Budgeting Techniques

Daffy Tunes manufactures a toy rabbit with moving parts and a built-in voice box. Projected sales in units for the next 5 months are as follows:---Daffy Tunes' unit production budget for toy rabbits for January is

Daffy Tunes manufactures a toy rabbit with moving parts and a built-in voice box. Projected sales in units for the next 5 months are as follows:---Daffy Tunes' dollar production budget for toy rabbits for February is

Mountain Corporation manufactures cabinets but outsources the handles. Eight handles are needed for a cabinet, with assembly requiring 30 minutes of direct labor per unit. Ending finished goods inventory is planned to consist of 50% of projected unit sales for the next month, and ending handles inventory is planned to be 80% of the requirement for the next month's projected unit output of finished goods.----The number of units that Mountain finished during December is

Mountain Corporation manufactures cabinets but outsources the handles. Eight handles are needed for a cabinet, with assembly requiring 30 minutes of direct labor per unit. Ending finished goods inventory is planned to consist of 50% of projected unit sales for the next month, and ending handles inventory is planned to be 80% of the requirement for the next month's projected unit output of finished goods.----The number of handles Mountain should purchase in October is

A company's budget contains the following information:----How many equivalent units should the company plan to produce?

Jordan Auto has developed the following production plan:---How much direct materials should Jordan Auto purchase in March?

A company's budget calls for the following production:---Each unit of product requires three pounds of direct material. The company's policy is to begin each quarter with an inventory of direct materials equal to 30% of that quarter's direct material requirements. Budgeted direct materials purchases for the third quarter would be

A sales budget shows quarterly sales for the next year as follows:----Company policy is to have a finished goods inventory at the end of each quarter equal to 20% of the next quarter's sales. Budgeted production for the second quarter of the next year would be

Superflite expects April sales of its deluxe model airplane, the C-14, to be 402,000 units at $11 each. Each C-14 requires three purchased components shown below.--Superflite's C-14 production budget for April should be based on the manufacture of

Superflite expects April sales of its deluxe model airplane, the C-14, to be 402,000 units at $11 each. Each C-14 requires three purchased components shown below.--Assume Superflite plans to manufacture 400,000 units in April. Superflite's April budget for the purchase of A-9 should be

Simpson, Inc., is in the process of preparing its annual budget. The following beginning and ending inventory levels (in units) are planned for the year ending December 31.-- If 500,000 finished units were to be manufactured for the year by Simpson, the units of raw material that must be purchased would be

Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1 through June 30:--If Paradise Company plans to sell 480,000 units during the fiscal year, the number of units it will have to manufacture during the year is

Paradise Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1 through June 30:-- If 500,000 complete units were to be manufactured during the fiscal year by Paradise Company, the number of units of raw materials to be purchased is

Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales. There are 150,000 finished units in inventory on June 30. Each unit of finished product requires 4 pounds of direct materials at a cost of $1.20 per pound. There are 800,000 pounds of direct materials in inventory on June 30. Berol Company's production requirement in units of finished product for the 3-month period ending September 30 is

Berol Company plans to sell 200,000 units of finished product in July and anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished product is 80% of the next month's estimated sales. There are 150,000 finished units in inventory on June 30. Each unit of finished product requires 4 pounds of direct materials at a cost of $1.20 per pound. There are 800,000 pounds of direct materials in inventory on June 30. Assume Berol Company plans to produce 600,000 units of finished product in the 3-month period ending September 30, and to have direct materials inventory on hand at the end of the 3-month period equal to 25% of the use in that period. The estimated cost of direct materials purchases for the 3-month period ending September 30 is

A company has budgeted sales of 24,000 finished units for the forthcoming 6-month period. It takes 4 pounds of direct materials to make one finished unit. Given the following:--How many pounds of direct materials should be budgeted for purchase during the 6-month period?

A company prices its products by adding 30% to its cost. The company anticipates sales of $715,000 in July, $728,000 in August, and $624,000 in September. The company's policy is to have on hand enough inventory at the end of the month to cover 25% of the next month's sales. What will be the cost of the inventory that the company should budget for purchase in August?

Streeter Company produces plastic microwave turntables. Sales for the next year are expected to be 65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter, and 66,000 units in the fourth quarter. Streeter usually maintains a finished goods inventory at the end of each quarter equal to one half of the units expected to be sold in the next quarter. How many units should Streeter produce in the second quarter?

Streeter Company produces plastic microwave turntables. Sales for the next year are expected to be 65,000 units in the first quarter, 72,000 units in the second quarter, 84,000 units in the third quarter, and 66,000 units in the fourth quarter. Streeter usually maintains a finished goods inventory at the end of each quarter equal to one half of the units expected to be sold in the next quarter. Due to a work stoppage, the finished goods inventory at the end of the first quarter is 8,000 units less than it should be. How many units should Streeter produce in the second quarter?

A company produces one product and budgeted 220,000 units for the month of August with the following budgeted manufacturing costs:---The variable cost per unit and the total fixed costs are unchanged within a production range of 200,000 to 300,000 units per month. The total for the batch set-up cost in any month depends on the number of production batches that is run. A normal batch consists of 50,000 units unless production requires less volume. In the prior year, the company experienced a mixture of monthly batch sizes of 42,000 units, 45,000 units, and 50,000 units. The company consistently plans production each month in order to minimize the number of batches. For the month of September, the company plans to manufacture 260,000 units. What will be the company's total budgeted production costs for September?

A company has budgeted sales at 6,300 units for the next fiscal year and desires to have 590 good units on hand at the end of that year. Beginning inventory is 470 units. The company has found from past experience that 10% of all units produced do not pass final inspection and therefore must be destroyed. How many units should the company plan to produce in the next fiscal year?

A corporation assembles backup tape drive systems for home microcomputers. For the first quarter, the budget for sales is 67,500 units. The corporation will finish the fourth quarter of last year with an inventory of 3,500 units, of which 200 are obsolete. The target ending inventory is 10 days of sales (based upon 360 days). What is the budgeted production for the first quarter?

Tidwell Corporation sells a single product for $20 per unit. All sales are on account, with 60% collected in the month of sale and 40% collected in the following month. A partial schedule of cash collections for January through March of the coming year reveals the following receipts for the period:---March sales total $150,000. The number of units Tidwell must purchase in February is

A company is a maker of men's slacks (pants). The company would like to maintain 20,000 yards of fabric in ending inventory. The beginning fabric inventory is expected to contain 25,000 yards. The expected yards of fabric needed for sales is 90,000. Compute the yards of fabric that the company needs to purchase.

A gift shop maintains a 35% gross profit percentage on sales and carries an ending inventory balance each month sufficient to support 30% of the next month's expected sales. Anticipated sales for the fourth quarter are as follows:--What amount of goods should the gift shop plan to purchase during the month of November?

An entity estimates that it will sell 200,000 dolls during the coming year. The beginning inventory is 12,000 dolls; the target ending inventory is 15,000 dolls. Each doll requires two shoes, which are purchased from an outside supplier. The beginning inventory of shoes is 20,000; the target ending inventory is 18,000 shoes. The number of shoes that should be purchased during the year is

A corporation has a policy of maintaining inventory at 15% of the next month's forecast sales. The cost of the corporation's merchandise averages 60% of the selling price. The inventory balance as of May 31 is $63,000, and the forecast dollar sales for the last seven months of the year are as follows:--What is the budgeted dollar amount of the corporation's purchases for July?

Polk Retailers is developing cash and other budget information for July, August, and September. At June 30, Polk had cash of $6,600, accounts receivable of $524,000, inventories of $371,280, and accounts payable of $159,666. The budget is to be based on the following assumptions:---Polk's budgeted purchases for July and August are

Polk Retailers is developing cash and other budget information for July, August, and September. At June 30, Polk had cash of $6,600, accounts receivable of $524,000, inventories of $371,280, and accounts payable of $159,666. The budget is to be based on the following assumptions:--The budgeted number of units of inventory Polk will purchase during September is

A firm desires a finished goods ending inventory equal to 25% of the following month's budgeted sales. January sales are budgeted at 10,000 units and February at 12,000 units. Each unit requires 2 pounds of Material X, which costs $4 per pound. The company has a just-in-time system and materials are delivered daily just prior to use, so no raw materials inventories are maintained. Materials are paid for in the month following purchase. The January 1 finished goods inventory is 2,500 units. In February, what amount should the company expect to pay as a cash outflow for raw materials?

Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Rokat, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month's sales are in the finished goods inventory. Rokat also purchases sufficient direct materials inventory to ensure that direct materials inventory is 60% of the following month's scheduled production.--The number of tables to be produced by Rokat during August is

Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Rokat, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month's sales are in the finished goods inventory. Rokat also purchases sufficient direct materials inventory to ensure that direct materials inventory is 60% of the following month's scheduled production.--Assume Rokat's required production for August and September is 1,600 and 1,800 units, respectively, and the July 31 direct materials inventory is 4,200 units. The number of table legs to be purchased in August is

A company pays out sales commissions to its sales team in the month the company receives cash for payment. These commissions equal 5% of total (monthly) cash inflows as a result of sales. The company has budgeted sales of $300,000 for August, $400,000 for September, and $200,000 for October. Approximately half of all sales are on credit, and the other half are cash sales. Experience indicates that 70% of the budgeted credit sales will be collected in the month following the sale, 20% the month after that, and 10% of the sales will be uncollectible. Based on this information, what should be the total amount of sales commissions paid out by the company in the month of October?

Mountain Corporation manufactures cabinets but outsources the handles. Eight handles are needed for a cabinet, with assembly requiring 30 minutes of direct labor per unit. Ending finished goods inventory is planned to consist of 50% of projected unit sales for the next month, and ending handles inventory is planned to be 80% of the requirement for the next month's projected unit output of finished goods.--Given that a full-time employee works 160 hours per month, no overtime is allowed, and part-time employees may be used, how many full-time equivalent employees does Mountain need to assemble the output of finished units in November?

Rokat Corporation is a manufacturer of tables sold to schools, restaurants, hotels, and other institutions. The table tops are manufactured by Rokat, but the table legs are purchased from an outside supplier. The Assembly Department takes a manufactured table top and attaches the four purchased table legs. It takes 20 minutes of labor to assemble a table. The company follows a policy of producing enough tables to ensure that 40% of next month's sales are in the finished goods inventory. Rokat also purchases sufficient direct materials inventory to ensure that direct materials inventory is 60% of the following month's scheduled production.--Assume that Rokat Corporation will produce 1,800 units in the month of September. How many employees will be required for the Assembly Department? (Fractional employees are acceptable since employees can be hired on a part-time basis. Assume a 40-hour week and a 4-week month.)

For the month of December, a bottling company expects to sell 12,500 cases of water at $24.80 per case and 33,100 cases of cola at $32.00 per case. Sales personnel receive 6% commission on each case of water and 8% commission on each case of cola. In order to receive a commission on a product, the sales personnel team must meet the individual product revenue quota. The sales quota for water is $500,000, and the sales quota for cola is $1,000,000. The sales commission that should be budgeted for December is

For the month of June, a company expects to sell 12,500 cases of small cherries at $25 per case and 33,000 cases of large cherries at $32 per case. Sales personnel receive a 6% commission on each case of small cherries and an 8% commission on each case of large cherries. To receive a commission on a product, the sales personnel team must meet the individual product revenue quota. The sales quotas for small cherries and large cherries are $500,000 and $1 million, respectively. What are the sales commissions budgeted for June?

A company's selling and administrative costs for the month of August, when it sold 20,000 units, were as follows.--The variable costs represent sales commissions paid at the rate of 6.2% of sales. The step costs depend on the number of salespersons employed by the company. In August there were 17 persons on the sales force. However, two members have taken early retirement effective August 31. It is anticipated that these positions will remain vacant for several months. Total fixed costs are unchanged within a relevant range of 15,000 to 30,000 units per month. The company is planning a sales price cut of 10%, which it expects will increase sales volume to 24,000 units per month. If the company implements the sales price reduction, the total budgeted selling and administrative costs for the month of September would be

A retailer uses flexible budgeting as a planning tool. The company's original budget for the upcoming year is shown below.--The manager of the retailer's Marketing Department believes sales volume will increase by 10% if the advertising budget is increased by $5,000,000. Should the retailer approve the increased advertising request?

A company is setting up a new division to sell its products in Africa. An accountant has determined that the new African division will have to sell 250,000 units in order to cover the division's fixed costs of $365,000. The company is estimating total sales of $475,000 for the new African division. What is the contribution margin per unit for the new African division?

A company receives an order from a major customer on the first day of every quarter and has to produce an extra 10% to cover for product defects. Each finished product requires two pounds of direct material and three direct labor hours. Finished goods inventory as of January 1 is 300 units, which can be used to fulfill the order. The orders for the first quarter are shown below.
January 2,000 units
February 2,300 units
March 2,500 units
Budgeted direct labor hours for the first quarter are