Question

#1

Action Company, sells mood lights for $60 each. In 2018 Action anticipates selling 15,000 lights. The company has the following costs and inventory levels per light for the year:

Direct materials $16

Direct manufacturing labor $18

Manufacturing overhead $10

Beginning inventory Ending inventory

Direct materials 200 units 300 units

Work-in-process inventory          0 units 0 units

Finished goods inventory             2,100 units 1,500 units

Calculate the following for Action in 2018.

A) Budgeted income statement sales.

B) Number of mood lights produced in 2018.

C) Budgeted income statement cost of goods sold.

D) What are the 2016 budgeted production costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively?

#2

Jonas Corporation has the following 2017 year-end information:

Sales (20,000 units) $600,000

Less: Cost of goods sold                330,000

Gross profit 270,000

Operating expenses (includes $10,000 of Depreciation) 180,000

Net income $ 90,000

In 2018 the company expects the following:

- Increase unit selling prices by 6%

- increase sales volume of 3%

- cost of goods sold as a percentage of sales decrease to 52%

- all operating costs are variable except for depreciation

A) What is Jonas Corporations budgeted income statement for 2018?

#3

Tetra Company has the following:

budgeted sales of 126,000 units

targeted ending finished goods inventory of 18,000 units

beginning finished goods inventory of 12,000 units

A) How many units should Tetra Company produce next year?

#4

The following sales and purchases information relates to The Molly Company for the months of March through August:

Month Sales Purchases

March   $10,000 $9,000

April       12,000 8,000

May       15,000 9,000

June      16,000 11,000

July        19,000 12,000

August 25,000 18,000

The Molly Company collects cash from its customers as follows::

In the month of sale (1% cash discount) 10%

In the month after the sale         75%

Two months after sale   10%

The amount anticipated to be uncollectible         5%

For purchases, Molly pays cash for 60% of the purchase in the month of purchase. The balance is paid in the following month.

A) Prepare a summary of Molly’s cash collections and cash disbursements for June through August.

#5

Raineri Products produces skylights. Their average number of daily orders is 55. Each order is fabricated by hand and takes 7 minutes each. The fabricator works eight hours a day, five days a week.

A) What is the average waiting time in minutes?

B) What is the cycle time for an order?

Answer 1

Problem # 1 – Action Company

Solution:

A) Budgeted Income Statement Sales = Estimated Sales Unit 15,000 lights x Unit Selling Price $60 = $900,000

B) Number of mood lights produced in 2018 = Estimated Unit Sales + Finished Goods Ending Inventory – Finished Goods Beginning inventory

= 15,000 + 1500 – 2100

= 14,400 lights

C) Budgeted Income Statement Cost of Goods Sold = Units Sold x Unit Product Cost

Unit Product Cost = Direct material cost per unit $16 + Direct manufacturing labor $18 + Manufacturing overhead $10

= $44 per unit

Budgeted Income Statement Cost of Goods Sold = Units Sold 15,000 x Unit Product Cost $44 = $660,000

D)

Budgeted Production Cost

	$$
Direct Materials (Units Produced 14,400*$16)	$230,400
Direct Labor (Units Produced 14,400*$18)	$259,200
Manufacturing overhead (14,400*10)	$144,000
Budgeted Production Cost	$633,600

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