The following information was taken from Southgate Industry\'s cash budget for t
ID: 2482481 • Letter: T
Question
The following information was taken from Southgate Industry's cash budget for the month of July: Beginning cash balance $480,000 Cash receipts 304,000 Cash disbursements 544.000 If the company has a policy of maintaining a minimum end of the month cash balance o! $400,000. the amount the company would have to borrow is A) $160,000. B) $80,000 C) $240,000. D) $96,000. 9. Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets? A) Direct materials cost B) Direct labor cost C) Variable manufacturing overhead D) Fixed manufacturing overhead 10 The following information is taken from the production budget for the first quarter. Beginning inventory in units 1.200 Sales budgeted for the quarter 426.000 Capacity in units of production facility 472,000 How many finished goods units should be produced during the quarter if the company desires 3.200 units available to start the next quarter? A) 428.000 B) 4 4,000 C) 474.000 D) 429.200Explanation / Answer
Answer No. 7
Budgeted variable cost per unit = Total variable cost at normal capacity / Production at normal capacity
= $48,000 / 16,000 units
=$3 per unit
Fixed manufacturing overhead will remain same for different levels of production.
Budgeted variable overhead for 18,000 units of production = 18,000 x $3
= $54,000
Total budgeted overheads for production of 18,000 units = Budgeted variable overheads + Budgeted fixed overheads
= $54,000 + $270,000
= $324,000
Actual overheads for production of 18,000 units = $321,000.
Different between actual and budgeted overheads = $324,000 - $321,000
= $3,000 (favorable)
Reason for favorable variance: Actual cost incurred is less than anticipated/budgeted cost of the said production. Due to the cost saved, this will be termed as a favorable variance.
Hence, answer is Option (B) : $3,000 favorable
Answer No. 8
Actual cash balance at the end of month of July = Beginning cash balance + Cash receipts - Cash disbursements
= $480,000 + $304,000 - $544,000
= $240,000
Minimum cash balance to be maintained at month end = $400,000
Amount to be borrowed to maintain the required cash balance = $400,000 - $240,000
= $160,000
Hence, firm will have to borrow $160,000 in order to maintain its minimum required cash balance at the end of month of July. Correct answer is Option (A) $160,000
Answer 9
Fixed manufacturing overheads remain same for different levels of production as these are the expenses which need to be incurred whether the production is on a higher side or lower side. Variable manufacturing overheads vary with the levels of production. This fact remains same despite the type of budget i.e. flexible budget or static budget.
Hence, correct answer is Option (D) Fixed manufacturing overheads
Answer 10
As the firm already has some beginning inventory, the same will have to be adjusted to calculate the required production.
Inventory required to be produced to maintain the desired inventory for next quarter = Budgeted unit sales for current quarter + Ending inventory balance to be maintained – Beginning inventory balance
= 426,000 + 3,200 – 1,200
= 428,000
Hence, correct answer is Option (A): 428,000
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