Accounting Test Questions
Question 1 a)
On January 1, 2011 the Batista Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2011: Sales units: 1st quarter – 5 000 2nd quarter – 6 000 3rd quarter – 7 000
Ending raw materials inventory – 50% of the next quarter 's production requirements.
Ending finished goods inventory – 30% of the next quarter 's expected sales units.
3rd quarter actual production – 7 250 units
Three pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound. a) Prepare a production budget by quarters for the 6-months period ended June 30, 2011. b) Prepare a direct materials budget by quarters for the 6-months period ended June 30, 2011
Solution: a) The production budget shows the units to produce to meet anticipated sales (Weynadt, Kimmel, Kieso, 9th edition, 2010, p.1024). Production budget is calculated by adding budgeted sales units to desired ending finished goods units and subtracting beginning finished goods units and determined by the following formula: Required production units = Budgeted sales units (1st + 2nd)+ Desired Ending finished goods (1st + 2nd) units – Beginning finished goods units (1st + 2nd). Calculation of the production budget is showed in the table.1 which is posted below.
To compute the production budget we need to find each element of above mentioned formula.
As we know that 1 500 units are already made in the 4st quarter 2010 which computed by multiplying 1 quarter 's expected sales units to 30% = 5000 x 30% = 1 500 units.
Ending finished goods for the 1st quarter is computed by multiplying 2 quarter 's expected sales units to 30% = 6000 x 30% = 1 800 units.
Ending finished goods for the 2st quarter is computed by multiplying 2 quarter 's expected sales units to 30% = 7000 x 30% = 2 100 units.
So we found the amount of ending fished goods for each quarter which are
On January 1, 2011 the Batista Company budget committee has reached agreement on the following data for the 6 months ending June 30, 2011: Sales units: 1st quarter – 5 000 2nd quarter – 6 000 3rd quarter – 7 000
Ending raw materials inventory – 50% of the next quarter 's production requirements.
Ending finished goods inventory – 30% of the next quarter 's expected sales units.
3rd quarter actual production – 7 250 units
Three pounds of raw materials are required to make each unit of finished goods. Raw materials purchased are expected to cost $4 per pound. a) Prepare a production budget by quarters for the 6-months period ended June 30, 2011. b) Prepare a direct materials budget by quarters for the 6-months period ended June 30, 2011
Solution: a) The production budget shows the units to produce to meet anticipated sales (Weynadt, Kimmel, Kieso, 9th edition, 2010, p.1024). Production budget is calculated by adding budgeted sales units to desired ending finished goods units and subtracting beginning finished goods units and determined by the following formula: Required production units = Budgeted sales units (1st + 2nd)+ Desired Ending finished goods (1st + 2nd) units – Beginning finished goods units (1st + 2nd). Calculation of the production budget is showed in the table.1 which is posted below.
To compute the production budget we need to find each element of above mentioned formula.
As we know that 1 500 units are already made in the 4st quarter 2010 which computed by multiplying 1 quarter 's expected sales units to 30% = 5000 x 30% = 1 500 units.
Ending finished goods for the 1st quarter is computed by multiplying 2 quarter 's expected sales units to 30% = 6000 x 30% = 1 800 units.
Ending finished goods for the 2st quarter is computed by multiplying 2 quarter 's expected sales units to 30% = 7000 x 30% = 2 100 units.
So we found the amount of ending fished goods for each quarter which are
Bibliography: 1. Brigham, F.E., Houston, J.F., 2009, “Fundamentals of Financial Management”, 12th edition, The Thomson South Western, USA. 2. Weygandt, J.J., Kimmel, P.D., Kieso, D.E., Accounting Principles, ninth edition, 2010, www.wiley.com, viewed 05.03.2010 3. Beneski A, 2005 “Internal Company image”, http://www.ippnou.ru/article.php?idarticle=001840, translated from Russian language, viewed 07.03.2010. 4. Smith J.A and Reid G.S, 2010, “Risk assessment by investors and invested in creating new businesses”, International Journal "Problems of theory and practice of management", http://vasilievaa.narod.ru/ptpu/7_1_04.htm, translated from Russian language, viewed 05.03.2010