Question

4.Assume that a company expects to produce 11,400, 12,400, and 14,400 units of finished goods in January, February, and March, respectively. Each unit of finished goods requires 3 pounds of raw material and each pound of raw material costs $4.50. The company always maintains an ending raw materials inventory equal to 20% of next month’s production needs. What is the amount of expected raw materials purchases for February?

Multiple Choice

• $172,800

• $134,400

• $169,200

• $122,520

1.Assume a company is preparing a budget for its first two months of operations. During the first and second months it expects credit sales of $48,000 and $72,000, respectively. The company expects to collect 60% of its credit sales in the month of the sale, 35% in the following month, and 5% is deemed uncollectible. What amount of cash collections from credit sales would the company include in its cash budget for the second month?

Multiple Choice

• $60,000

• $63,600

• $25,200

• $43,200

2.Assume the following budgeted information for a merchandising company: Budgeted sales (all on credit) for November, December, and January are $243,000, $213,000, and $204,000, respectively. Cash collections related to credit sales are expected to be 75% in the month of sale, 25% in the month following the sale. The cost of goods sold is 70% of sales. Each month’s ending inventory equals 15% of next month’s cost of goods sold. 30% of each month’s merchandise purchases are paid in the current month and the remainder is paid in the following month. Monthly selling and administrative expenses that are paid in cash in the month incurred total $22,500. Monthly depreciation expense is $6,500. The budgeted net operating income for December would be:

Multiple Choice

• $41,400

• $15,344

• $21,844

• $34,900

Answer 1

4. $ 1,72,800

1. $ 60,000

2. $ 32,900

Raw Material Required ( 3 Pounds Cost of Raw per 1 pound of Material ( $ 4.50 Finished Goods Finished Goods ) per Pound) 11,400.00 34,200.00 1,53,900.00 12,400.00 37,200.00 1,67,400.00 14,400.00 43,200.00 1,94,400.00 January February March 33,480.00 Cost of Raw Material from January Cost of Raw Material has to remain for March 38,880.00 1,72,800.00 Purchases to be made in February

Credit Sales Debtors (35%) Collection in this Month (60%) 28,800.00 43,200.00 Bad Debts (5%) 2,400.00 3,600.00 Month 1 Month 2 48,000.00 72,000.00 16,800.00 25,200.00 Cash Collected in Month 2 43,200.00+16,800.00 60,000.00

Cash Collected Cost of Inventory Cash Collected in in th next Goods Sold 15% of Next this Month ( 75%) Month ( 25%) (70%) Month COGS) 1,82,250 60,750 1,70,100 22,365 1,59,750 53,250 1,49,100 21,420 1,53,000 51,000 1,42,800 Sales 2,43,000 2,13,000 2,04,000 November December January Net Profit for the month December Sales - COGS - Expenses - Depreciation 213000-149100-22500-6500 34900