Principles of Accounting II

Exercise A - Chapter 7 Budgeting

EA1.

LO 7.2Blue Book printing is budgeting sales of 25,000 units and already has 5,000 units in

beginning inventory. How many units must be produced to also meet the 7,000 units required in

ending inventory?

EA2.

LO 7.2How many units are in beginning inventory if 32,000 units are budgeted for sales, 35,000

units are produced, and the desired ending inventory is 9,000 units?

EA3.

LO 7.2Navigator sells GPS trackers for $50 each. It expects sales of 5,000 units in quarter 1 and

a 5% increase each subsequent quarter for the next 8 quarters. Prepare a sales budget by quarter

for the first year.

EA4.

LO 7.2One 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 month’s sales. Prepare a production budget for the first four months of the year.

EA5.

LO 7.2Sunrise Poles manufactures hiking poles and is planning on producing 4,000 units in

March and 3,700 in April. Each pole requires a half pound of material, which costs $1.20 per

pound. The company’s policy is to have enough material on hand to equal 10% of the next

month’s production needs and to maintain a finished goods inventory equal to 25% of the next

month’s production needs. What is the budgeted cost of purchases for March?

EA6.

LO 7.2Given the following information from Rowdy Enterprises’ direct materials budget, how

much direct materials needs to be purchased?

Exercise A - Chapter 7 Budgeting

EA7.

LO 7.2Each unit requires direct labor of 2.2 hours. The labor rate is $11.50 per hour and next

year’s direct labor budget totals $834,900. How many units are included in the production budget

for next year?

EA8.

LO 7.2How many units are estimated to be sold if Skyline, Inc., has a planned production of

900,000 units, a desired beginning inventory of 160,000 units, and a desired ending inventory of

100,000 units?

EA9.

LO 7.3Cash collections for Wax On Candles found that 60% of sales were collected in the

month of the sale, 30% was collected the month after the sale, and 10% was collected the second

month after the sale. Given the sales shown, how much cash will be collected in January and

February?

EA10.

LO 7.3Nonna’s Re-Appliance Store collects 55% of its accounts receivable in the month of sale

and 40% in the month after the sale. Given the following sales, how much cash will be collected

in February?

EA11.

LO 7.3Dream Big Pillow Co. pays 65% of its purchases in the month of purchase, 30% the

month after the purchase, and 5% in the second month following the purchase. It made the

following purchases at the end of 2017 and the beginning of 2018:

Exercise A - Chapter 7 Budgeting

EA12.

LO 7.3Desiccate purchases direct materials each month. Its payment history shows that 70% is

paid in the month of purchase with the remaining balance paid the month after purchase. Prepare

a cash payment schedule for March if in January through March, it purchased $35,000, $37,000,

and $39,000, respectively.

EA13.

LO 7.3What is the amount of budgeted cash payments if purchases are budgeted for $420,000

and the beginning and ending balances of accounts payable are $95,000 and $92,000,

respectively?

EA14.

LO 7.3Halifax Shoes has 30% of its sales in cash and the remainder on credit. Of the credit

sales, 65% is collected in the month of sale, 25% is collected the month after the sale, and 5% is

collected the second month after the sale. How much cash will be collected in August if sales are

estimated as $75,000 in June, $65,000 in July, and $90,000 in August?

EA15.

LO 7.4Cold X, Inc. uses this information when preparing their flexible budget: direct materials

of $2 per unit, direct labor of $3 per unit, and manufacturing overhead of $1 per unit. Fixed costs

are $35,000. What would be the budgeted amounts for 20,000 and 25,000 units?

EA16.

LO 7.4Using the provided budgeted information for production of 10,000 and 15,000 units,

prepare a flexible budget for 17,000 units.

EA17.

Exercise A - Chapter 7 Budgeting

LO 7.5The production cost for a waterproof phone case is $7 per unit and fixed costs are

$23,000 per month. How much is the favorable or unfavorable variance if 5,500 units were

produced for a total of $61,000?