1.All of Gaylord Company's sales are on account.

Thirty-five
percent of the credit sales are collected in the month of
sale, 45% in the month following sale, and the rest are
collected in the second month following sale. Bad debts
are negligible and should be ignored. The following are
budgeted sales data for the company:

January February March April

Total sales...... $50,000 $60,000 $40,000 $30,000

What is the amount of cash that should be collected in

March?
A) $39,000
B) $37,000
C) $27,500
D) $51,000

Solution:

March sales ($40,000 × 35%) $14,000

February sales ($60,000 × 45%) 27,000
January sales ($50,000 × 20%*) 10,000
Total..................................... $51,000
*100% − 35% − 45% = 20%

2.On October 1, The Gala Manufacturing Company has 300

units of Product XYZ on hand. The company plans to sell
1,200 units of Product XYZ during October, and plans to
have 500 units on hand October 31. How many units of
Product XYZ must be produced during October?
A) 1,400
B) 1,500
 C) 1,000
D) 2,000

Solution:
Units produced = Ending inventory + Units sold −
Beginning inventory
= 500 + 1,200 − 300 = 1,400

3.Garry Manufacturing Corporation's most recent production

budget indicates the following required production:

October November December

Required production (units) 210,000 175,000 110,000

Each unit of finished product requires 5 pounds of raw

materials. The company maintains raw materials inventory
equal to 25% of the next month's expected production
needs. How many pounds of raw material should Garry
plan on purchasing for the month of November?
A) 1,006,250
B) 793,750
C) 1,012,500
D) 893,500

Solution:

Materials to be purchased = Ending inventory + Materials

to be used − Beginning inventory
= (25% × 110,000 × 5) + (175,000 × 5) − (25% × 175,000
× 5)
= 137,500 + 875,000 − 218,750 = 793,750
 4.Depasquale Corporation is working on its direct labor
budget for the next two months. Each unit of output
requires 0.41 direct labor-hours. The direct labor rate is
$8.10 per direct labor-hour. The production budget calls
for producing 5,000 units in May and 5,400 units in June.
If the direct labor work force is fully adjusted to the total
direct labor-hours needed each month, what would be the
total combined direct labor cost for the two months?
A) $16,605.00
B) $17,933.40
C) $17,269.20
D) $34,538.40

Solution:

Total direct labor-hours = 0.41 × (5,000 + 5,400) = 4,264

Direct labor cost = 4,264 × $8.10 = $34,538.40

5.Traverse Company manufactures and sells women's skirts.

Each skirt (unit) requires 2.5 yards of cloth. Selected data
from Traverse's master budget for next quarter are shown
below:

July August September

Budgeted sales (in units).. 6,000 8,000 9,000
Budgeted production (in units) 8,000 10,500 12,000

Each unit requires 1.5 hours of direct labor, and the

average hourly cost of Traverse's direct labor is $10. What
is the cost of Traverse Company's direct labor in
September?
A) $135,000
B) $180,000
C) $157,500
D) $120,000
Solution:

12,000 × 1.5 × $10 = $180,000

6.Haylock Inc. bases its manufacturing overhead budget on

budgeted direct labor-hours. The direct labor budget
indicates that 5,600 direct labor-hours will be required in
August. The variable overhead rate is $5.40 per direct
labor-hour. The company's budgeted fixed manufacturing
overhead is $69,440 per month, which includes
depreciation of $15,680. All other fixed manufacturing
overhead costs represent current cash flows. The August
cash disbursements for manufacturing overhead on the
manufacturing overhead budget should be:
A) $99,680
B) $84,000
C) $53,760
D) $30,240

Solution:

Variable manufacturing overhead + Fixed manufacturing

overhead
= (5,600 × $5.40) + ($69,440 − $15,680)
= $30,240 + $53,760 = $84,000