Introduction to Management Accounting Solutions Manual

Problems: Set A
P9-54A Comprehensive budgeting problem (Learning Objectives 2 & 3)
Solution:
Given

Sales Budget
December January February
Unit sales* 5,067 5,340 5,940
Unit selling price $ 15 $ 15 $ 15
Total sales Revenue $ 76,000 $ 80,100 $ 89,100
*Hint: Unit sales = Sales in dollars Selling price per unit

Req. 1

Cash Collections Budget

January February March
Cash sales (30%) $24,030 $26,730 $24,840
Credit sales (70%) $53,200 $56,070 $62,370
Total collections $77,230 $82,800 $87,210

Req. 2

Production Budget
January February March
Unit sales 5,340 5,940 5,520
Plus: Desired ending inventory (10%) 594 552 570
Total needed 5,934 6,492 6,090
Lesss: Beginning inventory 534 594 552
Units to produce 5,400 5,898 5,538

Req. 3

Direct Materials Budget

January February March
Units to be produced 5,400 5,898 5,538
Multiply by: Quantity of DM needed per unit 2 2 2
Quantity of DM needed for production 10,800 11,796 11,076
Plus: Desired ending inventory of DM (20%) 2,359 2,215 2,258
Total quantity of DM needed 13,159 14,011 13,334
Less: Beginning inventory of DM 2,160 2,359 2,215
Quantity of DM to purchase 10,999 11,652 11,119
Multiply by: Cost per pound $ 1.50 $ 1.50 $ 1.50

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Introduction to Management Accounting Solutions Manual

Total cost of DM purchases $16,499 $17,478 $16,679

April May
Unit Sales 5,700 5,160
Plus: Desired End Inventory (10%) 516
Total Needed 6,216
Less: Beginning Inventory 570
Units to produce 5,646
DM needed per unit 2
Quantity of DM needed for production 11,292

Req. 4

Cash Payments for Direct Material Purchases Budget

January February March
December purchases (From AP) $43,000
January purchases 20% and 80% $3,300 $13,199
February purchases $3,496 $13,982
March purchases $3,336
Total disbursements $46,300 $16,695 $17,318

Req. 5

Cash Payments for Direct Labor Costs

January February March
Direct Labor $2,106 $2,300 $2,160

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Introduction to Management Accounting Solutions Manual

Req. 6

Cash Payments for Manufacturing Overhead Budget

January February March
Rent (fixed) $6,500 $6,500 $6,500
Other MOH (fixed) $2,900 $2,900 $2,900
Variable manufacturing overhead $ 7,560 $ 8,257 $ 7,753
Total disbursements $16,960 $17,657 $17,153

Req. 7

Cash Payments for Operating Expenses Budget

January February March
Variable operating expenses $ 6,408 $ 7,128 $ 6,624
Fixed operating expenses $ 1,400 $ 1,400 $ 1,400
Total disbursements $ 7,808 $ 8,528 $ 8,024

* Hint: Units sold x Variable operating expenses per unit sold ($1.40)

Req. 8
Combined Cash Budget
January February March
Cash balance, beginning $4,460 $4,716 $19,936
Plus: cash collections (req. 1) $77,230 82,800 87,210
Total cash available $81,690 87,516 107,146
Less cash payments:
DM purchases (req. 4) $46,300 16,695 17,318
Direct labor (req. 5) $2,106 2,300 2,160
MOH costs (req 6) $16,960 17,657 17,153
Operating expenses (req 7) $7,808 8,528 8,024
Tax payment 10,800
Equipment purchases $5,800 11,600 15800
Total cash payments 78,974 67,580 60,455
Ending cash before financing 2,716 19,936 46,691
Financing:
Borrowings 2,000
Repayments -2000
Interest -75
Total financing 2,000 -2,075
Cash balance, ending $4,716 $19,936 $44,616

Req. 9

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Introduction to Management Accounting Solutions Manual

Budgeted Manufacturing Cost per Unit

Direct materials cost per unit $3.00
Direct labor cost per unit $0.39
Variable MOH cost per unit $1.40
Fixed MOH per unit (given in problem) $0.80
Cost of manufacturing each unit $5.59

Req. 10

Damon Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales $ 252,000
Cost of goods sold 93,912
Gross profit 158,088
Operating expenses -24,360
Depreciation expense -4,400
Operating income 129,328
Less: interest expense -75
Less: provision for income tax @ 30% -38,776
Net income $90,477

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March April May

5,520 5,700 5,160
$ 15 $ 15 $ 15
$ 82,800 $ 85,500 $ 77,400

Quarter
$75,600
$171,640
$247,240

Quarter
16800
570
17,370
534
16,836

Quarter
16,836
2
33,672
2,258
35,930
2,160
33,770
$ 1.50

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Introduction to Management Accounting Solutions Manual

$50,656

Quarter
$26,904
$16,499
$17,478
$3,336
$64,217

Quarter
$6,566

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Introduction to Management Accounting Solutions Manual

Quarter
$19,500
$8,700
$ 23,570
$51,770

Quarter
$ 20,160
$ 4,200
$ 24,360

Quarter
$4,460
247,240
276,352

80,313
6,566
51,770
24,360
10,800
33,200
207,009
69,343

2,000
-2,000
-75
-75
$44,616

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