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Carner Lumber sells lumber and general building supplies to building contractors in a medium-sized town in Montana. Data regarding the stores operations follow:

•             Sales are budgeted at $380,000 for November, $370,000 for December, and $350,000 for January.

•             Collections are expected to be 82% in the month of sale, 16% in the month following the sale, and 2% uncollectible.

•             The cost of goods sold is 63% of sales.

•             The company purchases 35% of its merchandise in the month prior to the month of sale and 65% in the month of sale. Payment for merchandise is made in the month following the purchase.

•             Other monthly expenses to be paid in cash are $24,000.

•             Monthly depreciation is $16,300.

•             Ignore taxes.

Statement of Financial Position October 31


Cash      $20,100

Accounts receivable (net of allowance for uncollectible accounts)             84,600

Inventory            83,790

Property, plant and equipment (net of $485,000 accumulated depreciation)            986,000

Total assets        $1,174,490

Liabilities and Stockholders’ Equity          

Accounts payable            $239,400

Common stock                  788,000

Retained earnings                 147,090

Total liabilities and stockholders’ equity                 $1,174,490

The accounts receivable balance, net of uncollectible accounts, at the end of December would be:

a)            $120,000

b)            $66,600

c)            $59,200

d)            $115,200



Golebiewski Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 4,900 direct labor-hours will be required in November. The variable overhead rate is $8.40 per direct labor-hour. The companys budgeted fixed manufacturing overhead is $78,400 per month, which includes depreciation of $10,290. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for November should be:

a)            $22.30

b)            $8.40

c)            $24.40

d)            $16.00



LDG Corporation makes and sells a product called Product WZ. Each unit of Product WZ requires 3.60 hours of direct labor at the rate of $9.60 per direct labor-hour. Management would like you to prepare a Direct Labor Budget for June.

The company plans to sell 21,900 units of Product WZ in June. The finished goods inventories on June 1 and June 30 are budgeted to be 300 and 450 units, respectively. Budgeted direct labor costs for June would be:

a)            $19,470

b)            $751,680

c)            $756,864

d)            $762,048




Friden Company has budgeted sales and production over the next quarter as follows:


                April       May       June

  Sales in units    104,000                 124,000                 ?    

  Production in units        108,000                 132,000                 160,000 

The company has 20,800 units of product on hand at April 1. A minimum of 20% of the next months sales needs in units must be on hand at the end of each month. July sales are expected to be 144,000 units. Budgeted sales for June would be (in units):

a)            192,800

b)            188,800

c)            132,000

d)            164,000




Porus Corporation makes and sells a single product called a Yute. The company is in the process of preparing its Selling and Administrative Expense Budget for the last quarter of the year. The following budget data are available:

                Variable Cost Per Yute Sold         Monthly Fixed Cost

  Sales commissions         $7.20                      

  Shipping             $9.10                      

  Advertising       $2.30                     $14,000   

  Executive salaries                         $149,000   

  Depreciation on office equipment                        $2,600   

  Other  $0.75                     $32,800   

All of these expenses (except depreciation) are paid in cash in the month they are incurred.

If the company has budgeted to sell 22,000 Yutes in November, then the total budgeted selling and administrative expenses for November would be:

a)            $624,100

b)            $621,500

c)            $198,400

d)            $425,700



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