Problems:

1. Carlos, Inc., produces office supplies, including pencils. Pencils are bundled in
packages; each product package sells for P20. The sales budget for the first four months
of the year follows for this

Unit Sales
January 100,000
February 120,000
March 110,000
April 100,000

Company policy requires that ending inventories for each month be 10 percent of next
month's sales However, due to greater sales in December than anticipated, the ending
inventory of pencils for that month is only 5,000 packages.

REQUIRED:
Prepare a production budget for the first quarter of the year. Show the number of units
that should be produced each month as well as for the quarter in total.

Jan Feb Mar Total

Sales
Add: desired ending inventory
Total needs
Less: Beginning inventory
Units to be produced .

2. Manning Company produces à variety of labels, including iron on name labels, which
are sold to parents of camp-bound children. (The camps require campers to have their
name on every article of clothing.) Each roil consists of 10 yards of paper strip with
500 copies of the child's name. Each yard of paper strip costs P2. Manning has
budgeted production of the label rolls for the next for months as follows:

March April May June

Rolls in units 6,000 9,000 15,000 10,000

Inventory policy requires that sufficient paper strip be in ending monthly inventory to satisfy
25 percent of the following month's production needs. The inventory of paper strip at the
beginning of March equals exactly the amount needed to satisfy the inventory policy.
Required:
1. Prepare a direct materials purchases budget for March, April, and May showing purchases
in units and in pesos for each month and in total.

2. Each roll of labels produced requires (on average) 0.05 direct labor hour. The average cost
of direct labor is P60 per hour. Prepare a direct labor budget for March, April, and May
showing the hours needed and the direct labor cost for each month and in total.

3. The production budget of a corporation for the upcoming fiscal year is as follows:

1Q 2Q 3Q 4Q
Budgeted production in units 2,000 2,050 2,125 1,950

Each unit requires four (4) hours of direct labor. The company's variable manufacturing
overhead rate is P5 per direct labor hour and the company's fixed manufacturing overhead
is P50,000 per quarter. The only non-cash item included in fixed manufacturing overhead is
depreciation, which is P20,000 per quarter.

REQUIRED:
1. Construct the company's manufacturing overhead budget for the upcoming fiscal year.
2.Compute the company's manufacturing overhead rate (including both variable and fixed
manufacturing overhead) for the upcoming fiscal year. Round off to the nearest whole cent.

4. Lawrence, Inc., found that about 20 percent of its sales during the month were for cash.
Lawrence has the following accounts receivable payment experience:

Percent paid in the month of sale 40%

Percent paid in the month after the sale 50%
Percent paid in the second month after the sale 8%

Lawrence's anticipated sales for the next few months are

April P240,000
May 283,000
June 276,000
July 295,000
August 300,000

REQUIRED: Prepare a cash receipts budget for July and August.

5. A company is preparing its budget for the upcoming fiscal year. Management has
prepared the following summary of its budgeted cash flows:
 1Q 2Q 3Q 4Q
Total cash receipts P180,000 P330,000 P210,000 P230,000
Total cash disbursements P260,000 P230,000 P220,000 P240,000

The company's beginning cash balance for the upcoming fiscal year will be P20,000.

The company requires a minimum cash balance of P10,000 and may borrow any amount
needed from a local bank at a quarterly interest rate of 3%. The company may borrow any
amount at the beginning of any quarter and may repay its loans, or any part of it, at the end
of any quarter. Interest payments are due on any principal at the time it is repaid. For
simplicity, assume the interest is not compounded.

REQUIRED: Prepare the company's cash budget for the upcoming fiscal year.
Q1 Q2 Q3 Q4 Year
Cash bal. beg
Add: Total cash receipts
Total cash available
Less: total disbursements
Excess (Deficiency)
Financing: (YEAR not Qtr)
Borrowing (Beg of qtr) (+)
Repayments (End of qtr) (-)
Interest (-)
Total Financing
Cash bal end

6. The management of Isner Company has prepared a graph showing the total costs of
operating branch warehouses throughout the country. The cost line crosses the vertical axis at
P400,000. The total cost of operating one branch is P650,000. The total cost of operating ten
branches is P2,900,000. For purposes of preparing a flexible budget based on the number of
branch warehouses in operation, what formula would be used to determine budgeted costs at
various levels of activity?
A. Y = P400,000 + P250,000X
B. Y= P400,000 + P290,000X
C. Y = P650,000 + P400,000X
D. Y=P650,000+ P250,000X

7. Bitoy Company is anticipating a production of 3,200 yards of M and 3,900 yards of N

at a cost of P6.70 per yard for M and P16.50 per yard for N. Sales amount to 2,900 yards
of M at P9.50 per yard and 3,760 yards for N at P24.50 per yard. There was no beginning
inventory. Selling expense amounts to 10 percent of sales, and administrative expense
amounts to P4,950. Taxes are at 20 percent of income. Accounts receivable at the beginning
of the period amounts to P21,500. Accounts receivable at the end of the period amounts to
20 percent of the period's sales. Payables at the beginning of the period amounted to
P14,800. Ending payable amounts to 20 percent of the period's cost of
production. Separable income for M amounts to:
A. P 5,365
B. P 8,120
C. P20,868
D. P30,080

8. Goldstre Company estimated its overhead to produce 80,000 units at P1,000,000 (60
percent is variable). If the estimate changes, and Goldstre now expects to produce
100,000 units, what would the budgeted overhead be if the cost behavior remains the
same?
A. P1,050,000
B. P1,150,000
C. P1,250,000
D. P1,450,000

9 . Schism Design, Inc. sells a variety of porcelain products including porcelain sinks In
December 31, the company had 1,000 sinks in inventory. The company's policy is to maintain
a sink inventory equal to 5 percent of next month sales. The company expects the following
sales activity for the first quarter of the year as:

January 15,000 sinks

February 20,000 sinks
March 23,000 sinks

What is the projected production for February?

A. 21,150
B. 19,850
C. 20,150
D. 22,150

10 . Congabo Company's sales budget shows the following expected sales for the following
year:

Quarter Units
First 120,000
 Second 160,000
Third 90,000
Fourth 110,000
Total 480,000

The inventory at December 31 of the prior year was budgeted at 36,000 units. The quantity
of finished goods inventory at the end of each quarter is to equal 30% of the next quarter's
budgeted unit sales.

How many units should be produced during the first quarter?

A. 48,000
B. 96,000
C. 132,000
D. 144,000

11. Violin Company manufactures a single product. It keeps its inventory of finished goods at
twice the coming month's budgeted sales and inventory of raw materials at 150% of the
coming month's budgeted production requirements. Each unit of product requires two pounds
of materials. The production budgets in units consist of the following

May 1,000
June 1,200
July 1,300
August 1,600

Raw material purchases in June would be

A. 2,600 pounds
B. 1,800 pounds
C. 2,400 pounds
D. 2,700 pounds

12. Mica Cage Manufacturing Company sells birdhouses. The company has prepared the
following forecast for the third quarter of 2022:

July 5,000 units

August 6,000 units
September 10,000 units

Inventory of finished goods in June 30, 2022 is budgeted at 1,000 units. Management would
like the desired quantity of finished goods inventory at the end of each month to equal 20
percent of next month's budgeted sales.
October's projected sales are 12,000 units.

Each completed unit of finished product requires 3 square feet of cedar at a cost of P15 per
square foot.

The company has determined that it needs 10 percent' of next month's raw material needs
on hand at the end of each month.

The cost of the direct material that should be purchased in August is:
A. P329,400
B. P306,000
C. P214,800
D. P322,200

13. Shoepao Company manufactures a single product. It keeps its inventory of finished goods
at 75% of the coming month's budgeted sales. It also keeps its inventory of raw materials at
50% of the coming month's budgeted production requirement. The production budget in units:
May, 1,000; June, 1,200; August 1,600. Raw material purchases in July would be:
A. 1,525 pounds
B. 2,900 pounds
C. 2,550 pounds
D. 3,050 pounds

14. Rover Company desires an ending inventory of P140,000. It expects sales of P800,000
and has a beginning inventory of P130,000. Cost of sales is 65% of sales. Budgeted purchases
are
A. P 530,000
B. P 790,000
C. P 810,000
D. P1,070,000

15. Caress Co. has projected its sales to be P600,000 in January, P750,000 in February, and
P800,000 in March. Caress wants to have 50% of next month's sales needs on hand at the
end of each month. If Caress has an average gross profit of 40%, what are the February
purchases?
A. P465,000
B. P310,000
C. P775,000
D. P428,000
16. Couchie Company budgeted purchases of P100,000. Cost of sales was P120,000
and the desired ending inventory was P42,000. The beginning inventory was
A. P20,000
B. P32.000
C. P42.000
D. P62,000
17. Germanie Company sells a single product. Budgeted sales for the year are anticipated to
be 640,000 units. The estimated beginning and ending finished goods inventory are 108,000
and 20,000, respectively. A production of one unit requires the following materials:
Material LL 0.50 1b. @ P0.60
Material MM 1.00 1b. @ P1.70
Material NN 1.20 lb. @ P1.00
What are the respective peso amounts of each material to be used in production during the
year?

Material LL Material MM Material NN

A. P181,200 P1,026,800 P724,800
B. P181,200 P1,026.800 P746,400
C. P186,600 P1,057,400 P746,400
D. P186,600 P1,057,400 P724,800

18. The payment schedule of purchases made on account is: 60% during the month of
purchase, 30% in the following month, and 10% in the subsequent month. Total credit
purchases were P200,000 in May, and P100,000 in June. Total payments on credit purchases
were P140,000 in June. What were the credit purchases in the month of April?
A. P200,000
B. P100,000
C. P145,000
D. P215,000

19. Starnie Company prepares its budgets on annual basis. The following beginning and
ending inventory unit levels are planned for the fiscal year of June 1, 2021 through May 31,
2022.Each unit of product requires two pounds of materials.
June 1, 2021 May 31, 2022
Raw material* 40,000 50,000
Work-in-process 10,000 10,000
Finished goods 80,000 50,000
*Two (2) units of raw material are needed to produce each unit of finished product.

If 500,000 finished units were to be manufactured during the 2021-2022 fiscal year by Star
Company, the units of raw material needed to be purchased would be
A. 1,000.000 units
B. 1,010,000 units
C.1,020,000 units
D. 990,000 units

20. Lopento Company has a collection schedule of 60% during the month of sales, 15% the
following month, and 15% subsequently. The total credit sales in the current month of
September were P80,000 and total collections in September were P57,000. What were the
credit sales in July?
A. P90,000
B. P30,000
C. P45,000
D. P32,000

21. Selerum Company has P299,000 in accounts receivable on January 1, 2022.

Budgeted sales for January are P860,000. Selerum expects to sell 20% of its
merchandise for cash.
Of the remaining sales, 75% are expected to be collected in the month of sale and the
remainder the following month.
The January cash collections from sales are:
A. P815,000
B. P691,000
C. P471,000
D. P987,000

22. Fascades Company, a merchandising firm, is preparing its master budget and
has gathered the following data to help budget cash disbursements:
Budgeted data:
Cost of goods sold P1,680,000
Desired decrease in inventories 70,000
Desired decrease in Accounts Payable 150,000

All of the accounts payables are for inventory purchases and all inventory items are
purchased on account. What are the estimated cash disbursements for inventories for the
budget period?
A. P1,460,000
B. P1,600,000
C. P1,900,000
D. P1,760,000

23. Mariona Company sells bolts of fabric to retailers for P8,000 per bolt. The company's
accountant has prepared the following sales forecast (in bolts) for the first quarter of 2022:
January 600 bolts
February 1,000 bolts
March 700 bolts

Historically, the cash collection of sales has been as follows:

60 percent in the month of sale; 30 percent in the month following the sale, and 9 percent in
the second month following the sale.

Cash receipts for March are expected to be:

A. P6,192,000
B. P8,216,000
C. P3,360,000
D. P5,784,000

24. Karat Company began its operations on January 1 of the current year.
Budgeted sales for the first quarter are P240,000, P300,000, and P420,000, respectively, for
January, February and March. Barat Company expects 20% of its sales on cash and the
remainder on account. Of the sales on account, 70% are expected to be collected in the month
of sale, 25% in the month following the sale, and the remainder in the following month. How
much should Barat receive from sales in March?
A. P304,800
B. P294,000
C. P388,800
D. P295,200

25. Risapa Company would like to prepare a summary cash budget for March. The
following information is available:

1. The cash balance at March 1 is estimated to be P3,000.

2. March sales, all on account, are estimated to be P50,000. Sales are collected over a two-
month period with 65 percent collected in the month of sale and the remainder in the
subsequent month. February sales on account were P60,000.
3. inventory purchases are expected to be P20,000 in March. The company pays for one-half
of inventory purchases in the month of purchase and the remainder in the subsequent month.
February's purchase are P18,000.
4. Cash disbursements for selling and administrative expenses are expected to be P4,000 in
March.
5. Depreciation expense for March is expected to be P5,000.
6. Loan and interest payments for March are expected to be P25,000.

What cash balance is expected by the end of March?

A P8500
B. P 3,500
C. P (3,500)
D. P26,500

26. As of January 1, 2022, the Demographic Sales Company had an account receivable of
P500,000. The sales for January, February, and March were as follows: P1,200,000,
P1,400,000 and P1,500,000, respectively. Of each month's sales, 80% is on account. 60%
of account sales is collected in the month of sale, with remaining 40% collected in the following
month.

What is the accounts receivable balance as of March 31, 2022?

A. P720,000
B. P480,000
C. P587,200
D. P600,000

27. Aranchsis, Inc, uses flexible budgeting for cost control. During the month of September,
Aranchsis, Inc. produced 14,500 units of finished goods with indirect labor costs of P25,375.
Its annual master budget reflects an indirect labor costs, a variable cost, of P360,000 based
on an annual production of 200,000 units. In the preparation of performance analysis for the
month of September, how much flexible budget should be allowed for indirect labor costs?
A P30,000
B. P29,167
C. P25,375
D. P26,100

Use the following to answer questions 28 - 30.

The Granger Company's budgeted income statement reflects the following amounts:
Sales Purchases Expenses
January P120,000 P78,000 P24,000
February 110,000 66,000 24,200
March 125,000 81,250 27,000
April 130,000 84,500 28,600
Sales are collected 50% in the month of sale, 30% in the month following sale, and 19% in the
second month following sale. One percent of sales is uncollectible and expensed at the end of
the year.

Granger pays for all purchases in the month following purchase and takes advantage of a
3% discount. The following balances are as of January I:

Cash P88,000
Accounts receivable* 58,000
Accounts payable 72,000

*Of this balance, P35,000 will be collected in January and the remaining amount
will be collected in February.

The monthly expense figures include P5, 000 of depreciation. The expenses are paid in the
month incurred.

28. Granger's expected cash balance at the end of January is:

A. P87,000.
B. P89,160.
C. P92,000.
D. P94,160.

29. Granger's budgeted cash receipts in February are:

A. P95,000.
B. P113,090.
C. P113,640.
D. P114,000.

30. Granger's budgeted cash payments in February are:

A. P75,660.
B. P94,860.
C. P97,200.
D. P99,860.