DO IT!

REVIEW 10-13
OAK CREEK COMPANY
Sales Budget (in thousands)
For the Year Ending December 31, 2012
Quarter
Unit sales
Unit price
Total sales

1
200
$40
$8,000

2
250
$40
$10,000

3
250
$40
$10,000

4
300
$45
$13,500

Year
1,000
$41,500

OAK CREEK COMPANY

Production Budget (in thousands)
For the Year Ending December 31, 2012
Quarter
Unit Sales
Add: ending inventory1
Total required
Less: beg. inventory
Total
1

1
200
50
250
40
210

20% of next quarters sales.

2
250
50
300
50
250

3
250
60
310
50
260
2

4
300
44
344
60
284

20% (200 110%).

Year
1,000
44
1,044
40
1,004

DO IT! REVIEW 10-13 (Continued)

OAK CREEK COMPANY
Direct Materials Budget (in thousands)
For the Year Ending December 31, 2012

Units to be produced
Direct materials per unit
Total kilograms required for
production
Add: desired ending
inventory
Total materials required
Less: beginning materials
inventory
Direct materials purchases
Cost per kilogram
Total cost of direct materials
purchases

1
210
2

Quarter
2
3
250
260
2
2

4
284
2

Year
1,004
2

420
500
520
568
5
0
52
57
50
470
552
577
618
4
2
50
52
57
428
502
525
561
$10.00 $10.00 $10.00 $10.00

2,008

42
2,016
$10.00

$4,280 $5,020 $5,250 $5,610

$20,160

50
2,058

EXERCISE 10-25
(a)

TYSON CHANDLER COMPANY

Production Budget198Z
For the Two Months Ending February 28, 2012

Expected unit sales

Add: Desired ending finished goods 1, 2
Total required units
Less: Beginning finished goods inventory
Required production in units
1

12,000 25%

13,000 25%

Month
Jan
Feb
10,000
12,000
3,000
3,250
13,000
15,250
2,500
3,000
10,500
12,250

Total
22,000
3,250
25,250
2,500
22,750

10,000; 12,000 25%

(b)
TYSON CHANDLER COMPANY
Direct Materials Budget (kgs)
For the Month Ending January 31, 2012

Units to be produced
Direct materials per unit (kg)
Total required for production
Add: desired ending inventory1
Total materials required
Less: beginning inventory2
Materials purchases in units
Cost per kilogram
Total cost of materials purchases
1
2

Total
10,500
2
21,000
9,800
30,800
8,400
22,400
$3.00
$67,200

40% of next months production needs, (40% 12,250 2)

40% current months production needs

EXERCISE 10-27
NUNEZ COMPANY
Cash Budget
For the Two Months Ending February 28, 2012

Month
Beginning cash balance
Add: Cash receipts
Collections from customers
Sale of marketable securities
Total receipts
Total available cash
Less: Disbursements
Direct material
Direct labour
Manufacturing overhead1
Selling and administrative expenses
Total disbursements
Excess (deficiency) of available cash
over cash disbursements
Financing:
Borrowing
Repayment
Total financing
Ending cash balance
1

Jan
$45,000

Feb
$25,000

Total
$45,000

100,000
10,000
110,000
155,000

160,000

160,000
185,000

260,000
10,000
270,000
315,000

60,000
30,000
25,000
15,000
130,000

80,000
45,000
30,000
20,000
175,000

140,000
75,000
55,000
35,000
305,000

25,000

10,000

10,000

$25,000

15,000

15,000
$25,000

15,000

15,000
$25,000

Deduct non-cash item, depreciation $1,000

EXERCISE 10-29
(a)

NIU COMPANY
Schedule of Expected Collections from Customers
For the Month Ending March 31, 2012

Januarycredit sales ($190,000 60% 36%)

Februarycredit sales ($210,000 60% 50%)
Marchcash sales ($300,000 40%)
Marchcredit sales ($300,000 60% 10%)
Total expected collections from customers
(b)

$41,040
63,000
120,000
18,000
$242,040

NIU COMPANY
Schedule of Expected Payments for Direct Materials
For the Month Ending March 31, 2012

Februarycredit purchases ($35,000 50% 40%)

Marchcash payments ($45,000 50%)
Marchcredit payments ($45,000 50% 60%)
Total expected payments

$7,000
22,500
13,500
$43,000

PROBLEM 10-43A
THE BIG SISTER COMPANY
Cash Budget
For the Four Quarters Ending December 31

Beginning cash balance

Plus: receipts
Accounts Receivable
Credit sales1st
Credit sales2nd
Credit sales3rd
Credit sales4th
Total cash receipts
Total cash available
Less: disbursements
Material purchases
Direct labour
Factory overhead
Sell & admin expenses
Purchase of equipment
Total cash disbursement
Excess (deficiency)
Financing:
Borrowing
Less: Repayment
Less: Interest 1, 2, 3
Total financing
Ending cash balance
1
2
3

1
$25,000
150,000
320,000

470,000
495,000
400,000
350,000
340,000
35,000
1,125,000
(630,000)

Quarter
2
3
$10,000
$11,250
160,000
200,000

100,000
320,000

4
$10,938

160,000
320,000
480,000
490,938

360,000
370,000

420,000
431,250

100,000
35,000
70,000
205,000
165,000

100,000
35,000
135,000
296,250

100,000
35,000
150,000
285,000
205,938

150,000
3,750
(153,75
0)
$11,250

275,000
10,312
(285,31
2)
$10,938

185,000
9,250
(194,19
4)
$11,688

640,000
640,000
$10,000

Interest: $150,000 5% 6/12

Interest: $275,000 5% 9/12
Interest: $185,000 5% 12/12

PROBLEM 10-44A
(a)

ROTECH CO.
Cash Budget
For the Second Quarter Ended June 30, 2012

Beginning cash balance

Add: cash receipts
Collections from Q1 ($600,000 45%)
Collections from Q2 ($400,000 50%)
Total cash receipts
Total available cash
Less: Disbursements
Merchandise purchases1 ($150,000 + $150,000)
Factory overhead
Payroll
Selling costs (2% $400,000)
Administrative costs
Dividends
Total disbursements
Excess (deficiency) of cash available
over cash disbursements
Financing:
Borrowing
Less: Repayment
Total financing
Ending cash balance
1

$45,000
270,000
200,000
470,000
515,000
300,000
15,000
29,000
8,000
15,000
20,000
387,000
128,000

$128,000

60% ($400,000 + ($800,000 25%) ($400,000 25%)) = $300,000

Payment from first quarter: $300,000 50%
Payment from this quarter: $300,000 50%

PROBLEM 10-44A (Continued)

(b)

Advantages of budgeting include the following:

aids planning by helping management identify problems
before they occur
compatible with management by exception
communicates top management's plans and goals
compatible with management by objectives
aids subsequent performance evaluation
brings planning to the forefront
provides a means of allocating resources within the firm

PROBLEM 10-49B
THE BIG BOY COMPANY
Cash Budget
For the Four Quarters Ending December 31

Beginning cash balance

Plus: receipts
Accounts Receivable
Credit sales1st
Credit sales2nd
Credit sales3rd
Credit sales4th
Total cash receipts
Total cash available
Less: disbursements
Material purchases
Direct labour
Factory overhead
Sell & admin expenses
Purchase of equipment
Total cash disbursement
Excess (deficiency)
Financing:
Borrowing
Less: Repayment
Less: Interest 1, 2, 3
Total financing
Ending cash balance
1
2
3

1
$23,000
130,000
260,000

390,000
413,000
360,000
350,000
430,000
50,000
1,190,000
(777,000)

Quarter
2
3
$8,000
$8,400
130,000
500,000

250,000
260,000

4
$13,100

130,000
260,000
390,000
403,100

630,000
638,000

510,000
518,400

100,000
50,000
150,000
300,000
338,000

100,000
50,000
150,000
368,400

100,000
50,000
50,000
200,000
203,100

320,000
9,600
(329,60
0)
$8,400

340,000
15,300
(355,30
0)
$13,100

125,000
7,500
(132,50
0)
$70,600

785,000
785,000
$8,000

Interest: $320,000 6% 6/12

Interest: $340,000 6% 9/12
Interest: $125,000 6% 12/12