Ch8 Practice Leader Answeronly

1.
Sioux Corporation is estimating the following sales for the first four months of next year:

Sales are normally collected 60% in the month of sale, 35% in the month following the sale, and the remaining 5% being uncollectible. Based on this information, how much cash should Sioux expect to collect during the month of April?

A.
$286,500

B.
$320,000

C.
$192,000

D.
$94,500

Solutions: A
270,000 * 70% = 162,000
270,000 * 35% = 94,500
320,000 * 60% = 192,000
94,000 + 192,000 = 286,500

2.

Fab Manufacturing Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales at Fab (in units) for the next three months are as follows:

Fab likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. How many mugs should Fab plan on producing during the month of November?

A.
23,200 mugs

B.
26,800 mugs

C.
25,900 mugs

D.
34,300 mugs

Solutions: B
Budget + Desired Ending Inventory – Beginning Inventory = Units Produced
25,000 + (30% * 31,000) – (30% * 25,000) = 26,800

3.
The following are budgeted data:

Two pounds of material are required for each finished unit. The inventory of materials at the end of each month should equal 20% of the following month's production needs. Purchases of raw materials for May should be:

A.
39,200 pounds

B.
52,000 pounds

C.
36,800 pounds

D.
38,000 pounds

Solutions: C
Production:
April: 18,000 * 2 = 36,000
May: 19,000 * 2 = 38,000
June: 16,000 * 2 = 32,000
Materials to be Purchased = Production Needs + Desired Ending Inventory – Beginning Inventory
(19,000 * 2) + (32,000 * 20%) – (38,000 * 20%) = 36,800

4.
The manufacturing overhead budget at Amrein Corporation is based on budgeted direct labor-hours. The direct labor budget indicates that 4,900 direct labor-hours will be required in August. The variable overhead rate is $9.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is