Introduction to Management Accounting

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Problems: Set A

P9-59A Comprehensive budgeting problem (Learning Objectives 2 & 3)

Requirements
1. Prepare a schedule of cash collections for January, February, and March, and for the quarter
in total.
2. Prepare a production budget.
3. Prepare a direct materials budget.
4. Prepare a cash payments budget for the direct material purchases from Requirement 3.
5. Prepare a cash payments budget for conversion costs.
6. Prepare a cash payments budget for operating expenses.
7. Prepare a combined cash budget.
8. Calculate the budgeted manufacturing cost per unit.
9. Prepare a budgeted income statement for the quarter ending March 31.

Solution:
Given
Sales Budget
December
Unit sales

7,000

Unit selling price

10

Total sales Revenue

70,000

Req. 1

Cash Collections (30%)

Credit Collections (70%)
Total Cash Collections

Cash Collections
January
$28,000
$
49,000
$77,000

Req. 2

Unit Sales

Production Budget
January
8,000

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

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Plus: Desired ending inventory

Total needed
Less: Beginning inventory
Units to produce

2,300
10,300
2,000
8,300

Req. 3

Units to produce
x pounds of DM needed per unit
Quantity (pounds) needed for production
Plus: Desired ending inventory of DM
Total quantity (pounds) needed
Less: Beginning inventory of DM
Quantity (pounds) to purchase
x Cost per pound
Total cost of DM purchase

Direct Materials Budget

January
8,300
2
16,600
1,875
18,475
3,320
15,155
2
$30,310

Unit Sales
Desired ending inventory (10%)
Total Needed
Beginning inventory
Units to produce
DM needed per unit
DM needed for production
20% of DM

April
9,700
850
10,550
2,425
8,125
2
16,250

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
January
December purchases (from Accounts Payable)
$42,400
January purchases
$6,062
February purchases
March purchases
Total cash payments for direct material purchases

Chapter 9: The Master Budget and Responsibility Accounting

$48,462

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

Introduction to Management Accounting

Solutions Manual

Req. 5
Schedule of Expected Cash DisbursementsConversion Costs
January
Variable conversion cost
$9,960
Rent (fixed)
$5,000
$
3,000
Other fixed MOH
Total payments for conversion costs
$17,960

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
January
Variable operating expenses
$
8,000
Fixed operating expenses
$1,000
Total payments for operating expenses
$
9,000

Req. 7

Cash balance, beginning

Add cash collections
Total cash available
Less cash payments
Direct material purchase
conversion cost
Operating expenses
Equipment purchases
tax payment
Total cash payments
Ending cash balance before financing
Financing:
Borrowings
Repayments
Interest payments
Total Financing
Ending cash balance

Combined Cash Budget

January
$4,500
77,000
81,500

Total interest

Chapter 9: The Master Budget and Responsibility Accounting

$48,462
17,960
9,000
5,000
80,422
1,078
3,000

3,000
$4,078

$280

Introduction to Management Accounting

Solutions Manual

Req. 8
Budgeted Manufacturing Cost per Unit
Direct material cost per unit
Conversion cost per unit
Fixed manufacturing overhead per unit
Budgeted cost of manufacturing each unit

$4.00
$1.20
$3,000.00
$3,005.20

Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Cost of good sold
Gross profit
Operating expenses
Depreciation
Operating income
Less interest expense
Les provision for income taxes
Net income

Chapter 9: The Master Budget and Responsibility Accounting

$
271,000
81,440,920
81,711,920
30,100
4,800
81,677,020
-280
24,503,022
$57,173,718

Introduction to Management Accounting

Solutions Manual

(60 min.) P 9-59A

bjectives 2 & 3)

and March, and for the quarter

hases from Requirement 3.

g March 31.

Sales Budget
January

February

8,000
$
$

9,200

10 $
80,000

March

April

9,900

May

9,700

8,500

10 $

10 $

10

10

92,000 $

99,000 $

97,000

85,000

ons
February
$32,200
$
56,000
$88,200

March
$34,650
$
64,400
$99,050

Quarter
$94,850
$169,400
$264,250

February
9,200

March
9,900

Quarter
27,100

dget

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

2,475
11,675
2,300
9,375

2,425
12,325
2,475
9,850

Solutions Manual

2,425
29,525
2,000
27,525

Budget
February
9,375
2
18,750
1,970
20,720
1,875
18,845
2
$37,690

March
9,850
2
19,700
3250
22,950
1,970
20,980
2
$41,960

Quarter
27,525
2
55,050
3,250
58,300
3,320
54,980
2
$109,960

March

$30,152
$8,392

Quarter
$42,400
$30,310
$37,690
$8,392

$38,544

$118,792

May
8,500

mentsMaterial Purchases
February
$24,248
$7,538

$31,786

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

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Introduction to Management Accounting

ementsConversion Costs
February
March
$11,250
$11,820
$5,000
$5,000
$
3,000
###
$19,250
$19,820

Solutions Manual

Quarter
$33,030
$15,000
$
9,000
$57,030

ments -- Operating Expenses

February
March
Quarter
$
9,200 $
9,900 $
27,100
$1,000
$1,000 $
3,000
$
10,200 $
10,900 $
30,100

Budget
February
$4,078
88,200
92,278

March
$5,762
99,050
104,812

Quarter
$4,500
264,250
268,750

$31,786
19,250
10,200
12,000
10,000
83,236
9,042

$38,544
19,820
10,900
16,000
85,264
19,548

$118,792
57,030
30,100
33,000
10,000
248,922
19,828

0
$19,548

3,000
-3,000
-280
-280
$19,548

-3000
-280
-3,280
$5,762

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

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