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 (30%)

Credit Collections (70%)
Total Cash Collections

Cash Collections
January
$24,000
$

56,000
$80,000

February
$27,600
$

64,400
$92,000

Req. 2

Unit Sales

Production Budget
January
8,000

Chapter 9: The Master Budget and Responsibility Accounting

February
9,200

Introduction to Management Accounting

Plus: Desired ending inventory
Total needed
Less: Beginning Inventory
Units to produce

Solutions Manual
2,300
10,300
2,000
8,300

2,475
11,675
2,300
9,375

Req. 3
Direct Materials Budget
January
February
Units to be produced
8,300
9,375
Quantity of DM needed per unit
2
2
Quantity of DM needed for production
16,600
18,750
Desired ending inventory of DM
1,875
1,970
Total quantity of DM needed
18,475
20,720
Beginning inventory of DM
1,660
1,875
Quantity of DM to purchase
16,815
18,845
Cost per pound
3
3
Total cost of DM purchases
$50,445
$56,535

Unit Sales
Desired End Inventory (25%)
Total Needed
Beginning Inventory
Units to produce
DM Needed per unit
DM needed for production
10% of DM

April
9,700
2,125
11,825
2,425
9,400
2
18,800

May
8,500

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
January
February
December purchases (from accounts
payable)
January Purchases
February Purchases
March Purchases
Total Disbursements

$42,400
$10,089

$52,489

Chapter 9: The Master Budget and Responsibility Accounting

$40,356
$11,307
$51,663

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

Introduction to Management Accounting

Solutions Manual

Req. 5
Schedule of Expected Cash DisbursementsConversion Costs
January
February
Rent (fixed)
$5,000
$5,000
Other fixed MOH
$3,000
$3,000
Variable Conversion Costs
9960
11,250
Total payments for conversion costs
$17,960
$19,250

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
January
February
Variable operating expenses
$
8,000 $
9,200
Fixed Operating Expenses
$
1,000 $
1,000
Total Disbursements
$
9,000 $
10,200

Req. 7

Cash Balance - Beginning

Add Cash Collections
Total Cash Available
Less Cash Disbursements:
Direct Materials Purchases
Conversion Costs
Operating Expenses
Equipment Purchases
Tax Payment
Total Disbursements
Excess of Cash
Financing
Borrowings
Repayments
Interest Payments
Total Financing
Cash Balance - Ending
Interest: 4000 X 0.01 X 3 Months
12,000 x .01 x 2 months

Combined Cash Budget

January
February
$4,500
$4,051
80,000
92,000
84,500
96,051
52,489
17,960
9,000
5,000
84,449
51

51,663
19,250
10,200
12,000
10,000
103,113
-7,062

4,000

12,000

4,000
$4,051

12,000
$4,938

120
240

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Total interest

Solutions Manual
$280

Req. 8
Budgeted Manufacturing Cost per Unit
Direct Materials (2lbs x $2)
$4.00
Coversion Costs
$1.20
Fixed MOH (.80)
$0.80
Cost of manufacturing ea. Unit
$6.00
Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
COGS
Gross Profit
Operating Expenses
Depreciation
Opertaing Income
Less Interest Expense
Less provision for income taxes
Net Income

271,000
-162,600
108,400
30,100
4,800
73,500
-280
21,966
$51,254

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

(60 min.) P 9-59A

ves 2 & 3)

March, and for the quarter

from Requirement 3.

Budget
February

March

9,200

April

9,900

10

10

92,000

99,000

March
$29,700
$

69,300
$99,000

March
9,900

May

9,700
###
$

97,000

8,500
$

10

85,000

Quarter
$81,300
$

189,700
$271,000

Quarter
27,100

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

2,425
12,325
2,475
9,850

March
9,850
2
19,700
1880
21,580
1,970
19,610
3
$58,830

Material Purchases
March

$45,228
$11,766
$56,994

Solutions Manual

2,425
29,525
2,000
27,525

Quarter
27,525
2
55,050
1,880
56,930
1,660
55,270
3
$165,810

Quarter
$42,400
$50,445
$56,535
$11,766
$161,146

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

Introduction to Management Accounting

Conversion Costs
March
$5,000
$3,000
11820
$19,820

Quarter
$15,000
$9,000
$33,030
$57,030

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

Quarter
27,100
3,000
30,100

$
$
$

March
$4,938
99,000
103,938

Quarter
$4,500
271,000
275,500

56,994
19,820
10,900
16,000

161,146
57,030
30,100
33,000
10,000
291,276
-15,776

103,714
224
5000
-280
4,720
$4,944

Solutions Manual

21,000
0
-280
20,720
$4,944

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

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