Reference no: EM132313335

Question 1. Evan Manufacturing Corporation manufactures and sells stainless steel coffee mugs. Expected mug sales (in units) for the next three months are as follows:

	October	November	December
Budgeted unit sales	28,000	25,000	31,000

The company likes to maintain a finished goods inventory equal to 30% of the next month's estimated sales. This requirement was met on 30 September. How many mugs should Evan Manufacturing Corporation plan on producing during the month of October?
A) 23,200 mugs
B) 27,100 mugs
C) 25,900 mugs
D) 34,300 mugs

Question 2. The Chow Company has budgeted production for next year as follows:

	Feb	Mar	Apr
Sales in units	14,000	12,000	10,000
Production in units	12,000	16,000	14,000

Four pounds of raw materials are required for each unit produced. The raw materials inventory at the end of each month should equal 10% of the next month's production needs. The amount of beginning raw material inventory in February is consistent with raw materials inventory policy. Budgeted purchases of raw materials in the March would be:
A) 63,200 pounds
B) 62,400 pounds
C) 56,800 pounds
D) 50,400 pounds

Question 3. Pure Alliance Limited has a policy that it needs to keep 30% of the following month's expected sales quantity as finished goods inventory at each period end to avoid potential hiccup that could cause loss of sales. The following are the expected sales quantities between January 20X0 and April 20X0. Average unit selling price is $50 each and average unit production cost is $25.

20X0	Jan	Feb	Mar	Apr
Sales Quantity	180,000	200,000	190,000	210,000

On average, 25% of the sales are settled in the same month, 30% in the following month and 44.5% are paid in the month after. The remaining 0.5% represents potential bad debts which will be written off at the year-end in December.
(1) Calculate the Production requirement in March 20X0.

(2) How much cash will be collected in March 20X0?

Question 4. Lee and Company has the following financial data for February:

	Actual	Static Budget
Units Sold	10,000	12,000
Sales	$1,100,000	$1,200,000
Variable Expenses	($470,000)	($480,000)
Fixed Expenses	($320,000)	($400,000)
Net Operating Income	$310,000	$320,000

Compute the Flexible Budget Net Operating Income for the same month.

A) $240,000 B) $280,000 C) $320,000 D) $200,000

Question 5. Puget Sound Divers is a company that provides diving services such as underwater ship repairs to clients in the Puget Sound area. The company's planning budget for May appears below:

Puget Sound Divers Planning Budget
For the Month Ended May 31

Budgeted diving hours (Q)	100
Revenue ($365 * Q)	$36,500
Expenses:
Wages and salaries ($8,000+$125 * Q)	20,500
Supplies ($3 * Q)	300
Equipment rental ($1,800+$32 * Q)	5,000
Insurance ($3,400)	3,400
Miscellaneous ($630+$1.8 * Q)	810
Total Expense	30,010
Net operating income	$ 6,490

Q: During May, the company's activity was actually 105 diving-hours. Prepare a flexible budget for that level of activity.