Introduction to Management Accounting

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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 sales
Credit sales
Total cash collections

Cash Collections Budget

January
February
$24,000
$27,600
$
49,000 $
56,000
$
73,000 $
83,600

Req. 2

unit sales*

Production Budget
January
8,000

Chapter 9: The Master Budget and Responsibility Accounting

February
9,200

Introduction to Management Accounting

Solutions Manual

plus: Desired ending inventory

production need
less: Beginning inventory
Units to produce

2,300
10,300
2000
8,300

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

Req. 3
Direct Materials Budget
January
Units to be produced
8,300
x Pounds of DM needed per unit
2
Quantity (pounds) needed for production
16,600
Plus: Desired ending inventory of DM
1,875
Total quantity of (pounds) needed
18,475
Less: Beginning inventory of DM
1,660
Quantity (pounds) needed to purchase
16,815
x Cost per pound
$
2.00 $
Total cost of DM purchases
$33,630

Units to be produced
x Pounds of DM neede per unit
Quantity (pounds) needed for production
Plus: Desired ending inventory of DM
Total Quantity of (pounds) needed
Less: Beginging inventory of DM
Quantity (pounds) needed to purchase
x Cost per pound
Total cost of DM purchases
Req. 4

April
9,700
2
19,400
1,700
21,100
1940
19,160
$
$

2 $
38,320 $

February
9,375
2
18,750
1,970
20,720
1,875
18,845
2.00
$37,690

May
8,500
2
17,000
1,700
18,700
1,600
17,100
2
34,200

Schedule of Expected Cash DisbursementsMaterial Purchases

January
February
December purchases (from Accounts payable)
January purchases
February purchases
March purchases
Total cash payments for direct materials
purchases

$42,400
$6,726

$49,126

Chapter 9: The Master Budget and Responsibility Accounting

$26,904
$7,538

$34,442

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

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Req. 5
Schedule of Expected Cash DisbursementsConversion Costs
January
February
Variable conversion costs
$9,960
$11,250
Rent (fixed)
$5,000
$5,000
Other fixed MOH
$
3,000 $
3,000
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 epenses
$1,000
$1,000
Total payments for operating expenses
$9,000
$10,200

Req. 7

Cash, balance, beginning

Add cash collection
Total cash available
Less cash payments
Direct materials purchases
Conversion costs
Operating expenses
Equipment purchases
Tax payment
Total cash payments
Ending cash balance before financing
Financing:
Borrowings
Repayments
Interest payments
Ending cash balance

Total interest

Combined Cash Budget

January
February
$4,500
$4,414
73,000
83,600
77,500
88,014
49,126
17,960
9,000
5,000
81,086
-3,586

34,442
19,250
10,200
12,000
10,000
85,892
2,122

8,000

2,000

4,414

4,122

$280

Chapter 9: The Master Budget and Responsibility Accounting

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Req. 8
Budgeted Manufacturing Cost per Unit
Direct materials cost per unit
$4.00
Conversion costs per unit
$1.20
Fixed manufacturing overhead per unit
$0.80
Budgeted cost of manufacturing each unit
$6.00
Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Cost of goods sold *
Gross profit
Operating expenses
Depreciation
Operating income
Less interest expense
Less provisions 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.

udget
February
9,200

March

April

9,900

May

9,700

8,500

10 $

10 $

10

10

92,000 $

99,000 $

97,000

85,000

March
Quarter
$29,700
$81,300
$
64,400 $
169,400
$94,100
$
250,700

March
9,900

Quarter
27,100

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

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

7,200
34,300
6,775
27,525

March
9,850
2
19,700
1940
21,640
1,970
19,670
$
2.00 $
$39,340

aterial Purchases
March

Solutions Manual

Quarter
27,525
2
55,050
5,785
60,835
1,660
59,175
2.00

$110,660

Quarter

$30,152
$7,868

$33,630
$37,690
$71,320

$38,020

$121,588

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

Solutions Manual

onversion Costs
March
Quarter
$11,820
$33,030
$5,000
$15,000
$
3,000 $
9,000
$19,820
$57,030

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

Quarter
$27,100
$3,000
$30,100

March
$4,122
94,100
98,222

Quarter
$4,500
250,700
255,200

38,020
19,820
10,900
16,000
84,740
13,482

121,588
57,030
30,100
33,000
10,000
251,718
3,482

-9,000
-280
4,202

10,000
-9,000
-280
4,202

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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