In: Accounting
1. Dilly Farm Supply is located in a small town in the rural west. Data regarding the store's operations follow:
Sales are budgeted at $308,000 for November, $328,000 for December, and $228,000 for January.
Collections are expected to be 65% in the month of sale and 35% in the month following the sale.
The cost of goods sold is 80% of sales.
The company desires to have an ending merchandise inventory at the end of each month equal to 70% of the next month's cost of goods sold. Payment for merchandise is made in the month following the purchase.
Other monthly expenses to be paid in cash are $22,900.
Monthly depreciation is $30,000.
Ignore taxes.
Balance Sheet October 31 |
||||||
Assets | ||||||
Cash | $ | 35,500 | ||||
Accounts receivable | 86,000 | |||||
Merchandise inventory | 172,480 | |||||
Property, plant and equipment, net of $624,000 accumulated depreciation | 923,000 | |||||
Total assets | $ | 1,216,980 | ||||
Liabilities and Stockholders' Equity | ||||||
Accounts payable | $ | 257,000 | ||||
Common stock | 758,000 | |||||
Retained earnings | 201,980 | |||||
Total liabilities and stockholders' equity | $ | 1,216,980 | ||||
The difference between cash receipts and cash disbursements for December would be:
2. Haylock Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 8,900 direct labor-hours will be required in August. The variable overhead rate is $1.80 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $100,520 per month, which includes depreciation of $8,830. All other fixed manufacturing overhead costs represent current cash flows. The August cash disbursements for manufacturing overhead on the manufacturing overhead budget should be:
3. Bustillo Inc. is working on its cash budget for March. The budgeted beginning cash balance is $42,000. Budgeted cash receipts total $123,000 and budgeted cash disbursements total $117,000. The desired ending cash balance is $65,500. To attain its desired ending cash balance for March, the company needs to borrow:
4. Which of the following statements is NOT correct concerning the Cash Budget?
a The Cash Budget builds on earlier budgets and schedules as well as additional data.
b The Cash Budget should be prepared before the Budgeted Balance Sheet.
c The Cash Budget should be prepared before the Budgeted Income Statement.
d It is not necessary to prepare any other budgets before preparing the Cash Budget.
5, In the merchandise purchases budget, the required purchases (in units) for a period can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units) and desired ending merchandise inventory (in units). true or false