Exercise 8-3 (Algo) Direct Materials Budget [LO8-4] Two grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.50 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 Year 3 First Second Third Fourth First Budgeted production, in bottles 74,000 104,000 164,000 114,000 84,000 The inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 29,600 grams of musk oil will be on hand to start the first quarter of Year 2. Required: Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.

Exercise 8-3 (Algo) Direct Materials Budget [LO8-4] Two grams of musk oil are required for each bottle of Mink Caress, a very popular perfume made by a small company in western Siberia. The cost of the musk oil is $1.50 per gram. Budgeted production of Mink Caress is given below by quarters for Year 2 and for the first quarter of Year 3: Year 2 Year 3 First Second Third Fourth First Budgeted production, in bottles 74,000 104,000 164,000 114,000 84,000 The inventory of musk oil at the end of a quarter must be equal to 20% of the following quarter's production needs. Some 29,600 grams of musk oil will be on hand to start the first quarter of Year 2. Required: Prepare a direct materials budget for musk oil, by quarter and in total, for Year 2.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter9: Profit Planning And Flexible Budgets

Section: Chapter Questions

Problem 23BEA: Preparing a Direct Materials Purchases Budget Patrick Inc. makes industrial solvents sold in...

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Pasadena Candle Inc. budgeted production of 785,000 candles for January. Wax is required to produce a candle. Assume 10 ounces of wax is required for each candle. The estimated January 1 wax inventory is 16,000 pounds. The desired January 31 wax inventory is 12,500 pounds. If candle wax costs 1.24 per pound, determine the direct materials purchases budget for January.
Refer to Cornerstone Exercise 8.2 for the production budgets for practice balls and match balls. Every practice ball requires 0.7 square yard of polyvinyl chloride panels, one bladder with valve (to fill with air), and 3 ounces of glue. FlashKicks policy is that 20 percent of the following months production needs for raw materials be in ending inventory. Beginning inventory in January for all raw materials met this requirement. Required: 1. Construct a direct materials purchases budget for each type of raw materials for the practice ball line for January and February of the coming year. 2. What if FlashKick decreased the ending inventory percentage to 15 percent of the next months production needs? What impact would that have on the direct materials purchases budgets prepared in Requirement 1? Refer to Cornerstone Exercise 8.1, through Requirement 1. FlashKick requires ending inventory of product to equal 20 percent of the next months unit sales. Beginning inventory in January was 3,100 practice soccer balls and 400 match soccer balls. Required: 1. Construct a production budget for each of the two product lines for FlashKick Company for the first three months of the coming year. 2. What if FlashKick wanted a production budget for the two product lines for the month of April? What additional information would you need to prepare this budget?
Preparing a Direct Materials Purchases Budget Patrick Inc. makes industrial solvents sold in 5-gallon drums. Planned production in units for the first 3 months of the coming year is: Each drum requires 5.5 gallons of chemicals and one plastic drum. Company policy requires that ending inventories of raw materials for each month be 15% of the next months production needs. That policy was met for the ending inventory of December in the prior year. The cost of one gallon of chemicals is 2.00. The cost of one drum is 1.60. (Note: Round all unit amounts to the nearest unit. Round all dollar amounts to the nearest dollar.) Required: 1. Calculate the ending inventory of chemicals in gallons for December of the prior year and for January and February. What is the beginning inventory of chemicals for January? 2. Prepare a direct materials purchases budget for chemicals for the months of January and February. 3. Calculate the ending inventory of drums for December of the prior year and for January and February. 4. Prepare a direct materials purchases budget for drums for the months of January and February.
8) Problem 8-31 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Cash $ 41,000 Accounts receivable 200,800 Inventory 57,900 Buildings and equipment (net) 351,000 Accounts payable $ 85,425 Common stock 500,000 Retained earnings 65,275 $ 650,700 $ 650,700 Actual sales for December and budgeted sales for the next four months are as follows: December(actual) $ 251,000 January $ 386,000 February $ 583,000 March $ 297,000 April $ 194,000 Sales are 20% for cash and 80% on credit. All payments on…
8 Problem 8-31 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Cash $ 41,000 Accounts receivable 200,800 Inventory 57,900 Buildings and equipment (net) 351,000 Accounts payable $ 85,425 Common stock 500,000 Retained earnings 65,275 $ 650,700 $ 650,700 Actual sales for December and budgeted sales for the next four months are as follows: December(actual) $ 251,000 January $ 386,000 February $ 583,000 March $ 297,000 April $ 194,000 Sales are 20% for cash and 80% on credit. All payments on…
8 Problem 8-31 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Cash $ 41,000 Accounts receivable 200,800 Inventory 57,900 Buildings and equipment (net) 351,000 Accounts payable $ 85,425 Common stock 500,000 Retained earnings 65,275 $ 650,700 $ 650,700 Actual sales for December and budgeted sales for the next four months are as follows: December(actual) $ 251,000 January $ 386,000 February $ 583,000 March $ 297,000 April $ 194,000 Sales are 20% for cash and 80% on credit. All payments on…
Problem 8-29 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10]The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 9,200Accounts receivable $ 26,800Inventory $ 49,800Building and equipment, net $ 104,400Accounts payable $ 29,925Common stock $ 150,000Retained earnings $ 10,275The gross margin is 25% of sales.Actual and budgeted sales data:March (actual) $ 67,000April $ 83,000May $ 88,000June $ 113,000July $ 64,000Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales.Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold.One-half of a month’s inventory purchases is paid for in the month of purchase; the other half is paid for in the following month. The accounts payable at…
Problem 8-29 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 7,600 Accounts receivable $ 20,400 Inventory $ 40,200 Building and equipment, net $ 128,400 Accounts payable $ 23,925 Common stock $ 150,000 Retained earnings $ 22,675 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 51,000 April $ 67,000 May $ 72,000 June $ 97,000 July $ 48,000 Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold. One-half of a month’s inventory purchases is paid for in the month of purchase; the…
9 Problem 8-29 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] The following data relate to the operations of Shilow Company, a wholesale distributor of consumer goods: Current assets as of March 31: Cash $ 7,600 Accounts receivable $ 20,400 Inventory $ 40,200 Building and equipment, net $ 128,400 Accounts payable $ 23,925 Common stock $ 150,000 Retained earnings $ 22,675 The gross margin is 25% of sales. Actual and budgeted sales data: March (actual) $ 51,000 April $ 67,000 May $ 72,000 June $ 97,000 July $ 48,000 Sales are 60% for cash and 40% on credit. Credit sales are collected in the month following sale. The accounts receivable at March 31 are a result of March credit sales. Each month’s ending inventory should equal 80% of the following month’s budgeted cost of goods sold. One-half of a month’s inventory purchases is paid for in the month of purchase; the…
Problem 8-31 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Cash $ 41,000 Accounts receivable 200,800 Inventory 57,900 Buildings and equipment (net) 351,000 Accounts payable $ 85,425 Common stock 500,000 Retained earnings 65,275 $ 650,700 $ 650,700 Actual sales for December and budgeted sales for the next four months are as follows: December(actual) $ 251,000 January $ 386,000 February $ 583,000 March $ 297,000 April $ 194,000 Sales are 20% for cash and 80% on credit. All payments on…
roblem 8-24 Cash Budget with Supporting Schedules [LO8-2, LO8-4, LO8-8] Garden Sales, Inc., sells garden supplies. Management is planning its cash needs for the second quarter. The company usually has to borrow money during this quarter to support peak sales of lawn care equipment, which occur during May. The following information has been assembled to assist in preparing a cash budget for the quarter: Budgeted monthly absorption costing income statements for April–July are: April May June July Sales $ 510,000 $ 710,000 $ 410,000 $ 310,000 Cost of goods sold 357,000 497,000 287,000 217,000 Gross margin 153,000 213,000 123,000 93,000 Selling and administrative expenses: Selling expense 71,000 91,000 52,000 31,000 Administrative expense* 40,500 53,600 32,600 29,000 Total selling and administrative expenses 111,500 144,600 84,600 60,000 Net operating income $ 41,500 $ 68,400 $ 38,400 $ 33,000…
Problem 8-31 (Algo) Completing a Master Budget [LO8-2, LO8-4, LO8-7, LO8-8, LO8-9, LO8-10] Hillyard Company, an office supplies specialty store, prepares its master budget on a quarterly basis. The following data have been assembled to assist in preparing the master budget for the first quarter: As of December 31 (the end of the prior quarter), the company’s general ledger showed the following account balances: Debits Credits Cash $ 60,000 Accounts receivable 216,000 Inventory 60,750 Buildings and equipment (net) 370,000 Accounts payable $ 91,125 Common stock 500,000 Retained earnings 115,625 $ 706,750 $ 706,750 Actual sales for December and budgeted sales for the next four months are as follows: December(actual) $ 270,000 January $ 405,000 February $ 602,000 March $ 317,000 April $ 213,000 Sales are 20% for cash and 80% on credit. All payments on credit sales are collected in the month following sale. The…