Question

Flagstaff Company has budgeted production units of 9,500 for July and 9,700 for August. The direct materials requirement per unit is 2 ounces (oz.). The company has determined that it wants to have safety stock of direct materials on hand at the end of each month to complete 25% of the units budgeted in the following month. There was 4,750 ounces of direct material in inventory at the start of July. The total amount of direct materials in ounces, to be purchased in July is:

Multiple Choice

• 19,000.

• 19,400.

• 23,850.

• 19,100.

• 18,900.

Ultimate Sportswear has $180,000 of 7% noncumulative, nonparticipating, preferred stock outstanding. Ultimate Sportswear also has $580,000 of common stock outstanding. In the company's first year of operation, no dividends were paid. During the second year, the company paid cash dividends of $38,000. This dividend should be distributed as follows:

Multiple Choice

• $9,500 preferred; $28,500 common.

• $12,600 preferred; $25,400 common.

• $20,000 preferred; $18,000 common.

• $0 preferred; $38,000 common.

• $19,000 preferred; $19,000 common.

Answer 1

1.

Budgeted production	9,500
Direct material required per unit	2
Total material required for production (9,500*2)	19,000
Add: Ending raw material inventory (9,700*2*25%)	4,850
Less: Beginning raw material inventory	(4,750)
Raw material to be purchased in July	19,100

Answer is D

2.

Preferred dividend ($180,000*7%)	$ 12,600
Common dividend ($38,000-$12,600)	$ 25,400

Answer is B

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