Rerun Manufacturing Company is in the process of preparing its 2020 budget and is anticipating the following changes: 30% increase in the number of units sold. 20% increase in the direct material unit cost. 15% increase in the direct labor cost per unit. 10% increase in the manufacturing overhead cost per unit. 20% increase in the sales price. 7% increase in the administrative expenses. Rerun does not keep any units in inventory. The composition of the cost of finished products during 2019 for direct materials, direct labor, and factory overhead, respectively, was in the ratio of 3:2:1. The condensed income statement for 2019 is as follows: Sales (37,000 units) $518,000 Less sales returns 25,900 492,100 313,000 Net sales Cost of Goods Sold Gross Profit $179,100 $ 67,000 Selling Expenses Admin. Expenses 37,000 104,000 Net Income $ 75,100 What are estimated net sales for 2020, assuming the sales return/gross sales relationship remains constant? Multiple Choice $767,676. $685,425. $721,500. $718,900.

Rerun Manufacturing Company is in the process of preparing its 2020 budget and is anticipating the following changes: 30% increase in the number of units sold. 20% increase in the direct material unit cost. 15% increase in the direct labor cost per unit. 10% increase in the manufacturing overhead cost per unit. 20% increase in the sales price. 7% increase in the administrative expenses. Rerun does not keep any units in inventory. The composition of the cost of finished products during 2019 for direct materials, direct labor, and factory overhead, respectively, was in the ratio of 3:2:1. The condensed income statement for 2019 is as follows: Sales (37,000 units) $518,000 Less sales returns 25,900 492,100 313,000 Net sales Cost of Goods Sold Gross Profit $179,100 $ 67,000 Selling Expenses Admin. Expenses 37,000 104,000 Net Income $ 75,100 What are estimated net sales for 2020, assuming the sales return/gross sales relationship remains constant? Multiple Choice $767,676. $685,425. $721,500. $718,900.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter8: Budgeting For Planning And Control

Section: Chapter Questions

Problem 11CE: Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted...

See similar textbooks

Similar questions

Shalimar Company manufactures and sells industrial products. For next year, Shalimar has budgeted the follow sales: In Shalimars experience, 10 percent of sales are paid in cash. Of the sales on account, 65 percent are collected in the quarter of sale, 25 percent are collected in the quarter following the sale, and 7 percent are collected in the second quarter after the sale. The remaining 3 percent are never collected. Total sales for the third quarter of the current year are 4,900,000 and for the fourth quarter of the current year are 6,850,000. Required: 1. Calculate cash sales and credit sales expected in the last two quarters of the current year, and in each quarter of next year. 2. Construct a cash receipts budget for Shalimar Company for each quarter of the next year, showing the cash sales and the cash collections from credit sales. 3. What if the recession led Shalimars top management to assume that in the next year 10 percent of credit sales would never be collected? The expected payment percentages in the quarter of sale and the quarter after sale are assumed to be the same. How would that affect cash received in each quarter? Construct a revised cash budget using the new assumption.
A companys controller is adjusting next years budget to reflect the impact of an expected 3 percent inflation rate. Listed below are selected items from next years budget before the adjustment. After adjusting for the 3 percent inflation rate, what is the companys total budget for the selected items before taxes for next year? a. 858,150 b. 860,412 c. 810,971 d. 858,971
Review the completed master budget and answer the following questions: Is Ranger Industries expecting to earn a profit during the next quarter? If so, how much? Does the company need to borrow cash during the quarter? Can it make any repayments? Explain. (Carefully review rows 74 through 80.)
CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2019 and 2020: Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depreciation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2019. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal, and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.
Palmgren Company produces consumer products. The sales budget for four months of the year is presented below. Company policy requires that ending inventories for each month be 25 percent of next months sales. At the beginning of July, the beginning inventory of consumer products met that policy. Required: Prepare a production budget for the third quarter of the year. Show the number of units that should be produced each month as well as for the quarter in total.
Rerun Manufacturing Company is in the process of preparing its 2020 budget and is anticipating the following changes:30% increase in the number of units sold.25% increase in the direct material unit cost.20% increase in the direct labor cost per unit.15% increase in the manufacturing overhead cost per unit.16% increase in the sales price.6% increase in the administrative expenses.Rerun does not keep any units in inventory.The composition of the cost of finished products during 2019 for materials, direct labor, and factory overhead, respectively, was in the ratio of 3:2:1. The condensed income statement for 2019 is as follows: Sales (34,000 units) $ 510,000 Less sales returns 25,500 Net sales 484,500 Cost of Goods Sold 318,000 Gross Profit $ 166,500 Selling Expenses $ 64,000 Admin. Expenses 34,000 98,000 Net Income $ 68,500 What is the estimated cost of…
Capstone, Inc. is preparing its budget for the coming year, 2020. The first step is to plan for the first quarter of that coming year. Capstone, Inc. gathered the following information from the managers. Sales Unit sales for November 2019 112500 Unit sales for December 2019 104,000 Expected unit sales for January 2020 116,000 Expected unit sales for February 2020 115,500 Expected unit sales for March 2020 117,000 Expected unit sales for April 2020 135,000 Expected unit sales for May 2020 145,000 Unit selling price $13.00 Capstone, Inc. likes to keep 10% of the next month’s unit sales in ending inventory. All sales are on account. 85% of the Accounts Receivable are collected in the month of sale, and 15% of the Accounts Receivable are collected in the month after sale. Accounts receivable on December 31, 2019,…
Boulders Manufacturing has just hired a new controller, Delado. During his first week on the job, Delado was asked to establish a budget for operating expenses in 2020. Since Delgado was not yet familiar with the operations of Boulder Manufacturing, he decided to budget these expenses using the same procedures as the prior controller. Therefore, in order to establish a budget for operating expenses, Delgado started with actual operating expenses incurred in 2019 and added 4.3 percent. Delgado based this percentage on inflation as measured by the consumer price index. Please comment on the effectiveness of Diana’s budgeting strategy. "budgeting chapter", what budget is to come to your mind as the "starting point" in preparing the master budget? What may result if this budget is inaccurate?
MORGAN Merchandising is preparing its Production Budget for the 3rd Quarter of 2020. Its Sales Budget is prepared using a budgeted sales price per unit agreed upon at the beginning of the year. To help in the Production budget preparation, the following information are given: Inventories at the end of 2019 can be sold for a total of ₱225,000 at a sales price of ₱250 per unit. Production runs are only done at the start of each quarter. A minimum of 200 units are to be maintained at the end of each quarter to serve as buffer stocks. Budgeted quantities sold for the 1st quarter of 2020 is 4,500 units. It is forecasted that the same quantities will be sold per month of each quarter. It is estimated that quantities sold will increase by 500 units at the start of each quarter. MORGAN Merchandising estimates a gross profit rate of 35%. What is the beginning inventory for January 2020? 200 0 1,385 900
Barka Company is in the period of budgeting for 2022. The Sales manager forecasted the number of units to be sold as 30000 units and determined the selling price as 20 OMR per unit. The management revised these estimates with a 15 % decrease in selling price and with a 25 % increase in the number of units sold. According to these estimates, which of the following is revised Sales (OMR)? Select one: a. 700000 b. 692500 c. 850000 d. 637500
MORGAN Merchandising is preparing its Production Budget for the 3rd Quarter of 2020. Its Sales Budget is prepared using a budgeted sales price per unit agreed upon at the beginning of the year. To help in the Production budget preparation, the following information are given: Inventories at the end of 2019 can be sold for a total of ₱225,000 at a sales price of ₱250 per unit. Production runs are only done at the start of each quarter. A minimum of 200 untis are to be maintained at the end of each quarter to serve as buffer stocks. Budgeted quantities sold for the 1st quarter of 2020 is 4,500 units. It is forecasted that the same quantities will be sold per month of each quarter. It is estimated that quantities sold will increase by 500 units at the start of each quarter. MORGAN Merchandising estimates a gross profit rate of 35%. What is the number of units to be produced for March 2020?
Soprano Co. is in the process of preparing the second quarter budget for 2019, and the following data have been assembled: The company sells a single product at a selling price of $45 per unit. The estimated sales volume for the next six months is as follows: March 6,400 units June 8,400 units April 7,000 units July 9,300 units May 10,000 units August 6,100 units All sales are on account. The company's collection experience has been that 42% of a month's sales are collected in the month of sale, 51% are collected in the month following the sale, and 7% are uncollectible. It is expected that the net realizable value of accounts receivable (i.e., accounts receivable less allowance for uncollectible accounts) will be $146,880 on March 31, 2019. Management's policy is to maintain ending finished goods inventory each month at a level equal to 51% of the next month's budgeted sales. The finished goods inventory on March 31, 2019, is expected to be 3,570…