COLLEGE OF BUSINESS, HOSPITALITY AND TOURISM STUDIES

SCHOOL OF ACCOUNTING

ACC 407 – Budget Process

Semester 1 2022

Instructions:

 This is an individual assignment.

 Both questions are compulsory

 The assignment must comply with normal academic requirements. Refer to the course outline

and regulation concerned with plagiarism and copying!

 The assignment weighting is 10% towards the overall assessment.

 You need to upload your assignment on Moodle on or before 8th May 2022. There is no

need to submit the hard copy.

Question 1

Bacon Inc. is preparing its annual budgets for the year ending December 31, 2017. Accounting
assistants furnish the following data.

Product A Product B
Sales Budget:
Anticipated volume in units 410 000 250 000
Unit selling price $25 $35
Production budget:
Desired ending finished goods units 20 000 25 000
Beginning finished goods units 30 000 15 000
Direct material budget:
Direct material per unit (pounds) 2 3
Desired ending direct material pounds 50 000 10 000
Beginning direct materials pounds 40 000 20 000
Cost per pound $2 $3
Direct labor budget:
Direct labor time per unit 0.5 0.75
Direct labor rate per hour $12 $12
Budgeted income statement:
Total unit cost $12 $22

An accounting assistant has prepared the detailed manufacturing overhead budget and selling and
administrative expense budget. The latter shows selling expenses of $750 000 for Product A and
$580 000 for Product B, and administrative expenses of $420 000 for Product A and $380 000
for Product B. Income taxes are expected to be 20%.

Required:

Prepare the following budgets for the year. Show data for each product. Quarterly budgets need
not be prepared.

a) Sales (5 marks)

b) Production (5 marks)

c) Direct materials (5 marks)

d) Direct labor (5 marks)

e) Income statement (10 marks)

Question 2

Northern Swit is famous in making ice cream. One unique flavor of ice cream produced by
Northern Swits is Black Raspberry Crunch. Assume that Northern Swits prepares monthly cash
budget. The following information is provided by their accountant Kritesh for the year 2016:

August (2016) September (2016)

$ $

Sales 460,000 412,000

Direct material purchased 185,000 210,000

Direct Labour 70,000 85,000

Manufacturing overhead 50,000 65,000

Selling and administrative expenses 85,000 95,000

Collections are expected to be 75% in the month of sale, and 25% in the month following sale.
Northern Swits pays 60% of the direct materials purchases in cash in the month of purchase, and
the balance due in the month following the purchase. All other items are paid in the month
incurred.

Other information:

Sales July 2016: $380,000

Purchase of direct materials: July 2016: $175,000

Other receipts: August – Donation received $2,000

September – sale of used equipment $4,000

Other disbursement: September- Purchased equipment 4,000

Repaid debt: August $30,000

Required:

1. Prepare the schedules of expected cash collection of Northern Swits from customers for
August and September. (7.5 marks)
2. Prepare the schedules of expected cash payment of Northern Swits for August and
September . (7.5 marks)

The End.