Question

1. Month sales for May and June are $200,000k and $210,000, respectively. Cost of Goods Sold (CGS) 65%. Variable Cost (VC) 20%. Monthly Fixec Costs (FC) $12,000. Depreciation included in FC $4,000. Ending inventory 40% of next month CGS. Beginning Inventory $52,000 for May. Find the sale budget for May?

1. $213,500 and $ 215,500

2. $230,000 and 231,500

3. $232,500 and $234,500

4. $234,500 and $246,500

5. none of the above

2. During last month, you are given the following data for MM Retail Store
the available for sales	$150,000
Ending inventory	20%	of Cost of goods sold
Find cost of goods sold for the last month

		$100,000
		$125,000
		$150,000
		$175,000

In preparing a flexible budget, we use

	a.	expected costs at the actual level of activity
	b.	expected costs at the estimated level of activity
	c.	actual costs at the actual activity
	d.	actual costs at the budgeted activity

Answer 1

Requirement 1: The correct option is “5” None of the above.

The budgeted sales revenue for the month of May is $200,000 and for June $210,000 respectively.

Requirement 2: The correct option is “2” $125,000

Let X cost of goods sold

X          = Goods available for sale − Ending inventory

            = $150,000 − (X × 20%)

1.20X = $150,000

X          = $150,000 ÷ 1.20

= $125,000

Requirement 3: The correct option is ‘a’ Expected costs at the actual level of activity.

While preparing flexible budgets, expected total revenues and expected total costs are calculated for the actual level of activity.