Garrison 14e Practice Exam Chapter 8

Print these pages. Answer each of the following questions, explaining your answers or showing your work, and then compare your solutions to those provided at the end of the practice exam. 1. Experience has shown that 50% percent of the sales of Geraghty Company sales are for cash. Monthly sales are budgeted as follows: $280,000 for October, $240,000 for November, and $320,000 for December. The rest are on credit with 70% of the credit sales are collected in the month of sale, 20% in the month following sale, and 5% in the second month following sale. The remainder is expected to be uncollectible. Prepare a schedule of expected cash collections for the month of December.

2. Maganti Manufacturing Company has budgeted production for next year as follows. First Quarter 80,000 Second Quarter 96,000 Third Quarter 128,000 Fourth Quarter 112,000

Production in units

Ten pounds of raw materials are required for each unit produced. Raw materials on hand at the beginning of the year total 20,000 lbs. The raw materials inventory at the end of each quarter should equal 10% of the next quarter's production needs. Prepare a direct materials budget for the second quarter.

3. Kromelow Company manufactures lamp shades. Budgeted sales of lamp shades are 3,200 units in January, 4,800 units in February, and 4,000 units in March. Management believes that an ending inventory equal to 20% of the next month's sales strikes the appropriate balance between excessive and insufficient inventories. Each lamp shade requires 1.5 direct labor hours. The average direct labor rate is $10.00 per hour. Part (a) Prepare a production budget for February.

Part (b) Prepare a direct labor budget for February.

GNB 14e Practice Exam Solutions Chapter 8

1. Solution (Learning O !ecti"e #$% Collected during ece!"er $112,000 160,000 2)2,000 2-,000 ),000 $&0&,000

Month of Sale ece!"er# Credit Cash +o,e!"er .cto"er Total cash collections

Calculations %$&20,000 ' .(0 ' .)0* %$&20,000 ' .(0* %$2-0,000 ' .(0 ' .20* %$280,000 ' .(0 ' .0(*

#& Solution (Learning O !ecti"e 4$% /e0uired for# Second 0uarter 1roduction %96,000 ' 10 l"s.* Planned ending in,entor2 %128,000 ' .10 ' 10 l"s.* 3ess 1lanned "eginning in,entor2 %96,000 ' .10 ' 10 l"s.* /a4 !aterials to "e 1urchased %1ounds* 960,000 128,000 %96,000* 992,000

'& Part (a$ Solution (Learning O !ecti"e '$% 5udgeted 1roduction for Fe"ruar2 4ould "e deter!ined as follo4s. Sales Plus 1lanned ending in,entor2 %-,000 ' .20* 3ess "eginning in,entor2 %-,800 ' .20* 6nits to "e 1roduced Part ( $ Solution (Learning O !ecti"e ($% /e0uired 1roduction in fra!es irect la"or hours re0uired 1er fra!e Total direct la"or hours needed irect la"or cost 1er hour Total direct la"or cost -,6-0 1.( 6,960 ' $10.00 $69,600 ' -,800 800 %960* -,6-0