Budgeting

MODULE 8 - BUDGETING

THEORIES:Basic Concepts1. The concept of “management by exception” refers to management’s consideration of

A. only those items that vary materially from expectations.B. only rare events.C. samples selected at random.D. only significant unfavorable deviations.

8. A formal written statement of management’s plans for the future, packaged in financial terms, is a:A. Responsibility report. C. Cost of production report.B. Performance report. D. Budget.

2. Budgets are related to which of the following management functions?A. Planning C. ControlB. Performance evaluation D. all of these

22. Budgeting supports the planning process by encouraging all of the following activities except:A. Requiring all organizational units to establish their goals for the coming period.B. Increasing the motivation of managers and employees by providing agreed-upon

expectations.C. Improving overall decision making by considering all viewpoints, options, and cost

control programs.D. Directing and coordinating operations during the period.

3. Which of the following advantages does a budget mostly provide?A. Coordination is increased.B. Planning is emphasized.C. Communication is continuous.D. Comparison of actual versus budgeted data.

24. Which of the following is NOT an advantage of budgeting?A. It forces managers to plan.B. It provides resource information that can be used to improve decision making.C. It aids in the use of resources and employees by setting a benchmark that can be used

for the subsequent evaluation of performance.D. It provides organizational independence.

4. Which of the following is least likely a reason why a company prepares its budget?

A. To provide a basis for comparison of actual performanceB. To communicate the company’s plans throughout the entire business organizationC. To control income and expenditure in a particular period.D. To make sure the company expands its operations.

5. Which of the following does not contribute to an effective budgeting? A. Top management is involved in budgeting.B. To give each manager a free hand in the preparation of the budget, the data within the

master budget are flexible.C. The organization is divided into responsibility units.D. There is communication of results.

6. The budgets that are based on a very high levels of performance, like expected costs using ideal standards,A. assist in planning the operations of the companyB. stimulate people to perform better than they ordinarily wouldC. are helpful in evaluating the performance of managersD. can lead to low levels of performance

7. Which of the following statements is incorrect? A. An imposed budget is the same as a participative budget.B. Preparation of the budget would be the responsibility of each responsibility unit.C. Top management’s support is necessary to promote budget participation.D. The top management should review and approve each responsibility unit’s budget.

9. The primary role of the budget director and the budgeting department is toA. Settle disputes among operating executives during the development of the annual

operating plan.B. Develop the annual profit plan by selecting the alternatives to be adopted form the

suggestions submitted by the various operating segments.C. Compile the budget and manage the budget process.D. Justify the budget to the corporate planning committee of the board of directors.

10. The primary variable affecting active participation and commitment to the budget and the control system isA. Management efforts to achieve the budget rather than optimize results.B. The rigid adherence to the budget without recognizing changing conditions.C. Top management involvement in support of the budget.D. The opportunity budgeting gives to risk-taker managers for department growth.

12. A variant of fiscal-year budgeting whereby a twelve-month projections into the future is maintained at all times:

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A. Forecasting. C. Continuous budgeting.B. Zero-based budgeting. D. Calendar budgeting.

35. The method of budgeting which adds one month’s budget to the end of the plan when the current month’s budget is dropped from the plan refers toA. Long-term budget C. Incremental budgetB. Operations budget D. Continuous budget

27. A continuous budgetA. is a budget that is revised monthly or quarterly.B. is a medium term plan that consists of more than 2 years’ projections.C. is appropriate only for use of a not-for-profit entity.D. works best for an entity that can reliably forecast events a year or more into the future.

37. “Incremental budgeting” refers toA. line-by-line approval of expendituresB. setting budget allowances based on prior year expendituresC. requiring top management approval of increases in budgetsD. using incremental revenues and costs in budgeting

49. A budget plan for annual fixed costs that arises from top management decisions directly reflecting corporate policy.A. Flexible budget. C. Discretionary budget.B. Static budget. D. Program budget.

36. The term “decision package” relates toA. comprehensive budgeting C. program budgetingB. zero-based budgeting D. line budgeting

41. The budget approach that is more relevant when the continuance of an activity or operation must be justified on the basis of its need or usefulness to the organization.A. the incremental approach C. the baseline approachB. the zero-based approach D. both a and b are true

11. The process of developing budget estimates by requiring all levels of management to estimate sales, production, and other operating data as though operations were being initiated for the first time is referred to as:A. Forecasting. C. Continuous budgeting.B. Zero-based budgeting. D. Program budgeting.

38. Which of the following is a contemporary approach to budgeting?A. incremental approach C. baseline approach

B. zero-based approach D. both a and b are true

51. Zero-base budgeting requires managers toA. Justify expenditures that are increases over the prior period’s budgeted amount.B. Justify all expenditures, not just increases over last year’s amount.C. Maintain a full-year budget intact at all times.D. Maintain a budget with zero increases over the prior period.

13. Zero-based budgeting:A. involves the review of changes made to an organization’s original budget.B. does not provide a summary of annual projections.C. involves the review of each cost component from a cost/benefit perspective.D. emphasizes the relationship of effort to projected annual revenues.

18. A systematized approach known as zero-based budgeting:A. Classifies the budget by the prior year’s activity and estimates the benefits arising from

each activity.B. Commence with either the current level of spending or projected whichever is lower.C. Presents planned activities for a period of time but does not present a firm commitment.D. Divides the activities of individual responsibility centers into a series of packages that are

prioritized.

20. Which of the following statements about Zero-based budgeting is incorrect?A. All activities in the company are organized into break-up units called packages.B. All costs have to be justified every budgeting period.C. The process is not time consuming since justification of costs can be done as a routine

matter.D. Zero-based budgeting includes variable costs only.

34. Budgeting expenditures by purpose is calledA. program budgeting C. zero-based budgetingB. line budgeting D. flexible budgeting

28. A static budget is not appropriate in evaluating a manager's effectiveness if a company hasA. substantial fixed costs.B. substantial variable costs.C. planned activity levels that match actual activity levels. D. no variable costs.

45. Flexible budgeting is a reporting system wherein the A. Budget standards may be adjusted at management’s discretion.B. Planned level of activity is adjusted to the actual level of activity before the performance

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report is prepared.C. Reporting dates vary according to the managerial levels of the users.D. Packages of activities vary from period to period.

15. A budget that presents the plan for a range of activity so that the plan can be adjusted for changes in activity levels is referred to as:A. Zero-based budgeting.B. Continuous budgeting.C. Flexible budgeting.D. Program planning and budgeting system.

16. A flexible budget isA. one that can be changed whenever a manager so desiresB. adjusted to reflect expected costs at the actual level of activityC. one that uses the formula total costs = cost per unit x units producedD. the same as a continuous budget

26. A series of budgets for varying levels of activity is a:A. Variable cost budget. C. Master budget.B. Flexible budget. D. Zero-based budget.

48. If a company wishes to establish a factory overhead budget system in which estimated costs can be derived directly from estimates of activity levels, it should prepare aA. flexible budget. C. Discretionary budget.B. Program budget. D. Manufacturing budget.

46. The basic difference between a master budget and a flexible budget is that aA. Flexible budget considers only variable costs but a master budget considers all costs.B. Flexible budget allows management latitude in meeting goals whereas a master budget

is based on a fixed standard.C. Master budget is for an entire production facility but a flexible budget is applicable to

single department only.D. Master budget is based on one specific level of production and a flexible budget can be

prepared for any production level within a relevant range

47. Which of the following is a difference between a static budget and a flexible budgets?A. A flexible budget includes only variable costs; a static budget includes only fixed costs.B. A flexible budget includes all costs, a static budget includes only fixed costs.C. A flexible budget gives different allowances for different levels of activity, a static budget

does not.D. There is no difference between the two.

17. A system that classifies budget requests by activity and estimates the benefits arising from each activity:A. Incremental budgeting system.B. Static budgeting system.C. Program planning and budgeting system.D. Participative system.

21. A budget that identifies revenues and costs with an individual controlling their incurrence is A. Master budget C. Product budgetB. Responsibility budget D. None of the above

25. The difference between an individual's submitted budget projection and his or her best estimate of the item being projected is an example ofA. padding the budgetB. adhering to zero-based budgeting assumptionsC. creating budgetary slackD. being incongruent with participative budgeting

43. Budget slack is a condition in whichA. Demand is low at various times of the yearB. Excess machine capacity exists in some areas of the plantC. There is an intentional overestimate of expenses or an underestimate of revenuesD. Managers grant favored employees extra time-off

39. The procedure for setting profit objectives in which the determination of profit objectives is subordinated to the planning, and the objectives emerge as the product of the planning itself is theA. a priori method C. practical methodB. theoretical method D. a posteriori method

40. The procedure for setting profit objectives in which management specifies a given rate of return that it seeks to realize in the long run by means of planning toward that end is theA. a priori method C. pragmatic methodB. theoretical method D. ad hoc method

50. Budgeting process in which information flows top down and bottom up is referred to as:A. Continuous budgeting. C. Perpetual budgetingB. Participative budgeting D. Joint budgeting

42. Which of the following is not a potential problem with participative budgeting?A. setting standards that are either too high or too lowB. padding the budget

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C. build slack into the budgetD. all of the above are potential problems

33. The ideal financial planning process would beA. top-down planning. B. bottom-up planning. C. a combination of top-down and bottom-up planning. D. None of the above

44. A common starting point in the budgeting process isA. expected future net income. C. to motivate the sales force.B. past performance. D. a clean slate, with no expectations.

57. Which one of the following is an external factor that would need to be considered in forming an initial budget proposal?A. changes in product designB. introduction of a new productC. competitors' actionsD. adoption of a new manufacturing process

14. Operating budgets areA. a forecast of expected operating expenses.B. a forecast of operating expenses and related revenues.C. a forecast of units of production.D. concerned with the income-generating activities of a firm.

54. What is the proper preparation sequencing of the following budgets?1. Budgeted Balance Sheet2. Sales Budget3. Selling and Administrative Budget4. Budgeted Income StatementA. 1, 2, 3, 4 C. 2, 3, 4, 1B 2, 3, 1, 4 D. 2, 4, 1, 3

29. In estimating the sales volume for a master budget, which of the following techniques may be used to improve the projections?A. Brainstorming.B. Statistical analysis.C. Estimating from previous sales volume.D. All of these are useful.

30. Using the concept of ‘expected value” in sales forecasting means that the sales forecast to be

used isA. developed using the indicator methodB. the sum of the sales expected by individual managersC. based on expected selling prices of the productsD. based on probabilities

31. Several sales forecasts are available from different sources and the managers have good ideas about their likelihoods. This situation call for the use ofA. the expected value concept C. indicator methodsB. historical analysis D. a scatter diagram

53. An overly optimistic sales budget may result inA. increases in selling prices late in the year.B. insufficient inventories.C. increased sales during the year.D. excessive inventories.

56. Which of the following budgets provides the data for the preparation of the direct labor cost budget?A. Direct materials purchase budget. C. Sales budget.B. Cash budget. D. Production budget.

55. The increased use of automation and less use of the work force in companies has caused a trend towards an increase inA. both variable and fixed costs.B. fixed costs and a decrease in variable costs.C. variable costs and a decrease in fixed costs.D. variable costs and no change in fixed costs.

32. In preparing a cash budget, which of the following is normally the starting point for projecting cash requirements?A. Fixed assets. C. Accounts receivable.B. Sales. D. Inventories.

52. Recognition of the many uncertainties in budgeting is exemplified by companies normally A. forecasting salesB. establishing minimum required cash balancesC. forecasting only fixed costsD. omitting expected dividend payments from budgeted disbursements

19. Which of the following statements is True? A. Under zero-based budgeting, a manager is required to start at zero budget levels each

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period, as if the programs involved were being initiated for the first time.B. The primary purpose of the cash budget is to show the expected cash balance at the end

of the budget period.C. Budget data are generally prepared by top management and distributed downward in an

organization.D. The budget committee is responsible for preparing detailed budget figures in an

organization.

23. Which of the following is a valid statement?A. Responsibility budget identifies revenue and costs with the individual responsible for their

incurrence.B. The best way to establish budget figures is to use last year’s actual cost and activity data

as this year’s budget estimates.C. A sales budget and a sales forecast are the same thing.D. The primary purpose of the cash budget is to show the expected cash balance at the end

of the budget period.

PROBLEMS:Cost estimation formula1. Management has prepared a graph showing the total costs of operating branch warehouses

throughout the country. The cost line crosses the vertical axis at P400,000. The total cost of operating one branch is P650,000. The total cost of operating ten branches is P2,900,000. For purposes of preparing a flexible budget based on the number of branch warehouses in operation, what formula would be used to determine budgeted costs at various levels of activity?A. Y = P400,000 + P250,000X C. Y = P650,000 + P400,000XB. Y = P400,000 + P290,000X D. Y = P650,000 + P250,000X

Sales budgetPurchases budget – merchandising concern2. PTO Company desires an ending inventory of P140,000. It expects sales of P800,000 and

has a beginning inventory of P130,000. Cost of sales is 65% of sales. Budgeted purchases areA. P 530,000 C. P 810,000B. P 790,000 D. P1,070,000

3. Calypso Co. has projected sales to be P600,000 in January, P750,000 in February, and P800,000 in March. Calypso wants to have 50% of next month’s sales needs on hand at the end of a month. If Calypso has an average gross profit of 40%, what are the February 28 purchases?A. P465,000 C. P775,000B. P310,000 D. P428,000

4. Blue Company budgeted purchases of P100,000. Cost of sales was P120,000 and the desired ending inventory was P42,000. The beginning inventory wasA. P20,000 C. P42,000B. P32,000 D. P62,000

5. The payment schedule of purchases made on account is: 60% in the time period of purchase, 30% in the following time period, and 10% in the subsequent time period. Total credit purchases were P200,000 in May, and P100,000 in June. Total payments on credit purchases were P140,000 in June. What were the credit purchases in the month of April?A. P200,000 C. P145,000B. P100,000 D. P215,000

Production budget6. Montalban Company’s sales budget shows the following expected sales for

the following year:Quarter Units

First 120,000Second 160,000

Third 90,000Fourth 110,000Total 480,000

The inventory at December 31 of the prior year was budgeted at 36,000 units. The quantity of finished goods inventory at the end of each quarter is to equal 30% of the next quarter’s budgeted sales of units. How much should the production budget show for units to be produced during the first quarter?A. 48,000 C. 132,000B. 96,000 D. 144,000

7. Lorie Company plans to sell 400,000 units of finished product in July an anticipates a growth rate in sales of 5% per month. The desired monthly ending inventory in units of finished

5 . Answer: ATotal payments for purchases in June P140,000Deduct 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

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product is 80% of the next month’s estimated sales.There are 300,000 finished units in the inventory on June 30. Each unit of finished product requires four pounds of direct materials at a cost of P2.50 per pound. There are 800,000 pounds of direct materials in the inventory on June 30.How many units should be produced for the three-month period ending September 30?A. 1,260,000 C. 1,331,440B. 1,328,000 D. 1,424,050

Ending inventory budget8. If the required direct materials purchases are 8,000 pounds and the direct materials required

for production is three times the direct materials purchases, and the beginning direct materials are three and a half times the direct materials purchases, what are the desired ending direct material in pounds?A. 20,000 C. 12,000B. 4,000 D. 32,000

Raw materials usage budget9. Minerva Company sells a single product. Budgeted sales for the year are anticipated to be

640,000 units. The estimated beginning and ending finished goods inventory are 108,000 and 90,000, respectively. A production of one unit requires the following materials:

Material LL 0.50 lb. @ P0.60Material MM 1.00 lb. @ P1.70Material NN 1.20 lb. @ P1.00

What are the respective peso amounts of each material to be used in production during the year?

Material LL Material MM Material NNA. P181,200 P1,026,800 P724,800B. P181,200 P1,026,800 P746,400C. P186,600 P1,057,400 P746,400D. P186,600 P1,057,400 P724,800

Raw materials purchases budget10. If there were 30,000 pounds of raw material on hand on January 1, 60,000 pounds are

desired for inventory at December 31, and 180,000 pounds are required for annual production, how many pounds of raw material should be purchased during the year?A. 150,000 pounds C. 120,000 poundsB. 240,000 pounds D. 210,000 pounds

11. Silver Bowl Company manufactures a single product. It keeps its inventory of finished goods at 75% the coming month’s budgeted sales. It also keeps its inventory of raw materials at 50% of the coming month’s budgeted production. Each unit of product requires two pounds of

materials. The production budget is, in units: May, 1,000; June, 1,200; July, 1,300; august, 1,600. Raw material purchases in July would beA. 1,525 pounds C. 2,550 poundsB. 2,900 pounds D. 3,050 pounds

12. Each unit of finished product uses 6 kilograms of raw materials. The production and inventory budgets for May 2007 are as follows:

Beginning Inventory: Finished goods 15,000 units Raw materials 21,000 kg.Budgeted unit sales 18,000 unitsPlanned ending inventory Finished goods 11,400 units Raw materials 24,400 kg.

During the production process, it is usually found that 10% of production units are scrapped as defective and this loss occurs after the raw materials have been placed in process.How many kilograms of raw materials should be purchased in June? A. 89,800 C. 96,000B. 98,440 D. 99,400

13. Violet Company manufactures a single product. It keeps its inventory of finished goods at twice the coming month’s budgeted sales, inventory of raw materials at 150% of the coming month’s budgeted production requirements. Each unit of product requires two pounds of materials. The production budgets in units consist of the following:.

May 1,000June 1,200July 1,300August 1,600

Raw material purchases in June would beA. 2,600 pounds C. 2,400 poundsB. 1,800 pounds D. 2,700 pounds

14. Sales Company is budgeting sales of 300,000 units of its only product for the coming year. Production of one unit of product requires three pounds of Material Q and 2 pounds of Material L. Inventory units at the beginning of the year are:

Actual, Jan. 1 Budgeted, Dec 31Finished goods 60,000 50,000Material Q 80,000 60,000Material L 88,000 96,000

How many pounds of Material Q is Sales planning to buy during the coming year?A. 850,000 C. 862,000

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B. 890,000 D. 908,000

15. Strama Company prepares its budgets on annual basis. The following beginning and ending inventory unit levels are planned for the fiscal year of June 1, 2006 through May 31, 2007.

June 1, 2006 May 31, 2007Raw material* 40,000 50,000Work-in-process 10,000 10,000Finished goods 80,000 50,000

*Two (2) units of raw material are needed to produce each unit of finished product.If 500,000 finished units were to be manufactured during the 2006-2007 fiscal year by Strama Company, the units of raw material needed to be purchased would beA. 1,000,000 units C. 1,020,000 unitsB. 1,010,000 units D. 990,000 units

16. Diliman Corporation includes the following quarterly budget for production:Quarter Production

First 60,000 unitsSecond 45,000 units

Third 40,000 unitsFourth 65,000 units

Each unit of product requires 2.5 kilograms of direct materials. The company begins each quarter with inventory of direct materials equal to 25 percent of the total quarter’s material requirements. What is the budgeted purchases of materials for the second quarter?A. 113,750 C. 46,250B. 109,375 D. 112,500

Indirect labor costs17. Namuco, Inc. uses flexible budgeting for cost control. During the month of September,

Namuco, Inc. produced 14,500 units of finished goods with indirect labor costs of P25,375. Its annual master budget reflects an indirect labor costs, a variable cost, of P360,000 based on an annual production of 200,000 units. In the preparation of performance analysis for the month of September, how much flexible budget should be allowed for indirect labor costs?A. P30,000 C. P25,375B. P29,167 D. P26,100

Cash receipts budgetSales18. Generous Company began its operations on January 1 of the current year. Budgeted sales

for the first quarter are P240,000, P300,000, and P420,000, respectively, for January,

February and March. Generous Company expects 20% of its sales cash and the remainder on account. Of the sales on account, 70% are expected to be collected in the month of sale, 25% in the month following the sale, and the remainder in the following month.How much should Generous receive from sales in March?A. P304,800 C. P388,800B. 294,000 D. P295,200

Credit sales19. Mendrez Company has a collection schedule of 60% during the month of sales, 15% the

following month, and 15% subsequently. The total credit sales in the current month of September were P80,000 and total collections in September were P57,000. What were the credit sales in July?A. P90,000 C. P45,000B. P30,000 D. P32,000

Cash collections20. Obligacion Company has P299,000 in accounts receivable on January 1, 2006. Budgeted

sales for January are P860,000. Obligacion expects to sell 20% of its merchandise for cash. Of the remaining sales, 75% are expected to be collected in the month of sale and the remainder the following month. The January cash collections from sales are:A. P815,000 C. P471,000B. P691,000 D. P987,000

21. Adel Company has the following sales forecasts for the selected three-month period in 2007:

Month SalesApril P12,000May 7,000June 8,000

Seventy percent of sales are collected in the month of the sale, and the remainder is collected in the following month.

Accounts receivable balance (April 1, 2007) P10,000Cash balance (April 1, 2007) 5,000

Minimum cash balance is P5,000. Cash can be borrowed in P1,000 increments from the local bank (assume no interest charges).How much cash would be collected in June from sales?A. P 7,700 C. P 8,000B. P 8,500 D. P10,000

22. The Avelina Company has the following historical pattern on its credit sales.

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70 percent collected in month of sale15 percent collected in the first month after sale10 percent collected in the second month after sale 4 percent collected in the third month after sale 2 percent uncollectible

The sales on open account have been budgeted for the last six months of 2007 are shown below:

July P 60,000August 70,000September 80,000October 90,000November 100,000December 85,000

The estimated total cash collections during the fourth calendar quarter from sales made on open account during the fourth calendar quarter would beA. P172,500 C. P265,400B. P230,000 D. P251,400

23. The Le Amore Company had the following budgeted sales for the first half of the current year:

Cash Sales Credit SalesJanuary P70,000 P340,000February 50,000 190,000March 40,000 135,000April 35,000 120,000May 45,000 160,000June 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 following information has been assembled:

Collections on sales: 60% in month of sale 30% in month following sale 10% in second month following sale

The accounts receivable balance on January 1 of the current year was P70,000, of which P50,000 represents uncollected December sales and P20,000 represents uncollected November sales.The total cash collected by Le Amore Company during the month of January would be:A. P410,000 C. P344,000B. P254,000 D. P331,500

Accounts receivable balance24. As of January 1, 2007, the Liberal Sales Company had an account receivable of P500,000.

The sales for January, February, and March were as follows: P1,200,000, P1,400,000 and P1,500,000, respectively. Of each month’s sales, 80% is on account. 60% of account sales is collected in the month of sale, with remaining 40% collected in the following month.What is the accounts receivable balance as of March 31, 2007?A. P720,000 C. P587,200B. P480,000 D. P600,000

Credit to accounts receivable25. Ironman Company is preparing its cash budget for the month ending November 30. The

following information pertains to Ironman’s past collection experience from its credit sales:Current month’s sales 12%Prior month’s sales 75%Sales two months prior to current month 6%Sales three months prior to current month 4%Cash discounts (2/30, net/90) 2%Doubtful accounts 1%Credit sales: November – estimated P2,000,000 October 1,800,000 September 1,600,000 August 1,900,000

How much is the estimated credit to Accounts Receivable as a result of collections expected during November?A. P1,730,200 C. P1,762,000B. P1,757,200 D. P1,802,000

Increase in accounts receivable26. Lazaro Company will open a new store on January 1. Based on experience from its other

retail outlets, Lazaro is making the following sales projections:

Cash Sales Credit SalesJanuary P600,000 P400,000February 300,000 500,000March 400,000 600,000April 400,000 800,000

Lazaro estimates that 70% of the credit sales will be collected in the month following the month of the sale, with the balance collected in the second month following the sale. Based on these data, the balance in accounts receivable on January 31 will be increased byA. 400,000 C. P120,000

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B. P280,000 D. P580,000

Cash disbursements27. Cascades Company, a merchandising firm, is preparing its master budget and has gathered

the following data to help budget cash disbursements:Budgeted data:Cost of goods sold P1,680,000Desired decrease in inventories 70,000Desired decrease in Accounts Payable 150,000

All of the accounts payables are for inventory purchases and all inventory items are purchased on account. What are the estimated cash disbursements for inventories for the budget period?

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

Total operating costs P2,900,000Less 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: ACost of units sold (0.65 x P800,000) P520,000Add Desired ending inventory 140,000Total cost of goods available for sale 660,000Deduct Beginning inventory 130,000Budgeted purchases P530,000

3 . Answer: ACost of goods sold P750,000 x 0.6 P450,000Add Ending Inventory P800,000 x 0.6 x 0.5 240,000Total available for sale P690,000Deduct Beginning inventory P450,000 x 0.5 225,000Budgeted purchases, February P465,000

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

A. P1,460,000 C. P1,900,000B. P1,600,000 D. P1,760,000

28. Albatross Company started its commercial operations on September 30 of the current year. Projected manufacturing costs for the first three months of operations are P1,568,000, P1,952,000, and P2,176,000, respectively. Depreciation, insurance, and property taxes represent P288,000 of the estimated manufacturing costs. Insurance was paid on September 30, and property taxes will be paid in July next year. Seventy-five percent of the remainder of the manufacturing costs are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month. The cash payments for manufacturing costs in the month of November are:A. P1,568,000 C. P1,664,000B. P1,952,000 D. P1,856,000

Ending cash balance29. Albania Company expects its June sales to be P300,000, which is 25% higher than its May

sales. Purchases were P200,000 in May and are expected to be P240,000 in June. All sales are on credit and are collected as follows: 80% in the month of the sale and 20% in the following month. All payments in the month of sales are given 2% discount. Sixty percent of purchases are paid in the month of purchase to take advantage of purchase term of 1/10, n/40. The remaining amount is paid in the following month. The beginning cash balance on June 1 is P20,000. The ending cash balance on June 30 would be:A. P64,160 C. P80,640B. P73,000 D. P85,440

ComprehensiveQuestion Nos. 30 through 33 are based on the following information:Apollo Merchandiser asks your services to develop cash and other budget information for the first quarter of 2007. In December 31, the store had the following balance:

Cash P 55,000Accounts receivable 4,370,000 Inventories 3,094,000Accounts payable 1,330,550

The following information are relevant to 2007 operations:Sales:a. Each month’s sales are billed on the last day of the month.b. Customers are allowed a 3 percent discount if payment is made within 10

days after the billing date. Receivables are booked gross.c. Sixty percent of the billings are collected within the discount period, twenty-

five percent are collected by the end of the month, nine percent are collected by the end of the second month, and six percent are considered entirely uncollectible.

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Purchases:1. Fifty four percent of all purchases and selling, general, and administrative expenses

are paid in the month purchased and the remainder in the following month.2. Each month’s units of ending inventory is equal to one hundred thirty percent of the

next month’s units of sales.3. The cost of each unit of inventory is P200.4. Selling, general, and administrative expenses, of which P20,000 is depreciation, are

equal to fifteen percent of the current month’s sales.

Actual and projected sales are as follows:UNITS PESOS

November 11,800 P3,540,000December 12,100 3,630,000January 11,900 3,570,000February 11,400 3,420,000March 12,000 3,600,000April 12,200 3,660,000

30. The respective amounts of budgeted purchases for the months of January and February are:A. P2,418,000 and P2,360,000 C. P2,250,000 and P2,436,000B. P2,380,000 and P2,280,000 D. P3,570,000 and P3,420,000

31. The budgeted cash disbursements for the month of February are:A. P2,929,000 C. P2,949,000B. P2,873,790 D. P2,853,790

32. The amount of cash collected from sales during the month of January is:A. P3,338,760 C. P3,404,100B. P3,551,160 D. P3,556,560

33. The number of units to be purchased during the month of March is:A. 15,860 C. 12,000B. 12,260 D. 15,600

Rajah Enterprises is a growing retailer of home care products. During the first four months of the following year, it forecasts the following sales and purchases:

Sales PurchasesJanuary P7,200,000 P4,200,000

February 6,600,000 4,800,000March 6,000,000 3,600,000April 7,800,000 5,400,000

Rajah collects 70% of sales is collection during the month of sale, 20% the following month and 9% in the second month. 1% of sales are deemed uncollectible.

In order to fully avail of the 2% discount, Rajah pays all the purchases by the tenth of the month following the month of purchase.

Sales for the month of May are expected to be P6,600,000 and the amount of purchases are P6,000,000. Operating expenses to be paid during the month of May will be P1,440,000 and the cash balance by May 1 is P2,200,000.

The Atlanta Corporation has forecast the following sales for the first seven months of the year:

January P120,000 May P120,000February 160,000 June 200,000March 180,000 July 220,000April 240,000

Monthly material purchases are set equal to 20 percent of forecasted sales for the next month. Of the total material costs, 40 percent are paid in the month of purchase and 60 percent in the following month. Labor costs will run P60,000 per month, and fixed overhead is P30,000 per month. Interest payments on the debt will be P45,000 for both March and June. Finally, Atlanta’s sales force will receive a 3 percent commission on total sales for the first six months of the year, to be paid on June 30.

34. How much will be paid in the month of January for the purchase of materials? A. P 27,200 C. P137,856B. P117,200 D. P 33,600

35. How much does Atlanta plan to disburse in the month of June?A. P 41,600 C. P207,200B. P100,000 D. P117,200

Question Nos. 36 through 38 are based on the following:Super Sales’ actual sales and purchases for April and May are shown here along with forecasted sales and purchases for June through September.

Sales PurchasesApril (Actual) P390,000 P200,000

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Budgeting

May (Actual) 420,000 220,000June (forecast) 390,000 210,000July (forecast) 350,000 240,000August (forecast) 420,000 320,000September (forecast) 410,000 230,000

The company makes 10 percent of its sales for cash and 90 percent on credit. Of the credit sales, 30 percent are collected in the month after the sale and 70 percent are collected two months after. Super Sales pays for 45 percent of its purchases in the month after purchase and 55 percent two months after.

Labor expense equals 15 percent of the current month's sales. General overhead expense equals P10,000 per month. Interest payments of P35,000 are due in June and September. A cash dividend of P25,000 is scheduled to be paid in June. Tax payments of P30,000 are due in June and September. There is a scheduled purchase for cash of an equipment, P290,000 in September.

Super Sales’ ending cash balance in May is P25,000. The minimum desired cash balance is P20,000. The maximum desired cash balance is P50,000. Excess cash (above P50,000) is used to buy marketable securities. Marketable securities are sold before borrowing funds in case of a cash shortfall (less than P20,000).

36. During the month of June, Super Sales expects to receive cash from sales amounting to:A. P606,000 C. P398,100B. P408,900 D. P359,100

37. The cumulative amount of marketable securities purchased as of July 31 amounts to:A. P126,000 C. P143,300B. 132,500 D. P 0

38. The amount of loan to be obtained to maintain a balance of P50,000 cash as of September 30 will be:A. P109.4 C. P 9.4B. P 59.4 D. P 0.0

Question Nos. 39 through 45 are based on the following data:The Ingo Corporation makes standard-size 2-inch fasteners, which it sells for P155 per thousand. Irine Tee, the major stockholder, manages the inventory and finances of the company. She estimates sales for the following months to be:

January P263,500 (1,700,000 fasteners)February P186,000 (1,200,000 fasteners)March P217,000 (1,400,000 fasteners)

April P310,000 (2,000,000 fasteners)May P387,500 (2,500,000 fasteners)

Last year Ingo Corporation's sales were P175,000 in November and P232,500 in December (1,500,000 fasteners).

Ms. Tee is preparing for a meeting with Peninsula Banking Corporation to arrange the financing for the first quarter. Based on her sales forecast and the following information she has provided, you have to prepare a monthly cash budget, a monthly and quarterly pro forma income statement, a pro forma quarterly balance sheet, and all necessary supporting schedules for the first quarter.

Past history shows that Ingo Corporation collects 50 percent of its accounts receivable in the normal 30-day credit period (the month after the sale) and the other 50 percent in 60 days (two months after the sale). It pays for its materials 30 days after receipt. In general, Ms. Tee likes to keep a two-month supply of inventory in anticipation of sales. Inventory at the beginning of December was 2,600,000 units. (This was not equal to her desired two-month supply.)

The major cost of production is the purchase of raw materials in the form of steel rods, which are cut, threaded, and finished. Last year raw material costs were P52 per 1,000 fasteners, but Ms. Tee has just been notified that material costs have risen, effective January 1, to P60 per 1,000 fasteners. The Ingo Corporation uses FIFO inventory accounting. Labor costs are relatively constant at P20 per thousand fasteners, since workers are paid on a piecework basis. Overhead is allocated at P10 per thousand units, and selling and administrative expense is 20 percent of sales. Labor expense and overhead are direct cash outflows paid in the month incurred, while interest and taxes are paid quarterly.

The corporation usually maintains a minimum cash balance of P25,000, and it puts its excess cash into marketable securities. The average tax rate is 40 percent, and the company usually pays out 50 percent of net income in dividends to stockholders. Marketable securities are sold before funds are borrowed when a cash shortage is faced. Ignore the interest on any short-term borrowings. Interest on the long-term debt is paid in March, as are taxes and dividends.

As of year-end, the Ingo Corporation balance sheet was as follows:Ingo CorporationBalance SheetDecember 31, 2006

ASSETSCurrent assets:Cash P 30,000Accounts receivable 320,000Inventory 237,800

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Budgeting

Total current assets 587,800Plant and equipment, net of accumulated depreciation of P200,000 800,000Total Assets P1,387,800

LIABILITIES AND STOCKHOLDERS’ EQUITYAccounts payable P 93,600Long-term debt, 8% 400,000Common stock 504,200Retained earnings 390,000Total Liabilities and Stockholders’ Equity P1,387,800

39. The budgeted production respective to each month of the first quarter of the coming year are:A. 1,400,000; 2,000,000; 2,500,000 C. 2,500,000; 2,000,000; 1,400,000B. 1,400,000; 2,500,000; 2,000,000 D. 2,000,000; 1,400,000; 2,500,000

40. The amount of accounts payable paid in March for the purchase of materials is:A. P150,000 C. P104,000B. P120,000 D. P130,000

41. The expected cash collections on accounts receivable in the month of February are:A. P224,750 C. P 93,000B. P248,000 D. P186,000

42. The amount of accounts receivable outstanding as of March 31, 2007 is:A. P217,000 C. P310,000B. P224,750 D. P108,500

43. The cost of goods sold for the first quarter of the coming year amounts to:A. P363,800 C. P426,400B. P453,600 D. P373,400

44. The total cash and marketable securities as of January 31 will be:A. P45,450 C. P91,800B. P25,000 D. P54,450

6 . Answer: CBudgeted sales, First Quarter 120,000 unitsAdd Required Ending Finished goods: 30% x 160,000 48,000 unitsTotal units required 168,000 unitsLess Beginning Finished goods 36,000 unitsBudgeted production in units 132,000 units

45. The expected net income during the first quarter of the coming year is:A. P 91,080 C. P 96,840B. P161,400 D. P151,800

Question Nos. 46 through 48 are based on the Russon Corporation, a retailer whose sales are all made on credit. Sales are billed twice monthly, on the 10th of the month for the last half of the prior month’s sales, and on the 20th of the month for the first half of the current month’s sales. The terms of all sales are 2/10, net 30. Based upon past experience, the collection of accounts receivable is as follows:

Within the discount period 80%On the 30th day 18%Uncollectible 2%

Russon’s average markup on its products is 20% of the sales price. All sales and purchases occur uniformly throughout the month. The sales value of shipments for May and the forecasts for the next four months follow:

May (actual) P500,000June 600,000July 700,000August 700,000September 400,000

Russon purchases merchandise for resale to meet the current month’s sales demand and to maintain a desired monthly ending inventory of 25% of the next month’s sales. All purchases are on credit with terms of net/30. Russon pays for 50% of a month’s purchases in the month of purchase and 50% in the month following the purchase.

46. How much cash can Russon plan to collect in September from sales made in August?A. P337,400 C. P400,400B. P343,000 D. P280,000

47. The budgeted peso value of Russon’s inventory on August 31 will beA. P110,000 C. P112,000B. P 80,000 D. P100,000

48. How much cash can Russon plan to collect from accounts receivable during July?A. P574,000 C. P619,000B. P662,600 D. P608,600

444

Budgeting

7 . Answer: CSales for three-month period:

July 400,000August 400,000 x 1.05 420,000September 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 1,631,440Less July Inventory 300,000 Budgeted Production 1,331,440

8 . Answer: CBeginning Inventory (8000 x 3.5) 28,000Required Purchases 8,000Direct Materials Used for Production (8000 x 3) (24,000 )Desired Ending Inventory 12,000

9 . Answer: CLLMMNNBudgeted production622,000622,000622,000Required materials per unit of product0.501.001.2Materials required311,000622,000746,400Unit cost P0.60 P1.70 P1.00 Peso amounts of materials used by units producedP186,600P1,057,400P746,400

Budgeted sales in units 640,000Add Finished goods, end 90,000 Total 730,000Deduct Finished goods, beginning 108,000 Budgeted production 622,000

10 . Answer: D

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Budgeting

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

12 . Answer: DBudgeted sales 18,000Add Finished goods inventory, end 11,400Total 29,400Deduct Finished good inventory, beginning 15,000Budgeted production 14,400

Raw materials required by production (14,400 x 6 0.9) 6,000Desired Raw materials inventory end 24,400Total 120,400 Deduct Raw materials inventory, beginning 21,000Budgeted purchase of raw materials 99,400

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

14 . Answer: ABudgeted sales 300,000Less decrease in Finished goods inventory 10,000 Budgeted production 290,000

446

Budgeting

Material Q required by production 290,000 x 3 870,00016 . Answer: B

Materials required by 2nd Quarter’s production 45,000 x 2.5 kgs. 112,500Add: Materials inventory, end: 40,000 x 2.5 x0.25 25.000 Total materials required 137,500Less: Materials inventory, beginning: 112,500 x 0.25 28,125 Total budget purchases in kilograms 109,375

17 . Answer: DUnder flexible budget, analysis should be based on actual level achieved.Indirect labor cost per unit (P360,000 200,000 units) P1.80Flexible budget allowance: 14,500 units x P1.80 P26,100

18 . Answer: CCash sales (March) 0.2 x P420,000 P 84,000Collections 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: BTotal cash collections P57,000Deductions 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: DCollections 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

447

Budgeting

Less decrease in Material Q inventory 60,000 – 80,000 20,000 21 . Answer: A

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

22 . Answer: BOctober 90,000 x .95 P 85,500November 100,000 x .85 85,000December 85,000 x .70 59,500 Fourth quarter sales collected in fourth quarter P230,000

23 . Answer: DCash sales P 70,000Collections 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: BThe 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: CGross receivable collected month’s sales

November 2,000,000 x .12 P 240,000October 1,800,000 x .75 1,350,000September 1,600,000 x .06 96,000August 1,900,000 x .04 76,000 Total credit P1,762,000

448

Budgeting

Cash sales (P860,000 x 0.2) 172,000 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: DCost of goods sold P1,680,000Deduct desired decrease in inventories 70,000 Budgeted purchases P1,610,000Add decrease in Accounts Payable 150,000 Budgeted payments for purchases P1,760,000

28 . Answer: ANovember costs (P1,952,000 – P288,000) x 0.75 P1,248,000October costs (P1,568,000 – P288,000) x 0.25) 320,000 Total disbursements P1,568,000

29 . Answer: CBeginning Cash P 20,000Add:Cash collected on June's sales (P300,000 x .8 x .98) 235,200Cash collected on May's sales ((P300,000/1.25) x .2) 48,000 283,200 Total P303,200Less:Cash paid on June's purchases (P240,000 x .6 x .99) 142,560Cash paid on May's purchases (P200,000 x .4) 80,000 222,560 Ending cash balance P80,640

30 . Answer: CJanuaryFebruaryBudgeted sales11,90011,400Add: Ending inventory (130%)14,82015,600 Total26,72027,000Less: Beginning inventory15,47014,820 Budgeted purchases (units)11,25012,180Unit purchase price 200 200 Budgeted peso purchasesP2,250,000P2,436,000

Budgeted inventories:December 31 130% x 11,900 15,470January 31 130% x 11,400 14,820

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Budgeting

Total cash received P987,000 31 . Answer: D

Payments for: February purchases 54% x P2,436,000 P1,315,440January purchases 46% x P2,250,000 1,035,000 Total payments for purchases P2,350,440Selling, general and administrative expenses:February: [(P3,420,000 x 0.15) – P20,000]0.54 266,220January: [(P3,570,000 x 0.15) – P20,000]0.46 237,130 Total cash disbursements P2,853,790

32 . Answer: ABillings 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 0.25 907,500Billings of November 30: P3,540,000 x 0.09 318,600 Total collections P3,338,760

33 . Answer: BBudgeted March sales 12,000Add: Ending inventory units 15,860 Total units required 27,860Less: Beginning inventory units 15,600 Budgeted purchases in units, March 12,260

34 . Answer: APayments 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) 12,800Total January disbursements for purchases P27,200

35 . Answer: C

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Budgeting

Budgeted purchase in pounds, Material Q 850,000 36 . Answer: C

June cash sales (P390,000 x 0.1) P 39,000Collections 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) 113,400Total cash receipts, June P398,100

37 . Answer: BMarketable securities purchased on: June P 5,600 July 126,900Cumulative purchase of MS P132,500

38 . Answer: ACash Budget (P’000)

JuneJulyAugSeptCash receiptsP398.1P404.9P382.2P374.9Cash disbursements 367.5 278.0 296.5 702.5Net cash inflow (outflow) 30.6 126.9 85.7( 327.6)Beginning cash balance 25.0 50.0 50.0 50.0Cumulative cash balance 55.6 176.9 135.7( 277.6)M/S sold (purchased) - 5.6- 126.9- 85.7 218.2Cash loan 0.0 0.0 0.0 109.4Cash balance, endP 50.0P 50.0P 50.0P 50.0

Cash Receipts (P’000)JuneJulyAugSeptAccount sales (90%)P351.0P315.0P378.0P369.0Cash salesP 39.0P 35.0P 42.0P 41.0Collection of accounts First month (30%) 245.7 105.3 94.5 113.4 Second month (70%)

113.4 264.6 245.7 220.5TotalP398.1P404.9P382.2P374.9Cash Payments (P’000)

JuneJulyAugSeptPurchasesP210.0P240.0P320.0P230.0First month (45%)P 99.0P 94.5P108.0P144.0Second month (55%) 110.0 121.0 115.5 132.0 Total purchases paid 209.0 215.5 223.5 276.0Labor 58.5 52.5 63.0 61.5General overhead 10.0 10.0 10.0 10.0Interest 35.0 35.0Cash dividend 25.0Taxes 30.0 30.0Purchase of equipt. 290.0Total

paymentsP367.5P278.0P296.5P702.539 . Answer: A

Budgeted ProductionJanuaryFebruaryMarchTotalSales1,700,0001,200,0001,400,0004,300,000Inventory, end2,600,0003,400,0004,500,0004,500,000Total4,300,0004,600,0005,900,0008,800,000Inventory, beg.

(2,900,000(2,600,000(3,400,000(2,900,000Budgeted production1,400,0002,000,0002,500,0005,900,00040 . Answer: B

Payments for Purchases:January (December purchases - 1,800,000 x 0.052) P 93,600

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Budgeting

41 . Answer: BBudgeted Collections on Accounts Receivable

JanuaryFebruaryMarchTotalNovember sales87,50087,500December sales116,250116,250232,500January sales131,750131,750263,500February sales 93,00093,000Total203,750248,000224,750676,500

42 . Answer: CA 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 93,000March’s sales 217,000Outstanding accounts receivable, March 31 P310,000

43 . Answer: ACurrent unit cost per 1,000Material P 52Labor 20Overhead 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 P237,800March 1,400 x P90 126,000Cost of goods sold (first quarter) P363,800

44 . Answer: AJanuaryFebruaryMarchCash collections203,750248,000224,750Cash disbursements Payments for materials93,60084,000120,000 Labor expenses28,00040,00050,000 Overhead14,00020,00025,000

Selling & administrative52,70037,20043,400 Interest8,000 Taxes64,560 Dividends . . 48,420 Total disbursements188,300181,200359,380 Net Cash Inflow (Outflow)15,45066,800(134,630)Cash Balance, Beginning30,00025,00025,000Cumulative cash balance45,450 91,800(109,630)Marketable securities20,45066,800( 87,250) Cumulative

MS20,45087,250Borrowings 0 0 47,380Cash Balance, End25,000112,25025,000 45 . Answer: C

Proforma Income Statement

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Budgeting

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 41,600Labor costs 60,000Fixed Overhead 30,000February 28 130% x 12,000 15,600March 31 130% x 12,200 15,860

Required pounds by production 180,000Ending raw materials required 60,000Beginning raw materials ( 30,000 )

Budgeted purchases 210,000

15 . Answer: BMaterials required by production 500,000 x 2 1,000,000Increased in materials inventory (50,000 – 40,000) 10,000 Purchases 1,010,000

Interest payments 45,000Commission (0.03 x P1,020,000) 30,600 Total disbursements P207,200

February (January purchases – 1,400,000 x 0.06) 84,00046 . Answer: A

August sales Billed 8/20 P350,000 x 18% P 63,000 Billed 9/10 P350,000 x 80% x 98% 274,400Collections in Sept of Aug sales P337,400

47 . Answer: BRusson provides 25 percent of next month’s quantity sales. 25% x P400,000 x 80% = P80,000

48 . Answer: DMay sales billed June 10 250,000x18% P 45,000June Sales: Billed June 20 300,000 x 18% 54,000 Billed July 10 300,000 x .80 z .98 235,200July sales Billed July 20 P350,000 x .80 x .98 P274,400July Collections P608,600

453

Budgeting

March (February purchases – 2,000,000 x 0.06) 120,000Total for the quarter P297,600

JanuaryFebruaryMarchTotalSales263,500186,000217,000666,500Cost of goods sold139,40098,400126,000363,800Gross profit124,10087,60091,000302,700Selling expenses,

20%52,70037,20043,400133,300Operating income71,40050,40047,600169,400Interest expense2,6672,6672,6668,000Income before tax68,73347,73344,934161,400Income tax,

40%27,49319,09317,97464,560Net income41,24028,64026,96096,840

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