Louis Industries 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 85,000 105,000 Finished goods 165,000 120,000 Four pounds of raw material are needed to produce each unit of finished product. If Louis Industries plans to sell 780,000 units during next year, the number of units it would have to manufacture during the year would be: a. 735,000 units b. 885,000 units c. 555,000 units d. 585,000 units

Louis Industries 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 85,000 105,000 Finished goods 165,000 120,000 Four pounds of raw material are needed to produce each unit of finished product. If Louis Industries plans to sell 780,000 units during next year, the number of units it would have to manufacture during the year would be: a. 735,000 units b. 885,000 units c. 555,000 units d. 585,000 units

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 11CE: Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted...

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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.
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