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Practice Exam – Chapter 8

Print these pages. Answer each of the following questions, explaining your answers or showing your work, as appropriate, and then compare your solutions to those provided at the end of the practice exam.

1.Frame-It Company produces and sells picture frames. To guard against out of stock situations, the company requires that 20% of the next month's sales be on hand at the end of each month. Budgeted sales of picture frames over the next three months are:

| |January |February |March | |Budgeted sales in units |130,000 |180,000 |240,000 |

Compute budgeted production for February.

2.Santiago Company has budgeted production for next year as follows:

| |First Quarter |Second Quarter |Third Quarter |Fourth Quarter | |Production in units |80,000 |96,000 |128,000 |112,000 |

Five pounds of raw materials are required for each unit produced. Required raw materials inventory at the end of each quarter is 10% of the next quarter's production needs. Compute budgeted purchases of raw materials for the third quarter.

3.Daley Company plans to sell 86,000 units during the month of August. If the company has 18,000 units on hand at the start of the month, and plans to have 16,000 units on hand at the end of the month, how many units must be produced during the month?

4.Café Company’s sales budget for the fourth quarter is as follows:

| |October |November |December | |Total sales |$280,000 |$240,000 |$320,000 |

Management expects that 30% of the sales are for cash; the rest are on credit. Of...
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