12 Questions on Budgeting - Quiz 6 | ACG 3361, Quizzes of Cost Accounting

Download 12 Questions on Budgeting - Quiz 6 | ACG 3361 and more Quizzes Cost Accounting in PDF only on Docsity! Quiz: Chapter 6, Budgeting Spring 2009 Closing Time on Webcourses: Wednesday February 11, 2008 at 11:55 pm. Lucky, Inc. manufactures plastic containers. Management is now preparing detailed budgets for the third quarter, July through September, and has assembled the following information to assist in preparing the budget: a. The Marketing Department has estimated sales as follows for the remainder of the year (in numbers of containers): July……………… 9,000 October…………… 4,000 August………….. 6,000 November………… 5,000 September………. 8,000 December………… 8,000 The selling price of each container is $65. b. All sales are on account. Based on past experience, sales are expected to be collected in the following pattern: 40% in the month of sale 55% in the month following sale 5% uncollectible The beginning accounts receivable balance (excluding uncollectible amounts) on July 1 will be $200,000. c. The company maintains finished goods inventories equal to 20% of the following month’s sales. The inventory of finished goods on July 1 will be 1000 containers. d. Each container requires 6 pounds of a plastic material called Fantastic Plastic. To prevent shortages, the company would like the inventory of Fantastic Plastic on hand at the end of each month to be equal to 30% of the following month’s production needs. The inventory of Fantastic Plastic on hand on July 1 will be 3,000 pounds. e. Lucky has other cash operating expenses as follows: July……………… $300,000 September……… $220,000 August………….. $350,000 October………… $210,000 Depreciation expense is $50,000 a month. f. Fantastic Plastic costs $3.00 per pound. Lucky pays for 70% of its purchases in the month of purchase; the remainder is paid for in the following month. The accounts payable balance for Fantastic Plastic purchases will be $35,000 on July 1. g. Beginning cash balance on July 1 will be $85,000. The company always desires to have a minimum cash balance of $85,000. If the budget plan shows a cash shortfall at the end of any one month the company will be proactive and borrow the necessary funds on the first day of the month with the shortfall. Their bank charges them 10% interest on short term loans. They can pay the money back as they have cash surplus but the loan must be paid back all at once not in increments. If they can pay money back in a particular month they pay it back on the last day of the month. Assume all months have 30 days for the purposes of interest calculations. Round your interest to the nearest dollar. Interest is paid back when the loan is paid off. Tasks: 1. Prepare a sales budget, by month and in total, for the third quarter. (Show your budget in both units of containers and dollars.) Also prepare a schedule of expected cash collections, by month and in total, for the third quarter. 2. Prepare a production budget for each of the months July through October. 3. Prepare a direct materials budget for Fantastic Plastic, by month and in total, for the third quarter. 4. Prepare a schedule of expected cash disbursements for Fantastic Plastic, by month and in total, for the third quarter. 5. Prepare a cash summary schedule, by month and in total, for the third quarter. Questions: 1. What is the total sales budget in dollars for the third quarter? 1495000 2. What is Production in units for September? 7200 3. What is the ending inventory of finished goods at the end of September? 800 4. How many pounds of direct material should be purchased in August? 39840 5. How much is cash disbursed for operating expenses and depreciation in July? 300000 6. What are cash collections for September? 422500 7. What are cash disbursements for purchases of Raw Materials for August? 141012 8. What are Total cash collections for the third quarter? 1334250 9. What are Total cash disbursements for the third quarter? 1295060 10. How much money, if any, do they need to borrow? 48074 11. What is the total interest paid to the bank? 1091 12. What is the ending cash balance for the third quarter? 123099