9. The Adams Corporation, a merchandising firm, has budgeted its activity for No
ID: 2492533 • Letter: 9
Question
9. The Adams Corporation, a merchandising firm, has budgeted its activity for November according to the following information:
• Sales at $530,000, all for cash.
• Merchandise inventory on October 31 was $240,000.
• The cash balance November 1 was $26,000.
• Selling and administrative expenses are budgeted at $84,000 for November and are paid for in cash.
• Budgeted depreciation for November is $41,000.
• The planned merchandise inventory on November 30 is $270,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
• There is no interest expense or income tax expense.
The budgeted cash receipts for November are:
a. $395,000
b. $530,000
c. $135,000
d. $571,000
10. LFM Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 3.0 hours of direct labor at the rate of $26.00 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June.
The budgeted direct labor cost per unit of Product WZ would be:
a. $78.00 per unit
b. $26.00 per unit
c. $7.00 per unit
d. $46.00 per unit
11. LFM Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 3.3 hours of direct labor at the rate of $29.00 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June.
The company plans to sell 36,000 units of Product WZ in June. The finished goods inventories on June 1 and June 30 are budgeted to be 580 and 160 units, respectively. Budgeted direct labor costs for June would be:(Do not round intermediate calculations.)
a. $3,442,506
b. $3,405,006
c. $1,036,500
d. $3,423,756
9. The Adams Corporation, a merchandising firm, has budgeted its activity for November according to the following information:
• Sales at $530,000, all for cash.
• Merchandise inventory on October 31 was $240,000.
• The cash balance November 1 was $26,000.
• Selling and administrative expenses are budgeted at $84,000 for November and are paid for in cash.
• Budgeted depreciation for November is $41,000.
• The planned merchandise inventory on November 30 is $270,000.
• The cost of goods sold is 70% of the selling price.
• All purchases are paid for in cash.
• There is no interest expense or income tax expense.
The budgeted cash receipts for November are:
Explanation / Answer
9. As all sales are in cash, the budgeted receipts will be the same as total sales.
Thus, budgeted cash receipts = November sale = $530,000. Thus option "b".
10. 1 unit requires 3 hours of direct labor and the direct labor rate = $26 per hour.
budgeted direct labor cost per unit = number of hours*labor rate
= 3*26 = $78. Hence the answer is option "a"
11. Production = sales - opening inventory + closing inventory
Production = 36,000 - 580 + 160
= 35,580 units.
Total labor costs = production*labor hours required per unit*labor rate per hour
= 35,580 units*3.3 hours*$29/hour
= $3,405,000. Hence the answer is option "b".
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