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Managerial Accounting Chapter 9 Study Guide

1. Davie Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable factory overhead rate is $6.00 per direct labor-hour; the budgeted fixed factory overhead is $92,000 per month, of which $16,000 is factory depreciation If the budgeted direct labor time for November is 9,000 hours, then the total budgeted cash disbursements for November must be: $130,000

2. Davie Corporation is preparing its Manufacturing Overhead Budget for the fourth quarter of the year. The budgeted variable factory overhead rate is $6.00 per direct labor-hour; the budgeted fixed factory overhead is $92,000 per month, of which $16,000 is factory depreciation.

If the budgeted direct labor time for December is 4,000 hours, then the predetermined factory overhead per direct labor-hour for December would be: $29

3. Detmer Enterprises has budgeted sales for the next five months as follows:

Past experience has shown that the ending inventory for each month should be equal to 10% of the next month's sales in units. The inventory on December 31 contained 400 units, which was in excess of the desired level of inventory. The company needs to prepare a Production Budget for the first quarter of the year. The desired ending inventory for April is: 460

Desired ending inventory for April = 10% of May sales = 10% x 4,600 = 460 units

4. Thiel Inc. is working on its cash budget for October. The budgeted beginning cash balance is $35,000. Budgeted cash receipts total $166,000 and budgeted cash disbursements total $162,000. The desired ending cash balance is $50,000. The excess (deficiency) of cash available over disbursements for October will be: $39,000

Excess cash available over disbursements = Beginning cash balance + Budgeted cash receipts Budgeted cash disbursements = $35,000 + $166,000 - $162,000 = $39,000

5. Sarrazin Corporation is in the process of preparing its annual budget. The following beginning and ending inventory levels are planned for the year.

Each unit of finished goods requires 8 grams of raw material. If the company plans to sell 640,000 units during the year, the number of units it would have to manufacture during the year would be: 590,000

6. Mouw Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 5,400 direct labor-hours will be required in January. The variable overhead rate is $4.40 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $77,220 per month, which includes depreciation of $9,720. All other fixed manufacturing overhead costs represent current cash flows. The January cash disbursements for manufacturing overhead on the manufacturing overhead budget should be: $91,260

Variable overhead = 5,400 direct labor-hours x $4.40 = $23,760 Cash portion of fixed manufacturing overhead = $77,220 - $9,720 = $67,500 Total cash disbursement for overhead in January = $23,760 + $67,500 = $91,260

7. Hardin, Inc, has budgeted sales in units for the next five months as follows:

Past experience has shown that the ending inventory for each month should be equal to 15% of the next month's sales in units. The inventory on May 31 contained 1,020 units. The company needs to prepare a production budget for the next five months. The total number of units produced in July should be: 5,660 Units produced = Ending inventory + Units sold - Beginning inventory= (6,000 x 15%) + 5,600 - (5,600 x 15%) = 5,660

8. The cash budget must be prepared before you can complete the: budgeted balance sheet 9. A self-imposed budget can be a very effective control device in an organization. True

10.Dano Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The variable overhead rate is $1.50 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $110,200 per month, which includes depreciation of $28,880. All other fixed manufacturing overhead costs represent current cash flows. The direct labor budget indicates that 7,600 direct labor-hours will be required in December. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for December should be: $16.00