Ch 7 HW

Question 1

Sports Socks has a policy of always paying within the discount period and each of its suppliers provides a discount of 2% if paid within 10 days of purchase. Because of the purchase policy, 85% of its payments are made in the month of purchase and 15% are made the following month. The direct materials budget provides for purchases of $127,000 in November, $295,000 in December, $238,000 in January, and $235,000 in February. What is the balance in accounts payable for January 31, and February 28?

-----------		Ending Balance
January		$
February

Question 6

Before the year began, the following static budget was developed for the estimated sales of 100,000. Sales are sluggish and management needs to revise its budget. Use this information to prepare a flexible budget for 80,000 and 90,000 units of sales.

blank blank Flexible Budget

--------------------	100,000	80,000	90,000
Sales	$3,560,000	$	$
Cost of Goods Sold	---------------	---------	---------
Direct Material	$1,000,000	$	$
Direct Labor	1,000,000
Variable Manufacturing Overhead	230,000
Fixed Manufacturing Overhead	70,000
Cost of Goods Sold	$2,300,000	$	$
Gross Profit	$1,260,000	$	$
Variable Sales and Administrative Expenses	100,000
Fixed Sales and Administrative Expenses	950,000
Income Before Taxes	$210,000	$	$
Taxes	63,000
Net Income/Loss	$147,000	$	$