Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:

114. Weller Industrial Gas Corporation supplies acetylene and other compressed gases to industry. Data regarding the store's operations follow:

           

·       Sales are budgeted at $330,000 for November, $300,000 for December, and $320,000 for January.

·       Collections are expected to be 85% in the month of sale, 14% in the month following the sale, and 1% uncollectible.

·       The cost of goods sold is 60% of sales.

·       The company purchases 80% of its merchandise in the month prior to the month of sale and 20% in the month of sale. Payment for merchandise is made in the month following the purchase.

·       Other monthly expenses to be paid in cash are $21,200.

·       Monthly depreciation is $21,000.

·       Ignore taxes.

           

	Statement of Financial Position
	October 31
	Assets:
	Cash..................................................................................................	$    22,000
	Accounts receivable (net of allowance for uncollectible accounts).	83,000
	Inventory..........................................................................................	158,400
	Property, plant and equipment (net of $594,000 accumulated depreciation).................................................................................	1,004,000
	Total assets	$1,267,400
	Liabilities and Stockholders’ Equity:
	Accounts payable.............................................................................	$   196,000
	Common stock.................................................................................	620,000
	Retained earnings.............................................................................	451,400
	Total liabilities and stockholders’ equity.........................................	$1,267,400

            Required:

           

a.      Prepare a Schedule of Expected Cash Collections for November and December.

b.     Prepare a Merchandise Purchases Budget for November and December.

c.      Prepare Cash Budgets for November and December.

d.     Prepare Budgeted Income Statements for November and December.

e.      Prepare a Budgeted Balance Sheet for the end of December.

            Ans: 

           

a.		November	December
	Sales...........................................................	$330,000	$300,000
	Schedule of Expected Cash Collections
	Accounts receivable..................................	$ 83,000
	November sales.........................................	280,500	$ 46,200
	December sales..........................................		255,000
	Total cash collections................................	$363,500	$301,200

b.		November	December
	Cost of goods sold.....................................	$198,000	$180,000
	Merchandise Purchases Budget
	November sales.........................................	$ 39,600
	December sales..........................................	144,000	$ 36,000
	January sales..............................................		153,600
	Total purchases..........................................	$183,600	$189,600
	Disbursements for merchandise................	$196,000	$183,600

c.		November	December
	Cash receipts..............................................	$363,500	$301,200
	Cash disbursements:
	Disbursements for merchandise.............	196,000	183,600
	Other monthly expenses.........................	21,200	21,200
	Total cash disbursements.......................	217,200	204,800
	Excess (deficiency) of cash available over disbursements........................................	$146,300	$ 96,400

d.		November	December
	Sales...........................................................	$330,000	$300,000
	Bad debt expense.......................................	3,300	3,000
	Cost of goods sold.....................................	198,000	180,000
	Gross margin.............................................	128,700	117,000
	Other monthly expenses............................	21,200	21,200
	Depreciation..............................................	21,000	21,000
	Net operating income................................	$ 86,500	$ 74,800

e.	Statement of Financial Position
	December 31
	Assets:
	Cash............................................................................	$  264,700
	Accounts receivable (net of allowance for uncollectible accounts)...........................................	42,000
	Inventory....................................................................	153,600
	Property, plant and equipment (net of $636,000 accumulated depreciation)......................................	962,000
	Total assets.................................................................	$1,422,300
	Liabilities and Stockholders’ Equity:
	Accounts payable.......................................................	$   189,600
	Common stock...........................................................	620,000
	Retained earnings.......................................................	612,700
	Total liabilities and stockholders’ equity...................	$1,422,300

           

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  2,3,8,9,10     Level:  Hard

    115. At March 31 Streuling Enterprises, a merchandising firm, had an inventory of 38,000 units, and it had accounts receivable totaling $85,000. Sales, in units, have been budgeted as follows for the next four months:

           

	April......................	60,000
	May.......................	75,000
	June.......................	90,000
	July........................	81,000

            Streuling's board of directors has established a policy to commence in April that the inventory at the end of each month should contain 40% of the units required for the following month's budgeted sales.

            The selling price is $2 per unit. One-third of sales are paid for by customers in the month of the sale, the balance is collected in the following month.

           

            Required:

           

a.      Prepare a merchandise purchases budget showing how many units should be purchased for each of the months April, May, and June.

b.     Prepare a schedule of expected cash collections for each of the months April, May, and June.

            Ans: 

a.		April	May	June	July
	Budgeted sales, in units..............	60,000	75,000	90,000	81,000
	Desired ending inventory (40%)	30,000	36,000	32,400
	Total needs..................................	90,000	111,000	122,400
	Less beginning inventory...........	38,000	30,000	36,000
	Required purchases.....................	52,000	81,000	86,400

b.		April	May	June
	Budgeted sales, at $2 per unit.....	$120,000	$150,000	$180,000
	March 31 accounts receivable....	$ 85,000
	April sales...................................	40,000	$ 80,000
	May sales....................................		50,000	$100,000
	June sales....................................			60,000
	Total cash collections.................	$125,000	$130,000	$160,000

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  2,3     Level:  Medium

    116. Capes Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:

           

·       Sales are budgeted at $390,000 for November, $360,000 for December, and $340,000 for January.

·       Collections are expected to be 85% in the month of sale, 10% in the month following the sale, and 5% uncollectible.

·       The cost of goods sold is 80% of sales.

·       The company purchases 40% of its merchandise in the month prior to the month of sale and 60% in the month of sale. Payment for merchandise is made in the month following the purchase.

·       The November beginning balance in the accounts receivable account is $77,000.

·       The November beginning balance in the accounts payable account is $320,000.

           

            Required:

           

a.      Prepare a Schedule of Expected Cash Collections for November and December.

b.     Prepare a Merchandise Purchases Budget for November and December.

            Ans: 

a.		November	December
	Sales........................................................	$390,000	$360,000
	Schedule of Expected Cash Collections
	Accounts receivable...............................	$ 77,000
	November sales......................................	331,500	$ 39,000
	December sales.......................................		306,000
	Total cash collections.............................	$408,500	$345,000

b.		November	December
	Cost of goods sold..................................	$312,000	$288,000
	Merchandise Purchases Budget
	November sales......................................	$187,200
	December sales.......................................	115,200	$172,800
	January sales...........................................		108,800
	Total purchases.......................................	$302,400	$281,600
	Disbursements for merchandise.............	$320,000	$302,400

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  2,3     Level:  Medium

    117. Clay Company has projected sales and production in units for the second quarter of the coming year as follows:

           

		April	May	June
	Sales.......................	50,000	40,000	60,000
	Production.............	60,000	50,000	50,000

            Cash-related production costs are budgeted at $5 per unit produced. Of these production costs, 40% are paid in the month in which they are incurred and the balance in the following month. Selling and administrative expenses will amount to $100,000 per month. The accounts payable balance on March 31 totals $190,000, which will be paid in April.

            All units are sold on account for $14 each. Cash collections from sales are budgeted at 60% in the month of sale, 30% in the month following the month of sale, and the remaining 10% in the second month following the month of sale. Accounts receivable on April 1 totaled $500,000 $(90,000 from February's sales and the remainder from March).

           

            Required:

           

a.      Prepare a schedule for each month showing budgeted cash disbursements for the Clay Company.

b.     Prepare a schedule for each month showing budgeted cash receipts for Clay Company.

            Ans: 

a.		April	May	June
	Production units..........................	60,000	50,000	50,000
	Cash required per unit.................	× $5	× $5	× $5
	Production costs..........................	$300,000	$250,000	$250,000
	Cash disbursements:
		April	May	June
	Production this month (40%)......	$120,000	$100,000	$100,000
	Production prior month (60%)....	190,000	180,000	150,000
	Selling and administrative..........	100,000	100,000	100,000
	Total disbursements....................	$410,000	$380,000	$350,000

Payments relating to the prior month (March) in April represent the balance of accounts payable at March 31.

b.		April	May	June
	Sales units...................................	50,000	40,000	60,000
	Sales price...................................	× $14	× $14	× $14
	Total sales...................................	$700,000	$560,000	$840,000
		April	May	June
	Cash receipts:
	February sales.............................	$ 90,000
	March sales.................................	307,500	$102,500
	April sales...................................	420,000	210,000	$ 70,000
	May sales....................................		336,000	168,000
	June sales....................................			504,000
	Total receipts..............................	$817,500	$648,500	$742,000

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  2,4     Level:  Hard

    118. The Doley Company has planned the following sales for the next three months:

           

		Jan	Feb	Mar
	Budgeted sales.......	$40,000	$50,000	$70,000

Sales are made 20% for cash and 80% on account. From experience, the company has learned that a month’s sales on account are collected according to the following pattern:

	Month of sale.................................	60%
	First month following sale............	30%
	Second month following sale........	8%
	Uncollectible.................................	2%

The company requires a minimum cash balance of $5,000 to start a month. The beginning cash balance in March is budgeted to be $6,000.

Required:

a.      Compute the budgeted cash receipts for March.

b.     The following additional information has been provided for March:

	Inventory purchases (all paid in March).............................	$28,000
	Selling and administrative expenses (all paid in March)....	$40,000
	Depreciation expense for March........................................	$5,000
	Dividends paid in March....................................................	$4,000

            Prepare a cash budget in good form for the month of March, using this information and the budgeted cash receipts you computed for part (1) above. The company can borrow in any dollar amount and will not pay interest until April.

            Ans: 

a.	Cash sales, March: $70,000 × 20%........	$14,000
	Collections on account:
	Jan. sales: $40,000 × 80% × 8%.............	2,560
	Feb. sales: $50,000 × 80% × 30%..........	12,000
	Mar. sales: $70,000 × 80% × 60%.........	33,600
	Total cash receipts..................................	$62,160

b.	Cash balance, beginning.........................	$ 6,000
	Add cash receipts from sales..................	62,160
	Total cash available................................	68,160
	Less disbursements:
	Inventory purchases................................	28,000
	Selling and administrative expenses.......	40,000
	Dividends................................................	4,000
	Total disbursements................................	72,000
	Cash excess (deficiency)........................	(3,840)
	Financing–borrowing.............................	8,840
	Cash balance, ending..............................	$ 5,000

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  2,8     Level:  Medium

    119. A sales budget is given below for one of the products manufactured by the Key Co.:

           

	January..................	21,000 units
	February................	36,000 units
	March....................	61,000 units
	April......................	41,000 units
	May.......................	31,000 units
	June.......................	25,000 units

            The inventory of finished goods at the end of each month should equal 20% of the next month's sales. However, on December 31 the finished goods inventory totaled only 4,000 units.

            Each unit of product requires three specialized electrical switches. Since the production of these specialized switches by Key's suppliers is sometimes irregular, the company has a policy of maintaining an ending inventory at the end of each month equal to 30% of the next month's production needs. This requirement had been met on January 1 of the current year.

           

            Required:

            Prepare a budget showing the quantity of switches to be purchased each month for January, February, and March and in total for the quarter.

            Ans: 

	January	February	March	April
Budgeted sales (units)...................	21,000	36,000	61,000	41,000
Add: Desired ending inventory.....	7,200	12,200	8,200	6,200
Total needs....................................	28,200	48,200	69,200	47,200
Deduct: Beginning inventory........	4,000	7,200	12,200	8,200
Units to be produced.....................	24,200	41,000	57,000	39,000

	January	February	March	Quarter
Units to be produced	24,200	41,000	57,000	122,200
Switches per unit	×3	×3	×3	×3
Production needs	72,600	123,000	171,000	366,600
Add: Desired ending inventory	36,900	51,300	35,100	35,100
Total needs	109,500	174,300	206,100	401,700
Deduct: Beginning inventory	21,780	36,900	51,300	21,780
Required purchases	87,720	137,400	154,800	379,920

Beginning inventory, January 1: 72,600 × 0.3 = 21,780

Ending inventory, March 31: (39,000 × 3) × 0.3 = 35,100

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  4     Level:  Hard

    120. One quarter gram of a rare seasoning is required for each bottle of Dipping Oil, a very popular product sold through gourmet shops that is produced by The Lucas Company. The cost of the seasoning is $16 per gram. Budgeted production of Dipping Oil is given below for the second quarter, and the first month of the third quarter.

           

		April	May	June	July
	Required production bottles..........	5,000	8,000	15,000	10,000

            The seasoning is so difficult to get that the company must have on hand at the end of each month 20% of the next month's production needs. A total of 250 grams will be on hand at the beginning of April.

           

            Required:

           

            Prepare a direct materials budget for the seasoning, by month and in total for the second quarter. Be sure to include both the quantity to be purchased and its cost for each month.

            Ans: 

Lucas Company Direct Materials Budget for the Second Quarter
	April	May	June	Total
Required production (bottles)...........	5,000	8,000	15,000	28,000
Seasoning required per bottle (grams)...........................................	×0.25	×0.25	×0.25	×0.25
Production needs (grams)..................	1,250	2,000	3,750	7,000
Add desired ending inventory of seasoning.......................................	400	750	500	500
Total needs........................................	1,650	2,750	4,250	7,500
Less beginning inventory of seasoning.......................................	250	400	750	250
Seasoning to be purchased (grams)...	1,400	2,350	3,500	7,250
Cost of seasoning per gram...............	× $16	× $16	× $16	× $16
Cost of seasoning to be purchased....	$22,400	$37,600	$56,00	$116,000

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  4     Level:  Easy

    121. Whitmer Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.05 direct labor-hours. The direct labor rate is $11.80 per direct labor-hour. The production budget calls for producing 7,100 units in February and 6,800 units in March.

           

            Required:

           

            Construct the direct labor budget for the next two months, assuming that the direct labor work force is fully adjusted to the total direct labor-hours needed each month.

            Ans: 

	February	March
Required production in units.........	7,100	6,800
Direct labor-hours per unit............	0.05	0.05
Total direct labor-hours needed....	355	340
Direct labor cost per hour..............	$11.80	$11.80
Total direct labor cost....................	$4,189	$4,012

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  5     Level:  Easy

    122. Sthilaire Corporation is working on its direct labor budget for the next two months. Each unit of output requires 0.34 direct labor-hours. The direct labor rate is $11.10 per direct labor-hour. The production budget calls for producing 8,000 units in April and 8,300 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 2,840 hours in total each month even if there is not enough work to keep them busy.

           

            Required:

           

            Construct the direct labor budget for the next two months.

            Ans: 

	April	May
Required production in units.........	8,000	8,300
Direct labor-hours per unit............	0.34	0.34
Total direct labor-hours needed....	2,720	2,822
Total direct labor-hours paid.........	2,840	2,840
Direct labor cost per hour..............	$11.10	$11.10
Total direct labor cost....................	$31,524	$31,524

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  5     Level:  Medium

    123. Brockney Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $8.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $107,970 per month, which includes depreciation of $9,760. All other fixed manufacturing overhead costs represent current cash flows. The July direct labor budget indicates that 6,100 direct labor-hours will be required in that month.

           

            Required:

           

a.      Determine the cash disbursement for manufacturing overhead for July.

b.     Determine the predetermined overhead rate for July.

            Ans: 

a.		July
	Budgeted direct labor-hours...........................................	6,100
	Variable overhead rate...................................................	$8.60
	Variable manufacturing overhead..................................	$ 52,460
	Fixed manufacturing overhead.......................................	107,970
	Total manufacturing overhead.......................................	160,430
	Less depreciation............................................................	9,760
	Cash disbursement for manufacturing overhead............	$150,670

b.	Total manufacturing overhead (a)..................................	$160,430
	Budgeted direct labor-hours (b).....................................	6,100
	Predetermined overhead rate for the month (a)/(b)........	$26.30

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  6     Level:  Easy

    124. The manufacturing overhead budget of Reigle Corporation is based on budgeted direct labor-hours. The February direct labor budget indicates that 5,800 direct labor-hours will be required in that month. The variable overhead rate is $4.60 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $82,360 per month, which includes depreciation of $16,820. All other fixed manufacturing overhead costs represent current cash flows.

           

            Required:

           

a.      Determine the cash disbursement for manufacturing overhead for February. Show your work!

b.     Determine the predetermined overhead rate for February. Show your work!

            Ans: 

a.		February
	Budgeted direct labor-hours............................................	5,800
	Variable overhead rate....................................................	$4.60
	Variable manufacturing overhead...................................	$ 26,680
	Fixed manufacturing overhead........................................	82,360
	Total manufacturing overhead........................................	109,040
	Less depreciation.............................................................	16,820
	Cash disbursement for manufacturing overhead.............	$ 92,220

b.	Total manufacturing overhead (a)...................................	$109,040
	Budgeted direct labor-hours (b)......................................	5,800
	Predetermined overhead rate for the month (a)/(b).........	$18.80

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  6     Level:  Easy

    125. Wala Inc. bases its selling and administrative expense budget on the number of units sold. The variable selling and administrative expense is $8.20 per unit. The budgeted fixed selling and administrative expense is $132,800 per month, which includes depreciation of $14,400. The remainder of the fixed selling and administrative expense represents current cash flows. The sales budget shows 8,000 units are planned to be sold in July.

           

            Required:

           

            Prepare the selling and administrative expense budget for July.

            Ans: 

           

	July
Budgeted unit sales...................................................................	8,000
Variable selling and administrative expense per unit...............	$8.20
Budgeted variable expense.......................................................	$ 65,600
Budgeted fixed selling and administrative expense.................	132,800
Total budgeted selling and administrative expense..................	198,400
Less depreciation......................................................................	14,400
Cash disbursements for selling and administrative expenses...	$184,000

            AACSB:  Analytic     AICPA BB:  Critical Thinking     AICPA FN:  Reporting, Measurement     LO:  7     Level:  Easy