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Introduction

to Management Accounting

Solutions Manual

Problems: Set A
Kathryn Buda
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

Unit sales

Sales Budget
December
January
February
March
April
May
7,000 8,000 9,200 9,900 9,700 8,500

Unit selling price


Total sales Revenue

$ 10 $ 10 $ 10 $ 10 $ 10 $ 10
$ 70,000 $ 80,000 $ 92,000 $ 99,000 $ 97,000 $ 85,000

Req. 1

Cash Collections
January
$24,000
$49,000
$73,000

February
$27,600
$56,000
$83,600

March
$29,700
$64,400
$94,100

Quarter
$81,300
$169,400
$250,700

Production Budget
January
$8,000
$2,300
$10,300
$800
$9,500

February
$9,200
$2,475
$11,675
$920
$10,755

March
$9,900
$2,425
$12,325
$990
$11,335

Quarter
$27,100
$2,425
$29,525
$800
$28,725

Direct Materials Budget


January
February
Units to be Produced
9,500
10,755
Multiply by: Quantity (pounds) of DM needed per Unit
2
2
Quantity (Pounds) of DM needed for production 19,000
21,510
Plus: Desired Ending Inventory of DM
2,151
2,267
Total Quantity (Pounds) needed
21,151
23,777
Less: Beginning Inventory of DM
1,900
2,151
Quantity (pounds) to purchase
19,251
21,626
Multiply by: Cost per Pound
$2.00
$2.00
Total Cost of DM Purchases
$38,502
$43,252

March
11,335
2
22,670
1880
24,550
2,267
22,283
$2.00
$44,566

Quarter
28,725
2
57,450
1,880
59,330
1,900
57,430
$2.00
$114,860

Schedule of Expected Cash DisbursementsMaterial Purchases


January
February
March

Quarter

Cash Sales
Credit Sales
Total Cash Collections

Req. 2

Unit Sales
Plus: Desired ending Inventory
Total Needed
Less: Beginning Inventory
Units to Produce

Req. 3

Units to produce
Multiply by: Quantity(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
Multiply by: Cost per pound
Total Cost of DM Purchases

April
9,700

May
8,500

2
19,400
1,700
21,100
1940
19160
2
38,320

2
17000

Req. 4

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

20% of Current Month DM Purchases


80% of Last Month's DM purchases
Total Cash Payments

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

$7,700
$56,000
$63,700

$8,913
$30,802
$39,452

$8,913
$34,602
$43,515

$22,972
$121,403
$144,375

Introduction to Management Accounting

Solutions Manual

Req. 5

Schedule of Expected Cash DisbursementsConversion Costs


January
February
March
Variable Manufacturing Overhead Costs
$11,400
$12,906
$13,602
Rent (Fixed)
$5,000
$5,000
$5,000
Other Fixed MOH
$3,000
$3,000
$3,000
Cash Payments for Manufacturing Overhead
$19,400
$20,906
$21,602

Quarter
$37,908
$15,000
$9,000
$61,908

Req. 6

Schedule of Expected Cash Disbursements -- Operating Expenses


January
February
March
Variable Operating Expenses
$8,000
$9,200
$9,900
Fixed Operating Expenses
$1,000
$1,000
$1,000
Cash Payments for Operating Expenses
$9,000
$10,200
$10,900

Quarter
$27,100
$3,000
$30,100

Req. 7

Beginning Cash Balance


Plus: Cash Collections
Total Cash Available
Less Cash Payments:
Direct Materials Purchases
Conversion Costs
Operating Expenses
Equipment Purchases
Tax Payment
Total Disbursements
Ending Cash Balance Before Financing
Plus: New Borrowings
Less: Debt Repayments
Less: Interest Payments

Combined Cash Budget


January
February
$4,500
$5,598
$73,000
$83,600
$77,500
$89,198
$38,502
$19,400
$9,000
$5,000
$71,902
$5,598

Ending Cash Balance

$5,598

Interest Owed

$0

Total interest

$280

$43,252
$20,906
$10,200
$12,000
$10,000
$96,358
-$7,160
$12,000

$4,840
$120

March
$4,840
$94,100
$98,940

Quarter
$4,500
$250,700
$255,200

$44,566
$21,602
$10,900
$16,000
$93,068
$5,872

$126,320
$61,908
$30,100
$33,000
$10,000
$261,328
-$6,128

-$1,000

-$1,000

$4,642

$4,642

$110

$230

Req. 8

Budgeted Manufacturing Cost per Unit


Direct Materials cost per unit
Conversion costs per unit
fixed manufacturing overhead per unit
budgeted cost of manufacturing each unit

$5
$6
$1
$4

Req. 9

Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales Revenue
Less: Cost of Goods Sold
Gross Profit
Operating Expenses
Less: Depreciation Expense
Operating Income
Less: Interest Expense
Less: Income Tax Expense
Net Income

Chapter 9: The Master Budget and Responsibility Accounting

$271,000
($162,600)
$108,400
($30,100)
($4,800)
$73,500
($230)
($21,981)
$51,289