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MANAGERIAL ACCOUNTING - Fourth Edition Solutions Manual

WASATCH MANUFACTURING
Master Budget

Sales Budget
December January February March April May
Budgeted sales (units) 7,000 8,000 9,000 8,600 9,400 6,800
Selling price per unit $15 $15 $15 $15 $15 $15
Budgeted sales (dollars) $105,000 $120,000 $135,000 $129,000 $141,000 $102,000

Cash Collections Budget


January February March Quarter
Cash sales (30%) $36,000 $40,500 $38,700 $115,200
Credit sales (70%) 73,500 84,000 94,500 252,000
Total cash collections $109,500 $124,500 $133,200 $367,200

Production Budget
January February March Quarter
Sales in units 8,000 9,000 8,600 25,600
Add: Desired ending inventory 1,800 1,720 1,880 1,880
Total units needed 9,800 10,720 10,480 27,480
Less: Beginning inventory (1,333) (1,800) (1,720) (1,333)
Production in units 8,467 8,920 8,760 26,147

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MANAGERIAL ACCOUNTING - Fourth Edition Solutions Manual

Direct Materials Budget


January February March Quarter
Units to be produced 8,467 8,920 8,760 26,147
Multiply by: Quanity of DM needed per 4 4 4 4
unit (lbs.)
Quanity of DM needed for production (lbs 33,868 35,680 35,040 104,588
Plus: Desired ending inventory of DM (lbs 5,352 5,256 5,328 5,328
Total quanity of DM needed (lbs.) 39,220 40,936 40,368 109,916
Less: Beginning inventory of DM (lbs.) (5,080) (5,352) (5,256) (5,080)
Quanity of DM to purchase (lbs.) 34,140 35,584 35,112 104,836
Multiply by: Cost per pound $1.00 $1.00 $1.00 $1.00
Total cost of DM purchases $34,140 $35,584 $35,112 $104,836

Cash Payments for Direct Material Purchases Budget


January February March Quarter
December purchases (from A/P) $27,750 $27,750
January purchases 8,535 $25,605 34,140
February purchases 8,896 $26,688 35,584
March purchases 8,778 8,778
Total cash payments $36,285 $34,501 $35,466 $106,252

Cash Payments for Direct Labor Budget


January February March Quarter
Units produced 8,467 8,920 8,760 26,147
Multiply by: Hours per unit 0.1 0.1 0.1 0.1
Direct labor hours 847 892 876 2615
Multiply by: Direct labor rate per hour $15 $15 $15 $15

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MANAGERIAL ACCOUNTING - Fourth Edition Solutions Manual

Direct labor cost $12,701 $13,380 $13,140 $39,221

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MANAGERIAL ACCOUNTING - Fourth Edition Solutions Manual

Cash Payments for Manufacturing Overhead Budget


January February March Quarter
Rent (fixed) $10,000 $10,000 $10,000 $30,000
Other manufacturing overhead (fixed) 6,000 6,000 6,000 18,000
Variable manufacturing overhead costs 10,584 11,150 10,950 32,684
Cash payments for manufacturing overhe $26,584 $27,150 $26,950 $80,684

Cash Payments for Operating Expenses Budget


January February March Quarter
Variable operating expenses $10,400 $11,700 $11,180 $43,280
Fixed operating expenses 2,200 2,200 2,200 6,600
Cash payments for operating expenses $12,600 $13,900 $13,380 $49,880

Combined Cash Budget


January February March Quarter
Cash balance, Beginning $17,000 $15,516 $15,085 $17,000
Plus: Cash collections 109,500 124,500 133,200 367,200
Total cash available $126,500 $140,016 $148,285 $384,200
Less: Cash payments:
DM purchases $36,285 $34,501 $35,466 $106,252
Direct labor 12,701 13,380 13,140 39,221
Manufacturing overhead costs 26,584 27,150 26,950 80,684
Operating expenses 12,600 13,900 13,380 49,880
Tax payment 7,814 28,000 9,296 45,111
Equipment purchases 20,000 8,000 25,000 53,000
Total cash payments $115,984 $124,931 $123,232 $374,147
Ending cash before financing $10,516 $15,085 $25,053 $10,053

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MANAGERIAL ACCOUNTING - Fourth Edition Solutions Manual

Financing:
Borrowings 5000 0 - 5,000
Repayments - - 10,000 10,000
Interest payments - - 188 187.5
Cash balance, Ending $15,516 $15,085 $14,866 $14,866

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MANAGERIAL ACCOUNTING - Fourth Edition Solutions Manual

Budgeted Manufacturing Cost per Unit


Direct materials cost per unit $4.01
Direct labor cost per unit 1.50
Variable manufacturing costs per unit 1.25
Fixed manufacturing overhead per unit 0.75
Cost of manufacturing each unit $7.51

Budgeted Income Statement


Sales Revenue $384,000
Less: Cost of Goods Sold 192,243
Gross Profit $191,757
Less: Operating Expenses 49,880
Less: Depreciation Expense 10,000
Operating Income $131,877
Less: Interest Expense 187.5
Less: Income Tax Expense 45,111
Net Income $86,579

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