Problem 5 (Schedule of Expected Cash Collections; Cash Budget)

Requirement 1

Schedule of expected cash collections:

Month

April May June Quarter

From accounts receivable................................ P141,000 P 7,200 P148,200

Chapter 15 Functional and Activity-Based Budgeting

15-14

From April sales:

20% × 200,000................................ 40,000 40,000

75% × 200,000................................ 150,000 150,000

4% × 200,000................................ P 8,000 8,000

From May sales:

20% × 300,000................................ 60,000 60,000

75% × 300,000................................ 225,000 225,000

From June sales:

20% × 250,000................................ 50,000 50,000

Total cash collections................................ P181,000 P217,200 P283,000 P681,200

Requirement 2

Cash budget:

Month

April May June Quarter

Cash balance, beginning ................................ P 26,000 P 27,000 P 20,200 P 26,000

Add receipts:

Collections from
customers................................ 181,000 217,200 283,000 681,200

Total available ................................ 207,000 244,200 303,200 707,200

Less disbursements:

Merchandise purchases ................................ 108,000 120,000 180,000 408,000

Payroll ................................ 9,000 9,000 8,000 26,000

Lease payments................................ 15,000 15,000 15,000 45,000

Advertising ................................ 70,000 80,000 60,000 210,000

Equipment purchases ................................ 8,000 — — 8,000

Total disbursements ................................ 210,000 224,000 263,000 697,000

Excess (deficiency) of

receipts over

disbursements ................................ (3,000) 20,200 40,200 10,200

Financing:

Borrowings ................................ 30,000 — — 30,000

Repayments................................ — — (30,000) (30,000)

Interest................................ — — (1,200) (1,200)

Total financing................................ 30,000 — (31,200) (1,200)

Cash balance, ending P 27,000 P 20,200 P 9,000 P 9,000

Functional and Activity-Based Budgeting Chapter 15

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Requirement 3

If the company needs a minimum cash balance of P20,000 to start each

month, the loan cannot be repaid in full by June 30. If the loan is repaid in

full, the cash balance will drop to only P9,000 on June 30, as shown above.

Some portion of the loan balance will have to be carried over to July, at

which time the cash inflow should be sufficient to complete repayment.

Problem 6 (Flexible Budget)

Summer Machine Company

Flexible Overhead Budget

Department 1

Capacity

100% 90% 80% 70% 60%

Machine Hours 200,000 180,000 160,000 140,000 120,000

Variable Overhead P1,300,000 P1,170,000 P1,040,000 P 910,000 P 780,000

Fixed Overhead 300,000 300,000 300,000 300,000 300,000

Total P1,600,000 P1,470,000 P1,340,000 P1,210,000 P1,080,000

Manufacturing Overhead rate per machine hour P8.00

Summer Machine Company

Flexible Overhead Budget

Department 2

Capacity

100% 90% 80% 70% 60%

Direct Labor Hours 200,000 180,000 160,000 140,000 120,000

Machine Hours 400,000 360,000 320,000 280,000 240,000

Variable Overhead P1,400,000 P1,260,000 P1,120,000 P 980,000 P 840,000

Fixed Overhead 500,000 500,000 500,000