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Chapter 07 - Exercises - Part I

This document contains 6 exercises related to production and sales budgeting. Exercise 1 asks about cash expected to be collected in April based on given sales percentages. Exercise 2 asks about cash expected to be collected in March based on given sales and collection percentages. Exercise 3 asks about production needed in the first quarter to meet given sales projections and ending inventory requirements.

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311 views2 pages

Chapter 07 - Exercises - Part I

This document contains 6 exercises related to production and sales budgeting. Exercise 1 asks about cash expected to be collected in April based on given sales percentages. Exercise 2 asks about cash expected to be collected in March based on given sales and collection percentages. Exercise 3 asks about production needed in the first quarter to meet given sales projections and ending inventory requirements.

Uploaded by

Rawan Yasser
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chapter 07 – Exercises – Part I

Exercise one:
Sioux Company is estimating the following sales for the first six months of next year:
January ...... $250,000
February .... $220,000
March ........ $240,000
April .......... $300,000
May ........... $360,000
Sales at Sioux are normally collected as 60% in the month of sale, 35% in the month following
the sale, and the remaining 5% being uncollectible. Based on this information, how much cash
should Sioux expect to collect during the month of April?
A) $250,800
B) $264,000
C) $290,700
D) $306,000

Exercise Two:
All of Gaylord Company's sales are on account. Thirty-five percent of the credit sales are collected in the
month of sale, 45% in the month following sale, and the rest are collected in the second month following
sale. Bad debts are negligible and should be ignored. The following are budgeted sales data for the
company:
January February March April
Total sales.............. $50,000 $60,000 $40,000 $30,000
What is the amount of cash that should be collected in March?
A) $39,000
B) $37,000
C) $27,500
D) $51,000

Exercise Three:
Betz Company's sales budget shows the following projections for next year:
Sales in units
First Quarter ...................... 60,000
Second Quarter .................. 80,000
Third Quarter ..................... 45,000
Fourth Quarter ................... 55,000

Inventory at the beginning of the year was 18,000 units. The finished goods inventory at the end of each
quarter is to equal 30% of the next quarter's budgeted unit sales. How many units should be produced
during the first quarter?
A) 24,000
B) 48,000
C) 66,000
D) 72,000

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Exercise Four:
The following information relates to Minorca Manufacturing Corporation for next quarter:
January February March
Expected sales (in units)............................ 440,000 390,000 400,000
Desired ending finished goods inventory
(in units)................................................. 28,000 30,000 35,000

How many units should Minorca plan on producing for the month of February?
A) 360,000 units
B) 388,000 units
C) 392,000 units
D) 420,000 units

Exercise Five:
The following are budgeted data:
Month 1 Month 2 Month 3
Sales in units ..................... 15,000 20,000 18,000
Production in units ............ 16,000 22,000 15,000

One pound of material is required for each finished unit. The inventory of materials at the end of
each month should equal 20% of the following month's production needs. At the beginning of
Month 1, 3,200 lbs. of materials were on hand. Purchases of raw materials for Month 2 would be
budgeted to be:
A) 17,600 pounds
B) 23,400 pounds
C) 20,600 pounds
D) 25,000 pounds

Exercise Six:
Garry Manufacturing Corporation's most recent production budget indicates the following required
production:

October November December


Required production (units) .......... 210,000 175,000 110,000

Each unit of finished product requires 5 pounds of raw materials. The company maintains raw materials
inventory equal to 25% of the next month's expected production needs. How many pounds of raw
material should Garry plan on purchasing for the month of November?
A) 1,006,250
B) 793,750
C) 1,012,500
D) 893,500

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