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    Addtional Exercises - 6

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    Gega XachidE
    The document contains several multi-step word problems related to budgeting and cost accounting. It provides information about sales volumes, unit prices, inventory levels, direct costs, manufacturing overhead rates, and operating expenses for various companies. It then asks calculation questions to determine budgeted amounts for items like sales revenue, cost of goods sold, production costs, gross margin, and operating income based on the information provided.

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    © All Rights Reserved
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    Addtional Exercises - 6

    Uploaded by

    Gega XachidE
    139 views18 pages
    The document contains several multi-step word problems related to budgeting and cost accounting. It provides information about sales volumes, unit prices, inventory levels, direct costs, manufacturing overhead rates, and operating expenses for various companies. It then asks calculation questions to determine budgeted amounts for items like sales revenue, cost of goods sold, production costs, gross margin, and operating income based on the information provided.

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    Addtional Exercises - 6 (1)

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    The document contains several multi-step word problems related to budgeting and cost accounting. It provides information about sales volumes, unit prices, inventory levels, direct costs, manufacturing overhead rates, and operating expenses for various companies. It then asks calculation questions to determine budgeted amounts for items like sales revenue, cost of goods sold, production costs, gross margin, and operating income based on the information provided.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    139 views18 pages

    Addtional Exercises - 6

    Uploaded by

    Gega XachidE
    The document contains several multi-step word problems related to budgeting and cost accounting. It provides information about sales volumes, unit prices, inventory levels, direct costs, manufacturing overhead rates, and operating expenses for various companies. It then asks calculation questions to determine budgeted amounts for items like sales revenue, cost of goods sold, production costs, gross margin, and operating income based on the information provided.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
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    Example

    Mary's Baskets Company expects to manufacture and sell 24,000 baskets in 2020 for $5 each. There are 2,000 baskets in
    beginning finished goods inventory with target ending inventory of 2,000 baskets. The company keeps no work-in-
    process inventory. What amount of sales revenue will be reported on the 2020 budgeted income statement?
    A) $130,000
    B) $120,000
    C) $110,000
    D) $70,000

    ) First Class, Inc., expects to sell 25,000 pool cues for $12 each. Direct materials costs are $4, direct manufacturing labor is
    $6, and manufacturing overhead is $0.88 per pool cue. The following inventory levels apply to 2020:

    Beginning inventory Ending inventory


    Direct materials 29,000 units 29,000 units
    Work-in-process inventory 0 units 0 units
    Finished goods inventory 1,700 units 3,300 units

    On the 2020 budgeted income statement, what amount will be reported for cost of goods sold?
    A) $289,408
    B) $272,000
    C) $254,592
    D) $307,904

    First Class, Inc., expects to sell 27,000 pool cues for $13 each. Direct materials costs are $3, direct manufacturing labor is
    $6, and manufacturing overhead is $0.87 per pool cue. The following inventory levels apply to 2020:
    Beginning inventoryEnding inventory
    Direct materials 29,000 units 29,000 units
    Work-in-process inventory 0 units 0 units
    Finished goods inventory 1,900 units 2,500 units
    What are the 2020 budgeted costs for direct materials, direct manufacturing labor, and manufacturing overhead,
    respectively?
    A) $87,000; $174,000; $25,230
    B) $86,700; $173,400; $25,143
    C) $82,800; $165,600; $24,012
    D) $81,000; $162,000; $23,490
    Bradford, Inc., expects to sell 16,000 ceramic vases for $21 each. Direct materials costs are $2, direct manufacturing labor
    is $11, and manufacturing overhead is $3 per vase. The following inventory levels apply to 2020:
    Beginning inventoryEnding inventory
    Direct materials 4,000 units 4,000 units
    Work-in-process inventory 0 units 0 units
    Finished goods inventory 200 units 700 units
    What are the 2020 budgeted production costs for direct materials, direct manufacturing labor, and manufacturing
    overhead, respectively?
    A) $33,000; $181,500; $49,500
    B) $32,000; $176,000; $48,000
    C) $8,000; $44,000; $12,000
    D) $8,000; $0; $14,100

    The following information pertains to the January operating budget for Murphy Corporation, a retailer:

    Budgeted sales are $206,000 for January


    Collections of sales are 50% in the month of sale and 50% the next month
    Cost of goods sold averages 61% of sales
    Merchandise purchases total $160,000 in January
    Marketing costs are $3,600 each month
    Distribution costs are $6,000 each month
    Administrative costs are $10,000 each month

    For January, budgeted gross margin is:


    A) $103,000
    B) $125,660
    C) $80,340
    D) $46,000

    The following information pertains to the January operating budget for Murphy Corporation, a retailer:

    Budgeted sales are $203,000 for January


    Collections of sales are 50% in the month of sale and 50% the next month
    Cost of goods sold averages 66% of sales
    Merchandise purchases total $152,000 in January
    Marketing costs are $3,200 each month
    Distribution costs are $5,000 each month
    Administrative costs are $10,200 each month
    For January, the amount budgeted for the nonmanufacturing costs budget is:
    A) $87,420
    B) $10,200
    C) $170,400
    D) $18,400
    Three Bears Manufacturing produces an auto-quartz watch movement called OM362. Three Bears expects to sell 10,000
    units of OM362 and to have an ending finished inventory of 3,000 units. Currently, it has a beginning finished inventory
    of 1,200 units. Each unit of OM362 requires two labor operations, one labor hour(s) of assembling and three labor
    hour(s) of polishing. The direct labor rate for assembling is $11 per assembling hour and the direct labor rate for polishing
    is $15.50 per polishing hour.
    The expected number of hours of direct labor for OM362 is:
    A) 8,200 hours of assembling; 24,600 hours of polishing
    B) 11,800 hours of assembling; 35,400 hours of polishing
    C) 24,600 hours of assembling; 8,200 hours of polishing
    D) 35,400 hours of assembling; 11,800 hours of polishing

    Listed below are elements of the master budget. Determine whether each budget is an operating budget or a financial
    budget. Place an O for operating budget or F for a financial budget.

    1. Capital expenditures budget


    2. Cost of goods sold budget
    3. Revenues budget
    4. Budgeted statement of cash flows
    5. Distribution costs budget
    6. Marketing costs budget
    7. Cash budget
    8. Direct materials cost budget
    9. Budgeted balance sheet
    10. Budgeted income statement

    Advanced Enterprises reports year-end information from 2019 as follows:

    Sales (161,250 units) $964,000


    Cost of goods sold (645,000)
    Gross margin 319,000
    Operating expenses (267,000)
    Operating income $52,000
    Advanced is developing the 2020 budget. In 2020 the company would like to increase selling prices by 13.5%, and as a
    result expects a decrease in sales volume of 9%. All other operating expenses are expected to remain constant. Assume
    that cost of goods sold is a variable cost and that operating expenses are a fixed cost.
    The budgeted sales for 2020 is:
    A) $1,094,140
    B) $964,000
    C) $995,667
    D) $877,240
    Advanced Enterprises reports year-end information from 2019 as follows:
    Sales (160,250 units) $969,000
    Cost of goods sold (641,000)
    Gross margin 328,000
    Operating expenses(268,000)
    Operating income $60,000

    Advanced is developing the 2020 budget. In 2020 the company would like to increase selling prices by 13.5%, and as a
    result expects a decrease in sales volume of 10%. All other operating expenses are expected to remain constant. Assume
    that cost of goods sold is a variable cost and that operating expenses are a fixed cost.
    What is budgeted cost of goods sold for 2020?
    A) $727,535
    B) $576,900
    C) $705,100
    D) $641,000

    Violet Sales Corp, reports the year-end information from 2020 as follows:

    Sales (35,375 units) $283,000


    Cost of goods sold (111,000)
    Gross margin $172,000
    Operating expenses(160,000)
    Operating income $12,000
    Violet is developing the 2020 budget. In 2020 the company would like to increase selling prices by 4.5%, and as a result
    expects a decrease in sales volume of 13%. All other operating expenses are expected to remain constant. Assume that
    cost of goods sold is a variable cost and that operating expenses are a fixed cost.
    What is budgeted sales for 2020? (Round interim calculations to the nearest cent and the final answer to the nearest
    dollar.)
    A) $295,735
    B) $257,289
    C) $334,181
    D) $283,001
    Sherry and John Enterprises are using the kaizen approach to budgeting for 2020. The budgeted income statement for
    January 2020 is as follows:
    Sales (168,000 units) $1,090,000
    Cost of goods sold (610,000)
    Gross margin $480,000
    Operating expenses (390,000)
    (includes $50,000 of fixed costs)
    Operating income $90,000

    Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per
    month.

    What is budgeted cost of goods sold for March 2020?


    A) $597,861
    B) $616,100
    C) $610,000
    D) $603,900

    Alcott Company is developing its budgets for 2020 and, for the first time, will use the kaizen approach. The initial 2020
    income statement, based on static data from 2019, is as follows:
    Sales (140,000 units) $420,000
    Cost of goods sold (280,000)

    Gross margin 140,000


    Operating expenses (includes $28,000 of depreciation) (112,000)

    Net income $28,000


    Selling prices for 2020 are expected to increase by 8%, and sales volume in units will decrease by 10%. The cost of goods
    sold as estimated by the kaizen approach will decline by 10% per unit. Other than depreciation, all other operating costs
    are expected to decline by 5%.

    Required:
    Prepare a kaizen-based budgeted income statement for 2020.
    Steve Corporation is using the kaizen approach to budgeting for 2020. The budgeted income statement for January 2020
    is as follows:

    Sales (240,000 units) $360,000


    Cost of goods sold (240,000)

    Gross margin 120,000


    Operating expenses (includes $32,000 of fixed costs) (96,000)
    Net income $ 24,000
    Under the kaizen approach, cost of goods sold and variable operating expenses are budgeted to decline by 1% per
    month.
    Required:
    Prepare a kaizen-based budgeted income statement for March of 2020.
    Solution

    Explanation: B) Sales revenue = 24,000 baskets × $5 = $120,000


    Diff: 2

    Answer: B
    Explanation: B) The cost per unit is $10.88 ($4 + $6 + $0.88). Therefore, the
    total cost of goods sold is $272,000 ($10.88 × 25,000).

    Answer: C
    Explanation: C) Direct materials = 27,600 × $3 = $82,800; Direct
    manufacturing labor = 27,600 × $6 = $165,600; Manufacturing overhead =
    27,600 × $0.87 = $24,012
    Answer: A
    Explanation: A) Budgeted cost for direct materials = $33,000 [16,500 units ×
    $2].
    Budgeted cost for direct manufacturing labor = $181,500 [16,500 units × $11].
    Budgeted manufacturing overhead = $49,500 [16,500 × $3].

    Explanation: C) $206,000 - (0.61 × $206,000) = $80,340

    Explanation: D) $3,200 + $5,000 + $10,200 = $18,400


    Answer: B
    Explanation: B) 10,000 + 3,000 - 1,200 = 11,800
    (11,800 × 1) = 11,800 hours of assembling; (11,800 × 3) = 35,400 hours of
    polishing

    Answer:
    1. F 6. O
    2. O 7. F
    3. O 8. O
    4. F 9. F
    5. O 10. O

    Explanation: C) Budgeted sales = $964,000 × 1.135 × 0.91 = $995,667


    Explanation: B) Cost of goods sold in 2019 per unit: $641,000/160,250 units =
    $4 per unit
    Number of units sold in 2020 = 160,250 × 0.9 = 144,225 units × $4 per unit =
    $576,900.

    Explanation: B) Budgeted sales in 2020: Selling prices in 2019 were $8 per unit
    ($283,000/35,375 units);
    increase selling price by 4.5% in 2020 means new selling price per unit in 2020
    is $8.36 per unit; 2020 sales volume will be 35,375 units × 0.87 = 30,776.25
    units times $8.36 per unit = $257,289
    Explanation: A) Cost of goods sold in February is $603,900 ($610,000 × 0.99)
    and March = $597,861 ($603,900 × 0.99).

    Answer: Sales (126,000 × $3.24) $408,240


    COGS (126,000 × $1.80) (226,800)
    Gross margin 181,440
    Operating expenses ($28,000 + $79,800) 107,800
    Net income $ 73,640
    Sales $360,000
    Less: Cost of goods sold ($240,000 × 0.99 × 0.99) 235,224
    Gross margin 124,776
    Operating expenses [($64,000 × 0.99 × 0.99) + $32,000] 94,726

    Net income $ 30,050

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