PRE-TEST

Short-Term Budgeting MAS #6

1. Zeus, the god of thunder, plans to sell 11,000 units of thunderbolts during July, and expects sales
to increase at the rate of 10% per month during the remainder of the year. The June 30 and
September 30 ending inventories are anticipated to be 1,100 units and 950 units, respectively. On
the basis of this information, how many units of thunderbolts should Zeus purchase for the quarter
ended September 30?

Solution:
Beginning Bal - 1,100
Purchased - XX => 36,260u
(Sold) - (36,410) = [11,000+(11,000x1.1)+(11,000x1.1x1.1)] 10% increase per month
End - 950

2. An examination of Poseidon Corporation’s Inventory accounts revealed the following

information:

Raw materials, June 1: 54,000 units

Raw materials, June 30: 59,000 units
Purchases of raw materials during June: 193,000 units

Poseidon’s finished product requires four units of raw materials. On the basis of this information,
how many finished products were manufactured during June?

Solution:
Beginning - 13,500 (54,000/4)
Purchased - 48,250 (193,000/4)
(Sold) - XX => 47,000
End - 14,750 (59,000/4)

Apollo manufactures arrows requiring 0.25 ounces of gold per unit. The cost of gold is
approximately P360 per ounce; the company maintains an ending gold inventory equal to 10% of
the following month’s production usage. The following data were taken from the most recent
quarterly production budget:
Planned Production
July 1,000
August 1,100
September 980

3. The cost of gold to be purchased to support August production is?

Solution:
Beg - 9,900 = [1,100x 0.25 x 360 x 10%]
Purchased - XX => 97,920
(Sold) - (99,000) = [1,100 x 0.25 x 360]
End - 8,820 = [980 x 0.25 x 360 x 10%]
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PRE-TEST
Short-Term Budgeting MAS #6

4. If it takes three direct labor hours to produce each unit of arrow and Apollo’s cost per labor hour
is P15, direct labor cost for August would be budgeted at?

Solution:
1,100 units x 3 DLH x P15/DLH = P49,500

5. Athena’s Hunt makes all sales on account, subject to the following collection pattern: 20% are
collected in the month of sale; 70% are collected in the first month after sale; and 10% are collected
in the second month after sale. If sales for October, November, and December were P75,000,
P65,000, and P55,000, respectively, what was the budgeted receivables balance on December 31?

Solution:
October November December Receivable@12/31
October 75,000 20% 70% 10% 0
November 65,000 20% 70% 10%
December 55,000 20% 80%
50,500

The following selected data pertains to Aphrodite’s Apparel:

Cash Operating Expenses P 180,000
Depreciation 60,000
Merchandise Purchases in July 550,000
Estimated Payments in July for purchases:
In June 220,000
Prior to June 50,000
In July 30%

6. July’s Cash Disbursements are expected to be?

Solution:
Cash OpEx 180,000
Cash Payments:
In June 220,000
Prior to June 50,000
In July (550,000 x 30%) 165,000
Cash Disbursements 615,000

The Hades Company’s budgeted income statement reflects the following amounts:
Sales Purchases Expenses
Jan P120,000 P78,000 P24,000
Feb 105,00066,000 24,200
Mar 125,00081,250 27,000
Apr 130,00084,500 28,600
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PRE-TEST
Short-Term Budgeting MAS #6

Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the
second month following sale. One percent of sales is uncollectible and expensed at the end of the
year.

Hades pays for all purchases in the month following purchase and takes advantage of a 3%
discount. The following balances are as of January 1:
Cash P88,000
Accounts Receivable* 58,000
Accounts Payable 72,000
*Of this balance, P35,000 will be collected in January and the remaining amount will be collected
in February.

The monthly expense figures include P6,000 of depreciation. The expenses are paid in the amount
incurred.

7. Hades’ expected cash balance at the end of January is?

Solution:
Cash Beg P88,000
+ A/R Collected in Jan 35,000
+ Cash Sales in Jan (120,000 x 50%) 60,000
- A/P paid in Jan w/ Disc (72,000 x 97%) (68,940)
- Cash Expenses w/o Deprn (24,000 - 6,000) (18,000)
Cash, End 95,160

8. Hades’ budgeted cash receipts in February are?

Solution:
+ A/R Collected in Feb 23,000
+ Cash collected from sales in Jan (120,000 x 30%) 36,000
+ Cash sales in Feb ( 105,000 x 50%) 52,500
Cash receipts in Feb 111,500

9. Hades’ budgeted cash payments in February are?

Solution:
+ A/P Paid from Jan (78,000 x 97%) 75,660
+ Cash exp w/o Depn in Feb (24,200 - 6,000) 18,200
Cash payments in Feb 93,860

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PRE-TEST
Short-Term Budgeting MAS #6

10. Hermes Hospital has provided with the following budget information for January:

Cash Collections P800,000

January 1 cash balance P25,000
Cash disbursement P900,000

Hermes has a policy of maintaining a minimum cash balance of P30,000 and borrows only in
P1,000 increments. How much will Hermes borrow in January?

Solution:
Cash Balance Beg P25,000
Add: Cash Collections 800,000
Total available cash 825,000
Less: Cash Disbursement 900,000
Deficit: (75,000)
Minimum Balance (30,000)
Amount to be borrowed: P105,000

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