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Homework answers / question archive / 1 ABC Company prepares master budget for the next year
1
ABC Company prepares master budget for the next year. The Company has the following data: Month Budgeted Sales May $46,000 June 50,000 July 52,000 August 48,000 The cost of goods sold percentage is 65% of sales and the desired ending inventory level is 25% of next month's sales at cost. What are the expected total purchases for June? Select one: a. $17,500 b. $40,950 c. $32,825 d. $32,500
2
ABC company is a manufacturing company and prepares analysis for flexible budget variances. Poor product design and problems with the quality of materials will, more than likely, result in a(n) ________ variance or ________ variance. Select one: a. favorable material efficiency; unfavorable labor price b. unfavorable material price; unfavorable labor usage c. unfavorable material price; unfavorable labor rate d. unfavorable material efficiency; unfavorable labor usage
1
| Calculation of expected total purchases for June- | |||
| Particulars | May | June | July |
| Budgeted Sales | $46,000 | $50,000 | $52,000 |
| Cost of goods sold (65% of sales) | $29,900 | $32,500 | $33,800 |
| Add: Desired ending inventory of materials (25% of next month's sales at the cost) | $8,125 | $8,450 | $7,800 |
| Total needs | $38,025 | $40,950 | $41,600 |
| Less: Beginning inventory of materials | Data Not available | $8,125 | $8,450 |
| Materials to be purchased | Data not available | $32,825 | $33,150 |
Expected total purchases for June will be $32,825 (Option 'c' )
2
Answer of this question will be
D. unfavorable material efficiency; unfavorable labor usage
Reasons for all Options:
Option A:
In this given option, one variance is Favorable Material Efficiency Favorable. As mentioned in the question, there is a problem with the quality of material, there can not be Favorable Material Efficiency Variance. So, this option is not right.
Option B:
In this given option, one variance is unfavorable material price. In the question, NO details regarding material Price found, so, there is no question of Material Price Variance. So, this option is not right.
Option C:
In this given option, one variance is unfavorable material price. In the question, NO details regarding material Price found, so, there is no question of Material Price Variance. So, this option is not right.
Option D:
In the Question, Problem is poor quality of material and Poor product design. Both are negative signs. This will result in high cost and variances related to this will be unfavorable. Poor Quality of Material will result in poor result which will result in Unfavorable Material Efficiency Variance. and poor quality of Design will result in Unfavorable Labor Usage Variance. So. this option is correct.
