Introduction to Management Accounting

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Problems: Set A

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
Sales Budget
December
Unit sales

January

7,000

Unit selling price

Total sales Revenue

8,000

10 $
70,000

10
80,000

Req. 1
Cash Collections
Cash Sales (30%)
Credit Sales (70%)
Total Cash Collections

January
$24,000
$49,000
$73,000

February
$32,200
$56,000
$88,200

Req. 2
Production Budget
Unit Sales

January
8,000

Chapter 9: The Master Budget and Responsibility Accounting

February
9,200

Introduction to Management Accounting

Plus: Desired Ending Inventory
Total Needed
Less: Beginning Inventory
Units to Produce

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2,300
10,300
2,000
8,300

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

Req. 3
Direct Materials Budget
Units to be produced
X Pounds of DM needed per unit
Quantity (pounds) needed for production
Plus:Desired ending inventory of DM
Total quantity (pounds) needed
Less:Beginning inventory of DM
Quantity (pounds) to purchase
X Cost per pound
Total Cost of DM purchases

Unit Sales
Desired End Inventory
Total Needed
Beginning Inventory
Units to produce
DM needed per unit
DM needed for production

January
8,300
2
16,600
1,875
18,475
1,660
16,815
2
$33,630

April
9,700
850
10,550
2,425
8,125
2
16,250

February
9,375
2
18,750
1,970
20,720
1,875
18,845
2
$37,690

May
8,500

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
December Purchases
January Purchases
February Purchases
March Purchases
Total cash payments for direct material
purchases

January
$42,400
$6,726

$49,126

Chapter 9: The Master Budget and Responsibility Accounting

February
$26,904
$7,538

$34,442

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

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Introduction to Management Accounting

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Req. 5
Schedule of Expected Cash DisbursementsConversion Costs
Variable conversion costs
Rent (fixed)
Other fixed MOH
Total Payments for operating expenses

January
5,000
3,000
9,960
17,960

February
5,000
3,000
11,250
19,250

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
Variable operating expenses
Fixed operating expenses
Total payments for operating expenses

January
8,000
1,000
9,000

February
9,200
1,000
10,200

Req. 7
Combined Cash Budget
Cash balance, beginning
Add cash collections
Total cash available
Less cash payments:
Direct material purchases
Conversion costs
Operating Expenses
Equipment Purchases
Tax payment
Total cash payments
Ending cash balance before financing
Financing:
Borrowings
Repayments
Interest Payments
Total Financing
Cash balance, ending

Total interest

January
$4,500
73,000
77,500

February
$4,414
88,200
92,614

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

34,442
19,250
10,200
12,000
10,000
85,892
6,722

81,086
-3,586
8,000

8,000
$4,414

0
-2000
-60
-2,060
$4,662

$280

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

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 incom
Less interest expense
Less provision for income taxes
Net income

271,000
-162,600
108,400
30,100
4,800
73,500
-300
21,960
$51,240

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

(60 min.) P 9-59A

ves 2 & 3)

March, and for the quarter

from Requirement 3.

udget
February

March

9,200

April

9,900

May

9,700

8,500

10

10 $

10

10

92,000

99,000 $

97,000

85,000

March
$34,650
$64,400
$99,050

Quarter
$90,850
$169,400
$260,250

March
9,900

Quarter
27,100

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

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

2,425
29,525
2,000
27,525

March
9,850
2
19,700
1625
21,325
1,970
19,355
2

Quarter
27,525
2
55,050
1,625
56,675
1,660
55,015
2

$38,710

$110,030

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aterial Purchases
March

$30,152
$7,742

Quarter
$42,400
$33,630
$37,690
$7,742

$37,894

$121,462

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

onversion Costs
March
5,000
3,000
11,820
19,820

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

erating Expenses
March
9,900
1,000
10,900

Quarter
27,100
3,000
30,100

March
$4,662
99,050
103,712

Quarter
$4,500
260,250
264,750

37,894
19,820
10,900
16,000

121,462
57,030
30,100
33,000
10,000
251,592
13,158

84,614
19,098
0
-6,000
-240
-6,240
$12,858

8,000
-300
7,700
$20,858

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

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