246 question id cma 696 h5 topic annual profit plan

246. Question ID: CMA 696 H5 (Topic: Annual Profit Plan and Supporting Schedules)
Trumbull Company budgeted sales on account of $120,000 for July, $211,000 for August, and
$198,000 for September. Collection experience indicates that 60% of the budgeted sales will be
collected the month after the sale, 36% will be collected the second month, and 4% will be
uncollectible. The cash receipts from accounts receivable that should be budgeted for September
would be

A. $197,880
 B. $147,960

C. $194,760
 D. $169,800correct
Question was not answered
Correct Answer Explanation:
First, we should determine what amounts from which months' sales will be collected in September:
60% of the prior month's (August) sales and 36% of the sales in the month before last month (July)
will be collected during September. The sales from August that will be collected will be $126,600
($211,000 × 60%). The sales from July that will be collected will be $43,200 ($120,000 × 36%). Total
collections during September will be $126,600 + $43,200, or $169,800 in total.
Explanation for Choice A:
This is 60% of August sales plus 36% of September sales. Collections in September will be 60% of
August sales plus 36% of July sales.
Explanation for Choice B:
60% of August sales and 36% of July sales were collected in September, not vice versa. See the
correct answer for a complete explanation.
Explanation for Choice C:
This is 60% of September sales plus 36% of August sales. Collections in September will be 60%
of August sales plus 36% of July sales.
247. Question ID: CMA 1296 H6 (Topic: Annual Profit Plan and Supporting Schedules)
Karmee Company has been accumulating operating data in order to prepare an annual profit plan.
Details regarding Karmee's sales for the first 6 months of the coming year are as follows:

Hock 2020 Part 1
Section B - Planning, Budgeting, and Forecasting.
Answers
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Month
Estimated
Monthly Sales
Type of
Monthly Sale
January $600,000
All Months:
Cash sales 20%
Credit sales 80%
February 650,000
March 700,000
April 625,000
May 720,000
June 800,000
Collection Pattern for Credit Sales
Month of sale 30%
One month following sale 40%
Second month following sale 25%
Karmee's cost of goods sold averages 40% of the sales value. Karmee's objective is to maintain a
target inventory equal to 30% of the next month's sales in units. Purchases of merchandise for
resale are paid for in the month following the sale. The variable operating expenses (other than cost
of goods sold) for Karmee are 10% of sales and are paid for in the month following the sale. The
annual fixed operating expenses are presented below. All of these are incurred uniformly throughout
the year and paid monthly except for insurance and property taxes. Insurance is paid quarterly in
January, April, July, and October. Property taxes are paid twice a year in April and October.
Annual Fixed Operating Costs
Advertising $720,000
Depreciation 420,000
Insurance 180,000
Property taxes 240,000
Salaries 1,080,000
The total cash disbursements that Karmee Company will make for the operating expenses
(expenses other than the cost of goods sold) during the month of April will be
 A. $290,000

B. $385,000correct

C. $255,000
 D. $420,000
Question was not answered
Correct Answer Explanation: