Introduction to Management Accounting

Solutions Manual

Problems: Set A

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
Unit sales

January

7,000

Unit selling price

Total sales Revenue

8,000

10 $
70,000

10
80,000

Req. 1
Cash Collections
cash sales
credit sales
total cash collections

January
$ 24,000.00
$ 56,000.00
$ 80,000.00

February
$27,600
64400
$92,000

Req. 2
Production Budget
unit sales

January
66,667

Chapter 9: The Master Budget and Responsibility Accounting

February
76,667

Introduction to Management Accounting

Solutions Manual

plus: desired ending inventory

total needed
less:beginning inventory
units to produce

17,500
84,167
14,167
17,000

20,000
96,667
26,667
32,000

Req. 3
Direct Materials Budget
units to be produced
x pounds of DM needed per unit
quantity (lbs) needed for production
plus: desired ending inventory of DM
Total quantity (lbs) needed
less: beginning inventory of DM
quantity (lbs) to purchase
x cost per pound
total cost of DM purchases

January
17,000
2
2
3,200
37,200
14,167
2
2
$8,867

February
32,000
2
2
4,260
68,260
26,667
2
2
$14,927

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
december purchases (from acc pay)
january purchases
februrary purchases
march purchases

January
$1,400
$0
9,200
1,980

February
5,600
$1,600
9,200
7,920

total cash payments for direct material

purchases

$1,400

$5,600

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

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Req. 5
Schedule of Expected Cash DisbursementsConversion Costs
variable conversion costs
rent (fixed)
other MOH
total payments for conversion costs

January
$9,600
$5,000
3,000
$17,600

February
$11,040
$5,000
3,000
$19,040

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
variable operating expenses
fixed operating expenses
total payments for operating expenses

January
8,000
$1,000
9,000

February
9,200
$1,000
10,200

Req. 7
Combined Cash Budget
cash balance, beginning
add cash collections
total cash available
less cash payments:
direct material purchases
conversion costs
operating expenses
tax payment
equipment purchases
total cash payments
ending cash balance before finanicing
financing:
borrowings
repayments
interest payments
ending cash balance

Total interest

January
$4,500
80,000
84,500

February
$56,500
92,000
148,500

1,400
17,600
9,000

5,600
19,040
10,200
10,000

28,000
56,500

44,840
103,660

56,500

103,660

$280

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

Req. 8
Budgeted Manufacturing Cost per Unit
direct materials cost per unit
conversion costs per unit
fixed manufacuting each unit
budgeted cost of manufacturing each unit

$2.00
$1.20
$1.20
$4.40

Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
COGS
gross profit
operating expenses
depreciation
operating income
less interest expense
less provision for income taxes
net income

271,000
119,240
budgeted cost of manufacturing
151,760
30,100
271,000
280
10,000
$111,380

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

(60 min.) P 9-59A

es 2 & 3)

arch, and for the quarter

rom Requirement 3.

udget
February

March

9,200

April

9,900

May

9,700

8,500

10

10 $

10

10

92,000

99,000 $

97,000

85,000

March
$29,700
69300
$99,000

Quarter
$ 81,300.00
$189,700.00
$271,000.00

March
82,500

Quarter
225,833

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

$23,000.00
105,500
35,500
42,600

60,500
286,333
76,333
91,600

March
42,600
2
2
5320
90,520
35,500
2
2

Quarter
91,600
6
6
12,780
195,980
76,333
6
6

$19,520

$43,313

Solutions Manual

terial Purchases
March
0
8,000
9,200
9,900

Quarter
$7,000
$9,600
$27,600
$19,800

$9,980

$16,980

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

nversion Costs
March
$11,880
$5,000
3,000
$19,880

Quarter
$32,520
$15,000
$9,000
$56,520

erating Expenses
March
9,900
$1,000
10,900

March
$103,660
99,000
202,660
9,980
19,880
10,900

40,760
161,900

280
161,620

Quarter
27,100
3,000
30,100

Quarter
$164,660
$271,000
$435,660
$0
$16,980
$56,520
$30,100
$10,000
$0
$113,600
$322,060
$0
$0
$0
$280
$321,780

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

ted cost of manufacturing each unit x number of units sold

Chapter 9: The Master Budget and Responsibility Accounting