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Chapter 10 - Strategy and the Master Budget
CHAPTER 10: STRATEGY AND THE MASTER BUDGET
EXERCISES
10-24 Production and Materials Purchases Budgets (20-25 minutes)
Production Budget:
2nd Quarter 3rd Quarter
Budgeted sales 76,000 68,000
Desired ending inventory (5% of next quarter’s sales) + 3,400 + 4,800
Total units needed 79,400 72,800
Beginning inventory (5% of this quarter’s sales) – 3,800 – 3,400
Total units to produce 75,600 69,400
Budgeted Purchases of Direct Materials (in lbs.) for the 2nd quarter:
2nd Quarter 3rd Quarter

Budgeted production 75,600 69,400
Direct materials per unit x 3 x 3
Direct materials needed in production 226,800 208,200
Desired ending inventory of direct materials
(20% of 208,200) + 41,640
Total direct materials needed 268,440
Beginning inventory of DM (20% of 226,800) – 45,360
Budgeted purchases of direct materials (lbs.) 223,080
10-1
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any manner. This document may not be copied, scanned,
duplicated, forwarded, distributed, or posted on a website, in whole or part
10-26 Budgeted Cash Disbursements (30 minutes)
1. Budgeted cash payments for merchandise purchases:
a. February:
20% (January) × $150,000 = $30,000
80% (February) × $120,000 = $96,000 $126,000
b. March:
20% (February) × $120,000 = $24,000
80% (March) × $90,000 = $72,000 $96,000
2. Budgeted cash payments for merchandise purchases:
a. February:
20% (January) × $150,000 × 0.98 = $29,400
80% (February) × $120,000 × 0.98 =$94,080 $123,480
b. March:
20% (February) × $120,000 × 0.98 =$23,520
80% (March) × $90,000 × 0.98 = $70,560 $94,080
3. The financial cost of not taking advantage of the early-payment discount can be approximated by the following
formula:
Opportunity cost (%) = [discount % ÷ (1 – discount %)] × [365 ÷ no. of extra

days allowed if discount is not taken]
= [0.02 ÷ (1 − 0.02)] × [365 ÷ 15] = 0.020408 × 24.33 = 49.66%
Basically, if you choose not to take the early-payment discount, you are giving up a 2% discount (on the net
amount) in return for an extra 15 days in which to pay. There are 24.33 (365 ÷ 15) 15-day periods in a year. Note
10-2
that in the first term of this formula we divide the 2% discount rate by 98% (100% − 2%) because, in effect, you are
paying 2% to delay for 15 days paying 98% of the total bill. So, the percentage rate you are paying in this case is
really 2.0408% of the net bill (the bill without financing cost). Regardless of the technicalities here, students should
understand that the opportunity cost of not taking advantage of the early-payment (cash) discount can be very
significant, as is the case here. For this reason, firms record purchases at net cost and any discounts lost as
interest expense.
10-3
10-28 Cash Budget (20 minutes)
Marsha, Inc.
Cash Budget for Year 2013
Beginning cash balance $15,000

Net cash flow from operations:
Cash inflows:
Cash collections from customers $145,000
Cash outflows:
Direct materials purchases (25,000)
Operating expenses $50,000
Less: Depreciation 20,000 (30,000)
Payroll (75,000)
Income taxes (6,000) 9,000
Investing activities:
Purchase of machinery (30,000)
Financing activities:
Cash excess (shortage) before financing ($6,000)
Minimum cash balance required 25,000
New financing required 31,000
Budgeted end-of-period cash balance $25,000
10-4
10-30 Cash Budget (30-40 minutes)
1. Total credit sales in November $240,000

Percentage collectible × 95%
Total amount collectible from credit sales in November $228,000
Percentage collected in the month following month of sales × 40%
Budgeted collections in December from November credit sales $ 91,200
2. Cash sales in January $ 60,000

Collections from credit sales in January:
Total collectible from credit sales
$180,000 × 95% = $171,000
Percentage to be collected in January × 60% $102,600
Collections from credit sales in December:
Total collectible from credit sales
$360,000 × 95% = $342,000
Percentage to be collected in January × 40% 136,800
Budgeted total cash receipts in January $299,400
3. Total inventory purchases in November:

For November sales: $320,000 × 0.3 × 0.6 = $ 57,600
For December sales: $460,000 × 0.7 × 0.6 = 193,200 $250,800
Percentage of Nov. purchases to be paid in December × 75%
Payment in December for purchases in November $188,100
Budgeted purchases in December:
For December sales: $460,000 × 0.3 × 0.6 = $ 82,800
For January sales: $240,000 × 0.7 × 0.6 = 100,800 $183,600
Percentage of Dec. purchases to be paid in December × 25%
Payment in December for purchases in December $45,900
Budgeted payment in December for inventory purchases $234,000
10-5
10-32 Accounts Receivable Collections and Sensitivity Analysis (50 minutes)
Original Assumptions/Data:
Actual credit sales for March $130,000
Actual credit sales for April $160,000
Estimated credit sales for May $210,000
Estimated collections in month of sale 25%
Estimated collections in first month following month of sale 60%
Estimated collections in the second month after month of sale 10%
Estimated provision for bad debts in month of sale 5%
1. Estimated cash receipts from collections in May:

Collection from sales in March (0.10 × $130,000) $13,000
Collection from sales in April (0.60 × $160,000) $96,000
Collection from sales in May (0.25 × $210,000) $52,500
Total estimated cash collections in May $161,500
2. Gross accounts receivable, May 31st:

From credit sales made in April (0.15 × $160,000) $24,000
From credit sales made in May (0.75 × $210,000) $157,500
Estimated gross accounts receivable, May 31st $181,500
3. Net accounts receivable, May 31st:

Gross accounts receivable, May 31st $181,500
Less: Allowance for uncollectible accounts:
From credit sales made in April $8,000
From credit sales made in May $10,500
Net accounts receivable, May 31st $163,000
4. Revised data/assumptions:
Actual credit sales for March $130,000
Actual credit sales for April $160,000
10-6
Estimated credit sales for May $210,000

Estimated collections in month of sale 60%
Estimated collections in first month following month of sale 25%
Estimated collections in the second month after month of sale 10%
Estimated provision for bad debts in month of sale 5%
a. Estimated cash receipts from collections in May:

Collection from sales in March (0.10 × $130,000) $13,000
Collection from sales in April (0.25 × $160,000) $40,000
Collection from sales in May (0.60 × $210,000) $126,000
Total cash collections in May $179,000
10-32 (Continued)
b. Gross accounts receivable, May 31st:

From credit sales made in April (0.15 × $160,000) $24,000
From credit sales made in May (0.40 × $210,000) $84,000
Gross accounts receivable, May 31st $108,000
Note to Instructor: An Excel spreadsheet solution file is embedded in this document. You can open the spreadsheet
“object” that follows by doing the following:
1. Right click anywhere in the worksheet area below.

2. Select “worksheet object” and then select “Open.”
3. To return to the Word document, select “File” and then “Close and return to...” while you are in the
spreadsheet mode. The screen should then return you to the Word document.
10-7
Exercise 10-32: Accounts Receivable Collections and Sensitivity Analysis

Background
Papst Company is preparing its cash budget for the month of May. The following information is available
concerning its accounts receivable:
Actual credit sales for March

Actual credit sales for April
Estimated credit sales for May
5. The principal benefit is the accelerated receipt of cash, which the company can potentially employ to pay down debt,
reduce borrowing, invest, etc. Principal costs would relate to whatever programs are needed to secure the accelerated
collection of cash. These costs could include personnel, travel, mailings, telephone, incentive programs, and costs
related to customer relations.
10-8
10-34 Profit Planning and Sensitivity Analysis (40-45 minutes)
1. Sales volume in units:
Let "X" = required sales volume. Thus, when total cost at each alternative cost
structure is the same, we have:
$85.00X + $40,000 = $80.00X + $45,000

X = 1,000 units
2. Sales level needed:
Pre-tax profit = (cm/unit * X) − FC = 5% (sp/unit * X)

0 = [(cm/unit * X) − 5% (sp/unit * X)] − FC
X = FC ÷ [(cm/unit) − 5% (sp/unit)]
Alternative 1 Alternative 2
Selling price/unit = $100.00 $100.00
Variable cost/unit = $85.00 $80.00
Contribution margin/unit = $15.00 $20.00
Operating profit target (%) = 5% 5%
Required Sales Volume = 4,000 3,000
Check:
Sales Revenue $400,000 $300,000
Variable Costs $340,000 $240,000
CM $60,000 $60,000
Fixed Costs $40,000 $45,000
Operating Profit $20,000 $15,000
10-9
Operating Profit ÷ Sales Revenue 5.00% 5.00%
3. Sales volume in dollars needed under each alternative to achieve a profit goal of 5% on sales.
Let X = sales dollars, then:

Pre-tax profit = [(cm ratio)*X] − FC = 5.00%X
FC = (cm ratio * X) − 5.00%X
FC = (cm ratio − 5.00%)X
X = FC ÷ [(cm ratio − 5.00%)*X]
Targeted pre-tax profit (% of sales) = 5.00% 5.00%
10-10
10-34 (Continued)
Alternative 1 Alternative 2
Selling price/unit = $100.00 $100.00
Contribution margin/unit = $15.00 $20.00
Contribution margin ratio = 15.00% 20.00%
Operating profit target (%) = 5% 5%

Required Sales Volume = $400,000 $300,000
Check:
Sales Revenue $400,000 $300,000
Variable Costs $340,000 $240,000
CM $60,000 $60,000
Fixed Costs $40,000 $45,000
Operating Profit $20,000 $15,000
Operating Profit ÷ Sales Revenue 5.00% 5.00%
10-11
10-36 Cash Budgeting: Not-for-Profit Context (30-45 minutes)
1. “Endowment fund:” a gift (contribution) whose principal must be maintained but whose income may be expended. (You
might use the example of an “endowed professorship” as an example.)
2.
Cash Budget for Tri-County Social Service Agency
2013
(in thousands)
Quarters
I II III IV Year
Cash Balance, beginning $11 $8 $8 $8 $11
Receipts:
Grants $80 $70 $75 $75 $300
Contracts (evenly during year) $20 $20 $20 $20 $80
Mental Health Income (+5 in Qtrs II, III) $20 $25 $30 $30 $105
Charitable donations $250 $350 $200 $400 $1,200
Total Cash Available $381 $473 $333 $533 $1,696
Less: Disbursements:
Salaries and Benefits $335 $342 $342 $346 $1,365
Office expenses $70 $65 $71 $50 $256
Equipment purchases & maintenance $2 $4 $6 $5 $17
Specific assistance $20 $15 $18 $20 $73
Total disbursements $427 $426 $437 $421 $1,711
Excess (deficiency) of cash available
over disbursements ($46) $47 ($104) $112 ($15)
Financing:
Borrow from endowment fund $54 $0 $112 $0 $166
Repayments $0 ($39) $0 ($104) ($143)
Total financing effects $54 ($39) $112 ($104) $23
Cash Balance, ending $8 $8 $8 $8 $8
10-12
3. $23,000.
4. It is probable that both donations and requests for services are unevenly distributed over the year. The agency may
want to increase requests for donations and seek additional grants.
5. No. Assuming there is careful fiscal management, borrowing only occurs when necessary.
10-13
10-38 Service Firm Budget (60-75 minutes)
1.
Total hours for the budgeted activities:

Hourly
Budgeted Charge
Revenue Rate Required
(Given) (Given) Hours
Business returns $1,000,000 $250 4,000
Complex individual returns $1,200,000 $100 12,000
Simple individual returns $1,640,000 $50 32,800
$3,840,000 48,800
Professional staff requirements for the budgeted revenue:
Senior
Total Hours Partner Manager Consultant _Consultant_
Required Each Total Each Total Each Total Each Total
Business returns 4,000 0.30 1,200 0.20 800 0.50 2,000 0.00 0
Complex individual returns 12,000 0.05 600 0.15 1,800 0.40 4,800 0.40 4,800
Simple individual returns 32,800 0.00 0 0.00 0 0.20 6,560 0.80 26,240
Total Hours 48,800 1,800 2,600 13,360 31,040
Hours per week 50 45 40 40
# of weeks needed 36 58 334 776
# of weeks per professional staff per year 40 45 45 48
# of professional staff needed 1 1 8 16
Excess (deficiency) hours 1,040 (320)
Note: Because Consultants can be hired on a part-time basis, we round the calculation DOWN for this class of labor. The
other three labor classes are given (i.e., do not have to be planned for based on data in the problem).
Since, according to the present staffing plan and anticipated workload needs, there is an excess of senior
10-14
consultant hours, the budgeted cost for overtime hours worked by senior consultants would be $0.
10-15
10-38 (Continued)
2. Number of full-time consultants needed for the year:
No. of consultant-weeks needed for the yr = 776 (from solution to

requirement #1, above)
No. of weeks/full-time consultant/yr = 48 (from solution to
requirement #1, above)
No. of full-time consultants needed = 16 (776 ÷ 48, rounded
down)
3. The manager's total compensation, assuming that the revenues from preparing tax
returns remains the same:
Consultant's pay:
Earning per year = $60,000
Hrs. worked/year = 1,920
Hourly pay rate = $31.25
No. of PT hours, consultants = 320
Annual Salaries:
Per partner = $250,000
Per manager = $90,000
Per senior consultant = $90,000
Per support staff = $40,000
Staffing Plan:
Partners = 1
Managers = 1
Senior consultants = 8
Full-time Consultants = 16
Support staff = 5
10-16
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part
10-38 (Continued-2)
AccuTax, Inc.
Budgeted Operating Income
For the Year ended August 31, 2013
Revenue $3,840,000
Payroll expenses:
Partner $250,000
Manager 90,000
Senior consultants—base pay 720,000
Senior consultants—pay for overtime hours 0
Consultants:
Full-time $960,000
Part-time 10,000 970,000
Support staff 200,000 $2,230,000
General and administrative expenses 373,000
Operating income before bonus to manager $1,237,000
Less: manager's bonus 73,700
Operating income before taxes $1,163,300
Total compensation for the manager:

Salary (given) $90,000
Bonus (0.10 × [$1,237,000 − $500,000]) 73,700
Total $163,700
Note to Instructor: An Excel spreadsheet solution file is embedded in this document.

You can open the spreadsheet “object” that follows by doing the following:

2. Select “Worksheet Object,” then “Open.”
3. To return to the Word document, select “File” and then “Close and return to...”
while you are in the spreadsheet mode.
10-17
Exercise 10-38: Budgeting for a Service Firm

Background
Refer to AccuTax, Inc. in the chapter. One of the partners is planning to retire at
remaining partner, plans to add a manager at an annual salary of $90,000. She e
45 hours per week for 45 weeks per year. She plans to change the required sta
10-40 Activity-Based Budgeting (ABB) (20-30 Minutes)
1. Budgeted Cost-
Activity Activity Driver Rate Total Cost
Storage 400,000 $0.4925 $ 197,000
Requisition Handling 30,000 $12.50 $ 375,000
Pick Packing 800,000 $ 1.50 $1,200,000
Data Entry 800,000 $ 0.80 $ 640,000
30,000 $ 1.20 $ 36,000
Desktop Delivery 12,000 $30.00 $ 360,000
Total Budgeted Cost for the Division $2,808,000
2. Activity-related data are not available. The only data you have is that budgeted
fixed cost per month is $1,000,000 and budgeted variable cost per carton is
$1.30. Using this approach, what is the estimated cost for the month? Compare
and comment on how your answer here differs from the answer to Requirement 1.
Budgeted Cost for the Month:

Budgeted Fixed Cost $1,000,000
Budgeted Variable Cost ($1.30 × 1,170,000) $1,521,000
Total = $2,521,000
If the appropriate cost drivers have been chosen and the cost-driver rates are
correct, then the budget based on an ABC analysis should be more accurate in
terms of depicting the resource consumption (or resource demands) on the
organization for the coming month. Put another way, the use of a single, volume-
based cost driver will not likely capture the underlying economics of the
company's support activities and associate cost.
3. Expected saving in costs—January 2013:
Requisition Handling (@ $12.50/requisition) = $ 375,000

Data Entry: number of lines (@ $0.80/line) = 640,000
Data Entry: number of requisitions (@ $1.20/req.) = 36,000
10-18
Expected Cost Savings, January 2013 = $1,051,000
10-40 (Continued)
The ABC cost-rate data included above represent the estimated cost of resources
that are currently supplied by the company but which could be eliminated by the
introduction of an electronic order-processing system. Note, however, that in order
to achieve these savings, management of the company must take actions to cut
(eliminate) the under-lying resource spending or deploy these resources
elsewhere. In other words, the savings will not likelyoccur automatically.
If the company uses a single cost-rate system based on the number of cartons
delivered, it will not be able to estimate the cost savings without special efforts to
gather additional information. That is, the existing one-variable, volume-based
model does not reflect the resource demands/resource consumption of the current
process regardingthe processing of customer orders.
10-19
10-42 Time-Driven Activity-Based Budgeting (TDABB) (45-60 minutes)
1. Calculation of budgeted resource costs per hour:

(Item 6) (Item 5)
Practical Budgeted
Budgeted Capacity Cost per
Resource Cost (Hours) Hour
Indirect labor support $1,000,000 20,000 $50

Computer support $500,000 500 $1,000
2. Determination of the cost-driver rates for each activity (handle production runs, and
support product):
Activity #1: Handle Production Runs
(Item 3a,
(From 1 4a)
above) Unit Budgeted
Budgeted Times Cost-Driver
Resource Cost/Hour (hours) Rate
Indirect Labor $50 10.00 $500.00
Computer support $1,000 0.40 $400.00
$900.00 per run
Activity #2: Support Products
(From 1 (Item 3b,
above) 4b)
Unit Budgeted
Indirect Labor $50 500.00 $25,000
Computer Support $1,000 50.00 $50,000
$75,000 per product
3. Cost of unused capacity for the quarter, by resource:
(Item 6) (Item 5) (Given)

Cost of Resource Resource Cost of Cost of
Resource Units Units Resources Unused
Resource Supplied Supplied Used Used Capacity
Indirect labor $1,000,000 20,000 18,000 $900,000 $100,000
10-20
Computer support $500,000 500 450 $450,000 $50,000

Generally speaking, the cost of unused capacity should not be assigned to
actual units produced or customers served during the period. However, the cost
of unused capacity should not be ignored--it is someone's responsibility in the
organization. That is, the cost of unused capacity for a period should be
assigned to the person or office that authorized the level of capacity when that
capacity was acquired. Typically, this assignment would be made on a “lump-
sum” basis. This assignment provides feedback to managers regarding their
resource supply/demand decisions.
10-42 (Continued)
4. After implementing a TQM program, the company was able to implement process-
efficiency changes, the end result of which was a 10% reduction in the indirect labor
time associated with the activity “handling production runs.” Re-estimate the indirect
labor cost component of the cost to handle a production run. Also, recalculate the
cost of unused capacity for indirect labor assuming the original facts but with the 10%
efficiency gain. Assume that in the original case facts, 16,000 of the 18,000 hours
related to handling production runs.
Efficiency gain: indirect labor consumed by "handling a production run": 10%
Original indirect labor hours: handling production runs = 16,000
Original indirect labor hours: computer support = 2,000
Revised Budgeted Cost-Driver Rate: Indirect labor support for "handling a production
run":
Unit Budgeted
Indirect Labor $50 9.00 $450.00 per run
Revised Cost of Unused Capacity--Indirect Labor Support Cost:
Cost of Resource Resource Cost of Cost of

Resource Units Units Resources Unused
Resource Supplied Supplied Used Used Capacity
Indirect labor $1,000,000 20,000 16,400* $820,000 $180,000
*Resource Units Used Calculation: 2,000 + (16,000 × (1 – 10%)) = 16,400

As can be seen, the efficiency gain resulted in "freed-up" indirect labor resources,
which are now available for use elsewhere in the company. In the event that
alternative uses for this labor cannot be found, then management facesthe issue
of whether to reduce its workforce. Also, the reduced cost-driver rate ($50
reduction) would be of potential strategic use to management, for pricing and
10-21
product promotion purposes.
10-44 Kaizen Budgeting (30-40 minutes)
1. Recalculated budgeted factory overhead cost for June, under the assumption that,
starting in May, each budgeted cost-driver rate decreases by 0.5% relative to the
preceding month.
Activity-Based Budget (ABB)

April May June
Activity- Budgeted Activity- Budgeted Activity- Budgeted
Cost Pools Cost Rate Overhead Cost Rate Overhead Cost Rate Overhead
Semi-skilled, hour-related $0.60 $6,750 $0.597 $8,358 $0.594 $10,841
Skilled, hour-related $0.20 $900 $0.199 $1,114 $0.198 $1,445
Machine-hour-related $3.20 $21,280 $3.184 $26,172 $3.168 $33,297
Batch-related $1,700 $15,300 $1,692 $18,945 $1,683 $24,572
Product-related $5,000 $25,000 $4,975 $29,850 $4,950 $34,651
Facility-level costs $50,000 $50,000 $50,000 $50,000 $50,000 $50,000
Total $119,230 $134,440 $154,806
Recap: Budgeted Amount for June

Cost Pools Original Revised $ Difference % Difference
Semi-skilled, hour-related $10,950 $10,841 ($109) -0.9975%
Skilled, hour-related $1,460 $1,445 ($15) -0.9975%
Machine-hour-related $33,632 $33,297 ($335) -0.9975%
Batch-related $24,820 $24,572 ($248) -0.9975%
Product-related $35,000 $34,651 ($349) -0.9975%
Facility-level costs $50,000 $50,000 $0 0.0000%
Total $155,862 $154,806 ($1,056) -0.6775%
2. In general, the benefits associated with a move to continuous (i.e., Kaizen) budgeting
include the following:
• helps ensure that the budget is a forward-looking tool
• may help the organization stave off competition or otherwise secure a competitive
advantage
• is consistent with the move to "lean" (to support total quality, elimination of waste
and inefficiency, etc.)
• used during the manufacturing stage and thus complements the use of Target
Costing (used during the design stage)
• necessarily involves employees (who are knowledgeable about operating
processes) in the planning/control system (i.e., under a Kaizen approach, workers
are assumed to have better knowledge as to how cost-saving goals can be
10-22
10-44 (Continued)
• achieved); as such, its use is consistent with theories of decentralization and

worker empowerment
3. Principal concerns or limitations associate with Kaizen budgeting:
• a Kaizen approach places pressure on employees to meet continually revised (and

stricter) performance goals; dysfunctional consequences include employee burnout
and internal conflicts among various parties in the organization)
• the Kaizen approach, by its very design, motivates incremental, not radical,
operational improvements and cost savings
4. Examples of how Kerry Company could realize the cost savings referenced above in
Requirement 1: the activity cost rates are calculated as budgeted spending (on
resources) divided by the practical capacity (i.e., supply) of resources acquired.
Therefore, the rate can go down either because total budgeted spending is
decreased, or the supply of activities is increased while holding spending constant.
Both would seem to rest on notions of increasing efficiency. Some examples,
referenced to text Exhibit 10.19 might include the following:
• move to a JIT production system

• incorporate technology into (i.e., automate) the order-processing system used by
Kerry
• analyzing major expenditures to determine whether they are adding value in the
eyes of the consumer
• implement process improvements for all value-adding activities performed by the
business
• are there alternative forms of capacity that would be available at a less expensive
rate?
• greater attention to personnel planning, along the lines discussed in the text (see
section on budgeting for service organizations)
• requiring minimum order sizes (to eliminate short, unprofitable, production runs)
• effecting changes in the layout of the facility (e.g., to reduce movement and
storage of inventory
Notice, too, that in order to reduce spending (on resources), management has to take
direct and deliberate action to do so. This is due in large part because some of the
activity costs in an ABC model are considered short-term fixed costs. As such, the
only way to reduce spending on these activities is to eliminate the underlying
resource or deploy excess (i.e., the unused supply of resources) elsewhere in the
organization. While the activity-cost rates seem to imply short-term variable costs, in
reality they do not.
10-23
10-46 Budgetary Pressure and Ethics (20-30 minutes)
1. The use of alternative accounting methods to manipulate reported earnings is

professionally unethical because it violates the Standards contained in the IMA’s
Statement of Ethical Professional Practice (see: www.imanet.org). The
Competence standard is violated because of failure to perform duties in
accordance with relevant accounting (technical) standards. It can probably be
argued that the competence standard is also violated because the accountant is
not providing information that is accurate. The Integrity standard is violated
because the underlying activity would discredit the profession. The Credibility
standard is violated because of failure to communicate information fairly and
objectively.
2. Yes, costs related to revenue should be expensed in the period in which the
revenue is recognized (“matching principle”). Perishable supplies are purchased
for use in the current period, will not provide benefits in future periods, and should
therefore be matched against revenue recognized in the current period. In short,
the accounting treatment for supplies was not in accordance with generally
accepted accounting principles (GAAP). Note that similar issues, but on an
extremely large basis, occurred at WorldCom and at Global Crossing. In the case
of the latter, the company was engaging simultaneously in contracts to buy and to
sell bandwidth, treating the former as capitalized expenses and the latter as
revenue for the current accounting period.
3. The actions of Gary Woods were appropriate. Upon discovering how supplies
were being accounted for, Wood brought the matter to the attention of his
immediate superior, Gonzales. Upon learning of the arrangement with P&R,
Wood told Gonzales that the action was improper; he then requested that the
accounts be corrected and the arrangement discontinued. Wood clarified the
situation with a qualified and objective peer (advisor) before disclosing Gonzales’s
arrangement with P&R to Belco’s division manager, Tom Lin—Gonzales’s
immediate superior. Contact with levels above the immediate superior should be
initiated only with the superior’s knowledge, assuming the superior is not involved.
In this case, however, the superior is involved. According to the IMA’s statement
regarding Resolution of Ethical Conduct, Wood acted appropriately by
approaching Lin without Gonzales’s knowledge and by having a confidential
discussion with an impartial advisor.
10-24
10-48 Spring Manufacturing Company—Comprehensive Profit Plan (90 Minutes, but

much less if used in conjunction with 10-47 and completed with an Excel
spreadsheet)
1. Sales Budget
Spring Manufacturing Company

Sales Budget
2013
C12 D57 Total

Sales (in units) 12,000 18,000 30,000
× Selling Price Per Unit $160 $180
Total revenue $1,920,000 $3,240,000 $5,160,000
2. Production Budget

Production Budget
2013
C12 D57
Budgeted Sales (in units) 12,000 18,000
Plus: Desired finished goods ending inventory 300 200
Total units needed 12,300 18,200
Less: Beginning finished goods inventory 400 150
Budgeted Production (in units) 11,900 18,050
10-25
10-48 (Continued-1)
3. Direct Materials Purchases Budget (units and dollars)

Direct Materials Purchases Budget (units and dollars)
2013
C12 D57 Total
Raw Material (RM) 1:
Budgeted Production 11,900 18,050
Pounds per Unit × 10 ×8
RM 1 needed for production 119,000 144,400 263,400
Plus: Desired Ending Inventory (lbs.) 4,000
Total RM 1 needed (lbs.) 267,400
Less: Beginning inventory (lbs.) 3,000
Required purchases of RM 1 (lbs.) 264,400
Cost per pound $2.00
Budgeted purchases, RM 1 $528,800
Raw Material (RM) 2:

Pounds per Unit ×0 ×4
RM 2 needed for production 0 72,200 72,200
Raw Material 3:
Pounds per Unit ×2 ×1
RM 3 needed for production 23,800 18,050 41,850
10-26
10-48 (Continued-2)
4. Direct Manufacturing Labor Budget

Direct Labor Budget
2013
C12 D57 Total

Budgeted production 11,900 18,050
Direct labor hours (DLH) per unit × 2 × 3
Total direct labor hours needed 23,800 54,150 77,950

Hourly wage rate $25.00
Budgeted direct labor costs $1,948,750
5. Factory Overhead Budget
Variable OH per DLH (fromProb. 10-47): $6.40

Factory Overhead Budget
2013
Variable Factory Overhead ($6.40/DLH × 77,950 DLHs) $498,880

Fixed Factory Overhead:
Supervision $120,000
Maintenance costs 20,000
Heat, light, and power 43,420
Total Cash Fixed Factory Overhead $183,420
Depreciation 71,330 $254,750
Total Budgeted Factory Overhead $753,630
Variable OH rate per DLH $6.40

Fixed OH rate per DLH ($254,750 ÷ 77,950 DLHs) $3.26812
10-27
10-48 (Continued-3)
6. Budgeted CGS and Ending Finished Goods Inventory Budget

Ending Finished Goods Inventory and Budgeted CGS
2013
C12 D57 Total

Sales volume 12,000 18,000 30,000
Cost per unit (Schedule 1 and 2) $90.33624 $130.50436
Cost of goods sold $1,084,035 $2,349,079 $3,433,114
Finished goods ending inventory 300 200

Cost per unit (Schedule 1 and 2) $90.33624 $114.50
Budgeted ending inventories $27,101 $26,101 $53,202
Schedule 1: Cost per Unit—Product C12:

Inputs Cost
Cost Element Unit Input Cost Quantity Per Unit
RM-1 $2.00 10 $20.00
RM-3 $0.50 2 $1.00
Direct labor $25.00 2 $50.00
Variable factory OH ($326,080 ÷ 50,950) $6.40 2 $12.80
Fixed factory OH ($254,750 ÷ 77,950) $3.26812 2 $6.53624
Manufacturing cost per unit $90.33624
Schedule 2: Cost per Unit—Product D57:

_______ Inputs___ Cost
Cost Element Unit Input Cost Quantity Per Unit
RM-1 $2.00 8 $16.00
RM-2 $2.50 4 $10.00
RM-3 $0.50 1 $0.50
Direct labor $25.00 3 $75.00
Variable factory OH ($326,080 ÷ 50,950) $6.40 3 $19.20
Fixed factory OH ($254,750 ÷ 77,950) $3.26812 3 $9.80436
Manufacturing cost per unit $130.50436
10-28
10-48 (Continued-4)
7. Selling and Administrative Expense Budget

Selling and Administrative Expense Budget
2013
Selling Expenses:
Advertising $60,000
Sales salaries 200,000
Travel and entertainment 60,000
Administrative expenses:
Offices salaries $60,000
Executive salaries 250,000
Supplies 4,000
Total selling and administrative expenses $645,000
8. Budgeted Income Statement

Budget Income Statement
For the Year 2013
C12 D57 Total

Sales (part 1) $1,920,000 $3,240,000 $5,160,000
Cost of goods sold (part 6) 1,084,035 2,349,079 3,433,114
Gross profit $835,965 $890,921 $1,726,886
Selling and administrative expenses (part 7) $645,000
Pre-tax income $1,081,886
Income taxes (@40%) $432,754
After-tax income $649,132
10-29
10-48 (Continued-5)
Answers:
1. The projected increase in after-tax operating income =
$649,132 – $472,860 = $176,272
2. While the changes are projected to increase after-tax operating income, the
company should examine the decision more closely. Although the company
increases its after-tax operating income by 37% ($176,272 ÷ $472,860), it requires a
doubling of units of D57 to achieve this. In fact, a 100% increase in units sold of D57
increases the gross profit of D57 from $758,700 to $890,921, an increase of
$132,221, while the total change in gross profit is $293,786 (from $1,433,100 to
$1,726,886). The 100% increase in D57 accounts for only 45% ($132,221 
$293,786) of the increase in gross profit; C12 contributes 55% of the increase.
Further, the price increase in C12 has no effect on the units sold. This may be an
indication that C12 may have a higher potential than the firm perceived.
Note to Instructor: An Excel spreadsheet solution file is embedded in this document.

You can open the spreadsheet “object” that follows by doing the following:

3. To return to the Word document, select “File” and then
“Close and return to...” while you are in the spreadsheet mode.
Problem 10-48: Comprehensize Profit Plan

Background
(Use information in Prob. 10-47 for Spring Manufacturing Company, amended as ex
10-30
10-50 Budgeting for a Merchandising Firm (40-50 minutes)
1. Budgeted cash collections—December:

From November’s sales = net A/R, November 30th = $ 76,000
From December’s sales = $220,000 × 60% × 99% = 130,680
Budgeted cash collections--December $206,680
2. Net accounts receivable—December 31st:

Budgeted sales in December (given) $220,000
Allowance for doubtful accounts $220,000 × 2% = 4,400
Net A/R from sales in December $215,600
Collections of December sales in December $220,000 × 60% = 132,000
Net Accounts Receivable—December 31st $ 83,600
3. Budgeted pre-tax operating income—December:

Total sales $220,000
Gross margin ratio × 25%
Gross margin $ 55,000
Operating expenses:
Monthly cash operating expenses $22,600
Bad-debts expense $220,000 × 2% = 4,400
Depreciation expense $216,000 ÷ 12 = 18,000 45,000
Pre-tax operating income $10,000
4. Budgeted Inventory—December 31st:
Inventory, December 31st = ($200,000 × 0.75) × 80% = $120,000
5. Budgeted Purchases—December:
Inventory, December 1st (given) = $132,000

Plus: Purchases during December (plug figure) = 153,000
Cost of goods available for sale $285,000
Less: Cost of goods sold $220,000 × 75% = 165,000
Inventory, December 31st (part 4 above) = $120,000
10-31
10-50 (Continued)
6. Budgeted Accounts Payable—December 31st:
Accounts Payable, December 1st (given) $162,000

Plus: Budgeted Purchases, December (part 5 above) $153,000
Total Accounts Payable during December $315,000
Less: Payments in December (entire beginning balance) $162,000
Budgeted Accounts Payable, December 31st $153,000
Alternatively, the end-of-December Accounts Payable Balance = Purchases

made in December = answer to Part 5 above.
10-32
10-52 Budgeting for Marketing Expenses; Strategy (45-50 minutes)
1. The following screen shots are from the Excel spreadsheet created for this problem.
It shows that the original monthly budgeted marketing expense is $338,000 and that
the revised (budgeted) amount is $372,628, an overall increase of 10.24%.
10-33
10-52 (Continued-1)
2. To achieve the monthly targeted cost of $350,000, the rate of “telephone and mailing”
costs cannot increase at all (as is the case in the proposed budget); in fact, the
results of the “goal seek” analysis indicates that such rates must be decreased by
approximately 43%, as shown below:
These results are generated by completing the following dialog box that appears after
activating the “Goal Seek” command from the “Data” tab, then “What-If Analysis”
menu in Excel 2010:
10-34
10-52 (Continued-2)
3. As indicated in the text, budgets can be used both for control and for planning
purposes. The relative importance of each can be linked either to the competitive
strategy the business is pursuing or to the product life-cycle. In the present case
(start-up company, competing on the basis of a product-differentiation strategy), the
relative emphasis of the marketing budget is likely more for planning than control.
That is, the information contained in this budget can assist the company in
determining its financing needs. However, it probably should not be used for
“controlling” (i.e., cutting) expenses in situations where the underlying expenditures
are determinants of competitive success. Further, many types of so-called
“discretionary costs” (such as marketing) are fixed (or at least “sticky”) and therefore
difficult to cut in the short run. As such, the primary benefit of the budget in such
cases is to better plan for, rather than control, the underlying expenses.
Note to Instructor: The Excel 2010 spreadsheet solution referred to above is

embedded below. You can open the spreadsheet “object” by doing the following:

3. To return to the Word document, select “File” and then “Close and return to...”
while you are in the spreadsheet mode.
Problem 10-52: Budgeting for Marketing Expenses; Strategy

Background
You have been recruited by a former classmate, Susanna Wu, to join the fin
recently. The company produces a unique product-line of hypo-allergenic c
aggressive marketing program. The company is in a start-up phase and ther
and revenues upon which to rely for budgeting and planning purposes. Give
the available capital has been used for new-product development and to r
costs, including marketing costs, is thought by the management team to be
company. 10-35
You
manner. This have
document may not held
be copied,a number
scanned, duplicated, of intensive
forwarded, distributed, ordiscussions with
posted on a website, in whole Susanna and Jo
or part
firm. They have asked you to prepare an estimated budget for marketing expe
You are provided with the following data, which represent average actual
10-52 (Continued-3)
The following web-accessible tutorials regarding the use of Excel 2010 to perform
“What-If analysis” may be helpful:
1.Introduction to What-If Analysis:

http://office.microsoft.com/en-us/excel-help/introduction-to-what-if-analysis-HA010342628.aspx
2. Using Excel to Perform Scenario Analysis:
http://office.microsoft.com/en-us/excel-help/switch-between-various-sets-of-values-by-using-scenarios-
HP010072669.aspx
3. Using Excel to Create Data Tables:
http://office.microsoft.com/en-us/excel-help/calculate-multiple-results-by-using-a-data-table-
HP010342214.aspx
4. Using the Goal Seek Routine in Excel:
http://office.microsoft.com/en-us/excel-help/use-goal-seek-to-find-the-result-you-want-by-adjusting-an-
input-value-HP010342990.aspx
5. Using Solver to Perform What-If Analysis:

http://office.microsoft.com/en-us/excel-help/define-and-solve-a-problem-by-using-solver-
HP010342416.aspx
http://office.microsoft.com/en-us/excel-help/video-use-the-solver-add-in-VA101840549.aspx
10-36
10-54 Cash-Flow Analysis; Sensitivity Analysis (50-60 minutes)
1. Estimated Cash Receipts, April 2013:

April Cash Receipts:
April cash sales (25.0% × $425,000) = $106,250
April credit-card sales ($425,000 × 55% × 97%) = 226,738
Collection of accounts receivable:
From April Sales (20% × $425,000 × 25%) = 21,250
From March Sales ($400,000 × 20% × 45%) = 36,000
From February Sales ($550,000 × 20% × 27%) = 29,700
Total $419,938
2. Purchase Order for Hardware, executed January 25th:
a) Number of units to be ordered:

Estimated Unit Sales, March = 90
Plus: Desired Ending Inv., March (30% × 100) = 30
Total Needs (in Units) = 120
Less: Beginning Inventory, March (30% × 90) = 27
Required Purchases (in Units) = 93
b) Cost of purchases:
Selling price per unit (e.g., $300,000 ÷ 100 units) = $3,000
Estimated cost per unit (@65% of selling price) = $1,950
Total cost of purchases (93 units × $1,950/unit) = $181,350
Note that the cash outflow associated with these purchases will be
4/10/2013.
3. Sensitivity Analysis: Three Scenarios for March Sales and the CGS %
Est. Sales--March CGS %
Optimistic Estimate = 100 60%
Base-line Estimate = 90 65%
Pessimistic Estimate = 80 70%
10-37
10-54 (Continued-1)
Cash
March Sales Payment
Scenario (units) CGS % April 10th
1 100 60% $180,000
2 100 65% $195,000
3 100 70% $210,000
4 90 60% $167,400
5 90 65% $181,350
6 90 70% $195,300
7 80 60% $154,800
8 80 65% $167,700
9 80 70% $180,600
Maximum = $210,000
Minimum = $154,800
Range = $55,200
The following web-accessible tutorials regarding the use of Excel 2010 to perform “What-
If analysis” may be helpful:
1.Introduction to What-If Analysis: http://office.microsoft.com/en-us/excel-

help/introduction-to-what-if-analysis-HA010342628.aspx
2. Using Excel to Perform Scenario Analysis: http://office.microsoft.com/en-us/excel-

help/switch-between-various-sets-of-values-by-using-scenarios-HP010072669.aspx
3. Using Excel to Create Data Tables:http://office.microsoft.com/en-us/excel-

help/calculate-multiple-results-by-using-a-data-table-HP010342214.aspx
4. Using the Goal Seek Routine in Excel:http://office.microsoft.com/en-us/excel-

help/use-goal-seek-to-find-the-result-you-want-by-adjusting-an-input-value-
HP010342990.aspx
5. Using Solver to Perform What-If Analysis:http://office.microsoft.com/en-us/excel-

help/define-and-solve-a-problem-by-using-solver-HP010342416.aspx
http://office.microsoft.com/en-us/excel-help/video-use-the-solver-add-in-
VA101840549.aspx
10-38
10-54 (Continued-2)
4. Monthly cash budgets are prepared by companies such as CompCity, Inc., in order to
plan for their cash needs. This means identifying when both excess cash and cash
shortages may occur. A company needs to know when cash shortages will occur so
that prior arrangements can be made with lending institutions in order to have cash
available for borrowing when the company needs it. At the same time, a company
should be aware of when there is excess cash available for investment or repaying
loans so that planned usage of the excess can be made.
Sensitivity analysis, one type of which is illustrated in part (3) above, can be used to
help managers deal with uncertainties in the budgeting process. Sensitivity analysis
enables managers to examine how a budget would change in response to changes in
one or more underlying assumptions (such as sales volume level and CGS%). As
such, the process enables managers to monitor key assumptions and to make timely
adjustments to plans. In practice, management might view the baseline outcome as
the expected value prediction. It might define, subjectively, "optimistic" and
"pessimistic" values as those having a small probability (e.g., 10% or less).
10-39
10-56: Budgeting Insurance Policy Volume and Monthly Revenues (75 Minutes)
1. Monthly budgets broken down into three parts: marketsize and volume; volume for National Auto Insurance
Company; and, Premium Revenues earned.
January February March April May June

Part a: Market Size &
Volumes
Total # of households (market
size) 100,000,000 100,050,000 100,100,025 100,150,075 100,200,150 100,250,250
% of households--car
ownership 80.00% 80.00% 80.00% 80.00% 80.00% 80.00%
avg. # of cars owned per
household 2.2 2.2 2.2 2.2 2.2 2.2
% of car owners with insurance 85.000% 85.085% 85.170% 85.255% 85.341% 85.426%
total # of insured autos
(market-wide) 149,600,000 149,824,475 150,049,286 150,274,435 150,499,922 150,725,747
market share of National Auto
Insurance 10.00% 10.001% 10.001% 10.002% 10.002% 10.003%
# of autos insured by National,
end of mo. 14,960,000 14,983,197 15,006,429 15,029,698 15,053,002 15,076,343
10-40
10-56 (Continued-2)

Part b: Volume for National
Auto Insurance
# of autos insured, beginning
of month 14,940,000 14,921,325 14,902,673 14,884,045 14,865,440 14,846,858
cancellations during the month 18,675 18,652 18,628 18,605 18,582 18,559
# of insured autos, end of
month 14,921,325 14,902,673 14,884,045 14,865,440 14,846,858 14,828,300
avg. # of insured autos during
the month 14,930,663 14,911,999 14,893,359 14,874,742 14,856,149 14,837,579

Part c: Volume for
National Auto Insurance
# of autos insured during
the month 14,930,663 14,911,999 14,893,359 14,874,742 14,856,149 14,837,579
avg. insurance premium
per auto per month $100.00 $100.00 $100.00 $100.00 $100.00 $100.00
monthly premiums
revenue $1,493,066,250 $1,491,199,917 $1,489,335,917 $1,487,474,247 $1,485,614,905 $1,483,757,886
Change in Total Premiums Revenue, January to June:

January's Total Premiums = $1,493,066,250
June's Total Premiums = $1,483,757,886
Six-month Dollar Change = -$9,308,364
10-41
Six-month % change = -0.623%
10-42
10-56 (Continued-3)
2. What additional real-life refinements would you envision for the budgets you
prepared above in (1)? What additional budgets would you anticipate preparing for
the company were you in charge of the budget-preparation process?
a. As the person in charge of the budget-preparation process, one obvious

recommended change would be to report separately the number of new policies
written (the logical offset in Part b to the number of policy cancellations).
Currently the number of new policy-holders is buried somewhere in part a of the
budget. Thus, a significant improvement is to disclose prominently each month
the net change in (average) policies outstanding, which is defined as the
difference between the number of new policies written and the number of policy
cancellations.
b. In the example problem we assumed, for simplicity, that all policyholders paid
the same premium. Alternatively, we used an average premium rate per
month per policy, which is acceptable for budgeting purposes as long as the
mix of policyholders was not anticipated to change from the mix used to
calculate the weighted-average premium amount.
c. The budget we created applied to those individuals whose policies covered

the calendar year, January through December. A fuller, more realistic
analysis would gather similar data for policyholders whose anniversary date
is something other than January 1st. Whether the profiles of such
policyholders is different from the profile assumed above is an empirical
question.
d. The cancellation rate, and growth rate in new underwritings, would probably
be monitored carefully since these are key drivers of future financial
performers. That is, they are "leading indicators" of financial performance
and as such would probably be included in the customer perspective of the
company's balanced scorecard (BSC).
e. The problem includes information regarding a mid-term policy cancellation

rate (i.e., policies cancelled before the annual renewal date).It would seem
appropriate, however, to include in the model a policy-renewal rate (85%,
90%, etc.).
f. The above calculations and budgets deal solely with forecasted volume (#
of policies) and premiums revenue ($). The output of the budgetswe
prepared would then be used to prepare other budgets for the company. In
10-43
this sense, and similar to the extended example in thechapter, we say that
the budgets articulate with one another. For example, once a budget for
volume and sales has been prepared, thecompany can proceed to prepare
a "cost of claims" budget. In turn, information from both of these budgets
would be used to forecast staffing needs, what we might call "claims
handling." Claims processing times, the mix of "simple" versus
"complicated" claims, the average time to process a claim, the time
g. available per day (month) for each claims handler, the % of submitted
claims that are paid, etc. would all be "drivers" that would be incorporated
into the claims-processing budget.
h. The budget as presented is static in nature and covers a fixed period of

time. For reasons discussed more fully in the chapter, the limitations of such
budgets can be addressed by generating "rolling forecasts."
i. The budgets you prepared above in (1) can be referred to as “driver-based

budgets.” List some of the pros and the cons of such budgets,relative to
traditional budgeting practices.
j. Pros
a. Driver-based budgeting (e.g., traditional activity-
based budgeting (ABB) or Time-Driven Activity-Based Budgeting)
reduces the time to produce a budget or to re-forecast.
b. Driver-based budgeting requires fewer iterations--that is, it reduces
the "give and take" and time devoted to the "negotiations" aspect of
traditional budgets.
c. Driver-based budgeting saves costs--for example, overtime
payments (required to support time-consuming traditional budgeting
processes) can be eliminated; similarly, part-time (temporary) help to
support the traditional budget-preparation process can be reduced or
eliminated. Managers are "freed" to attend to more strategic
imperatives.
d. Driver-based budgets make managers accountable--situations such
as decreases in efficiency or unused capacity become more visible
under driver-based budgeting.
e. Driver-based budgeting provides insight and agility--if drivers are
appropriately chosen, then information about # of transactions and
cost-driver quantities for the period aid in the end-of-month
evaluation of operating performance. As well, this budgeting process
provides valuable non-financial information, which can be incorporate
10-44
into the organization's Balanced Scorecard (BSC).

f. Driver-based budgeting reduces risk exposure--if performance
drivers are appropriately defined and included in the budget, then
management can readily evaluate different risks and scenarios (mix
of products/services sold, productivity ratios, unit resource costs,
etc.).
g. Driver-based budgeting may decrease the amount of "gaming
behavior" on the part of managers and employees. With driver-based
budgeting causal relationships are transparent, a situation that can
limit the opportunity for "gaming." There is simply less opportunity to
fool senior managers if all of the assumptions in budgets are laid out
for everyone to see.
k. Cons
l. Driver-based budgeting is perceived to be difficult to implement.
m. Driver-based budgets require a sophisticated information processing
system--that is, the ability to capture, across the organization, key
resource drivers, activity cost drivers, and activities.
10-45
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Uinuu loisteessa kuun niin kaunihisti paimen suljetuin
silmin, posket hehkuin. Hiljaa kutrinsa leyhyy tuulessa
tuoksuvan yön.
Häntä Delia ääneti ja riutuin

katsoo korkeudesta kostein silmin.
Vaunut välkkyvät jättäin
hän alas laskeutuu.
Kirkkaammin hänen maahan tullessansa

laaksot, vuoret ja myrttimetsät loistaa.
Yksin valjakko halki
hopeisten pilvien käy.
Nukkuu rauhassa paimen, kutreillansa

neidon kyynelet tähtein lailla välkkyy.
Purppurahuulia polttaa
suudelma taivahinen.
Tyynny, huokaus tuulen puiden yllä!

Hiljaa, morsian ruususeppel, hiljaa
nähdä paimenen untaan
sahrami vuoteella suo!
Kuinka hirveä tyhjyys, kun hän herää, onkaan ympäri

liekehtivän sielun! Luo maan lapsen Olympos saa uness'
ainoastaan.
(Suom. Lauri Viljanen)
Elegia Yölle.
Kantaen lamppua Kuun sinä saatossa tähtien saavut
jälleen, lempeä Yö, helmasta varjojen maan.
Hiljaisuus, lepo seuraavat sua, valmuja vihmoin.
Parvenne voittoinen tuo unet karkelevat.
Yöpyhä! Leimuvin tuntein heittäydyn sinun helmaas,
köyhän sa kalleus oot, orjien oot vapaus.
Peitä ma ihmisten katseilta, vaienna ihmisten äänet,
äidinhelmassas tuudita lastasi taas.
Ellet haavoja lääkitä voi, mit' on iskenyt päivä,
korvasi kuitenkin tuskani äänelle suot.
Josp' iäks jäisit, oi! Mut kaikkea nielevi aika.
Aallot vaihtele ei kaukana aavalla niin.
Koht' ohi valtasi on, taas säihkyy ruusuinen Eos,
riemuni ennen, se nyt huolta ja kauhua tuo.
Mut levon loppua vailla ma tunnen, yön, jota koskaan
aaveet häiritse ei, ei uni ainoakaan.
Mulle se suokaa, oi jumalat! Pian mulle se suokaa!
Ainoa pyyntöni mun teille se on, jumalat.
Huokausten salaisuus.
Huokaukset ovat alkutila, jossa tuntee Luojan hengityksen.

Mikä aisteillesi ilon soikaan, syömes sykkimään sai
nopeammin ja sun poskes kalvaat vihmoi riemun lempeällä
ruusuhohtehella? Sano! Huokaus vain surumielen.
Lähtehestä hengen elämän se virtas harhaan Ajan
sokkeloissa.
Lakia kaks ohjaa elämäämme, kaksi voimaa varjoo kaiken,
joka syntyy vaihtuvan kuun kehrän alla. Kuule, ihminen! On
valta pyytää ensimmäinen. Pakko kieltäytyä toinen. Erillänsä
taivahassa, yhtä on ne maissa, joita paha vallitsee. Ja
ikuisesti niiden ykseys ja kaksinaisuus tulee huokausten
salaisuudess' ilmi. Elon suruhuokaus ja kuolon vavistuttaa
sydäntämme täällä, joka hengenveto julistaa sen kutsumusta
aistimaailmassa.
Näätkö merta? Kiitäen se tulee, tahtoo kaihontäysin

käsivarsin taivahan hääsoihtuin alla painaa povelleen maan
liljaseppeleisen. Nää, se tulee! Kaipuusta sen sydän kuohuu,
käsivarret kurkoittuvat. Mutta turhaan. Alla kuun ei mikään
toive täyty. Kuun on täyteyskin hetkellistä. Pettyneenä painuu
meri, ja sen ylväät aallot jälleen väistyy huokauksin rannan
luota.
Kuule tuulta! Suhisten se liitää lehdon poppelien

latvuksissa. Huokauksin paisuvin se puhuu, niinkuin ruumista
se ikävöitsis kihlatakseen kesän kukkarunsaan. Mutta äänet
himmenee jo. Lehväin tuuliharpussa soi joutsenlaulu yhä
hiljemmin ja kuolee vihdoin.
Kevätkin on huokaus maan poven tumman, joka taivahalta

kysyy, eikö kevät ikuinen jo puhkee. Mit' on kiuru,
aamusäteen armas, satakieli, varjoin rakastettu? Eri muotoja
vain huokausten.
Ihminen! jos viisautta elon halaat, kuule mua! Kahteen

lakiin liittyy elämä. On kyky pyytää ensimmäinen. Pakko
kieltäytyä toinen. Vapaudeks aateloi sa pakko, niin saat pyhän
sovituksen ja niin yli tomun kiertotähtein porteista käyt
kunnian sa sisään.
Narcissus.
Narcissus mykän lähteen yli taipuu, ja vettä aallon kirkkaan

janoo suu. Mut omat kasvot sieltä heijastuu, ja häneen syttyy
oudon syvä kaipuu.
Hän huokauksin lähteen viereen vaipuu, ja silmät kyynelistä

sumentuu. Ja elon riemujen ja kukkain kuu se pian hältä
jäljettömiin haipuu.
Pois suruaan ei tyttö suudellut, ei kohdannut hän ystävien

pöytää, eik' kutreillansa maine kukkinut.
Voi, sielussaan ken jumaluuden löytää ja pyhintä ken

pyytää elämän, maan ruusut kaikki kadottaapi hän!

CARL JONAS LOVE ALMQUIST (1793
—1866)
Antoniuksen laulu.
Sydämen kotiin ma kerran katselin kuunnellen.

Lähestyi valkeat olennot, vastasi viittoillen.
Hämmästyen näin ikuiset päivänmaat.
Sävelin kuiskivat rannat autuaat.
Sen jälkeen milloinkaan
en mieltynyt maailmaan.
Kuunteleva Maria.
Jumala, kuinka on kaunista kuulla

ääntä enkelin suun!
Jumala, kuinka on suloista kuolla
lauluun ja säveliin!
Hiljaa sula, mun sieluni, virtaan,
tummaan, taivaiseen purppuravirtaan!
Hiljaa vaivu, mun autuas henkeni,
jumalsyliin viileään, hyvään!

CARL JOHAN GUSTAF SNOILSKY
(1841 —1903)
Lepo Egyptissä.
Vesi solisee, laakso vihannoi, levon, varjon se vaeltajalle

soi. Tien jokainen äiti on hellyydessään sadun laaksoon
löytänyt nääntyessään.
On edessä huomenna erämaa,

missä poikasta sfinksit tuijottaa.
Pedot, ongelmat vaanii, missä hän kulkee,
hänet täällä äiti syliinsä sulkee.
Aron hiekkaa huomenna hän samoaa,

unen maassa hän ensin levätä saa.
Hän syntyi kulkemaan tuskaa vastaan.
On tääll' oma äidin hän ainoastaan.
Vedest' äitihin katsovat miettivään

kuvat pilvien, sammal ympärillään.
Nyt kostuttaa vesi huulia armaan —
Minä janoon, ne kerran lausuvat varmaan.
Hän viihtää kiihkon lapsellisen,
suun polttavan hiljaa virvoittaen.
Se pikari, pilvet min reunoja varjoo,
merensyvän ja katkeran kalkin tarjoo.
Vesi solisee, laakso vihannoi,

levon, varjon se vaeltajalle soi.
Aro helteinen kutsuu — hetkinen vuota.
Miks kiiruhdat, laps, sinä äitisi luota?

VERNER VON HEIDENSTAM (1859—
1940)
Pyhiinvaeltajan joululaulu.
Syyssade, arojen aurinko pyhiin vaeltaessa haalisti viittani.

Nousin jo kukon kiekuessa. Pitkänä aueten taival toi mun
tuhannet virstat kotia päin. Oljille raueten lieden loimun
äärehen vasta illalla jäin.
Tarinat toivioretkien mieleni kuntoon mietti. Ääneti pian väki

maalainen kuunnellen iltaa vietti. Naiset kuiskutti
kumartuessaan lähetysten kuuntelemaan. Hiillos tuiskutti
leimahtaessaan hehkuvat kipinät helmastaan.
Seikkailut, muistot retkeltäin harhaten kuljetulta huoleti

tulkitsin — kätkien näin mieleni salaista tulta. Lihaani vaivaista
lailla hartaan luostariveljen kurita en, niin hänen taivaista
kuningatartaan, Jumalan Äitiä palvellen.
Varjojen maahan autioon kulkenut olen yksin. Kuolleiden

kanssa puhunut oon hymyin ja nyyhkytyksin. Terveenä,
elossa aavikoita vaelsin keskellä vainajain. Seurasin pelossa,
rakastin noita, kodista varjojen kotia hain.
Heräsi kauniina elämään maailma, nukkunut kauan.

Niniven tyttäret viheriään kietoivat vaellussauvan. Soi sävel
haipuva Tähdet sinen hehkuivat valoa raamatun. Varjoihin
vaipuva, ihmeellinen kauneusmaailma valtasi mun.
Kaapuni simpukat korvaan toi Arkipelaagin hyrskeen.

Tympanon ja symbaali soi äärellä aaltojen tyrskeen. Kaviot
raikuen leikkiä kuumaa kentaurit kera neitojen lyö. Tahdissa
kaikuen nauraa ja huumaa laulut villit kuin pohjaton yö.
Kaivaten valoon ja elämään varjojen aavikolta pakenin

katujen vilinään — mutta en kohtalolta. Elämän kylitse kulkija
palaa; vietellen ne kohisevat. Silmäini ylitse varjot salaa
vainoten kätensä ojentavat.
Aikahan toiseen, jo heräävään tie on nuorille avoin.

Vieraaksi heidän luonaan jään. Kuljen aaveen tavoin. Päivän
sotihin nuorten sana niinkuin teräs iskeä saa, ääneti kotihin,
uneksivana varjojen poika vaeltaa.
Koskaan nyt pohtia saata en kysymyksiä hetken. Mietteissä

teen yhä harhaillen varjojen luoliin retken. Himmeää lyhtyä
kantaen löydän manalaan tieni, en elämään. Koskaan en
yhtyä ääressä pöydän veljien seuraan voi hilpeään.
Huutaen kurjet on paenneet. Kivien ympäri heittää valkeita

patjoja hiutaleet. Ruutuja huuru peittää. Lyhdettä etsien
maalaisen vajaa kiertää nälkäinen varpunen. Syksyisten
metsien sumussa ajaa poikanen joulusta laulaen.
Lapsuusvuosien äänten luo lumiset polut mun johtaa, mutta
ei sydäntä saavuta nuo, vain humu korvani kohtaa. Turhaan
tarjoten sovitusta äänet soi hiljaiset, ihanat. Katseeni varjoten
Hades musta nostaa näkynsä uhkaavat.
Unhoa antaa Lethen vuo — mutta pimeän Styxin aallosta

join ma: se mieleen tuo menneisyyden yksin. Varjot hyytävät
kutsuu mieltä Kharonin virralle uneksimaan. Mut veret
pyytävät elämän tieltä rypäleterttuja poimimaan.
Elämän kahleissa rauhaton harhailen maailmalla. Sinne,

miss' en ole, kaipuuni on. Vieraana kaikkialla. Kelle on
auennut Hades, ei saa se elämän heelmiä riistää, ei. Varjojen
rauennut kauneusmaa — se ainaiseksi mun sieluni vei.

SELMA LAGERLÖF (1858—1940)
Laps, olet lempinyt.
Laps, olet lempinyt, koskaan et

maista nyt riemua rakkauden.
Intohimo tärisytti sieluas sun.
Oi iloitse, rauhan jo sait!
Et nouse enää riemun korkeuksiin.
Oi iloitse, rauhan jo sait!
Et painu enää tuskan syvyyksiin,
et milloinkaan.
Laps, olet lempinyt, koskaan ei

liekehdi sielusi nyt.
Olit ruohokenttä sa kuivunut,
tuless' aaltosit kiitävän sekunnin.
Savun tieltä ja hiilihöytyvien
pois linnut kirkuen pakenivat.
Ne palata saa! Enää leimua et,
et leimuta voi.
Laps, olet lempinyt, koskaan et kuule nyt ääntä rakkauden.
Kuin väsyneet lapset vapauteen tylyn koulun penkeiltä ikävöi,
niin sydämes voimat kaihoavat, mut niitä kutsuta ei. Ne on
niinkuin vartio unhoitettu: niitä kutsuta ei.
Laps, on mennyt hän ainoo, hänen kanssaan rakkaus,

riemu sen. Meni hän, jota lemmit, niinkuin ois hän sinut
avaruuslentoon siivittänyt, jota lemmit, kuin ois ahdistaissa
tulvan pakopaikan sulle ainoon hän lahjoittanut, meni hän,
joka taisi yksinään oven aukaista sydämees.
(Suom. Elina Vaara)

GUSTAF FRÖDING (1860—1911)
Dolores di Colibrados.
Häntä nähnyt en Andalusian mailla, kun kasvoilla, tumman

kevähän lailla, hymys nuoruus kuin valta kaliifien. Hänet näin
vasta, kun oli syyssade käynyt ja Doloreelle talvi jo ennättänyt
lumijuovia hiuksille sirottaen.
Mut tulesta ennen niin lumoavasta viel' ollut ei laannut

leimahtamasta säen viimeinen, katkera katseeseen. Oli
kelmeäll' otsalla ylpeys yllään kuin muistona auringon,
säteilyllään hänen linnansa huippua valaisseen.
Lie äänet kutsuvat kaukaa soineet;

oli ylitse vesien, maiden ne voineet
hänet temmata kodista, juuriltaan.
Yli merien ehkä sai mies hänet viedä.
Minä luin nimen haudalta, muuta en tiedä,
oli vieras hän luonamme kulkiessaan.
Hän vieras ei tuntenut outoja meitä, kävi unhossa hän

ylenkatsotun teitä, oli ahdasta kolkassa pohjolan. Tavan
kaavaan hän tuskin tahtonsa sulki, viha kiehuva kun jo puristi
julki hänen pilkkansa ylpeän, katkeran.
Rikas oltuaan onnen lahjoista ennen oli tuhlannut kaikki

hän vuosien mennen ja kantaa, nääntyen häpeään, sai kurjia
ryysyjä vanhuudessaan, mut kuiskutus soi hänen
kulkiessaan: »Kas, aatelinen käy ryysyissään!»
Huvi rahvaan on ilkkua aatelisverta,

sitä saada herjata, nauraa kerta
Ja painaa ylhäinen lokahan maan.
Ja he pistivät neuloilla häntä sen tähden
ja nauroivat raa'asti, liekkejä nähden
hänen tummassa maurilaiskatseessaan.
Ja naapurit lausui: »Dolores on houkko,

hän on toisenlainen kuin meidän joukko,
hänen järkensä on kovin hämmentynyt»
Ei puuttunut pohjaa puheelta tältä,
sillä viimein sielu sumeni hältä.
Peri hullujenhuone Doloreen nyt.
Koki sentään hän lopulta kirkastumisen.

Näin särkyvän katsehen haaveellisen,
ja hymyillen tuskassa kuoleman ois
hän tahtonut käteensä käteni saada.
Ja kuiskaten hiljaa: »Se pierda Granada,
ay de mi Alhania», hän sammui pois.
Minä näin: oli kärsimys piirteitä syönyt, ja mietin: »Sota on

linnan lyönyt, jalo viinitarha nyt autio on; kävi tuhoten,
polttaen, synkentäen yli Granadan kuolema — kuitenkin näen
minä kauniin ja ylpeään raunion»
Ei Cordovan moskeijakatedraali, vaan laakson kirkko

hautahan vaali hänet keskellä pohjolan metsien.
Vahakynttilät, suitsutus tuoksuneet eivät, vain muutamat
miehet arkkua veivät väen halki huoleti tungeksien.
Andalusian aamu ei liekehdi sinne, ei suhise myrtti, ei

sypressi, minne Dolores on laskettu uinumahan. Läpi usvien
riutuva aurinko hohtaa, ja sen sätehet viluisen koivun kohtaa
Doloreen haudalle kumartuvan.
Nyt katsokaat uneksijaa.
Nyt katsokaat uneksijaa,

päin painuvin tuolla hän vaeltaa.
Polut oudot hän etsii, ei teitämme pole,

ei kaltaisemme hän ole.
Näin unensa julkeat valehtelevat:

kuu, aurinko, tähdet häntä kumartelevat.
On isämme rakkahin poika tää,

hänet maahan iskekää!
(Suom. Elina Vaara)

OSCAR LEVERTIN (1862—1906)
Sa kuule, sateess' elokuun.
Sa kuule, sateess' elokuun yö kuulas kuiskii, elää, kuin

sadun yöhön lumottuun veet suihkulähteen helää. Ja
pisaroiden huuhtelun kaikk' kukat tuntee salaa, myös sydämiä
sun ja mun suo raikkaan tulvan valaa.
Nyt muistaa vanhan laulelman ja kyyhkyn, haukan harmaan

ja prinssin, joka prinsessan vei ylpeän ja armaan —. Pääs
vaipuu vasten poskeain, sun hiukses hiljaa aukee, ja vasta
sateen nukahtain myös syleilymme raukee.

ERIK AXEL KARLFELDT (1864—1931)
Sinun silmäs ovat tulta.
Sinun silmäs ovat tulta, syttä sydämeni minun.

Käänny luotain, ennenkuin ma niinkuin miilu
leimahdan!
Viulu olen, armahani, josta loihtii kätes sinun,
mitä tahdot, miten tahdot — kaikki laulut
maailman.
Käänny luotain, käänny luoksein! Tuhkaksi ma

palaa mielin.
Olen riemu, olen kaipuu, liitän syksyn
keväimeen.
Vireessä on viulu, soida suo sen hulluin, hurjin
kielin,
valaa vuodet rakkauteni viime lauluun huumeiseen!
Käänny luoksein, käänny luotain! Kuin syysilta

tahdon palaa;
verta, kultaa viirissämme säihkyy myrskyn
humisten —
kunnes hiljenee, ja hämyyn askeleesi häipyy
salaa,
sinä kuuman nuoruuteni seuralainen
viimeinen.
Yökohokit keskellä viljaa.
Yökohokit keskellä viljaa nyt avaa kruunujaan, ja sarvekas

hirvi hiljaa käy etsien puolisoaan. Nyt vilukot puhkee suohon
liki hämyistä tietäni mun, läpi välkkyvän silmäruohon tulen
taas luo rakastetun.
Kuuneitsyt, kiulusi kasta sa auringon purppuraan —

ruislinnusta karkeasta satakielen ma tulisen saan. Tie pellon
tarhalle kulkee, jo lehdoissa lemmityn nään, minut
intohimoisna sulkee pian syliin hän lämpimään.
Häkin pohjalle vuoteeksemme jo Maarian heinät hain, siell'

lepohon raukenemme, lemu huumaa haasiain. — Maan
pojalle väkevälle, jonka valtimot raukeina lyö, suot runsaan
rakkautes hälle, tummasilmäinen Elokuunyö.
Elokuunhymni.
Kanervanummi sammuu loistossansa auringonlaskun lailla
verkkaisen. Vartoen metsä syvää bassoansa virittää syksyn
tulovirtehen. Kuuletko: sotaa, synnin parannusta kumea ääni
harjun takaa soi? Näetkö: laakson lokaan polku musta ylitse
oratuomikunnaan toi?
Jos mua seuraat, hyvästellä sun tuoksuja täytyy, kesän

kukkatarhaa. Kuin minä silloin lämpenetkö, kun viileät pilvet
avaruutta harhaa? Kuuletko: kevään kaikki luutut soivat
sulaen myrskyn urkuin pauhinaan, kohussa syksyn sateen
ilakoivat toukokuun purot, kaste yli maan?
Koskaan ei joutsen valkosulissansa morsiant' etsi tiellä

ilmojen, koskaan ei kauris varro armastansa, lehtien hiljaa
tuuleen kahisten. Mennyttä! Vuottaa lammet kukkivat
myöhäistä juhlaa rakkaudenhuuman, kuulee ne kuikan huudot
haikeat, juottaa ne joskus hirven lemmenkuuman.
Jos mua seuraat, seppel laske pois, laaksoissa jonka solmit

suvisissa; koskaan se päässäs et sa käydä vois saleissa
tanssiin soihdunvaloisissa. Surra et saa! Voin toisen sulle
antaa lehdistä, jotka tuuli puista vei. Kruunua syksyn
kulmillaan ken kantaa, haaveissa hymyy, enää naura ei.

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Cost Management A Strategic

Emphasis 6th Edition Blocher Solutions

CHAPTER 10: STRATEGY AND THE MASTER BUDGET

10-24 Production and Materials Purchases Budgets (20-25 minutes)

2nd Quarter 3rd Quarter

10-26 Budgeted Cash Disbursements (30 minutes)

1. Budgeted cash payments for merchandise purchases:

2. Budgeted cash payments for merchandise purchases:

Opportunity cost (%) = [discount % ÷ (1 – discount %)] × [365 ÷ no. of extra

= [0.02 ÷ (1 − 0.02)] × [365 ÷ 15] = 0.020408 × 24.33 = 49.66%

10-28 Cash Budget (20 minutes)

Beginning cash balance $15,000

10-30 Cash Budget (30-40 minutes)

1. Total credit sales in November $240,000

2. Cash sales in January $ 60,000

3. Total inventory purchases in November:

10-32 Accounts Receivable Collections and Sensitivity Analysis (50 minutes)

1. Estimated cash receipts from collections in May:

2. Gross accounts receivable, May 31st:

3. Net accounts receivable, May 31st:

Estimated credit sales for May $210,000

a. Estimated cash receipts from collections in May:

b. Gross accounts receivable, May 31st:

1. Right click anywhere in the worksheet area below.

Exercise 10-32: Accounts Receivable Collections and Sensitivity Analysis

Actual credit sales for March

10-34 Profit Planning and Sensitivity Analysis (40-45 minutes)

1. Sales volume in units:

$85.00X + $40,000 = $80.00X + $45,000

2. Sales level needed:

Pre-tax profit = (cm/unit * X) − FC = 5% (sp/unit * X)

Operating Profit ÷ Sales Revenue 5.00% 5.00%

Let X = sales dollars, then:

Operating profit target (%) = 5% 5%

Operating Profit ÷ Sales Revenue 5.00% 5.00%

10-36 Cash Budgeting: Not-for-Profit Context (30-45 minutes)

10-38 Service Firm Budget (60-75 minutes)

Total hours for the budgeted activities:

Professional staff requirements for the budgeted revenue:

2. Number of full-time consultants needed for the year:

No. of consultant-weeks needed for the yr = 776 (from solution to

Total compensation for the manager:

Note to Instructor: An Excel spreadsheet solution file is embedded in this document.

1. Right click anywhere in the worksheet area below.

Exercise 10-38: Budgeting for a Service Firm

10-40 Activity-Based Budgeting (ABB) (20-30 Minutes)

Budgeted Cost for the Month:

3. Expected saving in costs—January 2013:

Requisition Handling (@ $12.50/requisition) = $ 375,000

Expected Cost Savings, January 2013 = $1,051,000

10-42 Time-Driven Activity-Based Budgeting (TDABB) (45-60 minutes)

1. Calculation of budgeted resource costs per hour:

Indirect labor support $1,000,000 20,000 $50

Activity #1: Handle Production Runs

3. Cost of unused capacity for the quarter, by resource:

(Item 6) (Item 5) (Given)

Computer support $500,000 500 450 $450,000 $50,000

Revised Cost of Unused Capacity--Indirect Labor Support Cost:

Cost of Resource Resource Cost of Cost of

*Resource Units Used Calculation: 2,000 + (16,000 × (1 – 10%)) = 16,400

product promotion purposes.

10-44 Kaizen Budgeting (30-40 minutes)