Accounting 13 - Managerial Accounting II

2nd Semester SY 2014-2015 (MWF 7:00PM and 8:00PM Class)

Quiz # 2The Master BudgetProblems

h. Below are the material costs per pound:

Objective test students understanding/skills in preparing the master budget

Time allotted 1 hour
The following information pertains to the operations of a Cebu-based manufacturing
company for 2015 and for the first 3 quarters of 2016:
a. The company sells two products, Product A and Product B, for P500 per unit
and P400 per unit, respectively. Sales forecasts in units for the next seven
quarters are as follows:

b. The company desires an ending Product A inventory at the end of each quarter
equal to 20% of the Product A sales forecast for the next two quarters. On
December 31, 2014, the company had 15,000 units of Product A on hand.
c.

i.

The company desires an ending Material A and Material B inventory at the end
of each quarter equal to 10% and 15% of the following quarters production
needs, respectively. On December 31, 2014, the company had 15,000 pounds
of Material A and 10,000 pounds of Material B on hand.

j.

The company desires an ending Material C and Material D inventory at the end
of each quarter equal to 12% and 20% of the following quarters production
needs, respectively. On December 31, 2014, the company had 10,000 pounds
of Material C and 6,000 pounds of Material D on hand.

k. On December 31, 2014, the companys balance sheet showed P185,000 in

total accounts payable for material purchases, all of which will be paid for in
the first quarter of the year. Below is the breakdown of such payables:

The company desires an ending Product B inventory at the end of each quarter
equal to 35% of the Product B sales forecast for the next quarter. On
December 31, 2014, the company had 20,000 units of Product B on hand.

d. All sales are on credit.Sales for both products are collected in the following
pattern: 50% in the quarter the sales are made, 25% in the following quarter
and the remaining 25% in the second quarter following the quarter of the sale.
The company terms are 2% (end of month) net 30; all collections within the
quarter of sale are net of the 2% discount.

l.

e. On December 31, 2014, the companys balance sheet showed P150,000 in

accounts receivable (P100,000 pertaining to Product A and P50,000 pertaining
to Product B), all of which will be collected in the first quarter of the year. Bad
debts are negligible and can be ignored.

Requirements: Prepare the following budgets and schedules for 2015

(quarterly and in total for each product):

f.

Three pounds of Material A and five pounds of Material B are required to

complete one unit of Product A. Two pounds of Material C and three pounds of
Material D are required to complete one unit of Product B.

g. All material purchases are paid for in the following pattern: 50% paid in the
quarter the purchases are made and the remaining 50% paid in the following
quarter.

It usually takes 2 hours to produce one unit of Product A and 1.5 hours to
produce one unit of Product B.
Average hourly direct labor wage rate is
P42.50 (P340 per day Cebu City minimum wage). Overhead is applied at a
rate of P60.00 per direct labor hour.

1.
2.
3.
4.
5.
6.
7.

Sales budget (10pts)

Production Budget (20 pts)
Materials Purchases Budget in pounds and in Peso (20 pts)
Schedule of expected cash collections (10 pts)
Schedule of expected cash payments for purchases of materials (20 pts)
Direct labor budget in hours and in Peso (10 pts)
Overhead to be charged to production (10 pts)