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# Exercise 1 Material Purchase Budget Exercise 3 Manufacturing Overhead Budget

Mini Products, Inc., has developed a very powerful electronic calculator. Each calculator The direct labor budget of Kiko Corporation for the upcoming fiscal year contains the
requires three small “chips” that cost P200 each and are purchased from an overseas following details concerning budgeted direct labor-hours.
supplier. Mini Products has prepared a production budget for the calculator by quarters for 1st quarter 2nd quarter 3rd quarter 4th quarter
2019 and for the first quarter of 2020, as shown below: Budgeted direct
2019 2020 labor-hours 5,000 4,800 5,200 5,400
1st 2nd 3rd 4th 1st The company’s variable manufacturing overhead rate is P1.75 per direct labor-hour and the
Budgeted production company’s fixed manufacturing overhead is P35,000 per quarter. The only noncash item
of calculators 60,000 90,000 150,000 100,000 80,000 included in the fixed manufacturing overhead is depreciation, which is P15,000 per quarter.
The chip used in production of the calculator is sometimes hard to get, so it is necessary to
carry large inventories as a precaution against stockouts. For this reason, the inventory of Required:
chips at the end of the quarter must be equal to 20% of the following quarter’s production 1. Construct the company’s manufacturing overhead budget for the upcoming fiscal
needs. Some 36,000 chips will be on hand to start the first quarter of 2019. year
2. Compute the company’s manufacturing overhead rate (including both variable
Required: and fixed manufacturing overhead) for the upcoming fiscal year. Round off to the
Prepare a materials purchases budget for chips, by quarter and in total, for 2019. At the nearest whole centavos.
bottom of your budget, show the peso amount of purchases for each quarter and for the
year in total. Exercise 4 Cash Budget Analysis
A cash budget, by quarters, is given below for a retail company (000 omitted). The company
Exercise 2 Direct Labor Budget requires a minimum cash balance of P5,000 to start each quarter.
The Production Department of the Laguna Plant of JC Corporation has submitted the Quarter
following forecast of units to be produced at the plant for each quarter of the upcoming 1 2 3 4 Year
fiscal year. The plant produces high-end outdoor barbeque grills. Cash balance, beginning P9 P? P? P? P?
1st quarter 2nd quarter 3rd quarter 4th quarter Add: collection from customers ? ? 125 ? 391
Units to be produced 5,000 4,400 4,500 4,900 Total cash balance 85 ? ? ? ?
Each unit requires 0.40 direct labor-hours and direct labor-hour workers paid P11 per hour. Less: disbursements
Purchase of inventory 40 58 ? 32 ?
Required: Operating expenses ? 42 54 ? 180
1. Construct the company’s direct labor budget for the upcoming fiscal year, Equipment purchases 10 8 8 ? 36
assuming that the direct labor work force is adjusted each quarter to match the Dividends 2 2 2 2 ?
number of hours required to produce the forecasted number of units produced. Total disbursements ? 110 ? ? ?
2. Construct the company’s direct labor budget for the upcoming fiscal year, Excess (deficiency) of cash available
assuming that the direct labor work force is not adjusted each quarter. Instead, over disbursements (3) ? 30 ? ?
assume that the company’s direct labor work force consists of permanent Financing:
employees who are guaranteed to be paid for at least 1,800 hours of work each Borrowings ? 20 - - ?
quarter. If the number of required direct labor-hours is less than this number, the Repayments (including interest)* - - (?) (7) (?)
workers are paid for 1,800 hours anyway. Any hours worked in excess of 1,800 Total financing ? ? ? ? ?
hours in a quarter are paid at the rate of 1.5 times the normal hourly rate for direct Cash balance, ending P? P? P? P? P?
labor.
* Interest will total P4,000 for the year

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