Introduction to Management Accounting

Problems: Set A

Solutions Manual

Joseph Kasal

(60 min.) P 9-59A

P9-59A Comprehensive budgeting problem (Learning Objectives 2 & 3)
Requirements
1. Prepare a schedule of cash collections for January, February, and March, and for the quarter
in total.
2. Prepare a production budget.
3. Prepare a direct materials budget.
4. Prepare a cash payments budget for the direct material purchases from Requirement 3.
5. Prepare a cash payments budget for conversion costs.
6. Prepare a cash payments budget for operating expenses.
7. Prepare a combined cash budget.
8. Calculate the budgeted manufacturing cost per unit.
9. Prepare a budgeted income statement for the quarter ending March 31.

Solution:
Given

December
Unit sales
Unit selling price
Total sales Revenue

Sales Budget
January

7,000
$
$

February

8,000

March

9,200

April

9,900

May

9,700

8,500

10 $

10 $

10 $

10 $

10 $

10

70,000 $

80,000 $

92,000 $

99,000 $

97,000 $

85,000

Req. 1

Cash sales
Credit sales
Total cash collections

Cash Collections
January
February
March
Quarter
$
24,000 $
27,600 $
29,700 $
81,300
$
49,000 $
56,000 $
64,400 $ 169,400
$
73,000 $
83,600 $
94,100 $ 250,700

Req. 2
Production Budget
January
8,000
2,300
10,300
2,000
8,300

March
9,900
2,425
12,325
2,475
9,850

Quarter
27,100
2,425
29,525
2,000
27,525

March
9,850
2
19,700
1,880.00
21,580
1,970
19,610
$
2
$ 39,220

Quarter
27,525
2
55,050
1,880
56,930
1,660
55,270
$
$

2
110,540

Schedule of Expected Cash DisbursementsMaterial Purchases

January
February
March
December purchases
$
42,400
January purchases
$
6,726 $
26,904
Febuary purchases
$
7,538 $
30,152
March purchases
$
7,844
Total cash Payments for DM purchases
$
49,126 $
34,442 $
37,996

$
$
$
$
$

Quarter
42,400
33,630
37,690
7,844
121,564

Unit sales
Plus: Desired ending inventory
Total needed
Less: Beginning inventory
Units to produce

February
9,200
2,475
11,675
2,300
9,375

Req. 3
Direct Materials Budget
January
February
Units to be produced
8,300
9,375
X Pounds of DM needed per unit
2
2
Quantity (pounds) needed for production
16,600
18,750
Plus: Desired ending inventory of DM
1,875
1,970
Total quantity (pounds) needed
18,475
20,720
Less: Beginning inventory of DM
1,660
1,875
Quantity (pounds) to purchase
16,815
18,845
X Cost per pound
$
2 $
2
Total cost of DM purchases
$
33,630 $
37,690

Unit sales
Add ending inventory
Less beginning inventory
Total units to produce
Total pounds needed for production

April
9,700
2,125
2,425
9,400
18,800

May
8,500

Req. 4

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

Introduction to Management Accounting

Solutions Manual

Req. 5
Schedule of Expected Cash DisbursementsConversion Costs
January
February
March
Variable conversion costs
$
9,960 $
11,250 $
11,820
Rent
$
5,000 $
5,000 $
5,000
Other fixed MOH
$
3,000 $
3,000 $
3,000
Total payments for conversion costs
$
17,960 $
19,250 $
19,820

$
$
$
$

Quarter
33,030
15,000
9,000
57,030

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
January
February
March
Quarter
Variable operation expenses
$
8,000 $
9,200 $
9,900 $
27,100
Fixed operating expenses
$
1,000 $
1,000 $
1,000 $
3,000
Total payments for operating expenses
$
9,000 $
10,200 $
10,900 $
30,100

Req. 7

Cash balance, beginning

Add cash collections
Total Cash Available
Less cash payments:
Direct material purchases
Conversion costs
Operation expenses
Equipment purchases
Tax payments
Total cash payments
Ending cash balance before financing
Financing:
Borrowings
Repayments
Interest payments
Ending cash balance

Combined Cash Budget

January
February
March
Quarter
$
4,500 $
4,414 $
4,122 $
4,500
$
73,000 $
83,600 $
94,100 $ 250,700
$
77,500 $
88,014 $
98,222 $ 255,200

Total interest

$
$
$
$

49,126
17,960
9,000
5,000

$
$

$
$
$
$
$
81,086 $
(3,586) $

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

$
$
$
$

37,996
19,820
10,900
16,000

$
$

$
$
$
$
$
84,716 $
13,506 $

121,564
57,030
30,100
33,000
10,000
251,694
3,506

8,000 $

2,000

4,414 $

$
$
4,122 $

$
9,000 $
280 $
4,226 $

10,000
9,000
280
4,226

$280

Req. 8
Budgeted Manufacturing Cost per Unit
Direct materials cost per unit
Conversion costs per unit
Fixed manufacturing overhead per unit
Budgeted cost of manufacturing each unit

$4.00
$1.20
$0.80
$6.00

Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Cost of goods sold
Gross profit
Operating expenses
Depreciation
Operating income
Less interest expense
Less provision for income taxes
Net Income

$
$
$
$
$
$
$
$
$

Chapter 9: The Master Budget and Responsibility Accounting

271,000
162,600
108,400
30,100
4,800
73,500
280
21,966
51,254