CASH FLOWS AND BUDGETING EXAM 3 PREP

9. The Task Company is to begin operations in April. They have budgeted April sales of $30,000, May sales of $34,000, June sales of $40,000, July sales of $42,000, and August sales of $38,000. 10% of each month's sales will represent cash sales; 75% of the balance will be collected in the month following the sale, 17% the second month, 6% the third month and the balance is bad debts. What is the amount of cash to be collected in the month of August? a. $40,106 b. $40,340 c. $38,036 d. $44,140

10. The Sun Company manufactures a special line of graphic tubing items. The company estimates it will sell 75,000 units of this item in 2008. The beginning finished goods inventory contains 20,000 units. The target for each year's ending inventory is 10,000 units. Each unit requires five feet of plastic tubing. The tubing inventory currently includes 70,000 feet of the required tubing. Materials on hand are targeted to equal three month's production. Any shortage in materials will be made up by the immediate purchase of materials. Sales take place evenly throughout the year. What is the production budget (in units) for 2008? a. 60,000 b. 65,000 c. 75,000 d. 85,000

11. The Sun Company manufactures a special line of graphic tubing items. The company estimates it will sell 75,000 units of this item in 2008. The beginning finished goods inventory contains 20,000 units. The target for each year's ending inventory is 10,000 units. Each unit requires five feet of plastic tubing. The tubing inventory currently includes 70,000 feet of the required tubing. Materials on hand are targeted to equal three month's production. Any shortage in materials will be made up by the immediate purchase of materials. Sales take place evenly throughout the year. What are the materials purchases (in feet) for 2008? a. 313,750 b. 336,250 c. 363,750 d. 386,250

12. Astrik Ltd. expects sales in February of $420,000. Markup on costs is 150%. Astrik expects the following expenses in February: management salaries $24200, salespersons wages $21000, bad debts 2% of sales, office salaries and expenses $12600, advertising 1.5% sales, discount allowed 1% sales, and interest on loan $1000. If EI is $13,500 higher than BI, what is the amount of purchases for February? a. $168,000 b. $181,500 c. $293,500 d. Neither of the above

13. The budget is to be based on the following assumptions: SALES: Each month's sales are billed on the last day of the month. Customers are allowed a 3% discount if payment is made within 10 days after the billing date. Receivables are recorded in the accounts at their gross amounts (not net of discounts). 55% of the billings are collected within the discount period; 30% are collected by the end of the month; 9% are collected by the end of the second month; and 6% turn out to be uncollectible. PURCHASES: 60% of all purchases of merchandise and 100% of the selling, general, and administrative expenses are paid in the month purchased and the remainder in the following month. The number of units in each month's ending inventory is equal to 125% of the next month's units of sales. The cost of each unit of inventory is $30. Selling, general, and administrative expenses, of which $3,000 is depreciation, are equal to 15% of the current month's sales. Actual and projected sales are as shown below: What are the budgeted number of inventory units that need to be purchased in July? a. 11,750 b. 15,000 c. 12,250 d. 12,000

14. Fravak Eng.s production costs per unit are: DM $22 DL $30 MO $15 Sales are expected to be 5000 units in May. Inventories of finished goods are estimated at: May 1: 500 units valued at $35,000 May 31: 800 units What is the expected CGS for May? a. $316,400 b. $336,500 c. $373,700 d. Neither of the above

15. Actual/projected sales (in dollars) are: March $472000, April $484000, May $476000, June $456,000, and July $480000. Actual/projected purchases (in units) are: March 12175, April 11850, May 11275, June 12150, and July 12250. The cost of each unit of inventory is $30. Selling, general, and administrative expenses, of which $3,000 is depreciation, are equal to 15% of the current month's sales. 60% of all purchases of merchandise and 100% of the selling, general, and administrative expenses are paid in the month purchased and the remainder in the following month. What are the budgeted cash disbursements during the month of June? a. $407,520 b. $419,400 c. $421,950 d. $434,280

16. Astrik Ltd. expects sales in February of $420,000. Markup on costs is 50%. Astrik expects the following expenses in February: management salaries $24200, salespersons wages $21000, bad debts 2% of sales, office salaries and expenses $12600, advertising 1.5% sales, discount allowed 1% sales, and interest on loan $1000. What is Astriks total financial expenses for February? a. $12,600 b. $13,600 c. $19,900 d. Neither of the above

17. The Waverly Company has budgeted sales for the year as follows: The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units. The finished goods inventory at the start of the year is 3,000 units. Scheduled production for the second quarter is (in units) a. 17,500 units b. 16,500 units c. 15,000 units d. 13,000 units

18. The Tobler Company had budgeted production for the year as follows: Four pounds of raw materials are required for each unit produced. Raw materials on hand at the start of the year total 4,000 lbs. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs in materials. Budgeted purchases of raw materials in the second quarter would be (in lbs.) a. 48,000 lbs b. 46,400 lbs c. 49,600 lbs d. 54,400 lbs

19. ABC Company has 10,000 units on hand at the beginning of the year and plans to sell 100,000 units during the year. If the ending inventory needs to be twice the beginning inventory, ABC will need to produce 90,000 units during the year. a. True b. False

20. Historically, andy wood products has had no significant bad debt experience with its customers. Cash sales have accounted for 10% of total sales, and payments for credit sales have been received as follows: 40% of credit sales in the month of the sale 30% of credit sales in the first subsequent month 25% of credit sales in the second subsequent month 5% of credit sales in the third subsequent month The forecast for both cash and credit sales is as follows: Month sales January $95,000 February 65,000 March 70,000 April 80,000 May 85,000 What is the forecasted cash inflow for andy wood products for may? a. $70,875 b. $79,375 c. $76,500 d. $83,650

21. Deberg company has developed the following sales projections for calendar year 2x10: May $100,000 June 120,000 July 140,000 August 160,000 September 150,000 October 130,000 Normal cash collection experience has been that 50% of sales is collected during the month of sale and 45% in the month following sale. The remaining 5% of sales is never collected. Deberg's budgeted cash collections for the third calendar quarter are a. $450,000 b. $440,000 c. $414,000 d. $360,000

22. RUNDLE LTD has estimated sales for Jan to April as: Jan $150,000 Feb 180,000 March 120,000 April 165,000 The mark-up on cost is 50% and management requires that opening stock be 90% of sales (at cost) each month. What is the purchases amount for Feb? a. $156,000 b. $118,000 c. $ 84,000 d. $ 63,000