New Era University

College of Business Administration

COST ACCOUNTING
Budgeting and Profit Planning

1. A. P186,750,000
Number of students to be enrolled (12,000 x 105%) 12,600 students
Less number of students to be given free tuition - 150
Number of students to pay full tuition 12,450 students
Multiply by credit hours per student per year (15 x 2) x 30 credit hours
Total credit hours full tuition 373,500 credit-hours
Multiply by tuition fee per credit hour x 500 per credit-hour
Budgeted tuition revenue for the upcoming year P186,750,000

2. D. 9,000 units
Inventory, June 1 (4,000 x 40%) 1,600 units
Add budgeted production for June 6,000
Total number of units available during June 7,600 units
Less June sales - 4,000
Inventory, June 30 3,600 units
Divide by % of ending inventory to next months sales 40 %
Budgeted sales for July 9,000 units

3. B. P5,060,000
Direct material cost per unit (P200 + P30) P230 per unit
Direct labor cost per unit [(4 x 75%) x P20] 60
Applied factory overhead (P60 x 3.6) 216
Total manufacturing costs per unit P506 per unit
Multiply by number of units to manufacture x 10,000 units
Budgeted cost of goods manufactured P5,060,000

4. C. 25,800
Budgeted sales for July 24,000 units
Add desired ending inventory [(30,000 x 30%) + 3,000] 12,000
Total budgeted production requirements during July 36,000 units
Less beginning inventory [(24,000 x 30%) + 3,000] - 10,200
Budgeted production for July 25,800 units

5. A. 14,500.
Budgeted sales for March 14,000 units
Add desired ending inventory [(18,000 x 25%) + 4,000] 8,500
Total budgeted production requirements during March 22,500 units
Less beginning inventory (given) - 8,000
Budgeted production for March 14,500 units

6. D. 52,000.
Budgeted production for June 26,000 units
Multiply by number of pounds per unit Material A x 2 pounds per unit
Number of pounds needed for production Material A 52,000 pounds
Note: Choice A (51,200) is the required raw materials inventory on hand at the end of June.
Choice C (61,600) is the number of pounds needed to be purchased in June. Choice B (35,600)
has no significance in this case.

1
7. A. 96,700 yards
Budgeted production for May 32,000 units
Multiply by number of yards of cloth per unit x3 yards per unit
Number of yards of cloth needed for production 96,000 yards
Add desired ending inventory 2,800
Total budgeted material requirements during May 98,800 yards
Less beginning inventory - 2,100
Number of yards of cloth needed to be purchased 96,700 yards

8. B. 46,400
Number of pounds needed for production (12,000 x 4) 48,000 pounds
Add desired ending inventory (11,000 x 4 x 40%) 17,600
Total budgeted material requirements during January 65,600 pounds
Less beginning inventory (12,000 x 4 x 40%) - 19,200
Number of pounds of raw materials needed to be purchased 46,400 pounds

9. B. P44,280
Desired ending inventory in units (24,600 x 1.5 x 30%) 11,070 units
Multiply by cost per unit x P4.00 per unit
Desired ending inventory in pesos P44,280

10. B. P1,008,000
Budgeted sales for May 5,000 units
Add desired ending inventory (3,000 x 40%) 1,200
Total budgeted production requirements during May 6,200 units
Less beginning inventory (5,000 x 40%) - 2,000
Budgeted production for May 4,200 units
Multiply by direct labor hours per unit x3 DLH per unit
Total direct labor hours needed for production 12,600 DLH
Multiply by budgeted labor rate x P80 per DLH
Budgeted direct labor cost P1,008,000

11. C. P1,764,000
Budgeted sales for June 31,000 units
Add desired ending inventory 600
Total budgeted production requirements during June 31,600 units
Less beginning inventory - 100
Budgeted production for June 31,500 units
Multiply by direct labor hours per unit x 3.5 DLH per unit
Total direct labor hours needed for production 110,250 DLH
Multiply by budgeted labor rate x P16 per DLH
Budgeted direct labor cost P1,764,000

12. C. 24,000 units

Budgeted cash disbursements P116,000
Less total cash fixed costs (P30,000 + P25,000 + P7,000) - 62,000
Total cash variable costs P 54,000
Divide by variable costs per unit (P0.75 + P1.30 + P0.20) P2.25 per unit
Budgeted sales for April in units 24,000 units

13. B. P83,000.
Budgeted cash fixed factory overhead (P66,000 P10,000) P56,000
Less budgeted variable factory overhead (P3 x 9,000) 27,000
Total budgeted cash disbursements P83,000

2
14. B. P148,600
Collections from April sales [(P21,000 15%) x 14%] P 19,600
Collections from May sales [(P48,000 30%) x 15%] 24,000
Collections from June sales (P150,000 x 70%) 105,000
Total collections during June P148,600
Note: The accounts receivable balances represent the uncollected amounts at the end of May.
When you divide this amount by the percentage of sales not yet collected, you will get the total
credit sales for the month. For example, the percentage of April sales not yet collected is 15%
(100% 70% 15%). The total credit sales during April would be P140,000 (P21,000 15%).
To get the amount of collections from April sales during June, just multiply the total credit sales
by the collection percentage in the second month after the month of sale (i.e. 14%).

15. D. II only
Statement I is false because the budgeted cash receipts for March are P550,000 (equal to cash
sales). Statement II is true, based on the following computation:
Budgeted cost of sales (P550,000 x 75%) P412,500
Add planned ending merchandise inventory 270,000
Total merchandise requirements P682,500
Less beginning merchandise inventory - 300,000
Budgeted purchases for March P382,500
Add budgeted selling and administrative expenses 60,000
Budgeted cash disbursements for March P442,500

16. C. P42,500.
Sales P550,000
Less cost of sales [(P550,000 x 75%) + P35,000] - 447,500
Gross profit P102,500
Less selling and administrative expenses - 60,000
Budgeted net income for December P 42,500

17. B. P80,640.
Cash balance, June 1 P 20,000
Add cash receipts during June:
From May sales [(P300,000 125%) x 20%] 48,000
From June sales (P300,000 x 80% x 98%) 235,200
Total available cash during June P303,200
Less cash disbursements during June:
For May purchases (P200,000 x 40%) - 80,000
For June purchases (P240,000 x 60% x 99%) - 142,560
Cash balance, June 30 P 80,640

18. C. P186,000.
Balance from February purchases (P140,000 x 30%) P 42,000
Balance from March purchases (P160,000 x 90%) 144,000
Accounts payable balance, March 31 P186,000

19. A. P1,393,750
Collections from February sales (P500,000 x 17%) P 85,000
Collections from March sales (P425,000 x 97%) 412,250
Collections from April sales (P450,000 x 97%) 436,500
Collections from May sales (P575,000 x 80%) 460,000
Expected cash collections in the second quarter P1,393,750

3
20. C. The total disbursements during August would be P102,000.
Choice A is false because the total available cash during July would be P178,400. Choice B is
false because needed financing (borrowings) during July would be P12,000. Choice D is
incorrect because the excess of available cash over disbursements during August would be
P40,800. Refer to the cash budget below and the supporting schedules:

FINAGAN COMPANY
Cash Budget
For the Two Months of July and August
July August
Beginning cash balance P 20,000 P 20,000
Add cash receipts:
Collections from customers1 56,400 44,800
Cash sales 102,000 78,000
Total receipts P158,400 P122,800
Total available cash P178,400 P142,800
Less cash disbursements:
Purchases2 110,000 71,000
Selling and administrative expenses 19,000 19,000
Dividends 41,400
Computer purchase ________ 12,000
Total disbursements P170,400 P102,000
Excess (deficiency) of available cash over disbursements P 8,000 40,800
Financing
Borrowings 12,000
Repayments3 ________ - 12,090
Ending cash balance P 20,000 P 28,710
1
Schedule of expected collections from customers:
July August
June credit sales P 21,600
July credit sales 34,800 P 23,200
August credit sales ________ 21,600
Total collections P 56,400 P 44,800
2
Schedule of expected payments for purchase of inventory:
July August
June purchases P 60,000
July purchases 50,000 P 50,000
August purchases ________ 21,000
Total collections P110,000 P 71,000
3
Computation of repayments:
Amount borrowed during July P12,000
Add interest for one month (P12,000 x 9% x 1/12) 90
Amount to be repaid P12,090

21. C. P28,710
See computations for no. 20.

22. D. P316,000
Cash P 50,000
Accounts receivable (P600,000 x 15%) 90,000
Merchandise inventory 70,000
Equipment (P196,000 P80,000 P10,000) 106,000
Total assets P316,000

4
23. B. P30,000
Accounts payable (P70,000 x 20%) P14,000
Income taxes payable 16,000
Total liabilities P30,000

24. A. P877,500
Payment for October purchases (P900,000 x 75%) P675,000
Payment for November purchases (P810,000 x 25%) 202,500
Expected payments for material purchases during November P877,500

25. A. P16,000
Beginning cash balance P 12,000
Add cash receipts:
Cash sales to customers 8,000
Cash collected from account customers 12,000
Total available cash P 32,000
Less cash disbursements:
Cash paid for merchandise purchased - 24,500
Cash paid for display cases - 9,600
Cash selling and administrative expenses (P4,000 P200) - 3,800
Cash deficiency P - 5,900
Needed financing (SQUEEZE) 16,000
Ending cash balance P 10,100
Note: Even though only P15,900 would be needed to meet the desired cash balance of P10,000,
amounts can only be borrowed in increments of P1,000. That is why the needed financing should
be P16,000.

26. C. P7,400 income

Sales (P30,000 + P8,000) P38,000
Less cost of merchandise sold - 26,600
Gross profit P11,400
Less selling and administrative expenses - 4,000
Budgeted net income P 7,400

27. C. P128,000
Sales (P350,000 + P360,000) P710,000
Less cost of goods sold (P710,000 x 60%) - 426,000
Gross profit P284,000
Less operating expenses [(P60,000 + P18,000) x 2] - 156,000
Budgeted net income for the two months ended March 31 P128,000

28. A. P180,500.
Cash balance, November 1 P 27,000
Add cash collections during November and December:
From October sales (accounts receivable, October 31) 79,000
From November sales (P260,000 x 99%) 257,400
From December sales (P230,000 x 80%) 184,000
Total available cash during November and December P547,400
Less cash disbursements during November and December:
Accounts payable, October 31 - 169,000
Nov. purchases for Nov. sales (P260,000 x 65% x 40%) - 67,600
Nov. purchases for Dec. sales (P230,000 x 65% x 60%) - 89,700
Other monthly cash expenses (P20,300 x 2) - 40,600
Cash balance, December 31 P180,500

5
29. B. P141,700.
Dec. purchases for Dec. sales (P230,000 x 65% x 40%) P 59,800
Dec. purchases for Jan. sales (P210,000 x 65% x 60%) 81,900
Accounts payable, December 31 P141,700

30. A. P466,400.
Sales (P260,000 + P230,000) P490,000
Less cost of goods sold (P490,000 x 65%) - 318,500
Gross profit P171,500
Less operating expenses:
Cash expenses (P20,300 x 2) - 40,600
Depreciation (P20,000 x 2) - 40,000
Doubtful accounts expense (P490,000 x 1%) - 4,900
Total net income for November and December P 86,000
Add retained earnings, October 31 380,400
Retained earnings, December 31 P466,400

< NOTHING FOLLOWS >