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Question
The production manager of Rordan Corporation has submitted the following forecast of units to be
produced by quarter for the upcoming fiscal year:

1st 2nd 3rd 4th

  Quarter Quarter Quarter Quarter
Units to be
produced ... 8,000 6,500 7,000 7,500
Each unit requires 0.35 direct labor-hours, and direct laborers are paid $I2.00 per hour.
Required:
1. Construct the company's direct labor budget for the upcoming fiscal year, assuming that the
direct labor workforce is adjusted each quarter to match the number of hours required to produce the
forecasted number of units produced.
2. Construct the company's direct labor budget for the upcoming fiscal year, assuming that the
direct labor workforce is not adjusted each quarter. Instead, assume that the company's direct labor
workforce consists of permanent employees who are guaranteed to be paid for at least 2,600 hours
of work each quarter. If the number of required direct labor-hours is less than this number, the
workers are paid for 2,600 hours anyway. Any hours worked in excess of 2,600 hours in a quarter
are paid at the rate of 1.5 times the normal hourly rate for direct labor.

Answer
Step 1
 1. Assuming that the direct labor workforce is adjusted each quarter, the direct labor budget is:

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year

nits to be produced  8,000 6,500 7,000 7,500 29,000
irect labor time per unit (hours)  ×0.35 ×0.35 ×0.35 ×0.35 ×0.35
otal direct labor-hours needed  2,800 2,275 2,450 2,625 10,150
irect labor cost per hour  ×$12.00 ×$12.00 ×$12.00 ×$12.00 ×$12.00
otal direct labor cost  $ 33,600 $ 27,300 $ 29,400 $ 31,500 $121,800
,
 Step 2
 2. Assuming that the direct labor workforce is not adjusted each quarter and that overtime wages
are paid, the direct labor budget is:
   1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year
 Units to be produced  8,000 6,500 7,000 7,500  
 Direct labor time per unit (hours)  ×0.35 ×0.35 ×0.35 ×0.35  
 Total direct labor-hours needed  2,800 2,275 2,450 2,625  
 Regular hours paid  2,600 2,600 2,600 2,600  
 Overtime hours paid     200       0       0     25  
            
 Wages for regular hours (@ $12.00 per hour) $31,200 $31,200 $31,200 $31,200 $124,800
 Overtime wages (@ 1.5 × $12.00 per hour)     3,600          0          0       450      4,050
 Total direct labor cost  $34,800 $31,200 $31,200 $31,650 $128,850
Answer
Manufacturing Overhead Budget:

  1st 2nd 3rd 4th Year

Variable Manufacturing Overhead = Rate*Number of hours26,00026,65027,62525,350105,625

Fixed Manufacturing Overhead 48,00048,00048,00048,000192,000

Total Manufacturing Overhead 74,00074,65075,62573,350297,625

Less: Depreciation 16,00016,00016,00016,00064,000

Cash disbursements 58,00058,65059,62557,350233,625

 
2.Overhead rate

Total budgeted overhead (A) 297,625

Budgeted Direct Labor Hours (B) 32,500

Predetermined overhead Rate (A/B) $9.16

Question
The budgeted unit sales of Weller Company for the upcoming fiscal year are provided below:

  1st 2nd 3rd 4th

  Quarter Quarter Quarter Quarter
Budgeted unit
sales 15,000     16,000     14,000     13,000
The company's variable selling and administrative expense per unit is $2.50. Fixed selling and
administrative expenses include advertising expenses of $8,000 per quarter, executive salaries of
$35,000 per quarter, and depreciation of $20,000 per quarter. In addition, the company will make
insurance payments of $5,000 in the first quarter and $5,000 in the third quarter. Finally, property
taxes of $8,000 will be paid in the second quarter.
Required:
Prepare the company's selling and administrative expense budget for the upcoming fiscal year.

Answer
Step 1
Selling and administrative expense budget:

Weller Company
Selling and Administrative Expense Budget
1 st
3rd
4th

2  Quarter
nd
Year
Quarter Quarter Quarter
Budgeted unit sales 15,000 16,000 14,000 13,000 58,000
Variable selling and administrative expense per
unit $2.50 $2.50 $2.50 $2.50 $2.50

Variable expenses $37,500$40,000 $35,000$32,500$1,45,000

Fixed selling and administrative expenses:
Advertising 8,000 8,000 8,000 8,000 32,000
Executive salaries 35,000 35,000 35,000 35,000 1,40,000
Insurance 5,000 5,000 10,000
Property taxes 8,000 8,000
Depreciation 20,000 20,000 20,000 20,000 80,000
Total fixed expense 68,000 71,000 68,000 63,000 270,000
Total selling and administrative expenses 105,500111,000 103,00095,500 415,000
Less depreciation 20,000 20,000 20,000 20,000 80,000
Cash disbursement for selling and administrative
$85,500$91,000 $83,000$75,500$335,000
expenses
• Variable expenses = Budgeted unit sales × Variable selling and administrative expense per unit
Example of quarter 1st: 15,000  $2.50 = $37,500
• Total selling and administrative expenses = Variable expenses + Total fixed expense
Example of quarter 1st: 37,500 + 68,000 = 105,500
• Cash disbursement for selling and administrative expenses = Total selling and administrative
expenses – depreciation
Example of quarter 1st: 105,500-20,000 = $85,500
×
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Question
Cash Budget, Pro Forma Balance Sheet
Bernard Creighton is the controller for Creighton Hardware Store. In putting together the cash
budget for the fourth quarter of the year, he has assembled the following data.
Sales
July (actual) $100,000   
August (actual) 120,000   
September
90,000   
(estimated)
October (estimated) 100,000   
November (estimated) 135,000   
December (estimated) 150,000   
Each month, 20 percent of sales are for cash, and 80 percent are on credit. The collection pattern for
credit sales is 20 percent in the month of sale, 50 percent in the following month, and 30 percent in
the second month following the sale.
Each month, the ending inventory exactly equals 40 percent of the cost of next month's sales. The
markup on goods is 33.33 percent of cost.
Inventory purchases are paid for in the month following purchase.
Recurring monthly expenses are as follows:
Salaries and wages $10,000
Depreciation on plant and
4,000
equipment
Utilities 1,000
Other 1,700
Property taxes of $15,000 are due and payable on September 15.
Advertising fees of $6,000 must be paid on October 20.
A lease on a new storage facility is scheduled to begin on November 2. Monthly payments are
$5,000.
The company has a policy to maintain a minimum cash balance of $10,000. If necessary, it will
borrow to meet its short-term needs. All borrowing is done at the beginning of the month. All
payments on principal and interest are made at the end of the month. The annual interest rate is 9
percent. The company must borrow in multiples of $1,000.
A partially completed balance sheet as of August 31 is given below. (Accounts payable is for
inventory purchases only.)
Liabilities &
  Assets
Owners’ Equity
Cash $ ?                     
Accounts receivable ?               
Inventory ?               
Plant and 431,750              
equipment
Accounts payable         $?     
Common stock   220,000          
Retained earnings   268,750          
Totals $ ?              $?     
Required:
1. Complete the balance sheet given in part (j).
Creighton Hardware Store
Balance Sheet
August 31
  Assets Liabilities & Owners' Equity
Cash $  
Accounts receivable    
Inventory    
Plant and
431,750 
equipment
Accounts payable   $
Common stock   220,000
Retained earnings   268,750
Totals $ $
Feedback
Remember A = L + OE
2. Bernard wants to see how the company is doing prior to starting the month of December. Prepare
a cash budget for the months of September, October, and November and for the three-month period
in total (the period begins on September 1). Enter repayments, interest, cash deficiencies and
negative total financing as negative amounts. If amount is zero, enter "0".
Creighton Hardware Store
Cash Budget
For the Period Ending November 30
Octobe Novembe
  September Total
r r
Beginning cash
$ $ $ $
balance
Cash collections        
Total cash available $ $ $ $
         
Disbursements:        
Accounts payable $ $ $ $
Salaries and wages        
Utilities        
Other        
Property taxes        
Advertising fees        
Lease        
Total disbursements $ $ $ $
Minimum cash balance        
Total cash needs $ $ $ $
Excess (deficiency) $ $ $ $
Financing:        
Borrowings $     $
Repayments   $    
Interest        
Total financing $ $   $
Ending cash balance $ $ $ $
Feedback
The Schedule of Cash collections will include Cash sales, Credit sales and Total collections.
Complete a supporting schedule of cash collections.
Creighton Hardware Store
Cash collections
For the Period Ending November 30
Octobe Novembe
  September Total
r r
Cash sales $ $ $ $
Credit sales:        
Current month        
Prior month        
From two months
       
ago
Total collections $ $ $ $
Feedback
The Schedule of Cash collections will include Cash sales, Credit sales and Total collections.
3. Prepare a pro forma balance sheet as of November 30.
Creighton Hardware Store
Pro Forma Balance Sheet
November 30
Assets:    
  $ 
     
     
     
Liabilities:    
    $
Owners' Equity:    
     
     
Totals $$

Answer
Completion of Balance sheet as of August 31,       
          
 Cash 10200      
 Accounts Receivable  100800      
 Inventory 27000      
 Plant & Equipment 431750      
 Total asset 569750      
          
 Accounts Payable 81000      
 Common stock  220000      
 Retained earnings 268750      
 Total Liabilities & OE 569750      
          
          
          
 Creighton Hardware Store
 Cash Budget
 For the Period Ending November 30
Septembe Novembe
   October Total
r r
 Beginning cash balance 10200 10862.5 17425 10200
 Cash collections 104400 100800 110200 315400
111662.
 Total cash available 114600 127625 325600
5
          
 Disbursements:        
 Accounts payable 81000 70500 85500 237000
 Salaries and wages 10000 10000 10000 30000
 Utilities 1000 1000 1000 3000
 Other 1700 1700 1700 5100
 Property taxes 15000     15000
 Advertising fees   6000   6000
 Lease     5000 5000
 Total disbursements 108700 89200 103200 301100
 Minimum cash balance        
 Total cash needs 10000 10000 10000 10000
 Excess (deficiency) -4100 12462.5 14425 14500
 Financing:        
 Borrowings 5000   0 5000
 Repayments 0 -5000 0 -5000
 Interest 37.5 37.5 0 75
 Total financing 5000 -5000 0 0
 Ending cash balance 10862.5 17425 24425 24425
 Feedback        
The Schedule of Cash collections will include Cash sales,
         
Credit sales and Total collections.
 Complete a supporting schedule of cash collections.        
 Creighton Hardware Store
 Cash collections
 For the Period Ending November 30
Septembe Novembe
   October Total
r r
 Cash sales 18000 20000 27000 65000
 Credit sales:        
 Current month 14400 16000 21600 52000
 Prior month 48000 36000 40000 124000
 From two months ago 24000 28800 21600 74400
 Total collections 104400 100800 110200 315400
 Feedback        
 The Schedule of Cash collections will include Cash sales,
         
Credit sales and Total collections.
 3. Prepare a pro forma balance sheet as of November 30.        
 Creighton Hardware Store    
 Pro Forma Balance Sheet    
 Nov-30    
 Assets:        
 Cash 24425      
 Accounts Receivable 110400      
 Inventory 45000      
 Plant & Equipment 419750      
 Liabilities:        
 Accounts payable   105750    
 Owners' Equity:        
 Common Stock   220000    
 Retained earnings   273825    
 Totals 599575 599575    
b
For Accounts Payable taken from the balance sheet developed in Requirement 1.
c
$5,000 × 0.09 × (2/12) (beginning of September to end of October).
d
Includes minimum cash balance of $10,000.
 
I have no idea how they were calculated, please advise, thanks u!
Answer for question no.1:
Particulars Assets Liabilities Remarks
Cash(balancing
$10,200.00    
figure)
Accounts $100,800.0 July receivables is 30% of 80% of sales and August
 
receivable 0 receivbles is 80% of 80% of 120000
Inventory $27,000.00   40% of cost of sales of september
Plant and $431,750.0
   
equipment 0
Accounts payable   $81,000.00 Purchases of August
$220,000.0
Common stock    
0
$268,750.0
Retained earnings    
0
$569,750.0 $569,750.0
Total  
0 0

Answer
Given margin on sales = 33.33% on cost.
Given cost is x, then cost of sales =.3333x
Selling price=x+.3333x
x=selling price * 1/1.3333
=75%. of selling price.
margin on sales=75%*.3333=25%.
 
 
Answer for question no.2:
Cash collections budget is as follows:
Septembe Octobe Novembe Accounts receivables at the
Particulars July August
r r r end of November
12000
Sales (A) 100000 90000 100000 135000  
0
Cash sales(B)=20% of A 20000 24000 18000 20000 27000  
Credit sales(C )=80% of A 80000 96000 72000 80000 108000  
Collections from debtors            
20% in the month of
16000 19200 14400 16000 21600  
Sale(D)=20%*(C )
50% in next month(E )=50% *(C )   40000 48000 36000 40000 54000
30% in the second month following
    24000 28800 21600 24000
sale(F)=30%*(C )
Cash from sales(G)=(B)+(D)+(E )+
36000 83200 104400 100800 110200 78000
(F)
 
Cash payment to purchases budget and account payable as follows:
Accounts receivables
Septembe Octobe Novembe
Particulars July August Decemberat the end of
r r r
November
Sales (A) 10000012000090000 100000 135000 150000  
Cost of sales(b) =75% of
75000 90000 67500 75000 101250 112500  
(A)
Closing stock(C ) (40%
of next month cost of 36000 27000 30000 40500 45000    
sales)
Opening stock
(D)=Previous month   36000 27000 30000 40500 45000  
closing stock
Purchases (E )=(B)+(C )-
  81000 70500 85500 105750    
(D)
This is accounts
Payment for purchases     81000 70500 85500 105750
payable for november
 
Cash budget is as follows:
Particulars September October November
Opening balance $10,200.00 $10,900.00 $17,462.50
Add:      
$100,800.0
Cash collections $104,400.00 $110,200.00
0
$111,700.0
Total cash available $114,600.00 $127,662.50
0
Minus: Payments      
payment to creditors $81,000.00 $70,500.00 $85,500.00
Salaries and wages $10,000.00 $10,000.00 $10,000.00
Utilities $1,000.00 $1,000.00 $1,000.00
Other $1,700.00 $1,700.00 $1,700.00
Property taxes $15,000.00    
advertising   $6,000.00  
Lease payment     $5,000.00
Total payments $108,700.00 $89,200.00 $103,200.00
Balance in hand $5,900.00 $22,500.00 $24,462.50
Interest payment and principal
  $5,037.50  
payment
Miminum balance $10,000.00    
Amount to be borrowed $5,000.00    
10000-5900=4100 rounded to
     
5000
Closing balance $10,900.00 $17,462.50  
 
Question
Down Under Products, Ltd., of Australia has budgeted sales of its popular boomerang for the next
four months as follows:

     Sales
  in Units
April ... 50,000
May ... 75,000
June ... 90,000
July ... 80,000
The company is now in the process of preparing a production budget for the second quarter. Past
experience has shown that end-of-month inventory levels must equal 10% of the following month's
sales. The inventory at the end of March was 5,000 units.
Required:
Prepare a production budget for the second quarter; in your budget, show the number of units to be
produced each month and for the quarter in total.

Answer
Step 1
  April May June Quarter
Budgeted sales in units  50,000 75,000 90,000 215,000
Add desired ending inventory*   7,500  9,000  8,000    8,000
Total needs  57,500 84,000 98,000 223,000
Less beginning inventory   5,000  7,500  9,000    5,000
Required production  52,500 76,500 89,000 218,000
  *10% of the following month’s sales in units.

Answer