1. The selling and administrative expense budget of SpurlockCorporation is based on budgeted unit sales, which are 6,300 unitsfor February. The variable selling and administrative expense is$9.30 per unit. The budgeted fixed selling and administrativeexpense is $118,440 per month, which includes depreciation of$19,530 per month. The remainder of the fixed selling andadministrative expense represents current cash flows. The cashdisbursements for selling and administrative expenses on theFebruary selling and administrative expense budget should be:
A) $98,910
B) $157,500
C) $58,590
D) $177,030
2.
Guthridge Inc. is working on its cash budget for February. Thebudgeted beginning cash balance is $26,000. Budgeted cash receiptstotal $104,000 and budgeted cash disbursements total $100,000. Thedesired ending cash balance is $40,000. To attain its desiredending cash balance for February, the company needs toborrow:
A) $0
B) $10,000
C) $40,000
D) $70,000
3.
A flexible budget:
A) classifies budget requests by activity and estimates thebenefits arising from each activity.
B) presents a statement of expectations for a period of time butdoes not present a firm commitment.
C) presents the plan for only one level of activity and does notadjust to changes in the level of activity.
D) presents the plan for a range of activity so that the plan canbe adjusted for changes in activity levels.
4.
Johnson's Snow Removal's cost formula for its vehicle operatingcost is $1,240 per month plus $348 per snow-day. For the month ofDecember, the company planned for activity of 12 snow-days, but theactual level of activity was 14 snow-days. The actual vehicleoperating cost for the month was $6,330. The vehicle operating costin the planning budget for December would be closest to:
A) $5,426
B) $6,112
C) $5,416
D) $6,330
5.
Corporation uses activity based costing and has three activitypools: Batch Setup, Order Processing, and Product Assembly. Thecompany uses the following activity rates from its activity-basedcosting to assign overhead costs to products: Batch Setup - $93.62per batchOrder Processing - $19.25 per orderProduct Assembly -$2.15 per assembly hourData concerning two products appearbelow:Product X60R - number of batches - 59, number of orders - 11,number of assembly hours - 687Product G96Y - number of batches -15, number of orders - 7, number of assembly hours - 716How muchoverhead cost would be assigned to Product X60R using theactivity-based costing system?
A) $5,523.58
B) $87,070.14
C) $115.02
D) $7,212.38
6.Corporation uses an activity-based costing system with threeactivity cost pools (Assembly, Setting Up and Other). The companyhas provided the following data concerning its costs: Wages -$240,000, Depreciation - $200,000, Utilities - $100,000.Distribution of these costs across the activity pools is asfollows: Wages (Assembly - 40%, Setting Up - 40%, Other - 20%),Depreciation (Assembly - 20%, Setting Up - 45%, Other - 35%),Utilities (Assembly - 35%, Setting Up - 40%, Other - 25%).How muchcost, in total, would be allocated in the first-stage allocation tothe Other activity cost pool?
A) $143,000
B) $144,000
C) $108,000
D) $135,000
7.
Which of the following statements is true for a company that usesvariable costing?
A) The unit product cost changes because of changes in the numberof units manufactured.
B) Profit fluctuates with sales.
C) Any underapplied overhead is included in the product cost.
D) Product costs include variable administration costs.
A) $98,910
B) $157,500
C) $58,590
D) $177,030
2.
Guthridge Inc. is working on its cash budget for February. Thebudgeted beginning cash balance is $26,000. Budgeted cash receiptstotal $104,000 and budgeted cash disbursements total $100,000. Thedesired ending cash balance is $40,000. To attain its desiredending cash balance for February, the company needs toborrow:
A) $0
B) $10,000
C) $40,000
D) $70,000
3.
A flexible budget:
A) classifies budget requests by activity and estimates thebenefits arising from each activity.
B) presents a statement of expectations for a period of time butdoes not present a firm commitment.
C) presents the plan for only one level of activity and does notadjust to changes in the level of activity.
D) presents the plan for a range of activity so that the plan canbe adjusted for changes in activity levels.
4.
Johnson's Snow Removal's cost formula for its vehicle operatingcost is $1,240 per month plus $348 per snow-day. For the month ofDecember, the company planned for activity of 12 snow-days, but theactual level of activity was 14 snow-days. The actual vehicleoperating cost for the month was $6,330. The vehicle operating costin the planning budget for December would be closest to:
A) $5,426
B) $6,112
C) $5,416
D) $6,330
5.
Corporation uses activity based costing and has three activitypools: Batch Setup, Order Processing, and Product Assembly. Thecompany uses the following activity rates from its activity-basedcosting to assign overhead costs to products: Batch Setup - $93.62per batchOrder Processing - $19.25 per orderProduct Assembly -$2.15 per assembly hourData concerning two products appearbelow:Product X60R - number of batches - 59, number of orders - 11,number of assembly hours - 687Product G96Y - number of batches -15, number of orders - 7, number of assembly hours - 716How muchoverhead cost would be assigned to Product X60R using theactivity-based costing system?
A) $5,523.58
B) $87,070.14
C) $115.02
D) $7,212.38
6.Corporation uses an activity-based costing system with threeactivity cost pools (Assembly, Setting Up and Other). The companyhas provided the following data concerning its costs: Wages -$240,000, Depreciation - $200,000, Utilities - $100,000.Distribution of these costs across the activity pools is asfollows: Wages (Assembly - 40%, Setting Up - 40%, Other - 20%),Depreciation (Assembly - 20%, Setting Up - 45%, Other - 35%),Utilities (Assembly - 35%, Setting Up - 40%, Other - 25%).How muchcost, in total, would be allocated in the first-stage allocation tothe Other activity cost pool?
A) $143,000
B) $144,000
C) $108,000
D) $135,000
7.
Which of the following statements is true for a company that usesvariable costing?
A) The unit product cost changes because of changes in the numberof units manufactured.
B) Profit fluctuates with sales.
C) Any underapplied overhead is included in the product cost.
D) Product costs include variable administration costs.
Related questions
The following data relate to the operations of PicanuyCorporation, a wholesale distributor of consumer goods: |
| Current assets as ofDecember 31: | ||
| Cash | $ | 6,500 |
| Accounts receivable | $ | 38,040 |
| Inventory | $ | 10,850 |
| Buildings andequipment, net | $ | 115,600 |
| Accountspayable | $ | 32,740 |
| Capital stock | $ | 100,000 |
| Retainedearnings | $ | 38,250 |
| a. | The gross margin is 30% ofsales. (In other words, cost of goods sold is 70% of sales.) |
| b. | Actual and budgeted sales dataare as follows: |
| December(actual) | $63,400 |
| January | $77,500 |
| February | $80,300 |
| March | $91,000 |
| April | $58,800 |
| c. | Sales are 40% for cash and 60% on credit. Credit sales arecollected in the month following sale. The accounts receivable atDecember 31 are the result of December credit sales. |
| d. | Each monthâs ending inventoryshould equal 20% of the following monthâs budgeted cost of goodssold. |
| e. | One-quarter of a monthâs inventory purchases is paid for in themonth of purchase; the other three-quarters is paid for in thefollowing month. The accounts payable at December 31 are the resultof December purchases of inventory. |
| f. | Monthly expenses are as follows: commissions, $11,640; rent,$1,900; other expenses (excluding depreciation), 8% of sales.Assume that these expenses are paid monthly. Depreciation is $5,430for the quarter and includes depreciation on new assets acquiredduring the quarter. |
| g. | Equipment will be acquired forcash: $6,800 in January and $8,500 in February. |
| h. | Management would like to maintain a minimum cash balance of$5,000 at the end of each month. The company has an agreement witha local bank that allows the company to borrow in increments of$1,000 at the beginning of each month, up to a total loan balanceof $50,000. The interest rate on these loans is 1% per month, andfor simplicity, we will assume that interest is not compounded. Thecompany would, as far as it is able, repay the loan plusaccumulated interest at the end of the quarter. |
1. Compute the following schedule
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| Complete the following:
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| 6. | Prepare a balance sheet as of March 31.
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I only need help with these parts of the problem. I've alreadydone the rest of my homework, but cannot understand what I'm doingwrong.
#1-part D
#2-The Financing Section(I cannot figure out how to find May'sborrowing, and June's interest/repayments
#3-The interest expense
#4-The whole problem.
You have just been hired as a management trainee by Cravat SalesCompany, a nationwide distributor of a designer�s silk ties. Thecompany has an exclusive franchise on the distribution of the ties,and sales have grown so rapidly over the last few years that it hasbecome necessary to add new members to the management team. Youhave been given responsibility for all planning and budgeting. Yourfirst assignment is to prepare a master budget for the next threemonths, starting April 1. You are anxious to make a favorableimpression on the president and have assembled the informationbelow.
The company desires a minimumending cash balance each month of $10,000. The ties are sold toretailers for $8 each. Recent and forecasted sales in units are asfollows: |
| January(actual) | 25,000 | June | 67,000 |
| February(actual) | 33,000 | July | 47,000 |
| March (actual) | 35,000 | August | 40,000 |
| April | 36,000 | September | 39,000 |
| May | 54,000 | ||
The large buildup in sales before and during June is due toFather�s Day. Ending inventories are supposed to equal 90% of thenext month�s sales in units. The ties cost the company $5 each. |
Purchases are paid for as follows:50% in the month of purchase and the remaining 50% in the followingmonth. All sales are on credit, with no discount, and payablewithin 15 days. The company has found, however, that only 25% of amonth�s sales are collected by month-end. An additional 50% iscollected in the following month, and the remaining 25% iscollected in the second month following sale. Bad debts have beennegligible. |
| The company�s monthly sellingand administrative expenses are given below: |
| Variable: | |||
| Sales commissions | $ 1 | per tie | |
| Fixed: | |||
| Wages and salaries | $ | 22,700 | |
| Utilities | $ | 16,900 | |
| Insurance | $ | 1,000 | |
| Depreciation | $ | 1,500 | |
| Miscellaneous | $ | 3,100 | |
All selling and administrativeexpenses are paid during the month, in cash, with the exception ofdepreciation and insurance expired. Land will be purchased duringMay for $21,000 cash. The company declares dividends of $12,000each quarter, payable in the first month of the following quarter.The company�s balance sheet at March 31 is given below: |
| Assets | ||
| Cash | $ | 15,000 |
| Accounts receivable($66,000 February sales; $210,000 March sales) | 276,000 | |
| Inventory (32,400units) | 162,000 | |
| Prepaidinsurance | 12,000 | |
| Fixed assets, net ofdepreciation | 123,150 | |
| Total assets | $ | 588,150 |
| Liabilities and Stockholders� Equity | ||
| Accountspayable | $ | 89,750 |
| Dividendspayable | 12,000 | |
| Capital stock | 300,000 | |
| Retainedearnings | 186,400 | |
| Total liabilitiesand stockholders� equity | $ | 588,150 |
The company has an agreement witha bank that allows it to borrow in increments of $1,000 at thebeginning of each month, up to a total loan balance of $130,000.The interest rate on these loans is 1% per month, and forsimplicity, we will assume that interest is not compounded. At theend of the quarter, the company would pay the bank all of theaccumulated interest on the loan and as much of the loan aspossible (in increments of $1,000), while still retaining at least$10,000 in cash. |
| Required: | |
| 1. | Prepare a master budget for thethree-month period ending June 30. Include the following detailedbudgets: |
| a. | A sales budget by month and intotal. (2 marks) (Omit the "$" sign inyour response.) |
| Cravat Sales Company Sales Budget | ||||
| April | May | June | Quarter | |
| Total sales | $ | $ | $ | $ |
| b. | A schedule of expected cash collections from sales, by month andin total. (8 marks)(Leave no cells blank -be certain to enter "0" wherever required. Omit the "$" sign inyour response.) |
| Cravat Sales Company Schedule of Expected Cash Collections | ||||||||
| April | May | June | Quarter | |||||
| February sales | $ | $ | $ | $ | ||||
| March sales | ||||||||
| April sales | ||||||||
| May sales | ||||||||
| June sales | ||||||||
| Total cashcollections | $ | $ | $ | $ | ||||
| c. | A merchandise purchases budgetin units and in dollars. Show the budget by month and intotal.(10 marks) (Input all amounts aspositive values. Omit the "$" sign in yourresponse.) |
| Cravat Sales Company Merchandise Purchases Budget | ||||||||
| April | May | June | Quarter | |||||
| Budgeted sales inunits | ||||||||
| (Click toselect) Add Deduct : (Click to select) Budgeted ending inventoryBeginning inventory | ||||||||
| Total needs | ||||||||
| (Click toselect) Deduct Add : (Click to select) Beginning inventory Budgetedending inventory | ||||||||
| Required unitpurchases | ||||||||
| Unit cost | $ | $ | $ | $ | ||||
| Required dollarpurchases | $ | $ | $ | $ | ||||
| d. | A schedule of expected cash disbursements for merchandisepurchases, by month and in total. (6.50 marks)(Leave no cells blank - be certain to enter "0" whereverrequired. Omit the "$" sign in your response.) |
| Cravat Sales Company Budgeted Cash Disbursements for Merchandise Purchases | ||||||||
| April | May | June | Quarter | |||||
| March purchases | $ | $ | $ | $ | ||||
| April purchases | ||||||||
| May purchases | ||||||||
| June purchases | ||||||||
| Total cashpayments | $ | $ | $ | $ | ||||
| 2. | A cash budget. Show the budget by month and intotal.(23.50 marks) (Input all amounts aspositive values except cash deficiency, repayments and interestwhich should be indicated by a minus sign. Leave no cells blank -be certain to enter "0" wherever required. Omit the "$" sign inyour response) |
| Cravat Sales Company Cash Budget For the Three Months Ending June 30 | ||||||||
| April | May | June | Quarter | |||||
| Cash balance,beginning | $ | $ | $ | $ | ||||
| Add receipts fromcustomers | ||||||||
| Total cashavailable | ||||||||
| Lessdisbursements: | ||||||||
| Purchase ofinventory | ||||||||
| Sales commissions | ||||||||
| Salaries and wages | ||||||||
| Utilities | ||||||||
| Miscellaneous | ||||||||
| Dividends paid | ||||||||
| Land purchases | ||||||||
| Totaldisbursements | ||||||||
| Excess (deficiency)of receipts over disbursements | ||||||||
| Financing: | ||||||||
| Borrowings | ||||||||
| Repayments | ||||||||
| Interest | ||||||||
| Total financing | ||||||||
| Cash balance,ending | $ | $ | $ | $ | ||||
| 3. | A budgeted income statement for the three-month period endingJune 30. Use the contribution approach. (10 marks)(Input all amounts as positive values. Omit the "$" sign inyour response.) |
| Cravat Sales Company Budgeted Income Statement For the Three Months Ended June 30 | ||||
| (Click toselect) Cost of goods sold Insurance expenses Contribution marginNet income (loss) Net operating income (loss) Utilities Salesrevenue | $ | |||
| Variableexpenses: | ||||
| (Click to select)Commissions Cost of goods sold Salaries Net operating incomeAdvertising Utilities Rent | $ | |||
| (Click to select)Utilities Commissions Salaries Rent Net operating incomeAdvertising Cost of goods sold | ||||
| (Click toselect) Utilities Commissions Contribution margin Sales revenue Netoperating income (loss) Cost of goods sold Interest expense | ||||
| Fixedexpenses: | ||||
| (Click to select)Utilities Sales Net operating income (loss) Depreciation Wages andsalaries Miscellaneous Insurance expenses | ||||
| (Click to select)Sales Utilities Depreciation Net operating income (loss)Miscellaneous Wages and salaries Insurance expenses | ||||
| (Click to select)Insurance expenses Depreciation Wages and salaries MiscellaneousNet operating income (loss) Sales Utilities | ||||
| (Click to select)Sales Net operating income (loss) Utilities Insurance expensesMiscellaneous Depreciation Wages and salaries | ||||
| (Click to select)Miscellaneous Insurance expenses Sales Net operating income (loss)Utilities Wages and salaries Depreciation | ||||
| (Click toselect) Sales revenue Wages and salaries Net operating income(loss) Net income (loss) Contribution margin Cost of goods soldUtilities | ||||
| (Click toselect) Interest expense Rent Prepaid insurance Sales commissionsInsurance Net operating income (loss) Utilities | ||||
| (Click toselect) Net income (loss) Contribution margin Sales revenueCommissions Wages and salaries Utilities Cost of goods sold | $ | |||
| 4. | A budgeted balance sheet as ofJune 30. (12 marks) (Besure to list the assets and liabilities in orderof their liquidity. Omit the "$" sign in yourresponse.) |
| Cravat Sales Company Budgeted Balance Sheet June 30 | ||
| Assets | ||
| (Click toselect) Fixed assets, net of depreciation Accounts receivable CashInventory Prepaid insurance | $ | |
| (Click toselect) Fixed assets, net of depreciation Cash Prepaid insuranceAccounts receivable Inventory | ||
| (Click toselect) Accounts receivable Fixed assets, net of depreciationPrepaid insurance Cash Inventory | ||
| (Click toselect) Fixed assets, net of depreciation Prepaid insuranceInventory Cash Accounts receivable | ||
| (Click toselect) Dividends payable Accounts payable, purchases Fixed assets,net of depreciation Capital stock Retained earnings | ||
| Total assets | $ | |
| Liabilities and Stockholders� Equity | ||
| (Click toselect) Cash Capital stock Accounts payable, purchases Dividendspayable Retained earnings | $ | |
| (Click toselect) Retained earnings Loans payable, bank Capital stockDividends payable Accounts payable, purchases | ||
| (Click toselect) Retained earnings Accounts payable, purchases Capital stockDividends payable Loans payable, bank | ||
| (Click toselect) Cash Dividends payable Loans payable, bank Capital stockAccounts payable, purchases | ||
| (Click toselect) Cash Loans payable, bank Retained earnings Dividendspayable Accounts payable, purchases | ||
| Total liabilitiesand stockholders� equity | $ | |
