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Acc 223a CH 5 Answers
Acc 223a CH 5 Answers
Requirement 1
Notice that even though sales peak in August, cash collections peak in September. This occurs
because the bulk of the company’s customers pay in the month following sale. The lag in collections
that this creates is even more pronounced in some companies. Indeed, it is not unusual for a company
to have the least cash available in the months when sales are greatest.
Requirement 2
Requirement 1
Assuming that the direct labor workforce is adjusted each quarter, the direct labor budget would be:
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Units to be produced 5,000 4,400 4,500 4,900 18,800
Direct labor time per unit (hours) × 0.40 × 0.40 × 0.40 × 0.40 × 0.40
Total direct labor hours needed 2,000 1,760 1,800 1,960 7,520
Direct labor cost per hour × P11.00 × P11.00 × P11.00 × P11.00 × P11.00
Total direct labor cost P 22,000 P 19,360 P 19,800 P 21,560 P 82,720
Requirement 2
Assuming that the direct labor workforce is not adjusted each quarter and that overtime wages are
paid, the direct labor budget would be:
2nd
1st Quarter Quarter 3rd Quarter 4th Quarter Year
Units to be produced 5,000 4,400 4,500 4,900 18,800
Direct labor time per unit (hours) × 0.40 × 0.40 × 0.40 × 0.40 × 0.40
Total direct labor hours needed 2,000 1,760 1,800 1,960 7,520
Regular hours paid 1,800 1,800 1,800 1,800 7,200
Overtime hours paid 200 - - 160 360
Wages for regular hours
(@ P11.00 per hour) P19,800 P19,800 P19,800 P19,800 P79,200
Overtime wages
(@ P11.00 per hour × 1.5) 3,300 - - 2,640 5,940
Total direct labor cost P23,100 P19,800 P19,800 P22,440 P85,140
Requirement 1
Kiko Corporation
Manufacturing Overhead Budget
1st
Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Budgeted direct labor-hours 5,000 4,800 5,200 5,400 20,400
Variable overhead rate x P1.75 x P1.75 x P1.75 x P1.75 x P1.75
Variable manufacturing overhead P 8,750 P 8,400 P 9,100 P 9,450 P 35,700
Fixed manufacturing overhead 35,000 35,000 35,000 35,000 140,000
Total manufacturing overhead 43,750 43,400 44,100 44,450 175,700
Less depreciation 15,000 15,000 15,000 15,000 60,000
Cash disbursements for manufacturing
overhead P28,750 P28,400 P29,100 P29,450 P115,700
Requirement 2
Helene Company
Selling and Administrative Expense Budget
1st
Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
Budgeted unit sales 12,000 14,000 11,000 10,000 47,000
Variable selling and administrative expense per
unit x P2.75 x P2.75 x P2.75 x P2.75 x P2.75
Variable expense P33,000 P 38,500 P 30,250 P 27,500 P129,250
Fixed selling and administrative expenses:
Advertising 12,000 12,000 12,000 12,000 48,000
Executive salaries 40,000 40,000 40,000 40,000 160,000
Insurance 6,000 6,000 12,000
Property taxes 6,000 6,000
Depreciation 16,000 16,000 16,000 16,000 64,000
Total fixed selling and administrative expenses 68,000 74,000 74,000 74,000 290,000
Total selling and administrative expenses 101,000 112,500 104,250 101,500 419,250
Less depreciation 16,000 16,000 16,000 16,000 64,000
Cash disbursements for selling and administrative
expenses P 85,000 P 96,500 P 88,250 P 85,500 P355,250
Financing:
Borrowings 8 20 * — — 28
Repayments (including interest)
0 0 (25) (7)* (32)
Total financing 8 20 (25) (7) (4)
Cash balance, ending P 5 P 5 P 5 P 6 P 6
*Given.
Answer to Problems
Requirement 1
Requirement 2
Payments to suppliers:
August purchases (accounts payable)...............................................................................
P16,000
September purchases: P25,000 × 20%.............................................................................
5,000
Total cash payments..............................................................................................................
P21,000
Requirement 3
COOKIE PRODUCTS
Cash Budget
For the Month of September
Requirement 1
Production budget:
July August September October
Budgeted sales (units) 40,000 50,000 70,000 35,000
Add desired ending inventory 20,000 26,000 15,500 11,000
Total needs 60,000 76,000 85,500 46,000
Less beginning inventory 17,000 20,000 26,000 15,500
Required production 43,000 56,000 59,500 30,500
Requirement 2
During July and August the company is building inventories in anticipation of peak sales in
September. Therefore, production exceeds sales during these months. In September and October
inventories are being reduced in anticipation of a decrease in sales during the last months of the year.
Therefore, production is less than sales during these months to cut back on inventory levels.
Requirement 3
As shown in requirement (1), production is greatest in September. However, as shown in the raw
material purchases budget, the purchases of materials is greatest a month earlier because materials
must be on hand to support the heavy production scheduled for September.
Requirement 1
Cash sales—June..................................................................................................................
P 60,000
Collections on accounts receivable:
May 31 balance..................................................................................................................
72,000
June (50% × 190,000)........................................................................................................
95,000
Total cash receipts.................................................................................................................
P227,000
Schedule of cash payments for purchases:
Requirement 2
Requirement 3
Requirement 1
Nikko Manufacturing Company
Sales Budget
For the year ending December 31, 2018
Units Amount
First quarter 16,000 P 480,000
Second quarter 20,000 600,000
Third quarter 22,000 660,000
Fourth quarter 22,000 660,000
Total 80,000 P2,400,000
Requirement 2
Nikko Manufacturing Company
Statement of Production Required
For 2018
Quarter
1st 2nd 3rd 4th Total
Units to be sold 16,000 20,000 22,000 22,000 80,000
Add: Desired ending inventory (20%) 4,000 4,400 4,400 5,000 5,000
Total units required 20,000 24,400 26,400 27,000 85,000
Less: Beginning inventory 3,000 4,000 4,400 4,400 3,000
Units to be produced 17,000 20,400 22,000 22,600 82,000
Requirement 3
Nikko Manufacturing Company
Statement of Raw Materials Purchase Requirements
For 2018
Quarter
1st 2nd 3rd 4th Total
Units required for production 51,000 61,200 66,000 67,800 246,000
Add: Desired ending inventory 12,240 13,200 13,560 15,000 15,000
Total units 63,240 74,400 79,560 82,800 261,000
Less: Beginning inventory 12,500 12,240 13,200 13,560 12,500
Raw Materials to be Purchased 50,740 62,160 66,360 69,240 248,500
Requirement 1
Month
April May June Quarter
From accounts receivable P141,000 P 7,200 P148,200
From April sales:
20% × 200,000 40,000 40,000
75% × 200,000 150,000 150,000
4% × 200,000 P 8,000 8,000
Requirement 2
Cash budget:
Month
April May June Quarter
Cash balance, beginning P 26,000 P 27,000 P 20,200 P 26,000
Add receipts:
Collections from customers 181,000 217,200 283,000 681,200
Total available 207,000 244,200 303,200 707,200
Less disbursements:
Merchandise purchases 108,000 120,000 180,000 408,000
Payroll 9,000 9,000 8,000 26,000
Lease payments 15,000 15,000 15,000 45,000
Advertising 70,000 80,000 60,000 210,000
Equipment purchases 8,000 — — 8,000
Total disbursements 210,000 224,000 263,000 697,000
Excess (deficiency) of receipts
over disbursements (3,000) 20,200 40,200 10,200
Financing:
Borrowings 30,000 — — 30,000
Repayments — — (30,000) (30,000)
Interest — — (1,200) (1,200)
Total financing 30,000 — (31,200) (1,200)
Cash balance, ending P 27,000 P 20,200 P 9,000 P 9,000
Requirement 3
If the company needs a minimum cash balance of P20,000 to start each month, the loan cannot be
repaid in full by June 30. If the loan is repaid in full, the cash balance will drop to only P9,000 on
June 30, as shown above. Some portion of the loan balance will have to be carried over to July, at
which time the cash inflow should be sufficient to complete repayment.
Capacity
100% 90% 80% 70% 60%
Machine Hours 200,000 180,000 160,000 140,000 120,000
Variable Overhead P1,300,000 P1,170,000 P1,040,000 P 910,000 P 780,000
Fixed Overhead 300,000 300,000 300,000 300,000 300,000
Total P1,600,000 P1,470,000 P1,340,000 P1,210,000 P1,080,000
Capacity
100% 90% 80% 70% 60%
Direct Labor Hours 200,000 180,000 160,000 140,000 120,000
Machine Hours 400,000 360,000 320,000 280,000 240,000
Variable Overhead P1,400,000 P1,260,000 P1,120,000 P 980,000 P 840,000
Fixed Overhead 500,000 500,000 500,000 500,000 500,000
Total P1,900,000 P1,760,000 P1,620,000 P1,480,000 P1,340,000
1. B 11. C 21. C
2. B 12. B 22. C
3. C 13. C 23. D
4. E 14. B 24. C
5. C 15. D 25. C
6. C 16. C 26. C
7. D 17. A 27. D
8. C 18. B 28. A
9. A 19. E 29. C
10. D 20. B 30. D
Supporting computations:
Questions 16 to 20:
January February
Cost of sales P1,400,000 P1,640,000
Add: Desired Minimum Inventory 492,000 456,000
Total 1,892,000 2,096,000
Less: Beginning Inventory (1,400,000 x 0.3) (17) 420,000 492,000
Gross Purchases 1,472,000 1,604,000
(16)
Less: Cash discount 14,720 16,040
Net cost of purchases P1,457,280 P1,587,960
Payments of Purchases
60% - month of purchase P874,368 P 952,776
40% - following month 582,912
Total (18) P1,535,688
(19)
February
Cash
Gross Discount Net
Current month’s sales (with discount) 35%
P595,000 P11,900 P583,100
Current month’s sales (without discount) 15% 255,000 0 255,000
(25)Accounts Payable on February 28, 2018 will be the unpaid purchases in February - (75% x P120,000) =
P90,000.
Questions 26 to 29:
Net sales P2,000,000
Less: Cost of sales
Finished goods inventory, Jan. 1 P 350,000
Add: Cost of goods manufactured (Sch. I) 1,350,000 *
Total available for sale P1,700,000
Less: Finished goods inventory, Dec. 31 400,000 1,300,000 (26)
Gross Profit P 700,000
Less: Operating and financial expenses
Selling P 300,000
Administrative 180,000
Finance 20,000 500,000
Net income before taxes P 200,000