31. 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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium
Solution:
Ending inventory + Units sold −
Beginning inventory
= 30,000 + 390,000 - 28,000 =
392,000
32. MJ
Department Store expects to generate the following sales figures for the next
three months:
|
|
|
July
|
August
|
September
|
|
|
Expected sales.......
|
$480,000
|
$560,000
|
$600,000
|
MJ's gross profit rate is 45% of
sales dollars. At the end of each month, MJ wants a merchandise inventory
balance equal to 30% of the following month's expected sales, stated at cost.
What dollar amount of merchandise inventory should MJ plan to purchase in
August?
A) $257,400
B) $314,600
C) $320,000
D) $327,800
Ans: B AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Hard
Solution:
Inventory
cost is 55% of sales dollars (1 – 45% gross profit rate)
Inventory purchased = Ending
inventory + Sales − Beginning inventory
= [($600,000 × 30%) × 55%] +
($560,000 × 55%) − [($560,000 × 30%) × 55%]
= ($180,000 × 55%) + $308,000 −
($168,000 × 55%)
= $99,000 + $308,000 − $92,400 =
$314,600
33. On
October 1, The Gala Manufacturing Company has 300 units of Product XYZ on hand.
The company plans to sell 1,200 units of Product XYZ during October, and plans
to have 500 units on hand October 31. How many units of Product XYZ must be
produced during October?
A) 1,400
B) 1,500
C) 1,000
D) 2,000
Ans: A AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
Solution:
Units produced = Ending inventory +
Units sold − Beginning inventory
= 500 + 1,200 − 300 = 1,400
34. 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
Ans: C AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium
Solution:
Materials
purchased = Ending inventory + Materials used − Beginning inventory
= (20% × 15,000) + 22,000 − (20% ×
22,000)
= 3,000 + 22,000 − 4,400 = 20,600
35. Alexis
Fabrication, Inc. manufactures and sells box trailers for semi trucks. Each
trailer requires two (2) axles. For next quarter, Alexis has scheduled 720
trailers for production and 750 for sale. Alexis is also moving to just-in-time
purchasing next quarter and plans on reducing its inventory of trailer axles by
100. How many axles should Alexis budget for purchase for next quarter?
A) 1,240
axles
B) 1,300
axles
C) 1,340
axles
D) 1,400
axles
Ans: C AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium
Solution:
Materials to be purchased = Ending
inventory + Materials to be used − Beginning inventory
= Materials to be used + (Ending
inventory − Beginning inventory)
= (720 × 2) − 100 = 1,440 − 100 =
1,340
36. 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
Ans: B AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Easy
Solution:
Materials to be purchased = Ending
inventory + Materials to be used − Beginning inventory
= (25% × 110,000 × 5) + (175,000 ×
5) − (25% × 175,000 × 5)
= 137,500 + 875,000 − 218,750 =
793,750
37. Depasquale
Corporation is working on its direct labor budget for the next two months. Each
unit of output requires 0.41 direct labor-hours. The direct labor rate is $8.10
per direct labor-hour. The production budget calls for producing 5,000 units in
May and 5,400 units in June. If the direct labor work force is fully adjusted
to the total direct labor-hours needed each month, what would be the total
combined direct labor cost for the two months?
A) $16,605.00
B) $17,933.40
C) $17,269.20
D) $34,538.40
Ans: D AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Total direct
labor-hours = 0.41 × (5,000 + 5,400) = 4,264
Direct labor cost = 4,264 × $8.10 =
$34,538.40
38. Pooler
Corporation is working on its direct labor budget for the next two months. Each
unit of output requires 0.15 direct labor-hours. The direct labor rate is $7.00
per direct labor-hour. The production budget calls for producing 6,500 units in
April and 6,200 units in May. The company guarantees its direct labor workers a
40-hour paid work week. With the number of workers currently employed, that
means that the company is committed to paying its direct labor work force for
at least 1,000 hours in total each month even if there is not enough work to keep
them busy. What would be the total combined direct labor cost for the two
months?
A) $13,825.00
B) $13,335.00
C) $14,000.00
D) $13,510.00
Ans: C AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
Direct
labor-hours needed for production in April = 0.15 × 6,500 = 975
Direct labor-hours needed for
production in May = 0.15 × 6,200 = 930
Even though both months’ production
needs would require less than 1,000 hours, the company has committed to paying
a minimum of 1,000 hours per month.
Total direct labor-hours = 1,000 +
1,000 = 2,000
Direct labor cost = 2,000 × $7 =
$14,000
39. Traverse
Company manufactures and sells women's skirts. Each skirt (unit) requires 2.5
yards of cloth. Selected data from Traverse's master budget for next quarter
are shown below:
|
|
|
July
|
August
|
September
|
|
|
Budgeted sales (in units)...............
|
6,000
|
8,000
|
9,000
|
|
|
Budgeted production (in units)......
|
8,000
|
10,500
|
12,000
|
Each unit requires 1.5 hours of
direct labor, and the average hourly cost of Traverse's direct labor is $10.
What is the cost of Traverse Company's direct labor in September?
A) $135,000
B) $180,000
C) $157,500
D) $120,000
Ans: B AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
Solution:
12,000 × 1.5
× $10 = $180,000
40. Haylock
Inc. bases its manufacturing overhead budget on budgeted direct labor-hours.
The direct labor budget indicates that 5,600 direct labor-hours will be
required in August. The variable overhead rate is $5.40 per direct labor-hour.
The company's budgeted fixed manufacturing overhead is $69,440 per month, which
includes depreciation of $15,680. All other fixed manufacturing overhead costs
represent current cash flows. The August cash disbursements for manufacturing
overhead on the manufacturing overhead budget should be:
A) $99,680
B) $84,000
C) $53,760
D) $30,240
Ans: B AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
Variable
manufacturing overhead + Fixed manufacturing overhead
= (5,600 × $5.40) + ($69,440 −
$15,680)
= $30,240 + $53,760 = $84,000
41. Arciba
Inc. bases its manufacturing overhead budget on budgeted direct labor-hours.
The direct labor budget indicates that 7,400 direct labor-hours will be
required in January. The variable overhead rate is $9.50 per direct labor-hour.
The company's budgeted fixed manufacturing overhead is $130,980 per month,
which includes depreciation of $10,360. All other fixed manufacturing overhead
costs represent current cash flows. The company recomputes its predetermined
overhead rate every month. The predetermined overhead rate for January should
be:
A) $27.20
B) $25.80
C) $17.70
D) $9.50
Ans: A AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
$9.50 + ($130,980 ÷ 7,400) = $9.50 +
$17.70 = $27.20
42. The
manufacturing overhead budget at Foshay Corporation is based on budgeted direct
labor-hours. The direct labor budget indicates that 5,800 direct labor-hours
will be required in May. The variable overhead rate is $9.10 per direct
labor-hour. The company's budgeted fixed manufacturing overhead is $104,400 per
month, which includes depreciation of $8,120. All other fixed manufacturing
overhead costs represent current cash flows. The company recomputes its
predetermined overhead rate every month. The predetermined overhead rate for
May should be:
A) $9.10
B) $27.10
C) $18.00
D) $25.70
Ans: B AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
$9.10 + ($104,400 ÷ 5,800) = $9.10 +
$18 = $27.10
43. The
manufacturing overhead budget at Franklyn Corporation is based on budgeted
direct labor-hours. The direct labor budget indicates that 4,400 direct
labor-hours will be required in January. The variable overhead rate is $1.30
per direct labor-hour. The company's budgeted fixed manufacturing overhead is
$60,280 per month, which includes depreciation of $17,160. All other fixed
manufacturing overhead costs represent current cash flows. The January cash
disbursements for manufacturing overhead on the manufacturing overhead budget
should be:
A) $5,720
B) $43,120
C) $48,840
D) $66,000
Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
Solution:
(4,400 ×
$1.30) + ($60,280 − $17,160) = $5,720 + $43,120 = $48,840
44. Schuepfer
Inc. bases its selling and administrative expense budget on budgeted unit
sales. The sales budget shows 1,300 units are planned to be sold in March. The
variable selling and administrative expense is $4.20 per unit. The budgeted
fixed selling and administrative expense is $19,240 per month, which includes
depreciation of $3,380 per month. The remainder of the fixed selling and
administrative expense represents current cash flows. The cash disbursements
for selling and administrative expenses on the March selling and administrative
expense budget should be:
A) $15,860
B) $5,460
C) $24,700
D) $21,320
Ans: D AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy
Solution:
(1,300 ×
$4.20) + ($19,240 − $3,380) = $5,460 + $15,860 = $21,320
45. The
selling and administrative expense budget of Choo Corporation is based on
budgeted unit sales, which are 4,600 units for August. The variable selling and
administrative expense is $7.30 per unit. The budgeted fixed selling and
administrative expense is $51,980 per month, which includes depreciation of
$6,440 per month. The remainder of the fixed selling and administrative expense
represents current cash flows. The cash disbursements for selling and
administrative expenses on the August selling and administrative expense budget
should be:
A) $85,560
B) $45,540
C) $79,120
D) $33,580
Ans: C AACSB: Analytic
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy
Solution:
(4,600 ×
$7.30) + ($51,980 − $6,440) = $33,580 + $45,540 = $79,120
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