Question

Vaviano Ltd expects to sell 34,000 units of finished goods over the next 6-month period. The company has 10,000 units on hand and its managers want to have 14,000 units on hand at the end of the period. To produce one unit of finished product, two units of direct materials are needed. Vaviano has 100,000 units of direct material on hand and has budgeted for an ending inventory of 110,000 units.

What is the amount of direct material to be purchased (in units)?

Select one:

a. 38,000

b. none of these

c. 66,000

d. 86,000

e. 76,000

Super Solar Systems has forecast the following unit sales and production for the next year, by quarter.

Quarter	1st	2nd	3rd	4th
Production	75	80	70	50
Sales	60	70	75	60

Super Solar has the following beginning inventories.

Finished goods	50 units
Direct material A	15 kilograms
Direct material B	30 square metres

A finished unit requires one kilogram of material A and two square metres of material B. There should be enough material on hand at the end of each quarter to meet 20% of the next quarter’s production needs. There are no work-in-process inventories.

What is the ending inventory for material A for quarter 2?

Select one:

a. 14 kilograms

b. none of these

c. 80 kilograms

d. 78 kilograms

e. 70 kilograms

Limelite Ltd, a retail store, projects sales for its first three months of operation as follows.

	January	February	March
Credit sales	$150,000	$188,000	$176,000
Cash sales	$60,000	$50,000	$55,000
Total sales	$210,000	$238,000	$231,000

Inventory on 1 January is $40,000. Subsequent beginning inventories should be 40% of that month’s cost of goods sold. Goods are priced at 140% of their cost.

50% of purchases are paid for in the month of purchase; the balance is paid in the following month.

It is expected that 50% of credit sales will be collected in the month following sale, 30% in the second month following the sale and the balance the third month. A 5% discount is given if payment is received in the month following sale.

What are the anticipated cash receipts for February?

Select one:

a. $107,500

b. $238,000

c. $121,250

d. $71,250

e. None of these

Answer 1

Question 1

Correct answer--------------d. 86,000

Working

Units to be sold	34000
Add: Desired Ending Inventory	14000
Total Units needed	48000
Less: Beginning finished goods inventory	10000
Units to be produced	38000

.

Required Production in Units of Finished Goods	38000
Units of Raw material needed per Unit of Fished Goods	2
Units of Raw material needed to meet Production	76000
Desired Ending Inventory of Raw Material	110000
Total Units of Raw material Needed	186000
Beginning Inventory of Raw Material Available	100000
Units of Raw material to be Purchased	86000

.

Question 2

Correct answer--------------d. 78 kilograms

Working

Direct Materials Budget
	Quarter
	First	Second	Third
Required Production in Units of Finished Goods	75	80	70
Units of Raw material needed per Unit of Fished Goods	1	1	1
Units of Raw material needed to meet Production	75	80	70
Desired Ending Inventory of Raw Material	16	14
Total Units of Raw material Needed		94
Beginning Inventory of Raw Material Available		16
Units of Raw material to be Purchased		78