Liberty ACCT 212 Chapter 7 Homework Answers Complete Solutions

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Question 1

Ruiz Co. provides the following sales forecast for the next four months.

The company wants to end each month with ending finished goods inventory equal to 30% of next month’s forecasted sales. Finished goods inventory on April 1 is 192 units.

Prepare a production budget for the months of April, May, and June.

Question 2

Zira Co. reports the following production budget for the next four months.

Each finished unit requires four pounds of raw materials and the company wants to end each month with raw materials inventory equal to 30% of next month’s production needs. Beginning raw materials inventory for April was 665 pounds. Assume direct materials cost $5 per pound.

Prepare a direct materials budget for April, May, and June. (Round your intermediate calculations and final answers to the nearest whole dollar amount.)

Question 3

Electro Company manufactures an innovative automobile transmission for electric cars. Management predicts that ending finished goods inventory for the first quarter will be 69,000 units. The following unit sales of the transmissions are expected during the rest of the year: second quarter, 230,000 units; third quarter, 450,000 units; and fourth quarter, 486,500 units. Company policy calls for the ending finished goods inventory of a quarter to equal 30% of the next quarter’s budgeted sales.

Prepare a production budget for both the second and third quarters that shows the number of transmissions to manufacture.

Question 4

MCO Leather manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $5 per pound and 0.7 direct labor hours at a rate of $17 per hour. Variable manufacturing overhead is charged at a rate of $3 per direct labor hour. Fixed manufacturing overhead is $14,000 per month. The company’s policy is to end each month with direct materials inventory equal to 30% of the next month’s materials requirement. At the end of August the company had 3,580 pounds of direct materials in inventory. The company’s production budget reports the following.

(1) Prepare direct materials budgets for September and October.

(2) Prepare direct labor budgets for September and October.

(3) Prepare factory overhead budgets for September and October.

Question 5

Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash payments (excluding cash payments for loan principal and interest payments) for the first three months of next year.

According to a credit agreement with its bank, Kayak requires a minimum cash balance of $40,000 at each month-end. In return, the bank has agreed that the company can borrow up to $150,000 at a monthly interest rate of 1%, paid on the last day of each month. The interest is computed based on the beginning balance of the loan for the month. The company repays loan principal with any cash in excess of $40,000 on the last day of each month. The company has a cash balance of $40,000 and a loan balance of $80,000 at January 1.

Prepare monthly cash budgets for January, February, and March. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.)