Donnelly Manufacturing
Donnelly Manufacturing Sells Cedar Birdhouses Inventory at 30 June 2009 Was Budgeted at 1000 Units

question 64

Multiple Choice

Donnelly Manufacturing
Donnelly Manufacturing sells cedar birdhouses. The company has prepared the following forecast for the third quarter of 2009:
$$\begin{array} { l r } \text { July } & 5000 \text { units } \\\text { August } & 6000 \text { units } \\\text { September } & 10000 \text { units }\end{array}$$
Inventory at 30 June 2009 was budgeted at 1000 units. Management would like the desired quantity of finished goods inventory at the end of each month to be equal to 20 per cent of next month’s budgeted unit sales. October’s sales are projected to be 12 000 units.
Each completed unit of finished product requires 3 square feet of cedar at a cost of $1.50 per square foot.
-The company has determined that it needs 10 per cent of next month's raw material needs on hand at the end of each month.
The cost of the direct material that should be purchased in August is:

• A) $32 940
• B) $21 480
• C) $30 600
• D) $35 280

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Definitions:

Respondeat Superior

A legal doctrine holding an employer or principal legally responsible for the wrongful acts of an employee or agent, under certain conditions.

Vicarious Liability

A legal principle that holds one party responsible for the actions of another under certain conditions, typically within employment contexts.

Doctrine

A principle, theory, or policy adopted and adhered to by an individual, group, or institution, often in a legal or philosophical context.

Professional Corporations

A type of corporation for professionals where the company's owners are shielded from certain liabilities and it is taxed differently than traditional corporations.