Coastal Manufacturing budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year: Item Beginning Inventory Ending Inventory Raw Material 45,000 Finished Goods 85,000 55,000 60,000 Four pounds of raw material are needed to produce each unit of finished product. If Coastal Manufacturing plans to sell 600,000 units during next year, the number of units it would have to manufacture during the year would be: a. 575,000 units b. 625,000 units c. 600,000 units d. 645,000 units

Coastal Manufacturing budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year: Item Beginning Inventory Ending Inventory Raw Material 45,000 Finished Goods 85,000 55,000 60,000 Four pounds of raw material are needed to produce each unit of finished product. If Coastal Manufacturing plans to sell 600,000 units during next year, the number of units it would have to manufacture during the year would be: a. 575,000 units b. 625,000 units c. 600,000 units d. 645,000 units

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter9: Profit Planning And Flexible Budgets

Section: Chapter Questions

Problem 66P: Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the...

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Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities. Projected sales in units for the coming 5 months follow: The following data pertain to production policies and manufacturing specifications followed by Allison Manufacturing: a. Finished goods inventory on January 1 is 32,000 units, each costing 166.06. The desired ending inventory for each month is 80% of the next months sales. b. The data on materials used are as follows: Inventory policy dictates that sufficient materials be on hand at the end of the month to produce 50% of the next months production needs. This is exactly the amount of material on hand on December 31 of the prior year. c. The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is 14.25. d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) f. The unit selling price of the subassembly is 205. g. All sales and purchases are for cash. The cash balance on January 1 equals 400,000. The firm requires a minimum ending balance of 50,000. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the end of the quarter, as is the interest due (cash borrowed at the end of the quarter is repaid at the end of the following quarter). The interest rate is 12% per annum. No money is owed at the beginning of January. Required: 1. Prepare a monthly operating budget for the first quarter with the following schedules. (Note: Assume that there is no change in work-in-process inventories.) a. Sales budget b. Production budget c. Direct materials purchases budget d. Direct labor budget e. Overhead budget f. Selling and administrative expenses budget g. Ending finished goods inventory budget h. Cost of goods sold budget i. Budgeted income statement j. Cash budget 2. CONCEPTUAL CONNECTION Form a group with two or three other students. Locate a manufacturing plant in your community that has headquarters elsewhere. Interview the controller for the plant regarding the master budgeting process. Ask when the process starts each year, what schedules and budgets are prepared at the plant level, how the controller forecasts the amounts, and how those schedules and budgets fit in with the overall corporate budget. Is the budgetary process participative? Also, find out how budgets are used for performance analysis. Write a summary of the interview.
One Device makes universal remote controls and expects to sell 500 units in January, 800 in February, 450 in March, 550 in April, and 600 in May. The required ending inventory is 20% of the next months sales. Prepare a production budget for the first four months of the year.
Palmgren Company produces consumer products. The sales budget for four months of the year is presented below. Company policy requires that ending inventories for each month be 25 percent of next months sales. At the beginning of July, the beginning inventory of consumer products met that policy. Required: Prepare a production budget for the third quarter of the year. Show the number of units that should be produced each month as well as for the quarter in total.
Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the follow sales: In Shalimars experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are 4,900,000 and for the fourth quarter of the current year are 6,850,000. Required: 1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each quarter of next year. 2. Construct a cash receipts budget for Shalimar Company for each quarter of the next year, showing the cash sales and the cash collections from credit sales. 3. What if the recession led Shalimars top management to assume that in the next year 10 percent of credit sales would never be collected? The expected payment percentages in the quarter of sale and the quarter after sale are assumed to be the same. How would that affect cash received in each quarter? Construct a revised cash budget using the new assumption.
If the sales forecast estimates that 50,000 units of product will be sold during the following year, should the factory plan on manufacturing 50,000 units in the coming year? Explain.
Play-Disc makes Frisbee-type plastic discs. Each 12-inch diameter plastic disc has the following manufacturing costs: For the coming year, Play-Disc expects to make 300,000 plastic discs, and to sell 285,000 of them. Budgeted beginning inventory in units is 16,000 with unit cost of 4.75. (There are no beginning or ending inventories of work in process.) Required: 1. Prepare an ending finished goods inventory budget for Play-Disc for the coming year. 2. What if sales increased to 290,000 discs? How would that affect the ending finished goods inventory budget? Calculate the value of budgeted ending finished goods inventory.
The fixed overhead budgeted for Ranier Industries at an expected capacity of 500,000 units is 1,500,000. Variable costing is used internally, and the net income is adjusted to an absorption costing net income at year-end. Data collected over the last three years show the following: Determine the adjustment each year to convert the variable costing income to absorption costing net income. Compute the absorption costing net income for each year.
The sales department of Macro Manufacturing Co. has forecast sales for its single product to be 20,000 units for June, with three-quarters of the sales expected in the East region and one-fourth in the West region. The budgeted selling price is 25 per unit. The desired ending inventory on June 30 is 2,000 units, and the expected beginning inventory on June 1 is 3,000 units. Prepare the following: a. A sales budget for June. b. A production budget for June.
The number of units it would have to manufacture during tha year would be
Gardner Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. Beginning Inventory Ending Inventory Raw material* 48,000 58,000 Finished goods 88,000 58,000 * Three pounds of raw material are needed to produce each unit of finished product. If Gardner Corporation plans to sell 520,000 units during next year, the number of units it would have to manufacture during the year would be:
Paradise Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. Beginning Ending Inventory Inventory Raw material* 58,000 68,000 Finished goods 98,000 68,000 * Three pounds of raw material are needed to produce each unit of finished product. If Paradise Corporation plans to sell 570,000 units during next year, the number of units it would have to manufacture during the year would be: Multiple Choice O 600,000 units 540,000 units 512,000 units 570,000 units
Paradise Corporation budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for next year. Beginning Inventory Inventory Ending Raw material* 53,000 63,000 63,000 Finished goods 93,000 * Three pounds of raw material are needed to produce each unit of finished product. If Paradise Corporation plans to sell 545,000 units during next year, the number of units it would have to manufacture during the year would be: Multiple Choice 545,000 units 492,000 units 575,000 units 515,000 units