Introduction to Management Accounting Solutions Manual

Problems: Set A

(60 min.) P 9-59A

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 January February March
Unit sales 7,000 8,000 9,200 9,900
Unit selling price $ 10 $ 10 $ 10 $ 10
Total sales Revenue $ 70,000 $ 80,000 $ 92,000 $ 99,000

Req. 1
Cash Collections
January February March Quarter
Cash Collections $24,000 $27,600 $29,700 $81,300
credit collections $ 49,000.0 $ 56,000.0 $ 64,400.0 $169,400
total cash collections $73,000 $83,600 $94,100 $250,700

Req. 2

Production Budget
January February March Quarter
unit sales 8,000 9,200 9,900 27,100
desired endind inventory 2,300 2,475 2,425 2,425
total needed 10,300 11,675 12,325 29,525
beginning inventory 2,000 2,300 2,475 2,000

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Units to produce 8,300 9,375 9,850 27,525

Req. 3

Direct Materials Budget

January February March Quarter
units to be produced 8,300 9,375 9,850 27,525
quantity of DM needed per unit 2 2 2 2
quantity of direct DM needed for produc 16,600 18,750 19,700 55,050
desired ending inventory of DM 1,875 1,970 1880 1,880
total quantity of DM needed 18,475 20,720 21,580 56,930
beginning inventory of DM 1,660 1,875 1,970 1,660
quantity of DM to purchase 16,815 18,845 19,610 55,270
cost per pound 2 2 2 2
toal cost of DM purchases $33,630 $37,690 $39,220 $110,540

April May
units sales 9,700 8,500
desired ending inventory 2,125
total needed 11,825
beginning inventory 2,425
units to produced 9,400
quantity of DM needed per unit 2
quantity of DM needed for production 18,800

Req. 4

Schedule of Expected Cash Disbursements—Material Purchases

January February March Quarter
December purchases $42,400 $42,400
January purchases $6,726.0 $26,904.0 $33,630
February purchases $7,538.0 $30,152.0 $37,690
March purchases $7,844.0 $7,844
Total disbursements $49,126 $34,442 $37,996 $121,564

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Req. 5

Schedule of Expected Cash Disbursements—Conversion Costs

January February March Quarter
Rent $5,000 $5,000 $5,000 $15,000
Other MOH $3,000 $3,000 $3,000 $9,000
Variable conversion cost 9960 11250 11820 $33,030
Total disbursments $17,960 $19,250 $19,820 $57,030

Req. 6

Schedule of Expected Cash Disbursements -- Operating Expenses

January February March Quarter
Variable operating expense 8,000 9,200 9,900 27,100
Fixed operating expense $1,000 $1,000 $1,000 3,000
Total disbursements 9,000 10,200 10,900 30,100

Req. 7
Combined Cash Budget
January February March Quarter
Cash Balance, Beginning $ 4,500.00 $ 4,414.00 $ 4,122.00 $ 4,500.00
Add cash collections(req 1) $ 73,000.00 $ 83,600.00 $ 94,100.00 ###
Total cash available $ 77,500.00 $ 88,014.00 $ 98,222.00 ###
less cash disbursements:
for materials (req.4) $ 49,126.00 $ 34,442.00 $ 37,996.00 ###
for conversion cost (req.5) $ 17,960.00 $ 19,250.00 $ 19,820.00 $ 57,030.00
for operation expenses (req.6) $ 9,000.00 $ 10,200.00 $ 10,900.00 $ 30,100.00
for equipment $ 5,000.00 $ 12,000.00 $ 16,000.00 $ 33,000.00
for taxes $ 10,000.00 $ 10,000.00
total disbursements $ 81,086.00 $ 85,892.00 $ 84,716.00 ###
exess of cash $ (3,586.00) $ 2,122.00 $ 13,506.00 $ 3,506.00
Financing:
borrowings $ 8,000.00 $ 2,000.00 $ 10,000.00
repayments $ (9,000.00) $ (9,000.00)
interest $ (280.00) $ (280.00)
Total financing $ 8,000.00 $ 2,000.00 $ (9,280.00) $ 720.00
cash balance, endindg $ 4,414.00 $ 4,122.00 $ 4,226.00 $ 4,226.00

Total interest $280

Req. 8

Budgeted Manufacturing Cost per Unit

Direct materials $4.00

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conversion cost $1.20

fixed MOH $0.80
Cost of manufacturing each unit $6.00

Req. 9

Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales $ 271,000
COGS 108,400
Gross profit 162,600
operating expenses 30,100
Depreciation Expense 4,800
Operating income 127,700
less:interest $ (280.00)
less: provision for income tax 38,226
net income $89,194

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April May
9,700 8,500
$ 10 $ 10
$ 97,000 $ 85,000

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