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PA12. 7.4 Before the year began, the following static budget was developed for the estimated sales of
100,000. Sales are sluggish and management needs to revise its budget. Use this information to prepare a
flexible budget for 80,000 and 90,000 units of sales.
PA13. 7.4 Caribbean Hammocks currently sells 75,000 units at $50 per unit. Its expenses are:
Management believes it can increase sales by 5,000 units for every $5 decrease in sales price. It also believes
the additional sales will allow a decrease in direct material of $1 for each additional 5,000 units. Prepare a
flexible budgeted income statement for 75,000-, 80,000-, and 85,000-unit sales.
PA14. 7.4 Total Pop’s data show the following information:
New machinery will be added in April. This machine will reduce the labor required per unit and increase the
labor rate for those employees qualified to operate the machinery. Finished goods inventory is required to be
20% of the next month’s requirements. Direct material requires 2 pounds per unit at a cost of $3 per pound.
The ending inventory required for direct materials is 15% of the next month’s needs. In January, the beginning
inventory is 3,000 units of finished goods and 4,470 pounds of material. Prepare a production budget, direct
materials budget, and direct labor budget for the first quarter of the year.
396 Chapter 7 Budgeting
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PA15. 7.4 Identify the document that contains the information listed in these lines from the budgeted
balance sheet shown.
A. Cash
B. Accounts receivable
C. Raw materials inventory
D. Computers
E. Accounts payable
PA16. 7.5 Titanium Blades refines titanium for use in all brands of razor blades. It prepared a static budget
for the sales of 5,000 units. These variances were observed:
Determine the static budget and use the information to prepare a flexible budget and analysis for the 6,000
units actually sold.
Chapter 7 Budgeting 397
B Problem Set B
PB1. 7.2 Lens & Shades sells sunglasses for $37 each and is estimating sales of 21,000 units in January and
19,000 in February. Each lens consists of 2.00 mm of plastic costing $2.50 per mm, 1.7 oz of dye costing $2.80
per ounce, and 0.50 hours direct labor at a labor rate of $18 per unit. Desired inventory levels are:
Prepare a sales budget, production budget, direct materials budget for silicon and solution, and a direct labor
budget.
PB2. 7.2 The following data were obtained from the financial records of Sonicbrush, Inc., for March:
Sales are expected to increase each month by 15%. Prepare a budgeted income statement.
PB3. 7.2 TIB makes custom guitars and prepared the following sales budget for the second quarter
It also has this additional information related to its expenses:
Direct material per unit $55, Direct labor per hour 20, Variable manufacturing overhead per hour 3.50, Fixed
manufacturing overhead per month 3,000, Sales commissions per unit 20, Sales salaries per month 5,000,
Delivery expense per unit 0.50, Utilities per month 4,000, Administrative salaries per month 20,000, Marketing
expenses per month 8,000, Insurance expense per month 11,000, Depreciation expense per month 9,000.
Prepare a sales and administrative expense budget for each month in the quarter ended June 30, 2018.
398 Chapter 7 Budgeting
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PB4. 7.2 Prepare a budgeted income statement using the information shown.
PB5. 7.2 Sunshine Gardens overhead expenses are:
Given production of 10,200; 11,300; 12,900; and 13,200 for each quarter of the next year, prepare a
manufacturing overhead budget for each quarter.
PB6. 7.3 Relevant data from the operating budget of The Framers are:
Other data:
• Capital assets were sold in quarter 1 and $8,000 was collected in quarter 1 and $500 collected in
quarter 2.
• Dividends of $500 will be paid in May
• The beginning cash balance was $50,000 and a required minimum cash balance is $10,000.
• Prepare a cash budget for the first two quarters of the year.
Chapter 7 Budgeting 399
PB7. 7.3 Fill in the missing information from the following schedules:
PB8. 7.3 Mesa Aquatics, Inc. estimated direct labor hours as 1,900 in quarter 1, 2,000 in quarter 2, 2,200 in
quarter 3, and 1,800 in quarter 4. a sales and administration budget using the information provided.
400 Chapter 7 Budgeting
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	Chapter 7. Budgeting
	Problem Set B