Learning Materials
Features
Discover
Chapter 22: Q3RQ (page 1228)
How is benchmarking beneficial?
Benchmarking is a road map of how the business entity will achieve performance goals.
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
Preparing an operating budget鈥攊nventory, purchases, and cost of goods sold budget
Slate, Inc. sells tire rims. Its sales budget for the nine months ended September 30, 2018, follows:
Quarter Ended Nine-MonthTotal
March 31 June 30 September 30 Cash sales, 20% \( 28,000 \) 38,000 \( 33,000 \) 99,000
Credit sales, 80% 112,000 152,000 132,000 396,000 Total sales \( 140,000 \) 190,000 \( 165,000 \) 495,000
In the past, cost of goods sold has been 40% of total sales. The director of marketing and the financial vice president agree that each quarter鈥檚 ending inventory should not be below \(5,000 plus 10% of cost of goods sold for the following quarter. The marketing director expects sales of \)240,000 during the fourth quarter. The January 1 inventory was $38,000. Prepare an inventory, purchases, and cost of goods sold budget for each of the first three quarters of the year. Compute cost of goods sold for the entire nine-month period.
Connor Company began operations on January 1 and has projected the following selling and administrative expenses:
Rent Expense $ 1,000 per month, paid as incurred
Utilities Expense 500 per month, paid in month after incurred
Depreciation Expense 300 per month
Insurance Expense 100 per month, 6 months prepaid on January 1
Determine the cash payments for selling and administrative expenses for the first three months of operations.
Preparing an operating budget鈥攄irect materials, direct labor, and manufacturing overhead budgets
Grady, Inc. manufactures model airplane kits and projects production at 650, 500, 450, and 600 kits for the next four quarters. Direct materials are 4 ounces of plastic per kit and the plastic costs \(1 per ounce. Indirect materials are considered insignificant and are not included in the budgeting process. Beginning Raw Materials Inventory is 850 ounces, and the company desires to end each quarter with 10% of the materials needed for the next quarter鈥檚 production. Grady desires a balance of 200 ounces in Raw Materials Inventory at the end of the fourth quarter. Each kit requires 0.10 hours of direct labor at an average cost of \)10 per hour. Manufacturing overhead is allocated using direct labor hours as the allocation base. Variable overhead is \(0.20 per kit, and fixed overhead is \)165 per quarter. Prepare Grady鈥檚 direct materials budget, direct labor budget, and manufacturing overhead budget for the year. Round the direct labor hours needed for production, budgeted overhead costs, and predetermined overhead allocation rate to two decimal places. Round other amounts to the nearest whole number.
Preparing a financial budget鈥攃ash budget
You recently began a job as an accounting intern at Reilly Golf Park. Your first task was to help prepare the cash budget for April and May. Unfortunately, the computer with the budget file crashed, and you did not have a backup or even a paper copy. You ran a program to salvage bits of data from the budget file. After entering the following data in the budget, you may have just enough information to reconstruct the budget.
Reilly Golf Park eliminates any cash deficiency by borrowing the exact amount needed from First Street Bank, where the current interest rate is 6% per year. Reilly Golf Park first pays interest on its outstanding debt at the end of each month. The company then repays all borrowed amounts at the end of the month with any excess cash above the minimum required but after paying monthly interest expenses. Reilly does not have any outstanding debt on April 1.
Complete the cash budget. Round interest expense to the nearest whole dollar.
Southeast Suites operates a regional hotel chain. Each hotel is operated by a manager and an assistant manager/controller. Many of the staff who run the front desk, clean the rooms, and prepare the breakfast buffet work part-time or have a second job, so employee turnover is high.
Assistant Manager/Controller Terry Dunn asked the new bookkeeper to help prepare the hotel鈥檚 master budget. The master budget is prepared once a year and is submitted to company headquarters for approval. Once approved, the master budget is used to evaluate the hotel鈥檚 performance. These performance evaluations affect hotel managers鈥� bonuses, and they also affect company decisions on which hotels deserve extra funds for capital improvements.
When the budget was almost complete, Dunn asked the bookkeeper to increase the amounts budgeted for labor and supplies by 15%. When asked why, Dunn responded that hotel manager Clay Murry told her to do this when she began working at the hotel. Murry explained that this budgetary cushion gave him flexibility in running the hotel. For example, because company headquarters tightly control capital improvement funds, Murry can use the extra money budgeted for labor and supplies to replace broken televisions or pay 鈥渂onuses鈥� to keep valued employees. Dunn initially accepted this explanation because she had observed similar behavior at the hotel where she worked previously.
Requirements Put yourself in Dunn鈥檚 position. In deciding how to deal with the situation, answer the following questions:
1. What is the ethical issue?
2. What are the options?
3. What are the possible consequences?
4. What should you do?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine