CHECK UP EXAM…

AC 519 OPERATING BUDGET REVIEW

THEORY PROBLEM PROBLEM
1 2

ONE ONE ONE

TWO TWO TWO

THREE THREE THREE

FOUR FOUR FOUR

FIVE FIVE FIVE

 THEORY – ONE End
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The budgeting tool or process in which estimates of
revenues and expenses are prepared for each
product beginning with the product’s research and
development phase through customer support phase
a. Master Budget c. Zero based budget
b. Activitity based budget d. Life Cycle Budget

Letter D Back to Board

 THEORY – TWO End
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Tactical Planning usually involves which of the levels of
management

a. Middle and Lower

b. Middle and Top
c. Lower
d. Top

LETTER B Back to Board

 THEORY – THREE End
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The ending finished goods inventory budget supplies information needed
for the:

a. Cost of Good Sold Budget

b. Budgeted Income Statement
c. Cash Budget
d. Sales Budget

LETTER A Back to Board

THEORY – FOUR
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Which of the following is not true?
a. In creating sales budget, outside factors such as the state
of the economy, should be considered.
b. One approach to forecasting sales is the bottom up
approach
c. The production budget is prepared in units and pesos.
d. The sales forecast is done before the sales budget

Back to Board
LETTER C
THEORY – FIVE
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Budgetary slack can be described best as:
a. The elimination of certain expenses to enchance budgeted
income
b. The planned overestimation of budgeted expenses
c. A plug number used to achieve a present level of
operating income
d. The planned underestimation of budgeted expenses

Back to Board
LETTER B
PROBLEM 1 - ONE
Ying Company plans to sell 200,000 units of finished product
in October and anticipates a growth rate in sales of 5% per
month. The desired monthly ending inventory in units of
finished product is 80% of the next month's estimated sales.
There are 150,000 finished units in the inventory on
September 30.

Ying's production requirement in units of finished product for

the three-month period ending December 31 is:

665, 720
Back to Board
End
PROBLEM 1 - TWO
Candace Company produces and sells pillows. It expects to
sell 10,000 pillows in the year 2012 and had 1,000 pillows in
finished goods inventory at the end of 2011. Candace would
like to complete operations in the year 2012 with at least
1,250 completed pillows in inventory. There is no ending
work-in-process inventory. The pillows sell for $5 each. How
many pillows would be produced in the year 2012

10, 250 PILLOWS

Back to Board
End
PROBLEM 1 - THREE
Saphire Company budgeted the following production in units for
the second quarter of the year:April 45,000; May -38,000; June -
42,000

Each unit requires four pounds of raw material. Saphire's policy is

to have 30 percentage of the following month's production needs
for materials in inventory. This policy was met in March.
NARREND

Raw materials purchases budgeted for May in pounds equal:

156,800
Back to Board
End
PROBLEM 1 – FOUR
Bickford Company plans to sell 135,000 units in
November and 180,000 units in December. Bickford's
policy is that 10 percent of the following month's sales
must be in ending inventory. On November 1, there
were 14,000 units in inventory.

It takes 30 minutes of direct labor time to make one

unit. Direct labor wages average $17 per hour.Variable
overhead is applied at the rate of $5 per direct labor
hour. Fixed overhead is budgeted at $56,500 per month.
What is the DL cost and Total Overhead Cost in
November?
P1,181,500 and P404,000
Back to Board
End
PROBLEM 1 - FIVE
Suppose that a company has the following
accounts receivable collection pattern: Paid in
the month of sale
30%; Paid in the month following sale 70%

All sales are on credit. If credit sales for January

and February are $200,000 and $100,000
respectively, the cash collection for February is

P170,000 Back to Board

End
 PROBLEM II - ONE P25,258.20
Yummy Jams Company produces a line of jams. Yummy's
estimated production of jars of jam for the fourth quarter of
the year is as follows: October-75,000; November - 98,000;
December -63,000.
Each jar requires half a pound of berries. Yummy prefers to
buy the freshest berries, so its policy is to have just 3 percent
of the following month's production needs in ending
inventory. On October 1, the company had 1,125 pounds of
berries in inventory. Yummy's pays $0.60 per pound of berries.
It buys all berries on account and typically pays 40 percent of
a month's purchases in that month, and the remaining 60
percent the following month. How much is the total cash
payments for November? Back to Board
End
PROBLEM 1I - TWO
June Corporation has the following sales forecasts for the
first three months of the current year:January - $36,000;
February -24,000;March -40,000. 75 percent of sales are
collected in the month of the sale and the remainder is
collected in the following month.
Accounts receivable balance (January 1) - $22,800;
Cash balance (January 1)- 22,000; Minimum cash balance
needed - 20,000
What is the cash balance at the end of January,
assuming that cash is received only from customers and that
$48,000 is paid out during January?

P23,800 Back to Board

End
PROBLEM 2 - THREE
Lambert Company purchased $140,000 of goods in September
and expects to purchase $130,000 of goods in October. Lambert
typically pays for 20 percent of purchases in the month of purchase and
80 percent in the following month.
Every month, Lambert must make the following payments:Rent -$ 5,000
;Wages -14,000; Utilities -3,000; Telephone -400; Loan on equipment -
1,200
In mid-October, Lambert expects to buy a new computer for
$4,500 using the company credit card. Typically, the credit card bill is paid
in full in the following month. September credit card purchases totaled
$6,000.

167.600
Back to Board
End
PROBLEM 2 – FOUR
Abrams Bottling Company sells fruit-flavored colas. Estimated
sales in cartons for May, June, and July are 1,000, 3,000 and
5,000 respectively. The price is forecast at $5 per carton.
Abrams requires that finished goods ending inventory be 20
percent of the next month's sales. Inventory was 500 units on
May 1. Each carton requires 12 oz of fruit syrup and 130 oz of
carbonated water. Materials ending inventory is 10 percent of
the next month's production needs. May 1 inventory met that
requirement. How many ounces of syrup and carbonated
water should be purchased on MAY?

15,960 and 172,900

Back to Board
End
PROBLEM 2 - FIVE P836,660
Karam Inc. has compiled the following data in order to put
together their first quarter operating budget for 2011:January
- 35,000 ; February – 31,000; March – 38,000;April – 29,000.
Additional information: Karam sells each unit for $95.
Company policy is to have 30 percent of next month’s sales
(in units) in ending finished goods inventory. This policy was
met in December.
Company policy is to have 40 percent of next month’s
production needs in ending raw materials inventory. The
production needs for April is 95,500. This policy was met in
December. It takes three pounds of material to produce each
unit and the cost is $2.75/pound. How much is the total RM
Purchases for the 1st Quarter. Back to Board
End