Scribd
Upload
3 views

1_Inclass Practice Problems

The document outlines various budgeting exercises for Kingfisher Industries, Moncton Industries, Chatham Manufacturing Inc, and Roan Manufacturing, focusing on sales forecasts, production budgets, direct materials budgets, direct labor budgets, and cash budgets for the upcoming year. Each section includes specific requirements for preparing budgets based on provided sales data, production needs, and cash flow information. The exercises aim to enhance understanding of budgeting processes and financial planning in a corporate setting.

Uploaded by

ninhthaovananh01112003
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
3 views

1_Inclass Practice Problems

The document outlines various budgeting exercises for Kingfisher Industries, Moncton Industries, Chatham Manufacturing Inc, and Roan Manufacturing, focusing on sales forecasts, production budgets, direct materials budgets, direct labor budgets, and cash budgets for the upcoming year. Each section includes specific requirements for preparing budgets based on provided sales data, production needs, and cash flow information. The exercises aim to enhance understanding of budgeting processes and financial planning in a corporate setting.

Uploaded by

ninhthaovananh01112003
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 2

BUSI 294

Inclass Problems – Module 6: Budgets

Question 1

The marketing department of Kingfisher Industries has submitted the following sales forecast for the
upcoming year:

First Quarter Second Quarter Third Quarter Fourth Quarter


Budgeted unit sales 32,000 30,000 28,000 30,000

The selling price of the company’s product is $10.00 per unit. Management expects to collect 75% of sales
in the quarter in which the sales are made and 20% in the quarter following. The remaining 5% of sales
are expected to be uncollectible. The beginning balance of accounts receivable is $60,000, all of which
the company expects to collect in the first quarter.

The company expects to start the first quarter with 6,400 units in finished goods inventory. Kingfisher
prefers to have an ending finished goods inventory in each quarter equal to 20% of the next quarter’s
budgeted sales volume. The desired inventory in finished goods at the end of the fourth quarter is 6,800
units.

Required:

1. Prepare the company’s sales budget and expected cash collections for next year.
2. Prepare the company’s production budget, by quarter, for the next year.

Question 2

Moncton Industries manufactures programmable calculators. Each calculator requires three small chips
that cost $4.00 each and are purchased from an overseas manufacturer. The production budget for the
upcoming year for the company is as follows:

First Quarter Second Quarter Third Quarter Fourth Quarter


Budgeted production 90,000 135,000 225,000 150,000

Budgeted production for the first quarter of next year (i.e. year 2) is 120,000 units.

Because the chips are sourced overseas, Moncton prefers to have a substantial amount if raw materials
on hand. Consequently, the desired inventory at the end of any quarter is 20% of the next quarter’s
budgeted production. A total of 54,000 chips will be on at hand at the start of the first quarter.

Required:

1. Prepare a direct materials budget for chips, by each quarter and in total for the year. Show the
dollar amount of purchases for each quarter and for the year.
Question 3

Chatham Manufacturing Inc has submitted the following production budget for the upcoming year:

First Quarter Second Quarter Third Quarter Fourth Quarter


Budgeted production 30,000 26,400 27,000 29,400

Each unit requires 0.75 hours of direct labour time. Employees are paid $20.00 per hour.

Required:

1. Prepare the company’s direct labour budget for the upcoming fiscal year.

Question 4

Roan Manufacturing is preparing its cash budgets for the first 2 months of the upcoming year. The
following information concerns the company’s upcoming cash receipts and cash disbursements.

a. Sales are 65% cash and 35% credit. Credit sales are collected 30% in the month of sale and the
remainder in the month after sale. Actual sales in December were $51,000. Schedules of
budgeted sales for the two months of the upcoming year are as follows:

Budgeted Sales Revenue


January $60,000
February $69,000

b. Actual purchases of direct materials in December were $25,500. Roan’s purchases of direct
materials in January are budgeted to be $23,500 and $28,000 in February. All purchases are paid
30% in the month of purchase and 70% the following month.
c. Salaries and sales commissions are also paid half in the month earned and half in the next month.
Actual salaries were $8,000 in December. Budgeted salaries in January are $9,000 and February
budgeted salaries are $10,500. Sales commissions each month are 8% of that month’s sales.
d. Rent expense is $3,300 per month.
e. Depreciation is $2,800 per month.
f. Estimated income tax payments are made at the end of January. The estimated tax payment is
projected to be $12,000
g. The cash balance at the end of the prior year was $18,000.

Required:

1. Prepare a combined cash budget. If no financing activity took place, what is the budgeted cash
balance on February 28th?

You might also like