MANAGEMENT ADVISORY SERVICES

NAME SCORE Ø Administrative costs are $10,000 each month

For January, budgeted gross margin is (E)
COURSE/YEAR A. $50,000. C. $100,000.
B. $60,000. D. $140,000. Horngren
Multiple Choice. Choose the best answer. Write your letter choice in CAPITAL LETTER in the
answer sheet provided above. No erasures allowed. 4. Berol Company, which 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
1. Tidwell Corporation sells a single product for $20 per unit. All sales are on account, with 60% finished product is 80% of the next month's estimated sales. There are 150,000 finished units
collected in the month of sale and 40% collected in the following month. A partial schedule of in inventory on June 30.
cash collections for January through March of the coming year reveals the following receipts Each unit of finished product requires 4 pounds of direct materials at a cost of $1.20 per
for the period. pound. There are 800,000 pounds of direct materials in inventory on June 30.
Cash Receipts Berol Company's production requirement in units of finished product for the 3-month period
January February March ending September 30 is (E)
December receivables $32,000 A. 630,500 units. C. 665,720 units.
From January sales 54,000 $36,000 B. 638,000 units. D. 712,025 units. CMA 0692
From February sales 66,000 $44,000
Other information includes the following. 5. Simpson Inc. is in the process of preparing its annual budget. The following beginning and
• Inventories are maintained at 30% of the following month’s sales. ending inventory levels (in units) are planned for the year ending December 31.
• Assume that March sales total $150,000. Beginning Inventory Ending Inventory
The number of units to be purchased in February is (E*) Raw material* 40,000 50,000
A. 3,850 units. C. 6,100 units. Work-in-process 10,000 10,000
B. 4,900 units. D. 7,750 units. CMA 0408 Finished goods 80,000 50,000
2. Hannon Retailing Company prices its products by adding 30% to its cost. Hannon anticipates *Two units of raw material are needed to produce each unit of finished product.
sales of $715,000 in July, $728,000 in August, and $624,000 in September. Hannon’s policy If Simpson Inc. plans to sell 480,000 units during the year, the number of units it would have to
is to have on hand enough inventory at the end of the month to cover 25% of the next month’s manufacture during the year would be (E)
sales. What will be the cost of the inventory that Hannon should budget for purchase in A. 440,000 units. C. 480,000 units.
August? (E**) B. 450,000 units. D. 510,000 units. CMA 1294
A. $509,600. C. $560,000.
B. $540,000. D. $680,000. CMA 0408

3. The following information pertains to the January operating budget for Casey Corporation, a 6. Pardise Company budgets on an annual basis for its fiscal year. The following beginning and
retailer: ending inventory levels (in units) are planned for the fiscal year of July 1 through June 30:
Ø Budgeted sales are $200,000 for January July 1 June 30
Ø Collections of sales are 50% in the month of sale and 50% the next month Raw materials* 40,000 50,000
Ø Cost of goods sold averages 70% of sales Work-in-process 10,000 10,000
Ø Merchandise purchases total $150,000 in January Finished goods 80,000 50,000
Ø Marketing costs are $3,000 each month * Two (2) units of raw materials are needed to produce each unit of finished product.
Ø Distribution costs are $5,000 each month
Quiz No. 10 - Comprehensive Budgeting (Problem) Page 1 of 4
 MANAGEMENT ADVISORY SERVICES

If 500,000 finished units were to be manufactured during the fiscal year by Pardise Company, Ossmann is developing the 20x5 budget. In 20x5 the company would like to increase selling
the units of raw materials needed to be purchased would be (E**) prices by 8%, and as a result expects a decrease in sales volume of 10%. All other operating
A. 990,000 units C. 1,010,000 units expenses are expected to remain constant. Assume that COGS is a variable cost and that
B. 1,000,000 units D. 1,020,000 units CMA 0686, 0692, 1294 operating expenses are a fixed cost.
What is budgeted sales for 20x5? (E*)
7. Atlantic Co. used $200,000 of direct materials during June. At June 30, Atlantic's direct A. $432,000 C. $518,400
materials inventory was $30,000 more than it was at June 1. What were Atlantic's direct B. $466,560 D. $533,333 Horngren
materials purchases during June? (E)
A. $30,000 C. $200,000 11. The following information pertains to the January operating budget for Casey Corporation, a
B. $170,000 D. $230,000 Gleim retailer:
Ø Budgeted sales are $200,000 for January
8. Petersons Planters Inc. budgeted the following amounts for the coming year. Ø Collections of sales are 50% in the month of sale and 50% the next month
Beginning inventory, finished goods $ 10,000 Ø Cost of goods sold averages 70% of sales
Cost of goods sold 400,000 Ø Merchandise purchases total $150,000 in January
Direct material used in production 100,000 Ø Marketing costs are $3,000 each month
Ending inventory, finished goods 25,000 Ø Distribution costs are $5,000 each month
Beginning and ending work-in-process inventory Zero Ø Administrative costs are $10,000 each month
Overhead is estimated to be two times the amount of direct labor dollars. The amount that For January, budgeted net income is (E*)
should be budgeted for direct labor for the coming year is (E) A. $42,000. C. $52,000.
A. $105,000. C. $210,000. B. $50,000. D. $60,000. Horngren
B. $157,500. D. $315,000. CMA 0408
12. The Kafusi Company has the following budgeted sales:
9. The Covey Company is preparing its Manufacturing Overhead Budget for the fourth quarter of April May June July
the year. The budgeted variable factory overhead rate is $4.00 per direct labor hour; the Credit Sales $320,000 $300,000 $350,000 $400,000
budgeted fixed factory overhead is $64,000 per month, of which $18,000 is factory
Cash Sales $ 70,000 $ 80,000 $ 90,000 $ 70,000
depreciation. If the budgeted direct labor time for October is 8,000 hours, then the total
budgeted factory overhead for October is: (E*) The regular pattern of collection of credit sales is 30% in the month of sale, 60% in the month
A. $64,000. C. $78,000. following the month of sale, and the remainder in the second month following the month of
B. $76,000. D. $96,000. G & N 10e sale. There are no bad debts. The budgeted cash receipts for July would be: (E)
A. $390,000. C. $430,000.
10. Ossmann Enterprises reports year-end information from 20x4 as follows: B. $400,000. D. $435,000. G & N 10e
Sales (80,000 units) $480,000
Cost of goods sold 320,000 13. Bootstrap Corporation anticipates the following sales during the last six months of the year.
Gross margin 160,000 July $460,000
Operating expenses 130,000 August 500,000
Operating income $ 30,000 September 525,000
October 500,000
November 480,000
December 450,000
Quiz No. 10 - Comprehensive Budgeting (Problem) Page 2 of 4
~ MANAGEMENT ADVISORY SERVICES

20% of Bootstrap’s sales are for cash. The balance is subject to the collection pattern shown The next two questions are based on the following information. CMA 1296
below. Daffy Tunes manufactures a toy rabbit with moving parts and a built-in voice box. Projected sales
• Percentage of balance collected in the month of sale 40% in units for the next 5 months are as follows:
• Percentage of balance collected in the month following sale 30% Month Projected Sales in Units
• Percentage of balance collected in the second month following sale 25% January 30,000
• Percentage of balance uncollectible 5% February 36,000
What is the planned net accounts receivable balance as of December 31? (E**) March 33,000
A. $279,300. C. $360,000. April 40,000
B. $294,000. D. $367,500. CMA 0408 May 29,000
Each rabbit requires basic materials that Daffy purchases from a single supplier at $3.50 per rabbit.
14. You are given the following data for Dansalan Co. Voice boxes are purchased from another supplier at $1.00 each. Assembly labor cost is $2.00 per
Cash Credit Total rabbit, and variable overhead cost is $.50 per rabbit. Fixed manufacturing overhead applicable to
Cost of sales P50,000 P450,000 P500,000 rabbit production is $12,000 per month. Daffy’s policy is to manufacture 1.5 times the coming
Cash received from customers 65,000 585,000 650,000 month’s projected sales every other month, starting with January (i.e., odd- numbered months) for
Assuming merchandise were marked to sell as follows: Cash sales, 30% above cost and February sales, and to manufacture 0.5 times the coming month’s projected sales in alternate
months (i.e., even- numbered months). This allows Daffy to allocate limited manufacturing
credit sales at 40% above cost all of which are collectible, the balance of accounts receivable
at the end of the year was (E) resources to other products as needed during the even-numbered months.
A. P12,500 C. P135,000
B. P45,000 D. P147,500 RPCPA 0584 16. Daffy Tunes’ unit production budget for toy rabbits for January is (E)
A. 45,000 units. C. 54,000 units.
B. 16,500 units. D. 14,500 units.
15. It's January 1 and an accountant is preparing her firm's cash budget, obtaining the following
information. Sales for the previous November and December were $50,000 and $52,000,
respectively. Sales projected for January and February are $55,000 and $57,000, respectively. 17. Daffy Tunes’ dollar production budget for toy rabbits for February is (E)
Direct materials (DM) purchases are approximately 40% of sales. Firm policy dictates that all A. $327,000 C. $113,500
DM are purchased the month prior to their use in production. Historical payment patterns B. $390,000 D. $127,500
indicate that 30% of DM purchases are paid in the same month as the purchase; 50% are paid
the month following the purchase and 20% are paid two months following the purchase. What The next three questions are based on the following information. Bobadilla
are expected cash disbursements for direct materials in January? (E) The Grainger Company's budgeted income statement reflects the following amounts:
A. $22,000 C. $23,840 Sales Purchases Expenses
B $22,800 D. $26,160 CMA January P120,000 P78,000 P24,000
February 110,000 66,000 24,200
March 125,000 81,250 27,000
April 130,000 84,500 28,600
Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the
second month following sale. One percent of sales is uncollectible and expensed at the end of the
year.

Quiz No. 10 - Comprehensive Budgeting (Problem) Page 3 of 4

 MANAGEMENT ADVISORY SERVICES

Grainger pays for all purchases in the month following purchase and takes advantage of a 3%
discount. The following balances are as of January 1:
Cash P88,000
Accounts receivable* 58,000
Accounts payable 72,000

*Of this balance, P35,000 will be collected in January and the remaining amount will be collected in
February.

The monthly expense figures include P5,000 of depreciation. The expenses are paid in the month
incurred.

18. Grainger's expected cash balance at the end of January is: (M1**)
A. P87,000. C. P92,000.
B. P89,160. D. P94,160.

19. Grainger's budgeted cash receipts in February are: (E)

A. P95,000. C. P113,640.
B. P113,090. D. P114,000.

20. Grainger's budgeted cash payments in February are: (M1**)

A. P75,660. C. P97,200.
B. P94,860. D. P99,860.

Quiz No. 10 - Comprehensive Budgeting (Problem) Page 4 of 4