MULTIPLE CHOICE: BUDGETING Prof. Maria Teresa B.
De Jesus
1 - 10 The following information has been gathered by the budget director of Joshua Company, another
outfit managed by Aaron Inc.. The firm manufactures and sells only one product. The selling price is
P 15 per unit. Expected sales during the month 50,000 units of finished goods. Finished goods at the
beginning and end of the month is 22,000 and 20,000 units respectively.
Direct labor costs P 4 per hour. One half of an hour is required to manufacture each unit of
finished product. Factory Overhead is applied to work-in process on the basis of direct labor hours.
Variable factory expense at the planned level of operations is expected to amount to P 72,000; fixed
overhead is expected to amount to P 120,000.
The raw materials expected to be on hand at the beginning of the month total 6,000 gallons. Only
one kind of raw material is used to produce the finished product. Two and one half gallons of raw
materials are needed to manufacture each unit of finished product. Raw materials are expected to cost
P 1.10 per gallon during the coming month, its prevailing cost. Raw materials expected to be on hand at
the end of the month total 4,000 gallons. Variable administrative and selling expenses is P 1.00 per unit.
In assisting the company to formulate the budget, your determined the following budget parameters:
1. The total expected peso sales should be:
a. P 780,000 b. P 750,000 c. P 720,000 d. P 330,000
2. Finished goods in units to be produced during the month is:
a. 50,000 b. 52,000 c. 72,000 d. 48,000
3. Budgeted cost of raw materials to be used in the production is
a. P 132,000 b. P 134,200 c. P129,800 d. Answer not given
4. Budgeted raw materials purchases cost is:
a. P 132,000 b. P 134,200 c. P129,800 d. Answer not given
5. Budgeting direct labor cost is
a. P 192,000 b. P 96,000 c. P 200,000 d. P 208,000
6. Variable overhead per direct labor hour is
a. P 1.50 b. P 2.50 c. P 3.00 d. P 5.00
7. Fixed overhead cost per direct labor hour is
a. P 1.50 b. P 2.50 c. P 3.00 d. P 5.00
8. Budgeted contribution margin is
a. P 7.25 b. P 6.25 c. P 8.75 d. P 7.75
9. Budgeted cost of goods sold (full cost) is:
a. P 437,500 b. P 372,000 c. P 324,000 d. P 420,000
10. Income before tax is: a. P 300,000 b. P 262,500 c. P 228,000 d. P 252,500
11. Budgeted sales for the first six months the year for Hooper Corporation are listed below:
JANUARY FEBRUARY MARCH APRIL MAY JUNE
UNITS: 5,000 6,000 7,000 6,000 4,000 3,000
Hooper Corporation has a policy of maintaining an inventory of finished goods equal to 35 percent of the
next month's budgeted sales. How many units has Hooper Corporation budgeted to produce in the first
quarter of the year? a. 18,350 units b. 17,650 units c. 22,000 units d. 22,050 units
12. Production of Product B has been budgeted at 200,000 units for November. One unit of Product B
requires 2 lbs. of raw material. The projected beginning and ending materials inventory for November are:
Beginning inventory: 2,000 lbs. Ending inventory: 10,000 lbs.
How many lbs. of material should be purchased during November?
a. 192,000 b. 208,000 c. 408,000 d. 416,000
13. Each unit of Product Tim takes five direct labor hours to make. Quality standards are high and 10%
of units produced are normally rejected due to substandard quality next month’s budget are as follows:
Beg. inv. of finished goods 9,000 units Budgeted sales of Tim 40,000 units
Planned ending inv. of fin. goods 5,000 units
All stock of finished goods must have successfully passed the quality control check. What is the
direct labor budget for the month? a. 225,000 b. 250,000 c. 200,000 d. 222,222
14 - 18 The Winner Company marks up all merchandise at 25% of gross purchases.
All purchases are made on account with terms 1/10 n/60. Purchase discounts which are
recorded as miscellaneous income are always taken. Normally, 60% of each month’s purchases
are paid for in the month of purchase while the 40% are paid during the first 10 days of the first
month after the purchase. Inventories of merchandise at the end of each month are kept at 30%
of the next month projected cost of sales.
Terms of sales on account are 2/10, n/30. Cash sales are not subject to discount. 50%
of each month’s sales on account are collected during the month of sales: 45% are collected in
succeeding month and the remainder are usually uncollectible: 70% of the collections in the
month of sale are subject to discount while 10% of the collection in the succeeding month are
subject to discount.
Projected sales data for selected months follow:
Month Sales on acct.-gross Cash sales
December P 1,900,000 P 400,000
January 1,500,000 250,000
February 1,700,000 350,000
March 1,600,000 300,000
14. Projected gross purchases at the end of January is:
a. P 1,400,000 b. P 1,470,000 c P 1,248,000 d. P 1,472,000
15. Projected inventory at the end of December is:
a. P 441,000 b. P 420,000 c. P 393,750 d. P 552,000
16. Projected payments to suppliers during February are:
a. P 1,535,688 b. P 1,551,200 c. P 1,528,560 d. P 1,509,552
17. Projected sales discounts to be taken by customers making remittance during February:
a. P 15,250 b. P 13,250 c. P 15,925 d. P 11,900
18. Projected collections from customers during February are:
a. P 1,875,000 b. P 1,511,750 c. P 1,861,750 d. P 1,188,100
