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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

## 20% of Current Month DM Purchases

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

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

Solutions Manual

Req. 5

January
February
March
\$11,400
\$12,906
\$13,602
Rent (Fixed)
\$5,000
\$5,000
\$5,000
Other Fixed MOH
\$3,000
\$3,000
\$3,000
\$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

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

\$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
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

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