88. A company budgeted unit sales of 204,000 units for January, 2017 and 240,000 units for February 2017. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 61,200 units of inventory on hand on December 31, 2016, how many units should be produced in January, 2017 in order for the company to meet its goals? a. 214,800 units b. 204,000 units C. 193,200 units d. 276,000 units Ans: A, LO: 2, Bloom: AP. Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Resource Management, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation 89. At January 1, 2016, Deer Corp. has beginning inventory of 2,000 surfboards. Deer estimates it will sell 10,000 units during the first quarter of 2016 with a 12% increase in sales each quarter. Deer's policy is to maintain an ending inventory equal to 25% of the next quarter's sales. Each surfboard costs $100 and is sold for $150. How much is budgeted sales revenue for the third quarter of 2016? a. $450,000 b. $1,950,000 C. $1,881,600 d. $12,544 Ans: C, LO: 2, Bloom: AP, Diculty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Resource Management AICPA FN Mo m ent ri Budgetary Planning 9-19 90. Doe Manufacturing plans to sell 6,000 purple lawn chairs during May, 5,700 in June, and 6,000 during July. The company keeps 15% of the next month's sales as ending inventory. How many units should Doe produce during June? a. 5,745 b. 6,600 C. 5,655 d. Not enough information to determine. Ans: A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Resource Management, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation Strand Company is planning to sell 400 buckets and produce 380 buckets during March. Each bucket requires 500 grams of plastic and one-half hour of direct labor. Plastic costs $10 per 500 grams and employees of the company, are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Strand has 300 kilos of plastic in beginning inventory and wants to have 200 kilos in ending inventory. How much is the total amount of budgeted direct labor for March? a. $3,000 b. $6,000 c. $2,850 d. $5,7000 Ans: C, LO: 3, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Resource Management, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation 92. Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory. What is the total amount to be budgeted for manufacturing overhead for the month? a. $2,871 b. $2,970 c. $11,484 d. $11,880 Ans: A, LO: 3, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytio, AICPA BB: Resource Management, AICPA FN: Measurement, AICPA PC: 93. Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory. What is the total amount to be budgeted for direct labor for the month? a. $2,610 b. $10,440 C. $2,700 d. $41,760 Ans: A, LO: 3, Bloom: AP, Difficulty: Medium Min: 5 AASR Analytir AICRA BR: Ronnie 94. Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at 870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter hour of direct labor. Clay mix costs $0.40 per pound and employees of the company are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and wants to have 4,500 pounds in ending inventory. What is the total amount to be budgeted in pounds for direct materials to be purchased for the month? a. 38,280 b. 37,680 c. 38,880 d. 40,200 Ans: C, LO: 2, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Resource Management, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation 95. Lorie Nursery plans to sell 320 potted plants during April and 240 units in May. Lorie Nursery keeps 15% of the next month's sales as ending inventory. How many units should Lorie Nursery produce during April? a. 308 b. 332 c. 320 d. 356 96. ont cola Monthlo.fied Cost $3 $4 Comma Co. makes and sells widgets. The company is in the process of preparing its selling and administrative expense budget for the month. The following budget data are available: Item Variable Cost Per Unit Sold Sales commissions Monthly Fixed Cost Shipping Advertising Executive salaries $120,000 Depreciation on office equipment $4,000 Other $6,000 Expenses are paid in the month incurred. If the company has budgeted to sell 80,000 widgets in October, how much is the total budgeted selling and administrative expenses for October? a. $940,000 b. $140,000 C. $930,000 d. $800,000 97. Comma Manufacturing budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels are planned for the fiscal year of July 1, 2016 to June 30, 2017: June 30, 2017 June 30, 2016 Raw Materials 3,000 kilos 2,000 kilos Three kilos of raw materials are needed to produce each unit of finished product. If Comma Manufacturing plans to produce 560,000 units during the 2016-2017 fiscal year, how many kilos of materials will the company need to purchase for its production during the year? a. 1,681,000 b. 1,686,000 c. 1,680,000 d. 1,678,000 Ans: A, LO: 2, Bloom: AP, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA BB: Resource Management, AICPA FN: Measurement, AICPA PC: Problem Solving. IMA: Budget Preparation 98. The following information is taken from the production budget for the first quarter: Beginning inventory in units 1,200 Sales budgeted for the quarter 456,000 Production capacity in units 472,000 How many finished goods units should be produced during the quarter if the company desires 3,200 units available to start the next quarter? a. 458,000 b. 454,000 c. 474,000 d. 459,200