Op Budget Sample

1. MM Co. estimated its overhead to produce 80,000 units at 1,000,000 (60% variable).
If the estimate changes, and MM

now expects to produce 100,000 units, what would be the budgeted overhead be if the cost behavior remain the same?
2. MM sells variety of porcelain products including sinks. In Dec. 31, the company had 10,000 sinks in inventory. The
company’s policy is to maintain a sink inventory equal to 5% of the next month’s sale. Sales in Jan. last year was 15,000
and expects it to double this January and 20% increase each month for the rest of the 1 st quarter. What is the projected
production for January?
3. MM Co. sales budget shows the ff. expected sales for the ff. year:
Quarter Units
1st 120,000
2nd 160,000
rd
3 90,000
4th 110,000
The inventory at Dec. 31 of the prior year was budgeted at 36,000 units. The quantity of FGs 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?
4. MM has projected its sales to be 600,000 in Jan., 750,000 in Feb., and 800,000 in March. MM wants to have 50% of
next month’s sales needs on hand at the end of each month. If MM has an average gross profit of 40%, what are the
February purchase?
5. MM Co. sells a single product. Budgeted sales for the year are anticipated to be 640,000 units. The estimated
beginning and ending FGs are 108,000 and 90,000 respectively. A production of 1 unit requires the ff. materials:
LL 0.50lb @ 0.60 MM 1lb @ 1.70 NN 1.20lb @ 1.00
Budgeted amount of materials to be used in production during the year. _________________
6. The payment schedule of purchases made on account is: 60% during the month of purchase, 30% the ff. month, and
10% in the subsequent month. Total credit purchases were 200,000 in May and 100,000 in June. Total payment on
credits purchases were 140,000 in June. What were the credit purchases in the month of April?
7. MM Co. has the ff. historical pattern on its credit sales:
70% collected in the month of sales

15% collected in the first month after sale
10% collected in the 2nd month after sale
4% collected in the 3rd month after sale
2% uncollectible
The sale on open account have been budgeted for the last 6 months of 2023 are shown below:
July 60,000 August 70,000
Sept. 80,000 Oct. 90,000
Nov. 100,000 Dec. 85,000
The estimated total cash collections during the fourth quarter __________________
8. MM had the ff. budgeted sales for the first half of the ff. year:
Cash Sales Credit Sales
Jan 70,000 340,000
Feb 50,000 190,000
Mar 40,000 135,000
Apr 35,000 120,000
May 45,000 160,000
Jun 40,000 140,000
The company is in the process of preparing a cash budget and must determine the expected cash collections by month.
To this end, the ff. information has been assembled:
Collection on credit sales: 60% month of sale, 30% ff. month, 10% 2nd month ff. the sale
The AR balance on Jan. 1 of the current year was 70,000, of which 50,000 represents uncollected Dec. sales and 20,000
represents uncollected Nov. sales.
Budgeted cash collections 1st quarter ______________ and 2nd quarter __________________
9. MM ask your services to develop cash and other budget information for the 1st quarter of 2024. In Dec. 31, MM had
the ff. balances:
Cash 55,000
AR 4,370,000
Inventories 3,094,000
AP 1,330,550
The ff. information are relevant to 2024 operation:
SALES:
*each month’s sales are billed on the last day of the month
*customers are allowed 3% discount if payment is made within 10 days after billing period. Receivables are
booked gross.
*60% of the billings are collected w/in the discount period, 25% are collected at the end of the month, 9% are
collected by the end of 2nd month, and 6% are considered entirely uncollectible.
PURCHASES:
*54% of all purchases, selling, general and admin expenses are paid in the month purchased and the remainder
the ff. month.
*each month’s EI is equal to 130% of next month’s unit sales
*each inventory cost 200
*selling, general and admin expenses, of which 20,000 is depreciation, are equal to 15% of the current month’s
sale.
Projected sales are as follows:

Units Pesos
Nov 11,800 3,540,000
Dec 12,100 3,630,000
Jan 11,900 3,570,000
Feb 11,400 3,420,000
Mar 12,000 3,600,000
Apr 12,200 3,660,000
REQUIREMENTS:
1. Budgeted purchases for the month of January and February.
2. Budgeted cash disbursements for Feb.
3. Cash collections for the month of January.
4. Number of units to be produced during March.

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1. MM Co. estimated its overhead to produce 80,000 units at 1,000,000 (60% variable).

If the estimate changes, and MM

7. MM Co. has the ff. historical pattern on its credit sales:

70% collected in the month of sales

Projected sales are as follows:

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