirements for planned production = 150,000 units � 2 lbs./unit = 300,000 lbs.
Beginning inventory, aluminum = 30,000 lbs. (given)
Desired ending aluminum inventory = 23,000 lbs. (given)