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Bmgt 321 Chapter 6 Homework

• Date Submitted: 03/02/2016 11:26 PM
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BMGT 321 Chapter 6 Homework

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MASTER BUDGET AND RESPONSIBILITY ACCOUNTING
Problem Solutions

6-16 (15 min.) Sales budget, service setting.

In 2014, Rouse & Sons, a small environmental-testing firm, performed 12,200 radon tests for \$290 each and 16,400 lead tests for \$240 each. Because newer homes are being built with lead-free pipes, lead-testing volume is expected to decrease by 10% next year. However, awareness of radon-related health hazards is expected to result in a 6% increase in radon-test volume each year in the near future. Jim Rouse feels that if he lowers his price for lead testing to \$230 per test, he will have to face only a 7% decline in lead-test sales in 2015.

Required:
1. Prepare a 2015 sales budget for Rouse & Sons assuming that Rouse holds prices at 2014 levels.
2. Prepare a 2015 sales budget for Rouse & Sons assuming that Rouse lowers the price of a lead test to \$230. Should Rouse lower the price of a lead test in 2015 if the company’s goal is to maximize sales revenue?
6-17 (5 min.)   Sales and production budget.

The McKnight Company expects sales in 2015 of 208,000 units of serving trays. McKnight’s beginning inventory for 2015 is 18,000 trays, and its target ending inventory is 27,000 trays. Compute the number of trays budgeted for production in 2015.

6-18 (5 min.)   Direct materials purchases budget.

Inglenook Co. produces wine. The company expects to produce 2,500,000 two-liter bottles of Chablis in 2015. Inglenook purchases empty glass bottles from an outside vendor. Its target ending inventory of such bottles is 80,000; its beginning inventory is 50,000. For simplicity, ignore breakage. Compute the number of bottles to be purchased in 2015.

6-19     (10 min.) Budgeting material purchases.

The Howell Company has prepared a sales budget of 43,000 finished units for a 3-month period. The company has an inventory of 11,000...