MODULE 8 -
BUDGETING
THEORIES:
Basic Concepts
1. The concept of “management by exception”
refers to management’s consideration of
A. only those items that vary materially from
expectations.
B. only rare events.
C. samples selected at random.
D. only significant unfavorable deviations.
8. A formal
written statement of management’s plans for the future, packaged in financial
terms, is a:
A. Responsibility report. C. Cost of production report.
B. Performance report. D. Budget.
2. Budgets are related to which of the
following management functions?
A. Planning C. Control
B. Performance evaluation D. all of these
22. Budgeting
supports the planning process by encouraging all of the following activities
except:
A. Requiring all
organizational units to establish their goals for the coming period.
B. Increasing the
motivation of managers and employees by providing agreed-upon expectations.
C. Improving
overall decision making by considering all viewpoints, options, and cost
control programs.
D. Directing
and coordinating operations during the period.
3. Which of the following advantages does a
budget mostly provide?
A. Coordination is increased.
B. Planning is emphasized.
C. Communication is continuous.
D. Comparison of actual versus budgeted data.
24. Which of the
following is NOT an advantage of budgeting?
A. It forces
managers to plan.
B. It provides
resource information that can be used to improve decision making.
C. It aids in the
use of resources and employees by setting a benchmark that can be used for the
subsequent evaluation of performance.
D. It
provides organizational independence.
4. Which of the following is least likely a reason why a company
prepares its budget?
A. To
provide a basis for comparison of actual performance
B. To
communicate the company’s plans throughout the entire business organization
C. To
control income and expenditure in a particular period.
D. To make sure the company expands its operations.
5. Which of the following does not contribute to an effective
budgeting?
A. Top
management is involved in budgeting.
B. To give each manager a free hand in the preparation of the
budget, the data within the master budget are flexible.
C. The
organization is divided into responsibility units.
D. There
is communication of results.
6. The budgets that are based on a very high
levels of performance, like expected costs using ideal standards,
A. assist in planning the operations of the
company
B. stimulate people to perform better than they
ordinarily would
C. are helpful in evaluating the performance of
managers
D. can lead to low levels of performance
7. Which of the following statements is incorrect?
A. An imposed budget is the same as a participative budget.
B. Preparation
of the budget would be the responsibility of each responsibility unit.
C. Top
management’s support is necessary to promote budget participation.
D. The
top management should review and approve each responsibility unit’s budget.
9. The primary
role of the budget director and the budgeting department is to
A. Settle disputes
among operating executives during the development of the annual operating plan.
B. Develop the
annual profit plan by selecting the alternatives to be adopted form the
suggestions submitted by the various operating segments.
C. Compile
the budget and manage the budget process.
D. Justify the
budget to the corporate planning committee of the board of directors.
10. The primary
variable affecting active participation and commitment to the budget and the
control system is
A. Management
efforts to achieve the budget rather than optimize results.
B. The rigid
adherence to the budget without recognizing changing conditions.
C. Top
management involvement in support of the budget.
D. The opportunity
budgeting gives to risk-taker managers for department growth.
12. A variant of
fiscal-year budgeting whereby a twelve-month projections into the future is
maintained at all times:
A. Forecasting. C. Continuous
budgeting.
B. Zero-based budgeting. D. Calendar
budgeting.
35. The method of budgeting which adds one month’s
budget to the end of the plan when the current month’s budget is dropped from
the plan refers to
A. Long-term budget C. Incremental budget
B. Operations budget D. Continuous budget
27. A continuous budget
A. is a budget that is revised monthly or quarterly.
B. is a medium term plan that consists of more than 2 years’
projections.
C. is appropriate only for use of a not-for-profit entity.
D. works best for an entity that can reliably forecast events a year
or more into the future.
37. “Incremental budgeting” refers to
A. line-by-line
approval of expenditures
B. setting budget allowances based on prior year expenditures
C. requiring
top management approval of increases in budgets
D. using
incremental revenues and costs in budgeting
49. A budget plan for annual fixed costs that
arises from top management decisions directly reflecting corporate policy.
A. Flexible budget. C. Discretionary
budget.
B. Static budget. D. Program budget.
36. The term “decision package” relates to
A. comprehensive budgeting C. program budgeting
B. zero-based budgeting D. line budgeting
41. The budget
approach that is more relevant when the continuance of an activity or operation
must be justified on the basis of its need or usefulness to the organization.
A. the incremental
approach C. the baseline approach
B. the
zero-based approach D. both a and b are true
11. The process of
developing budget estimates by requiring all levels of management to estimate
sales, production, and other operating data as though operations were being
initiated for the first time is referred to as:
A. Forecasting. C. Continuous budgeting.
B. Zero-based budgeting. D. Program budgeting.
38. Which of the
following is a contemporary approach to budgeting?
A. incremental
approach C. baseline approach
B. zero-based
approach D. both a and b are true
51. Zero-base budgeting requires managers to
A. Justify expenditures that are increases over
the prior period’s budgeted amount.
B. Justify all expenditures, not just increases
over last year’s amount.
C. Maintain a full-year budget intact at all
times.
D. Maintain a budget with zero increases over
the prior period.
13. Zero-based
budgeting:
A. involves the
review of changes made to an organization’s original budget.
B. does not
provide a summary of annual projections.
C. involves
the review of each cost component from a cost/benefit perspective.
D. emphasizes the
relationship of effort to projected annual revenues.
18. A systematized approach known as zero-based budgeting:
A. Classifies
the budget by the prior year’s activity and estimates the benefits arising from
each activity.
B. Commence
with either the current level of spending or projected whichever is lower.
C. Presents
planned activities for a period of time but does not present a firm commitment.
D. Divides the activities of individual responsibility centers into
a series of packages that are prioritized.
20. Which of the following statements about Zero-based budgeting is
incorrect?
A. All
activities in the company are organized into break-up units called packages.
B. All
costs have to be justified every budgeting period.
C. The
process is not time consuming since justification of costs can be done as a
routine matter.
D. Zero-based budgeting includes variable costs only.
34. Budgeting expenditures by purpose is called
A. program budgeting C. zero-based budgeting
B. line budgeting D. flexible budgeting
28. A static budget is not appropriate in evaluating a manager's
effectiveness if a company has
A. substantial fixed costs.
B. substantial variable costs.
C. planned activity levels that match actual activity levels.
D. no variable costs.
45. Flexible
budgeting is a reporting system wherein the
A. Budget
standards may be adjusted at management’s discretion.
B. Planned
level of activity is adjusted to the actual level of activity before the
performance report is prepared.
C. Reporting dates
vary according to the managerial levels of the users.
D. Packages of
activities vary from period to period.
15. A budget that
presents the plan for a range of activity so that the plan can be adjusted for
changes in activity levels is referred to as:
A. Zero-based
budgeting.
B. Continuous
budgeting.
C. Flexible
budgeting.
D. Program
planning and budgeting system.
16. A flexible budget is
A. one that can be changed whenever a manager
so desires
B. adjusted to reflect expected costs at the
actual level of activity
C. one that uses the formula total costs = cost
per unit x units produced
D. the same as a continuous budget
26. A series of budgets for varying levels of activity is a:
A. Variable cost budget. C. Master budget.
B. Flexible
budget. D. Zero-based budget.
48. If a company wishes to establish a factory
overhead budget system in which estimated costs can be derived directly from
estimates of activity levels, it should prepare a
A. flexible
budget. C. Discretionary budget.
B. Program budget. D. Manufacturing budget.
46. The basic
difference between a master budget and a flexible budget is that a
A. Flexible budget
considers only variable costs but a master budget considers all costs.
B. Flexible budget
allows management latitude in meeting goals whereas a master budget is based on
a fixed standard.
C. Master budget is for an entire production
facility but a flexible budget is applicable to single department only.
D. Master budget is based on
one specific level of production and a flexible budget can be prepared for any
production level within a relevant range
47. Which of the following is a difference between
a static budget and a flexible budgets?
A. A flexible budget includes only variable
costs; a static budget includes only fixed costs.
B. A flexible budget includes all costs, a
static budget includes only fixed costs.
C. A flexible budget gives different allowances
for different levels of activity, a static budget does not.
D. There is no difference between the two.
17. A system that
classifies budget requests by activity and estimates the benefits arising from
each activity:
A. Incremental
budgeting system.
B. Static
budgeting system.
C. Program
planning and budgeting system.
D. Participative
system.
21. A budget that
identifies revenues and costs with an individual controlling their incurrence
is
A. Master budget C. Product budget
B. Responsibility budget D. None of the above
25. The difference between an individual's
submitted budget projection and his or her best estimate of the item being
projected is an example of
A. padding the budget
B. adhering to zero-based budgeting assumptions
C. creating budgetary slack
D. being incongruent with participative budgeting
43. Budget slack is a condition in which
A. Demand is low at various times of the year
B. Excess machine capacity exists in some areas
of the plant
C. There is an intentional overestimate of
expenses or an underestimate of revenues
D. Managers grant favored employees extra
time-off
39. The procedure for setting profit objectives in
which the determination of profit objectives is subordinated to the planning,
and the objectives emerge as the product of the planning itself is the
A. a priori method C. practical method
B. theoretical method D. a posteriori
method
40. The procedure for setting profit objectives in
which management specifies a given rate of return that it seeks to realize in
the long run by means of planning toward that end is the
A. a priori method C. pragmatic method
B. theoretical method D. ad hoc method
50. Budgeting process in which information flows
top down and bottom up is referred to as:
A. Continuous budgeting. C. Perpetual budgeting
B. Participative
budgeting D. Joint budgeting
42. Which of the
following is not a potential problem with participative budgeting?
A. setting
standards that are either too high or too low
B. padding the
budget
C. build slack
into the budget
D. all
of the above are potential problems
33. The ideal financial
planning process would be
A. top-down planning.
B. bottom-up planning.
C. a combination
of top-down and bottom-up planning.
D. None of the above
44. A common
starting point in the budgeting process is
A. expected future net income. C. to motivate the sales force.
B. past performance. D. a clean slate, with no expectations.
57. Which one of the following is an external
factor that would need to be considered in forming an initial budget proposal?
A. changes
in product design
B. introduction
of a new product
C. competitors' actions
D. adoption
of a new manufacturing process
14. Operating
budgets are
A. a forecast of
expected operating expenses.
B. a forecast of
operating expenses and related revenues.
C. a forecast of
units of production.
D. concerned
with the income-generating activities of a firm.
54. What is the
proper preparation sequencing of the following budgets?
1. Budgeted
Balance Sheet
2. Sales Budget
3. Selling and
Administrative Budget
4. Budgeted Income
Statement
A. 1, 2, 3, 4 C. 2, 3, 4, 1
B 2, 3, 1, 4 D. 2, 4, 1, 3
29. In estimating
the sales volume for a master budget, which of the following techniques may be
used to improve the projections?
A. Brainstorming.
B. Statistical analysis.
C. Estimating from previous sales
volume.
D. All of these
are useful.
30. Using the concept of ‘expected value” in sales
forecasting means that the sales forecast to be used is
A. developed using the indicator method
B. the sum of the sales expected by individual
managers
C. based on expected selling prices of the
products
D. based on probabilities
31. Several sales forecasts are available from
different sources and the managers have good ideas about their
likelihoods. This situation call for the
use of
A. the expected
value concept C. indicator methods
B. historical analysis D. a scatter diagram
53. An overly
optimistic sales budget may result in
A. increases in
selling prices late in the year.
B. insufficient
inventories.
C. increased sales
during the year.
D. excessive
inventories.
56. Which of the following budgets provides the
data for the preparation of the direct labor cost budget?
A. Direct materials purchase
budget. C. Sales budget.
B. Cash budget. D. Production budget.
55. The increased
use of automation and less use of the work force in companies has caused a
trend towards an increase in
A. both variable
and fixed costs.
B. fixed
costs and a decrease in variable costs.
C. variable costs
and a decrease in fixed costs.
D. variable costs
and no change in fixed costs.
32. In preparing a cash
budget, which of the following is normally the starting point for projecting
cash requirements?
A. Fixed
assets. C. Accounts receivable.
B. Sales. D. Inventories.
52. Recognition of the many uncertainties in budgeting is exemplified
by companies normally
A. forecasting
sales
B. establishing minimum required cash balances
C. forecasting
only fixed costs
D. omitting
expected dividend payments from budgeted disbursements
19. Which of the following statements is True?
A. Under zero-based budgeting, a manager is required to start at
zero budget levels each period, as if the programs involved were being
initiated for the first time.
B. The
primary purpose of the cash budget is to show the expected cash balance at the
end of the budget period.
C. Budget
data are generally prepared by top management and distributed downward in an
organization.
D. The
budget committee is responsible for preparing detailed budget figures in an
organization.
23. Which of the following is a valid statement?
A. Responsibility budget identifies revenue and costs with the
individual responsible for their incurrence.
B. The
best way to establish budget figures is to use last year’s actual cost and
activity data as this year’s budget estimates.
C. A
sales budget and a sales forecast are the same thing.
D. The
primary purpose of the cash budget is to show the expected cash balance at the
end of the budget period.
PROBLEMS:
Cost
estimation formula
[i]. Management has
prepared a graph showing the total costs of operating branch warehouses
throughout the country. The cost line
crosses the vertical axis at P400,000.
The total cost of operating one branch is P650,000. The total cost of operating ten branches is
P2,900,000. For purposes of preparing a
flexible budget based on the number of branch warehouses in operation, what
formula would be used to determine budgeted costs at various levels of
activity?
A. Y
= P400,000 + P250,000X C. Y = P650,000 + P400,000X
B. Y =
P400,000 + P290,000X D. Y = P650,000 + P250,000X
Sales budget
Purchases budget
– merchandising concern
[ii]. PTO Company
desires an ending inventory of P140,000.
It expects sales of P800,000 and has a beginning inventory of
P130,000. Cost of sales is 65% of sales. Budgeted purchases are
A. P 530,000 C. P
810,000
B. P 790,000 D. P1,070,000
[iii]. Calypso Co. has projected sales to be
P600,000 in January, P750,000 in February, and P800,000 in March. Calypso wants to have 50% of next month’s
sales needs on hand at the end of a month.
If Calypso has an average gross profit of 40%, what are the February 28
purchases?
A. P465,000 C. P775,000
B. P310,000 D. P428,000
[iv]. Blue Company
budgeted purchases of P100,000. Cost of
sales was P120,000 and the desired ending inventory was P42,000. The beginning inventory was
A. P20,000 C. P42,000
B. P32,000 D. P62,000
[v]. The payment
schedule of purchases made on account is: 60% in the time period of purchase,
30% in the following time period, and 10% in the subsequent time period. Total
credit purchases were P200,000 in May, and P100,000 in June. Total payments on
credit purchases were P140,000 in June. What were the credit purchases in the
month of April?
A. P200,000 C. P145,000
B. P100,000 D. P215,000
Production
budget
[vi]. Montalban
Company’s sales budget shows the following expected sales for the following
year:
Quarter
|
Units
|
First
|
120,000
|
Second
|
160,000
|
Third
|
90,000
|
Fourth
|
110,000
|
Total
|
480,000
|
The inventory at December 31 of the prior year was
budgeted at 36,000 units. The quantity
of finished goods inventory at the end of each quarter is to equal 30% of the
next quarter’s budgeted sales of units.
How much should the production budget show for units to be
produced during the first quarter?
A. 48,000 C. 132,000
B. 96,000 D. 144,000
[vii]. Lorie Company
plans to sell 400,000 units of finished product in July an anticipates a growth
rate in sales of 5% per month. The
desired monthly ending inventory in units of finished product is 80% of the
next month’s estimated sales.
There are 300,000 finished units in the inventory on June
30. Each unit of finished product
requires four pounds of direct materials at a cost of P2.50 per pound. There are 800,000 pounds of direct materials
in the inventory on June 30.
How many units should be produced for the three-month
period ending September 30?
A. 1,260,000 C. 1,331,440
B. 1,328,000 D. 1,424,050
Ending
inventory budget
[viii]. If the required
direct materials purchases are 8,000 pounds and the direct materials required
for production is three times the direct materials purchases, and the beginning
direct materials are three and a half times the direct materials purchases,
what are the desired ending direct material in pounds?
A. 20,000 C. 12,000
B.
4,000 D. 32,000
Raw materials
usage budget
[ix]. Minerva Company
sells a single product. Budgeted sales
for the year are anticipated to be 640,000 units. The estimated beginning and ending finished
goods inventory are 108,000 and 90,000, respectively. A production of one unit requires the
following materials:
Material LL 0.50
lb. @ P0.60
Material MM 1.00
lb. @ P1.70
Material NN 1.20
lb. @ P1.00
What are the respective peso amounts of each material to
be used in production during the year?
Material LL
|
Material MM
|
Material NN
|
|
A.
|
P181,200
|
P1,026,800
|
P724,800
|
B.
|
P181,200
|
P1,026,800
|
P746,400
|
C.
|
P186,600
|
P1,057,400
|
P746,400
|
D.
|
P186,600
|
P1,057,400
|
P724,800
|
Raw materials
purchases budget
[x]. If there were
30,000 pounds of raw material on hand on January 1, 60,000 pounds are desired
for inventory at December 31, and 180,000 pounds are required for annual production,
how many pounds of raw material should be purchased during the year?
A. 150,000 pounds C. 120,000 pounds
B. 240,000 pounds D. 210,000 pounds
[xi]. Silver Bowl
Company manufactures a single product.
It keeps its inventory of finished goods at 75% the coming month’s
budgeted sales. It also keeps its inventory of raw materials at 50% of the
coming month’s budgeted production. Each
unit of product requires two pounds of materials. The production budget is, in units: May, 1,000; June, 1,200; July, 1,300; august,
1,600. Raw material purchases in July
would be
A. 1,525 pounds C. 2,550 pounds
B. 2,900 pounds D. 3,050 pounds
[xii]. Each unit of
finished product uses 6 kilograms of raw materials. The production and inventory budgets for May
2007 are as follows:
Beginning
Inventory:
Finished goods 15,000
units
Raw materials 21,000
kg.
Budgeted unit
sales 18,000
units
Planned ending
inventory
Finished goods 11,400
units
Raw materials 24,400
kg.
During
the production process, it is usually found that 10% of production units are
scrapped as defective and this loss occurs after the raw materials have been
placed in process.
How
many kilograms of raw materials should be purchased in June?
A. 89,800 C. 96,000
B. 98,440 D. 99,400
[xiii]. Violet Company
manufactures a single product. It keeps
its inventory of finished goods at twice the coming month’s budgeted sales,
inventory of raw materials at 150% of the coming month’s budgeted production
requirements. Each unit of product
requires two pounds of materials. The
production budgets in units consist of the following:.
May
1,000
June
1,200
July
1,300
August
1,600
Raw material purchases in June would be
A. 2,600 pounds C. 2,400 pounds
B. 1,800 pounds D. 2,700 pounds
[xiv]. Sales Company is
budgeting sales of 300,000 units of its only product for the coming year. Production of one unit of product requires
three pounds of Material Q and 2 pounds of Material L. Inventory units at the beginning of the year
are:
Actual,
Jan. 1
|
Budgeted, Dec 31
|
|
Finished goods
|
60,000
|
50,000
|
Material Q
|
80,000
|
60,000
|
Material L
|
88,000
|
96,000
|
How many pounds of Material Q is Sales planning to buy
during the coming year?
A. 850,000 C. 862,000
B. 890,000 D. 908,000
[xv]. Strama Company
prepares its budgets on annual basis. The following beginning and ending inventory
unit levels are planned for the fiscal year of June 1, 2006 through May 31,
2007.
June 1, 2006
|
May 31, 2007
|
|
Raw material*
|
40,000
|
50,000
|
Work-in-process
|
10,000
|
10,000
|
Finished goods
|
80,000
|
50,000
|
*Two (2) units of raw material are needed to produce each
unit of finished product.
If 500,000 finished units were to be manufactured during
the 2006-2007 fiscal year by Strama Company,
the units of raw material needed to be purchased would be
A. 1,000,000 units C. 1,020,000 units
B. 1,010,000 units D.
990,000 units
[xvi]. Diliman Corporation includes the following quarterly budget for
production:
Quarter
|
Production
|
First
|
60,000 units
|
Second
|
45,000 units
|
Third
|
40,000 units
|
Fourth
|
65,000 units
|
Each unit of product requires
2.5 kilograms of direct materials. The
company begins each quarter with inventory of direct materials equal to 25
percent of the total quarter’s material requirements.
What is the budgeted purchases
of materials for the second quarter?
A. 113,750 C.
46,250
B. 109,375 D. 112,500
Indirect labor costs
[xvii]. Namuco, Inc. uses flexible budgeting for cost control. During the month of September, Namuco, Inc.
produced 14,500 units of finished goods with indirect labor costs of
P25,375. Its annual master budget
reflects an indirect labor costs, a variable cost, of P360,000 based on an
annual production of 200,000 units. In the
preparation of performance analysis for the month of September, how much flexible
budget should be allowed for indirect labor costs?
A. P30,000 C. P25,375
B. P29,167 D. P26,100
Cash receipts
budget
Sales
[xviii]. Generous Company began its operations on January 1 of the current
year. Budgeted sales for the first
quarter are P240,000, P300,000, and P420,000, respectively, for January,
February and March. Generous Company
expects 20% of its sales cash and the remainder on account. Of the sales on account, 70% are expected to
be collected in the month of sale, 25% in the month following the sale, and the
remainder in the following month.
How much should Generous
receive from sales in March?
A. P304,800 C. P388,800
B. 294,000 D. P295,200
Credit sales
[xix]. Mendrez Company
has a collection schedule of 60% during the month of sales, 15% the following
month, and 15% subsequently. The total credit sales in the current month of
September were P80,000 and total collections in September were P57,000. What
were the credit sales in July?
A. P90,000 C. P45,000
B. P30,000 D. P32,000
Cash collections
[xx]. Obligacion Company has P299,000 in accounts receivable on January
1, 2006. Budgeted sales for January are
P860,000. Obligacion expects to sell 20%
of its merchandise for cash. Of the
remaining sales, 75% are expected to be collected in the month of sale and the
remainder the following month.
The January cash collections
from sales are:
A. P815,000 C. P471,000
B. P691,000 D. P987,000
[xxi]. Adel Company has
the following sales forecasts for the selected three-month period in 2007:
Month
|
Sales
|
April
|
P12,000
|
May
|
7,000
|
June
|
8,000
|
Seventy percent of sales are collected in the month of the
sale, and the remainder is collected in the following month.
Accounts receivable
balance (April 1, 2007) P10,000
Cash balance (April
1, 2007) 5,000
Minimum cash balance is P5,000. Cash can be borrowed in P1,000 increments
from the local bank (assume no interest charges).
How much cash would be collected in June from sales?
A. P 7,700 C. P
8,000
B. P 8,500 D. P10,000
[xxii]. The Avelina
Company has the following historical pattern on its credit sales.
70 percent
collected in month of sale
15 percent
collected in the first month after sale
10 percent
collected in the second month after sale
4 percent collected in the third month after
sale
2
percent uncollectible
The sales on open account have been budgeted for the last
six months of 2007 are shown below:
July P 60,000
August 70,000
September 80,000
October 90,000
November 100,000
December 85,000
The estimated total cash collections during the fourth
calendar quarter from sales made on open account during the fourth calendar
quarter would be
A. P172,500 C. P265,400
B. P230,000 D. P251,400
[xxiii]. The Le Amore
Company had the following budgeted sales for the first half of the current
year:
Cash Sales
|
Credit Sales
|
|
January
|
P70,000
|
P340,000
|
February
|
50,000
|
190,000
|
March
|
40,000
|
135,000
|
April
|
35,000
|
120,000
|
May
|
45,000
|
160,000
|
June
|
40,000
|
140,000
|
The company is in the process of preparing a cash
budget and must determine the expected cash collections by month. To this end,
the following information has been assembled:
Collections on
sales: 60% in month of sale
30%
in month following sale
10% in second
month following sale
The accounts receivable balance on January 1 of the
current year was P70,000, of which P50,000 represents uncollected December
sales and P20,000 represents uncollected November sales.
The total cash collected by Le Amore Company during
the month of January would be:
A. P410,000 C. P344,000
B. P254,000 D. P331,500
Accounts receivable balance
[xxiv]. As of January 1, 2007, the Liberal Sales Company had an account
receivable of P500,000. The sales for
January, February, and March were as follows:
P1,200,000, P1,400,000 and P1,500,000, respectively. Of each month’s sales, 80% is on
account. 60% of account sales is
collected in the month of sale, with remaining 40% collected in the following
month.
What is the accounts receivable
balance as of March 31, 2007?
A. P720,000 C. P587,200
B. P480,000 D. P600,000
Credit to accounts receivable
[xxv]. Ironman Company
is preparing its cash budget for the month ending November 30. The following information pertains to
Ironman’s past collection experience from its credit sales:
Current month’s sales 12%
Prior month’s sales 75%
Sales two months prior to current month 6%
Sales three months prior to current month 4%
Cash discounts (2/30, net/90) 2%
Doubtful accounts 1%
Credit sales:
November –
estimated P2,000,000
October 1,800,000
September 1,600,000
August 1,900,000
How much is the estimated credit to Accounts Receivable as
a result of collections expected during November?
A. P1,730,200 C. P1,762,000
B. P1,757,200 D. P1,802,000
Increase in accounts receivable
[xxvi]. Lazaro Company
will open a new store on January 1. Based on experience from its other retail
outlets, Lazaro is making the following sales projections:
Cash Sales
|
Credit Sales
|
|
January
|
P600,000
|
P400,000
|
February
|
300,000
|
500,000
|
March
|
400,000
|
600,000
|
April
|
400,000
|
800,000
|
Lazaro estimates that 70% of the credit sales will be
collected in the month following the month of the sale, with the balance
collected in the second month following the sale. Based on these data, the
balance in accounts receivable on January 31 will be increased by
A. 400,000 C. P120,000
B. P280,000 D. P580,000
Cash
disbursements
[xxvii]. Cascades Company,
a merchandising firm, is preparing its master budget and has gathered the
following data to help budget cash disbursements:
Budgeted data:
Cost of goods sold P1,680,000
Desired decrease in
inventories 70,000
Desired decrease in
Accounts Payable 150,000
All of the accounts payables are for inventory purchases
and all inventory items are purchased on account. What are the estimated cash
disbursements for inventories for the budget period?
A. P1,460,000 C. P1,900,000
B. P1,600,000 D. P1,760,000
[xxviii]. Albatross Company started its commercial operations on September 30
of the current year. Projected
manufacturing costs for the first three months of operations are P1,568,000,
P1,952,000, and P2,176,000, respectively.
Depreciation, insurance, and property taxes represent P288,000 of the
estimated manufacturing costs. Insurance
was paid on September 30, and property taxes will be paid in July next
year. Seventy-five percent of the
remainder of the manufacturing costs are expected to be paid in the month in
which they are incurred, with the balance to be paid in the following
month. The cash payments for
manufacturing costs in the month of November are:
A. P1,568,000 C. P1,664,000
B. P1,952,000 D. P1,856,000
Ending cash
balance
[xxix]. Albania Company
expects its June sales to be P300,000, which is 25% higher than its May sales.
Purchases were P200,000 in May and are expected to be P240,000 in June. All
sales are on credit and are collected as follows: 80% in the month of the sale
and 20% in the following month. All payments in the month of sales are given 2%
discount. Sixty percent of purchases are paid in the month of purchase to take
advantage of purchase term of 1/10, n/40. The remaining amount is paid in the
following month. The beginning cash balance on June 1 is P20,000. The ending
cash balance on June 30 would be:
A. P64,160 C. P80,640
B. P73,000 D. P85,440
Comprehensive
Question Nos. 30 through 33 are
based on the following information:
Apollo Merchandiser asks your services to develop cash and
other budget information for the first quarter of 2007. In December 31, the store had the following
balance:
Cash P 55,000
Accounts receivable 4,370,000
Inventories
3,094,000
Accounts payable 1,330,550
The following information are relevant to 2007 operations:
Sales:
a.
Each month’s
sales are billed on the last day of the month.
b.
Customers are
allowed a 3 percent discount if payment is made within 10 days after the billing
date. Receivables are booked gross.
c.
Sixty percent
of the billings are collected within the discount period, twenty-five percent
are collected by the end of the month, nine percent are collected by the end of
the second month, and six percent are considered entirely uncollectible.
Purchases:
1.
Fifty four
percent of all purchases and selling, general, and administrative expenses are
paid in the month purchased and the remainder in the following month.
2.
Each month’s
units of ending inventory is equal to one hundred thirty percent of the next
month’s units of sales.
3.
The cost of
each unit of inventory is P200.
4.
Selling,
general, and administrative expenses, of which P20,000 is depreciation, are
equal to fifteen percent of the current month’s sales.
Actual and projected sales are as follows:
UNITS
|
PESOS
|
|
November
|
11,800
|
P3,540,000
|
December
|
12,100
|
3,630,000
|
January
|
11,900
|
3,570,000
|
February
|
11,400
|
3,420,000
|
March
|
12,000
|
3,600,000
|
April
|
12,200
|
3,660,000
|
[xxx]. The respective
amounts of budgeted purchases for the months of January and February are:
A. P2,418,000 and P2,360,000 C. P2,250,000 and P2,436,000
B. P2,380,000 and P2,280,000 D. P3,570,000 and P3,420,000
[xxxi]. The budgeted cash
disbursements for the month of February are:
A. P2,929,000 C. P2,949,000
B. P2,873,790 D. P2,853,790
[xxxii]. The amount of cash
collected from sales during the month of January is:
A. P3,338,760 C. P3,404,100
B. P3,551,160 D. P3,556,560
[xxxiii]. The number of units
to be purchased during the month of March is:
A. 15,860 C. 12,000
B. 12,260 D. 15,600
Rajah Enterprises is a growing retailer of home care
products. During the first four months
of the following year, it forecasts the following sales and purchases:
Sales
|
Purchases
|
|
January
|
P7,200,000
|
P4,200,000
|
February
|
6,600,000
|
4,800,000
|
March
|
6,000,000
|
3,600,000
|
April
|
7,800,000
|
5,400,000
|
Rajah collects 70% of sales is collection during the month
of sale, 20% the following month and 9% in the second month. 1% of sales are deemed uncollectible.
In order to fully avail of the 2% discount, Rajah pays all
the purchases by the tenth of the month following the month of purchase.
Sales for the month of May are expected to be P6,600,000
and the amount of purchases are P6,000,000.
Operating expenses to be paid during the month of May will be P1,440,000
and the cash balance by May 1 is P2,200,000.
The
Atlanta Corporation has forecast the following sales for the first seven months
of the year:
January P120,000 May P120,000
February 160,000 June 200,000
March 180,000 July 220,000
April 240,000
Monthly
material purchases are set equal to 20 percent of forecasted sales for the next
month. Of the total material costs, 40 percent are paid in the month of
purchase and 60 percent in the following month. Labor costs will run P60,000
per month, and fixed overhead is P30,000 per month. Interest payments on the
debt will be P45,000 for both March and June. Finally, Atlanta’s sales force
will receive a 3 percent commission on total sales for the first six months of
the year, to be paid on June 30.
A. P
27,200 C. P137,856
B. P117,200 D. P
33,600
[xxxv]. How much does Atlanta plan to disburse in the
month of June?
A. P
41,600 C. P207,200
B. P100,000 D. P117,200
Question Nos. 36 through 38 are based on the
following:
Super
Sales’ actual sales and purchases for April and May are shown here along with
forecasted sales and purchases for June through September.
Sales
|
Purchases
|
|
April (Actual)
|
P390,000
|
P200,000
|
May (Actual)
|
420,000
|
220,000
|
June
(forecast)
|
390,000
|
210,000
|
July
(forecast)
|
350,000
|
240,000
|
August
(forecast)
|
420,000
|
320,000
|
September
(forecast)
|
410,000
|
230,000
|
Super
Sales’ ending cash balance in May is P25,000. The minimum desired cash balance
is P20,000. The maximum desired cash
balance is P50,000. Excess cash (above P50,000) is used to buy marketable
securities. Marketable securities are sold before borrowing funds in case of a
cash shortfall (less than P20,000).
[xxxvi]. During the month of June, Super Sales expects
to receive cash from sales amounting to:
A. P606,000 C. P398,100
B. P408,900 D. P359,100
[xxxvii]. The cumulative amount of marketable securities
purchased as of July 31 amounts to:
A. P126,000 C. P143,300
B. 132,500 D. P 0
[xxxviii]. The amount of loan to be obtained to maintain a
balance of P50,000 cash as of September 30 will be:
A. P109.4 C. P
9.4
B. P
59.4 D. P
0.0
Question Nos. 39 through 45 are based on the
following data:
Past
history shows that Ingo Corporation collects 50 percent of its accounts
receivable in the normal 30-day credit period (the month after the sale) and
the other 50 percent in 60 days (two months after the sale). It pays for its
materials 30 days after receipt. In general, Ms. Tee likes to keep a two-month
supply of inventory in anticipation of sales. Inventory at the beginning of
December was 2,600,000 units. (This was not equal to her desired two-month
supply.)
As
of year-end, the Ingo Corporation balance sheet was as follows:
Ingo
Corporation
Balance
Sheet
December
31, 2006
ASSETS
Current
assets:
Cash P 30,000
Accounts receivable 320,000
Inventory 237,800
Total current assets 587,800
Plant and equipment, net of
accumulated depreciation of P200,000 800,000
Total Assets P1,387,800
LIABILITIES
AND STOCKHOLDERS’ EQUITY
Accounts payable P 93,600
Long-term debt, 8% 400,000
Common stock 504,200
Retained earnings 390,000
Total Liabilities and
Stockholders’ Equity P1,387,800
[xxxix]. The budgeted production respective to each
month of the first quarter of the coming year are:
A. 1,400,000; 2,000,000; 2,500,000 C. 2,500,000; 2,000,000; 1,400,000
B. 1,400,000; 2,500,000; 2,000,000 D. 2,000,000; 1,400,000; 2,500,000
[xl]. The amount of accounts payable paid in
March for the purchase of materials is:
A. P150,000 C. P104,000
B. P120,000 D. P130,000
[xli]. The expected cash collections on accounts
receivable in the month of February are:
A. P224,750 C. P
93,000
B. P248,000 D. P186,000
[xlii]. The amount of accounts receivable
outstanding as of March 31, 2007 is:
A. P217,000 C. P310,000
B. P224,750 D. P108,500
[xliii]. The cost of goods sold for the first quarter
of the coming year amounts to:
A. P363,800 C. P426,400
B. P453,600 D. P373,400
[xliv]. The total cash and marketable securities as
of January 31 will be:
A. P45,450 C. P91,800
B. P25,000 D. P54,450
[xlv]. The expected net income during the first
quarter of the coming year is:
A. P
91,080 C. P 96,840
B. P161,400 D. P151,800
Question Nos. 46 through 48
are based on the Russon Corporation, a retailer whose sales are all made on credit. Sales are billed twice monthly, on the 10th
of the month for the last half of the prior month’s sales, and on the 20th of
the month for the first half of the current month’s sales. The terms of all sales are 2/10, net 30. Based upon past experience, the collection of
accounts receivable is as follows:
Within the discount period 80%
On the 30th day 18%
Uncollectible 2%
Russon’s
average markup on its products is 20% of the sales price. All sales and purchases occur uniformly
throughout the month. The sales value of
shipments for May and the forecasts for the next four months follow:
May (actual) P500,000
June 600,000
July 700,000
August 700,000
September 400,000
Russon purchases
merchandise for resale to meet the current month’s sales demand and to maintain
a desired monthly ending inventory of 25% of the next month’s sales. All purchases are on credit with terms of
net/30. Russon pays for 50% of a month’s
purchases in the month of purchase and 50% in the month following the purchase.
[xlvi]. How much cash can Russon plan to collect in
September from sales made in August?
A. P337,400 C. P400,400
B. P343,000 D. P280,000
[xlvii]. The budgeted peso value of Russon’s inventory
on August 31 will be
A. P110,000 C. P112,000
B. P
80,000 D. P100,000
[xlviii]. How much cash can Russon plan to collect from
accounts receivable during July?
A. P574,000 C. P619,000
B. P662,600 D. P608,600
[i]. Answer: A
The amount of fixed costs in operating branches’ 10
warehouses is P400,000 (the fixed cost line intercepts the vertical axis).
Total operating costs P2,900,000
Less fixed costs 400,000
Total variable costs (10 warehouses) P2,500,000
Variable costs per branch:
P2,500,000 ¸ 10 P 250,000
[ii]. Answer: A
Cost of units sold
(0.65 x
P800,000) P520,000
Add Desired ending inventory 140,000
Total cost of goods available for sale 660,000
Deduct Beginning inventory 130,000
Budgeted purchases P530,000
[iii]. Answer:
A
Cost of goods sold P750,000 x 0.6 P450,000
Add Ending Inventory P800,000
x 0.6 x 0.5 240,000
Total available for sale P690,000
Deduct Beginning inventory P450,000
x 0.5 225,000
Budgeted purchases, February P465,000
[iv]. Answer: D
Cost of sales P120,000
Add Desired ending inventory 42,000
Total available for sale 162,000
Deduct Budgeted purchases 100,000
Beginning inventory P 62,000
[v]. Answer: A
Total payments for purchases in
June P140,000
Deduct payments applicable to
purchase of:
June
(P100,000
x 0.6) P60,000
May
(P200,000
x 0.30) 60,000 120,000
Payments applicable to April
purchase P 20,000
Credit purchase in April: P20,000 ¸ 0.10 P200,000
[vi]. Answer: C
Budgeted sales, First Quarter 120,000
units
Add Required Ending Finished goods: 30% x 160,000
48,000 units
Total units required 168,000
units
Less Beginning Finished goods 36,000 units
Budgeted production in units 132,000 units
[vii]. Answer: C
Sales for three-month period:
July 400,000
August 400,000
x 1.05 420,000
September 420,000
x 1.05 441,000
Total 1,261,000
Inventory, September 30
(441,000 x 1.05 x 0.8) 370,440
Total Requirements 1,631,440
Less July Inventory 300,000
Budgeted Production 1,331,440
[viii]. Answer: C
Beginning Inventory (8000
x 3.5) 28,000
Required Purchases
8,000
Direct Materials Used for Production (8000
x 3) (24,000)
Desired Ending Inventory 12,000
[ix]. Answer: C
LL
|
MM
|
NN
|
|
Budgeted production
|
622,000
|
622,000
|
622,000
|
Required materials per unit of product
|
0.50
|
1.00
|
1.2
|
Materials required
|
311,000
|
622,000
|
746,400
|
Unit cost
|
P0.60
|
P1.70
|
P1.00
|
Peso amounts of materials used by units produced
|
P186,600
|
P1,057,400
|
P746,400
|
Budgeted sales in units 640,000
Add Finished goods, end 90,000
Total 730,000
Deduct Finished goods, beginning 108,000
Budgeted production 622,000
[x]. Answer: D
Required pounds by production 180,000
Ending raw materials required 60,000
Beginning raw materials ( 30,000)
Budgeted purchases 210,000
[xi]. Answer: B
Materials required by June production 1,300 x 2 2,600
Add Ending raw materials inventory 1,600 x 2 x 0.5 1,600
Total materials required 4,200
Deduct Beginning materials inventory 1,300 x 2 x 0.5 1,300
Materials to be purchased 2,900
[xii]. Answer:
D
Budgeted
sales 18,000
Add
Finished goods inventory, end 11,400
Total 29,400
Deduct
Finished good inventory, beginning 15,000
Budgeted
production 14,400
Raw
materials required by production (14,400 x 6 ¸ 0.9) 6,000
Desired
Raw materials inventory end 24,400
Total 120,400
Deduct
Raw materials inventory, beginning 21,000
Budgeted
purchase of raw materials 99,400
[xiii]. Answer: D
Raw materials required by June production: 1,200
x 2 2,400
Add: Ending
materials inventory 1,300 x 2 . 1.5 3,900
Total materials required 6,300
Deduct Beginning material inventory 2,400
x 1.5 3,600
Budgeted materials purchase 2,700
[xiv]. Answer: A
Budgeted sales 300,000
Less decrease in Finished goods inventory
10,000
Budgeted production 290,000
Material Q required by production 290,000 x 3 870,000
Less decrease in Material Q inventory 60,000 – 80,000 20,000
Budgeted purchase in pounds, Material Q 850,000
[xv]. Answer: B
Materials required by production 500,000 x 2 1,000,000
Increased in materials inventory (50,000 – 40,000) 10,000
Purchases 1,010,000
[xvi]. Answer: B
Materials required by 2nd
Quarter’s production 45,000 x 2.5
kgs. 112,500
Add: Materials inventory, end: 40,000 x 2.5
x0.25 25.000
Total materials required 137,500
Less: Materials inventory, beginning: 112,500 x 0.25 28,125
Total budget purchases in
kilograms 109,375
[xvii]. Answer: D
Under flexible budget, analysis should be based on actual
level achieved.
Indirect labor cost per unit (P360,000 ¸ 200,000 units) P1.80
Flexible budget allowance:
14,500 units x P1.80 P26,100
[xviii]. Answer: C
Cash sales (March) 0.2 x P420,000 P 84,000
Collections of account sales:
March sales: (P420,000
x 0.8 x 0.7) 235,200
February sales: (P300,000
x 0.8 x 0.25) 60,000
January sales: (P240,000
x 0.8 x .05) 9,600
Total cash from sales P388,800
[xix]. Answer: B
Total cash collections P57,000
Deductions collections on September sales (P80,000
x 0.6) 48,000
Collections applicable to July and August sales P 9,000
Credit sales in July:
P9,000 ¸ 2 ¸ 0.15 P30,000
[xx]. Answer: D
Collections from:
January sales (P860,000 x 0.8 x 0.75) P516,000
December sales (January 1 Accounts) 299,000
Collections of credit sales 815,000
Cash sales (P860,000 x 0.2) 172,000
Total cash received P987,000
[xxi]. Answer: A
Collections sales of:
June: P8,000
x 0.7 P5,600
May: P7,000
x 0.3 2,100
Total collections from sales P7,700
[xxii]. Answer: B
October 90,000 x .95 P 85,500
November 100,000 x
.85 85,000
December 85,000 x
.70
59,500
Fourth quarter sales collected in fourth quarter P230,000
[xxiii]. Answer: D
Cash sales P 70,000
Collections from account sales:
January (P340,000
x 0.60) 204,000
December (P50,000
x 30/40) 37,500
November 20,000
Total cash receipts in January P331,500
[xxiv]. Answer: B
The balance of Accounts
Receivable, based on the collection pattern for Liberal Sales Company, equals
40 percent of credit sales for that month:
P1,500,000 x 0.8 x 0.4 = P480,000
[xxv]. Answer: C
Gross receivable collected month’s sales
November 2,000,000
x .12 P
240,000
October 1,800,000 x .75
1,350,000
September 1,600,000
x .06 96,000
August 1,900,000
x .04 76,000
Total credit
P1,762,000
[xxvi]. Answer: A
The balance
of Accounts Receivable as of January 31, its first month of operations, will
increase by P400,000 because the first collection on account sales will be in
February.
However, a
question of how much increase in Accounts Receivable in February will equal to
the difference between the February credit sales and 70% of January sales.
[xxvii]. Answer: D
Cost of goods sold P1,680,000
Deduct desired decrease in inventories 70,000
Budgeted purchases P1,610,000
Add decrease in Accounts Payable 150,000
Budgeted payments for purchases P1,760,000
[xxviii]. Answer: A
November costs (P1,952,000
– P288,000) x 0.75 P1,248,000
October costs (P1,568,000 – P288,000) x
0.25) 320,000
Total disbursements P1,568,000
[xxix]. Answer: C
Beginning Cash P 20,000
Add:Cash collected on June's sales (P300,000 x .8 x .98) 235,200
Cash collected on May's sales ((P300,000/1.25) x .2) 48,000 283,200
Total P303,200
Less:Cash paid on June's purchases (P240,000 x .6 x .99)
142,560
Cash paid on May's purchases (P200,000
x .4) 80,000 222,560
Ending cash balance P80,640
[xxx]. Answer: C
January
|
February
|
|
Budgeted sales
|
11,900
|
11,400
|
Add: Ending inventory (130%)
|
14,820
|
15,600
|
Total
|
26,720
|
27,000
|
Less: Beginning inventory
|
15,470
|
14,820
|
Budgeted purchases (units)
|
11,250
|
12,180
|
Unit purchase price
|
200
|
200
|
Budgeted peso purchases
|
P2,250,000
|
P2,436,000
|
Budgeted inventories:
December 31 130%
x 11,900 15,470
January 31 130%
x 11,400 14,820
February 28 130%
x 12,000 15,600
March 31 130%
x 12,200 15,860
[xxxi]. Answer: D
Payments for:
February purchases 54%
x P2,436,000 P1,315,440
January purchases 46%
x P2,250,000 1,035,000
Total payments for purchases P2,350,440
Selling, general and administrative expenses:
February: [(P3,420,000 x 0.15) – P20,000]0.54 266,220
January: [(P3,570,000
x 0.15) – P20,000]0.46 237,130
Total cash disbursements P2,853,790
[xxxii]. Answer: A
Billings of December 31:
Collections with
3% discount P3,630,000 x 0.6 x 0.97 P2,112,660
Collections end
of January P3,630,000 x 0.25 907,500
Billings of November 30:
P3,540,000 x 0.09 318,600
Total collections P3,338,760
[xxxiii]. Answer: B
Budgeted March sales 12,000
Add: Ending
inventory units 15,860
Total units required 27,860
Less: Beginning
inventory units 15,600
Budgeted purchases in units, March 12,260
[xxxiv]. Answer:
A
Payments
for purchases in the month of:
December
(0.2
x P120,000 x 0.6) P14,400
January
(0.2
x P160,000 x 0.4) 12,800
Total
January disbursements for purchases P27,200
[xxxv]. Answer:
C
Payments
for purchases:
May purchase (0.2
x P200,000 x 0.6) P24,000
June purchase (0.2
x P220,000 x 0.4) 17,600
Total 41,600
Labor
costs 60,000
Fixed
Overhead 30,000
Interest
payments 45,000
Commission (0.03 x P1,020,000) 30,600
Total disbursements P207,200
[xxxvi]. Answer:
C
June
cash sales (P390,000 x 0.1) P 39,000
Collections
from account sales:
April sales (P390,000
x 0.9 x 0.7) 245,700
May sales
(P420,000
x 0.9 x 0.3) 113,400
Total
cash receipts, June P398,100
[xxxvii]. Answer:
B
Marketable
securities purchased on:
June P 5,600
July 126,900
Cumulative
purchase of MS P132,500
[xxxviii]. Answer:
A
Cash
Budget (P’000)
June
|
July
|
Aug
|
Sept
|
|
Cash
receipts
|
P398.1
|
P404.9
|
P382.2
|
P374.9
|
Cash
disbursements
|
367.5
|
278.0
|
296.5
|
702.5
|
Net cash
inflow (outflow)
|
30.6
|
126.9
|
85.7
|
(
327.6)
|
Beginning
cash balance
|
25.0
|
50.0
|
50.0
|
50.0
|
Cumulative
cash balance
|
55.6
|
176.9
|
135.7
|
(
277.6)
|
M/S sold
(purchased)
|
- 5.6
|
-
126.9
|
- 85.7
|
218.2
|
Cash loan
|
0.0
|
0.0
|
0.0
|
109.4
|
Cash
balance, end
|
P 50.0
|
P 50.0
|
P 50.0
|
P 50.0
|
Cash
Receipts (P’000)
June
|
July
|
Aug
|
Sept
|
|
Account
sales (90%)
|
P351.0
|
P315.0
|
P378.0
|
P369.0
|
Cash sales
|
P 39.0
|
P 35.0
|
P 42.0
|
P 41.0
|
Collection
of accounts
|
||||
First month (30%)
|
245.7
|
105.3
|
94.5
|
113.4
|
Second month (70%)
|
113.4
|
264.6
|
245.7
|
220.5
|
Total
|
P398.1
|
P404.9
|
P382.2
|
P374.9
|
Cash
Payments (P’000)
June
|
July
|
Aug
|
Sept
|
|
Purchases
|
P210.0
|
P240.0
|
P320.0
|
P230.0
|
First month
(45%)
|
P 99.0
|
P 94.5
|
P108.0
|
P144.0
|
Second month
(55%)
|
110.0
|
121.0
|
115.5
|
132.0
|
Total purchases paid
|
209.0
|
215.5
|
223.5
|
276.0
|
Labor
|
58.5
|
52.5
|
63.0
|
61.5
|
General
overhead
|
10.0
|
10.0
|
10.0
|
10.0
|
Interest
|
35.0
|
35.0
|
||
Cash
dividend
|
25.0
|
|||
Taxes
|
30.0
|
30.0
|
||
Purchase of
equipt.
|
290.0
|
|||
Total
payments
|
P367.5
|
P278.0
|
P296.5
|
P702.5
|
[xxxix]. Answer:
A
Budgeted
Production
January
|
February
|
March
|
Total
|
|
Sales
|
1,700,000
|
1,200,000
|
1,400,000
|
4,300,000
|
Inventory,
end
|
2,600,000
|
3,400,000
|
4,500,000
|
4,500,000
|
Total
|
4,300,000
|
4,600,000
|
5,900,000
|
8,800,000
|
Inventory,
beg.
|
(2,900,000
|
(2,600,000
|
(3,400,000
|
(2,900,000
|
Budgeted production
|
1,400,000
|
2,000,000
|
2,500,000
|
5,900,000
|
[xl]. Answer:
B
Payments
for Purchases:
January (December
purchases - 1,800,000 x 0.052) P
93,600
February
(January purchases
– 1,400,000 x 0.06) 84,000
March (February
purchases – 2,000,000 x 0.06) 120,000
Total
for the quarter P297,600
[xli]. Answer:
B
Budgeted
Collections on Accounts Receivable
January
|
February
|
March
|
Total
|
|
November
sales
|
87,500
|
87,500
|
||
December
sales
|
116,250
|
116,250
|
232,500
|
|
January
sales
|
131,750
|
131,750
|
263,500
|
|
February
sales
|
93,000
|
93,000
|
||
Total
|
203,750
|
248,000
|
224,750
|
676,500
|
[xlii]. Answer:
C
A month’s
sales is collected 50 percent each in the first and second month. Therefore, the accounts receivable
outstanding as of March 31 includes March’s sales as well as 50 percent of
February sales.
February’s
accounts (P186,000 x 0.5) P
93,000
March’s
sales 217,000
Outstanding
accounts receivable, March 31 P310,000
[xliii]. Answer:
A
Current
unit cost per 1,000
Material P 52
Labor 20
Overhead 10
Total P 82
Effective
January 1, 2007, the price of materials will be raised to P60. The unit cost for 2007 production will be
P90. Since the sales of January and
February come from December production, only the March sales will have cost of
P90 per thousand.
January
and February cost of goods sold (1,700
+ 1,200) x P82 P237,800
March
1,400
x P90 126,000
Cost
of goods sold (first quarter) P363,800
[xliv]. Answer:
A
January
|
February
|
March
|
|
Cash
collections
|
203,750
|
248,000
|
224,750
|
Cash
disbursements
|
|||
Payments for materials
|
93,600
|
84,000
|
120,000
|
Labor expenses
|
28,000
|
40,000
|
50,000
|
Overhead
|
14,000
|
20,000
|
25,000
|
Selling & administrative
|
52,700
|
37,200
|
43,400
|
Interest
|
8,000
|
||
Taxes
|
64,560
|
||
Dividends
|
.
|
.
|
48,420
|
Total disbursements
|
188,300
|
181,200
|
359,380
|
Net Cash
Inflow (Outflow)
|
15,450
|
66,800
|
(134,630)
|
Cash
Balance, Beginning
|
30,000
|
25,000
|
25,000
|
Cumulative
cash balance
|
45,450
|
91,800
|
(109,630)
|
Marketable
securities
|
20,450
|
66,800
|
(
87,250)
|
Cumulative MS
|
20,450
|
87,250
|
|
Borrowings
|
0
|
0
|
47,380
|
Cash
Balance, End
|
25,000
|
112,250
|
25,000
|
[xlv]. Answer:
C
Proforma
Income Statement
January
|
February
|
March
|
Total
|
|
Sales
|
263,500
|
186,000
|
217,000
|
666,500
|
Cost of
goods sold
|
139,400
|
98,400
|
126,000
|
363,800
|
Gross profit
|
124,100
|
87,600
|
91,000
|
302,700
|
Selling
expenses, 20%
|
52,700
|
37,200
|
43,400
|
133,300
|
Operating
income
|
71,400
|
50,400
|
47,600
|
169,400
|
Interest
expense
|
2,667
|
2,667
|
2,666
|
8,000
|
Income
before tax
|
68,733
|
47,733
|
44,934
|
161,400
|
Income tax,
40%
|
27,493
|
19,093
|
17,974
|
64,560
|
Net income
|
41,240
|
28,640
|
26,960
|
96,840
|
[xlvi]. Answer:
A
August
sales
Billed 8/20
P350,000
x 18% P
63,000
Billed 9/10
P350,000
x 80% x 98% 274,400
Collections
in Sept of Aug sales P337,400
[xlvii]. Answer:
B
Russon
provides 25 percent of next month’s quantity sales.
25%
x P400,000 x 80% = P80,000
[xlviii]. Answer:
D
May
sales billed June 10 250,000x18% P 45,000
June
Sales:
Billed June 20 300,000
x 18%
54,000
Billed July 10 300,000
x .80 z .98 235,200
July
sales
Billed July 20 P350,000 x .80 x .98 P274,400
July
Collections P608,600
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