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1.  Submitted to : Sir Haider
 Submitted by : Sarmad Ali
 Ali Usama
 Subject :Managerial Accounting
 Class : MSC (Morning)

2.  ALI Company is preparing budgets for the
quarter ending December 31st.
 Budgeted sales for the next four months
are:
Jan 10,000 units
Feb 25,000 units
Dec 15,000 units
April 12,500 units
 The selling price is $6 per unit.

5.  All sales are on account.
 Royal’s collection pattern is:
50% collected in the month of sale,
50% collected in the month following sale,
 The December 31 accounts receivable
balance of $15,000 will be collected in
full.

7.  The management at ALI Company wants ending
inventory to be equal to 10% of the following
month’s budgeted sales in units.
 On Dec 31, 2,000 units were on hand.

9.  At ALI Company, 2.5 pounds of
material are required per unit of
product.
 Management wants materials on hand
at the end of each month equal to 5%
of the following month’s production.
 On Dec 31, 13,000 pounds of material
are on hand. Material cost is $0.20
per pound.

11.  50% of a month’s purchases is paid for in
the month of purchase; the other 50% is
paid in the following month.
 The Dec 31 accounts payable balance is
$6,000.
.

13.  At Royal, each unit of product requires 0.025
hours (1.5 minutes) of direct labor.
 The Company has a “no layoff” policy so all
employees will be paid for 10 hours of work each
week.
 In exchange for the “no layoff” policy, workers
agree to a wage rate of $5 per hour regardless of
the hours worked (No overtime pay).
 For the next three months, the direct labor
workforce will be paid for a minimum of 300 hours
per month.

15.  At ALI manufacturing overhead is applied to
units of product on the basis of direct labor
hours.
 The variable manufacturing overhead rate is
$10 per direct labor hour.
 Fixed manufacturing overhead is $25,000 per
month and includes $10,000 of noncash costs
(primarily depreciation of plant assets).

17. Production costs per unit Quantity Cost Total
Direct materials 2.50 lbs. 0.20$ 0.50$
Direct labor 0.025 5.00$ 0.13$
Manufacturing overhead 0.025 71.00$ 1.775$
2.40$
Budgeted finished goods inventory
Ending inventory in units 1,250
Unit product cost 2.40$
Ending finished goods inventory 3,000$
Total factory overhead cost
Total Direct labour hour

18.  At Ali, the selling and administrative expenses budget
is divided into variable and fixed components.
 The variable selling and administrative expenses are
$0.50 per unit sold.
 Fixed selling and administrative expenses are $35,000
per month.
 The fixed selling and administrative expenses include
$5,000 in costs – primarily depreciation – that are not
cash outflows of the current month.

20. The cash budget is divided into four sections:
1. Cash receipts listing all cash inflows excluding
borrowing
2. Cash disbursements listing all payments
excluding repayments of principal and interest
3. Cash excess or deficiency
4. The financing section listing all borrowings,
repayments and interest

21. Royal:
Maintains a 8% open line of credit for 35,000
Maintains a minimum cash balance of 20,000
Borrows on the first day of the month and
repays loans Any day of the month
Has an Jan 1 cash balance of 20,000