dgg1.

Answer: A

The amount of fixed costs in operating branches’ 10 warehouses is P400,000 (the fixed cost line intercepts
the vertical axis).

Total operating costs P2,900,000

Less fixed costs 400,000

Total variable costs (10 warehouses) P2,500,000

Variable costs per branch: P2,500,000  10 P 250,000

.2 Answer: A
Cost of units sold (0.65 x P800,000) P520,000
Add Desired ending inventory 140,000
Total cost of goods available for sale 660,000
Deduct Beginning inventory 130,000
Budgeted purchases P530,000

.3 Answer: A

Cost of goods sold P750,000 x 0.6 P450,000

Add Ending Inventory P800,000 x 0.6 x 0.5 240,000

Total available for sale P690,000

Deduct Beginning inventory P450,000 x 0.5 225,000

Budgeted purchases, February P465,000

4
. Answer: D
Cost of sales P120,000
Add Desired ending inventory 42,000
Total available for sale 162,000
Deduct Budgeted purchases 100,000
Beginning inventory P 62,000

. 5Answer: A

Total payments for purchases in June P140,000

Deduct payments applicable to purchase of:

June (P100,000 x 0.6) P60,000

May (P200,000 x 0.30) 60,000 120,000

 Payments applicable to April purchase P 20,000

Credit purchase in April: P20,000  0.10 P200,000

.6 Answer: C

Budgeted sales, First Quarter 120,000 units

Add Required Ending Finished goods: 30% x 160,000 48,000 units

Total units required 168,000 units

Less Beginning Finished goods 36,000 units

Budgeted production in units 132,000 units

.7 Answer: C

Sales for three-month period:

July 400,000

August 400,000 x 1.05 420,000

September 420,000 x 1.05 441,000

Total 1,261,000

Inventory, September 30 (441,000 x 1.05 x 0.8) 370,440

Total Requirements 1,631,440

Less July Inventory 300,000

Budgeted Production 1,331,440

.8 Answer: C

Beginning Inventory (8000 x 3.5) 28,000

Required Purchases 8,000

Direct Materials Used for Production (8000 x 3) (24,000)

Desired Ending Inventory 12,000

.9 Answer: C

LL MM NN

Budgeted production 622,000 622,000 622,000

Required materials per unit of product 0.50 1.00 1.2

Materials required 311,000 622,000 746,400

Unit cost P0.60 P1.70 P1.00

Peso amounts of materials used by

units produced
P186,600 P1,057,400 P746,400

Budgeted sales in units 640,000

Add Finished goods, end 90,000

Total 730,000

Deduct Finished goods, beginning 108,000

Budgeted production 622,000

.10 Answer: D

Required pounds by production 180,000

Ending raw materials required 60,000

Beginning raw materials ( 30,000)

Budgeted purchases 210,000

.11 Answer: B
Materials required by June production 1,300 x 2 2,600
Add Ending raw materials inventory 1,600 x 2 x 0.5 1,600
Total materials required 4,200
Deduct Beginning materials inventory 1,300 x 2 x 0.5 1,300
Materials to be purchased 2,900

.12 Answer: D

Budgeted sales 18,000

Add Finished goods inventory, end 11,400

 Total 29,400

Deduct Finished good inventory, beginning 15,000

Budgeted production 14,400

Raw materials required by production (14,400 x 6  0.9) 6,000

Desired Raw materials inventory end 24,400

Total 120,400

Deduct Raw materials inventory, beginning 21,000

Budgeted purchase of raw materials 99,400

.13 Answer: D
Raw materials required by June production: 1,200 x 2 2,400
Add: Ending materials inventory 1,300 x 2 . 1.5 3,900
Total materials required 6,300
Deduct Beginning material inventory 2,400 x 1.5 3,600
Budgeted materials purchase 2,700

.14 Answer: A

Budgeted sales 300,000

Less decrease in Finished goods inventory 10,000

Budgeted production 290,000

Material Q required by production 290,000 x 3 870,000

Less decrease in Material Q inventory 60,000 – 80,000 20,000

Budgeted purchase in pounds, Material Q 850,000

.15 Answer: B

Materials required by production 500,000 x 2 1,000,000

Increased in materials inventory (50,000 – 40,000) 10,000

Purchases 1,010,000
16. Answer: B

Materials required by 2nd Quarter’s production 45,000 x 2.5 kgs. 112,500

Add: Materials inventory, end: 40,000 x 2.5 x0.25 25.000

Total materials required 137,500

Less: Materials inventory, beginning: 112,500 x 0.25 28,125

Total budget purchases in kilograms 109,375

17. Answer: D

Under flexible budget, analysis should be based on actual level achieved.

Indirect labor cost per unit (P360,000  200,000 units) P1.80

Flexible budget allowance: 14,500 units x P1.80 P26,100

18. Answer: C

Cash sales (March) 0.2 x P420,000 P 84,000

Collections of account sales:

March sales: (P420,000 x 0.8 x 0.7) 235,200

February sales: (P300,000 x 0.8 x 0.25) 60,000

January sales: (P240,000 x 0.8 x .05) 9,600

Total cash from sales P388,800

19. Answer: B

Total cash collections P57,000

Deductions collections on September sales (P80,000 x 0.6) 48,000

Collections applicable to July and August sales P 9,000

Credit sales in July: P9,000  2  0.15 P30,000

20. Answer: D

Collections from:
 January sales (P860,000 x 0.8 x 0.75) P516,000

December sales (January 1 Accounts) 299,000

Collections of credit sales 815,000

Cash sales (P860,000 x 0.2) 172,000

Total cash received P987,000

.21 Answer: A
Collections sales of:
June: P8,000 x 0.7 P5,600
May: P7,000 x 0.3 2,100
Total collections from sales P7,700

.22 Answer: B

October 90,000 x .95 P 85,500

November 100,000 x .85 85,000

December 85,000 x .70 59,500

Fourth quarter sales collected in fourth quarter P230,000

23. Answer: D

Cash sales P 70,000

Collections from account sales:

January (P340,000 x 0.60) 204,000

December (P50,000 x 30/40) 37,500

November 20,000

Total cash receipts in January P331,500

24. Answer: B

The balance of Accounts Receivable, based on the collection pattern for Liberal Sales Company, equals 40
percent of credit sales for that month:

P1,500,000 x 0.8 x 0.4 = P480,000

.25 Answer: C

Gross receivable collected month’s sales

November 2,000,000 x .12 P 240,000

October 1,800,000 x .75 1,350,000

September 1,600,000 x .06 96,000

August 1,900,000 x .04 76,000

Total credit P1,762,000

.26 Answer: A

The balance of Accounts Receivable as of January 31, its first month of operations, will increase by P400,000
because the first collection on account sales will be in February.

However, a question of how much increase in Accounts Receivable in February will equal to the difference
between the February credit sales and 70% of January sales.

.27 Answer: D

Cost of goods sold P1,680,000

Deduct desired decrease in inventories 70,000

Budgeted purchases P1,610,000

Add decrease in Accounts Payable 150,000

Budgeted payments for purchases P1,760,000

. 28Answer: A

November costs (P1,952,000 – P288,000) x 0.75 P1,248,000

October costs (P1,568,000 – P288,000) x 0.25) 320,000

Total disbursements P1,568,000

.29 Answer: C

Beginning Cash P 20,000

Add:Cash collected on June's sales (P300,000 x .8 x .98) 235,200

 Cash collected on May's sales ((P300,000/1.25) x .2) 48,000 283,200

Total P303,200

Less:Cash paid on June's purchases (P240,000 x .6 x .99) 142,560

Cash paid on May's purchases (P200,000 x .4) 80,000 222,560

Ending cash balance P80,640

.30 Answer: C

January February

Budgeted sales 11,900 11,400

Add: Ending inventory (130%) 14,820 15,600

Total 26,720 27,000

Less: Beginning inventory 15,470 14,820

Budgeted purchases (units) 11,250 12,180

Unit purchase price 200 200

Budgeted peso purchases P2,250,000 P2,436,000

Budgeted inventories:

December 31 130% x 11,900 15,470

January 31 130% x 11,400 14,820

February 28 130% x 12,000 15,600

March 31 130% x 12,200 15,860

.31 Answer: D

Payments for:

February purchases 54% x P2,436,000 P1,315,440

January purchases 46% x P2,250,000 1,035,000

Total payments for purchases P2,350,440

 Selling, general and administrative expenses:

February: [(P3,420,000 x 0.15) – P20,000]0.54 266,220

January: [(P3,570,000 x 0.15) – P20,000]0.46 237,130

Total cash disbursements P2,853,790

.32 Answer: A

Billings of December 31:

Collections with 3% discount P3,630,000 x 0.6 x 0.97 P2,112,660

Collections end of January P3,630,000 x 0.25 907,500

Billings of November 30: P3,540,000 x 0.09 318,600

Total collections P3,338,760

.33 Answer: B

Budgeted March sales 12,000

Add: Ending inventory units 15,860

Total units required 27,860

Less: Beginning inventory units 15,600

Budgeted purchases in units, March 12,260

.34 Answer: A

Payments for purchases in the month of:

December (0.2 x P120,000 x 0.6) P14,400

January (0.2 x P160,000 x 0.4) 12,800

Total January disbursements for purchases P27,200

.35 Answer: C

Payments for purchases:

May purchase (0.2 x P200,000 x 0.6) P24,000

 June purchase (0.2 x P220,000 x 0.4) 17,600

Total 41,600

Labor costs 60,000

Fixed Overhead 30,000

Interest payments 45,000

Commission (0.03 x P1,020,000) 30,600

Total disbursements P207,200

.36 Answer: C

June cash sales (P390,000 x 0.1) P 39,000

Collections from account sales:

April sales (P390,000 x 0.9 x 0.7) 245,700

May sales (P420,000 x 0.9 x 0.3) 113,400

Total cash receipts, June P398,100

. 37Answer: B

Marketable securities purchased on:

June P 5,600

July 126,900

Cumulative purchase of MS P132,500

.38 Answer: A

Cash Budget (P’000)

June July Aug Sept

Cash receipts P398.1 P404.9 P382.2 P374.9

Cash disbursements 367.5 278.0 296.5 702.5

Net cash inflow (outflow) 30.6 126.9 85.7 ( 327.6)

 Beginning cash balance 25.0 50.0 50.0 50.0

Cumulative cash balance 55.6 176.9 135.7 ( 277.6)

M/S sold (purchased) - 5.6 - 126.9 - 85.7 218.2

Cash loan 0.0 0.0 0.0 109.4

Cash balance, end P 50.0 P 50.0 P 50.0 P 50.0

Cash Receipts (P’000)

June July Aug Sept

Account sales (90%) P351.0 P315.0 P378.0 P369.0

Cash sales P 39.0 P 35.0 P 42.0 P 41.0

Collection of accounts

First month (30%) 245.7 105.3 94.5 113.4

Second month (70%) 113.4 264.6 245.7 220.5

Total P398.1 P404.9 P382.2 P374.9

Cash Payments (P’000)

June July Aug Sept

Purchases P210.0 P240.0 P320.0 P230.0

First month (45%) P 99.0 P 94.5 P108.0 P144.0

Second month (55%) 110.0 121.0 115.5 132.0

Total purchases paid 209.0 215.5 223.5 276.0

Labor 58.5 52.5 63.0 61.5

General overhead 10.0 10.0 10.0 10.0

Interest 35.0 35.0

Cash dividend 25.0

 Taxes 30.0 30.0

Purchase of equipt. 290.0

Total payments P367.5 P278.0 P296.5 P702.5

.39 Answer: A

Budgeted Production

January February March Total

Sales 1,700,000 1,200,000 1,400,000 4,300,000

Inventory, end 2,600,000 3,400,000 4,500,000 4,500,000

Total 4,300,000 4,600,000 5,900,000 8,800,000

Inventory, beg. (2,900,000 (2,600,000 (3,400,000 (2,900,000

Budgeted production 1,400,000 2,000,000 2,500,000 5,900,000

.40 Answer: B

Payments for Purchases:

January (December purchases - 1,800,000 x 0.052) P 93,600

February (January purchases – 1,400,000 x 0.06) 84,000

March (February purchases – 2,000,000 x 0.06) 120,000

Total for the quarter P297,600

.41 Answer: B

Budgeted Collections on Accounts Receivable

January February March Total

November sales 87,500 87,500

December sales 116,250 116,250 232,500

January sales 131,750 131,750 263,500

February sales 93,000 93,000

 Total 203,750 248,000 224,750 676,500

.42 Answer: C

A month’s sales is collected 50 percent each in the first and second month. Therefore, the accounts receivable
outstanding as of March 31 includes March’s sales as well as 50 percent of February sales.
February’s accounts (P186,000 x 0.5) P 93,000

March’s sales 217,000

Outstanding accounts receivable, March 31 P310,000

.43 Answer: A

Current unit cost per 1,000

Material P 52

Labor 20

Overhead 10

Total P 82

Effective January 1, 2007, the price of materials will be raised to P60. The unit cost for 2007 production will be
P90. Since the sales of January and February come from December production, only the March sales will have
cost of P90 per thousand.

January and February cost of goods sold (1,700 + 1,200) x P82 P237,800

March 1,400 x P90 126,000

Cost of goods sold (first quarter) P363,800

.44 Answer: A

January February March

Cash collections 203,750 248,000 224,750

Cash disbursements

Payments for materials 93,600 84,000 120,000

 Labor expenses 28,000 40,000 50,000

Overhead 14,000 20,000 25,000

Selling & administrative 52,700 37,200 43,400

Interest 8,000

Taxes 64,560

Dividends . . 48,420

Total disbursements 188,300 181,200 359,380

Net Cash Inflow (Outflow) 15,450 66,800 (134,630)

Cash Balance, Beginning 30,000 25,000 25,000

Cumulative cash balance 45,450 91,800 (109,630)

Marketable securities 20,450 66,800 ( 87,250)

Cumulative MS 20,450 87,250

Borrowings 0 0 47,380

Cash Balance, End 25,000 112,250 25,000

.45 Answer: C

Proforma Income Statement

January February March Total

Sales 263,500 186,000 217,000 666,500

Cost of goods sold 139,400 98,400 126,000 363,800

Gross profit 124,100 87,600 91,000 302,700

Selling expenses, 20% 52,700 37,200 43,400 133,300

Operating income 71,400 50,400 47,600 169,400

Interest expense 2,667 2,667 2,666 8,000

Income before tax 68,733 47,733 44,934 161,400

Income tax, 40% 27,493 19,093 17,974 64,560

 Net income 41,240 28,640 26,960 96,840

46
. Answer: A

August sales

Billed 8/20 P350,000 x 18% P 63,000

Billed 9/10 P350,000 x 80% x 98% 274,400

Collections in Sept of Aug sales P337,400

.47 Answer: B

Russon provides 25 percent of next month’s quantity sales.

25% x P400,000 x 80% = P80,000

.48 Answer: D

May sales billed June 10 250,000x18% P 45,000

June Sales:

Billed June 20 300,000 x 18% 54,000

Billed July 10 300,000 x .80 z .98 235,200

July sales

Billed July 20 P350,000 x .80 x .98 P274,400

July Collections P608,600