Chapter 21 – Multiple Choice

With the top-down budgeting approach the budget:

Which of the following statements is incorrect?

Roland Corporation budgeted April sales at 2,500 units. The beginning finished goods inventory consisted of 2,000 units, however, Roland desired to have 2,500 finished units on hand by the end of April. Direct materials inventory consisted of 800 beginning units and Roland desired an ending balance of 1,400 units. Each finished unit required 2 units of direct material and 1 hour of direct labor. Direct materials cost $3.00 per unit, direct labor cost $11.00 per hour, and factory overhead is applied at $7.00 per direct labor hour. Roland has no work in process at the beginning or end of the month. How much is the anticipated cost of goods manufactured for April?

Bright Company manufactures mirrors which require 8 square feet of glass per mirror. Bright anticipates production of 500 units in January, 700 units in February, and 1,700 units in March. Bright maintains glass on hand equal to 40% of the following month’s anticipated production requirements. The glass costs $3 per square foot. At the beginning of January, only 500 square feet of glass is on hand. How many square feet of glass should Bright plan to buy in February?

Hanson anticipates unit sales during the first three months of the upcoming year at 5,000 for January, 4,000 for February, and 8,000 for March. If Hanson wishes to maintain its finished goods inventory at 80% of the following month’s sales, and the January 1 finished goods inventory consisted of 1,000 units, how many units must Hanson produce in January?

O’Connor Corporation had December sales of $30,000. Anticipated sales during January are $40,000, and February sales are projected at $37,500. Of sales made, 40% are for cash and 60% are on account. Sales on account are expected to be collected 50% in the month of sale, 45% in the month following the month of sale, and 5% ultimately prove uncollectible. How much are anticipated cash collections during the month of February?

Scanlon Corporation has estimated its activity for April as follows:

Scanlon has no raw material or work in process inventory at the beginning or end of April. On the basis of the above, what are estimated cash disbursements for April?

Blinder Corporation projected the following:

Blinder projects variable manufacturing costs of 40% of sales. Assuming no change in inventory, what will be the projected cost of goods sold?