Introduction to Management Accounting

Solutions Manual

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 Sales
Credit Sales
Total Cash Collections

Cash Collections
January
$24,000
$
49,000
$73,000

February
$27,600
$
56,000
$83,600

Production Budget
January
8,000

February
9,200

Req. 2

Unit Sales

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Introduction to Management Accounting
Plus: Desired ending Inventory
Total needed
Less: Beginning Inventory
Units to produce

Solutions Manual
2,300
10,300
800
9,500

2,475
11,675
920
10,755

Req. 3
Direct Materials Budget
January
February
Units to be produced
9,500
10,755
Multiply by: Quantity(pounds) of DM needed per
2
2
Quantity (pounds) needed for production
19,000
21,510
Plus: Desired ending inventory of DM
2,151
2,267
Total quantity (pounds) needed
21,151
23,777
Less: Beginning inventory of DM
1,900
2,151
Quantity (pounds) to purchase
19,251
21,626
2
Multiply by: Cost per pound
2
Total cost of DM purchases
$38,502
$43,252

units to be produced
Multiply by: Quantity(pounds) of DM needed per
Quantity (pounds) needed for production
Plus: Desired ending inventory of DM
Total quantity (pounds) needed
Less: Beginning inventory of DM
Quantity (pounds) to purchase
Multiply by: Cost per pound
Total cost of DM purchases

April
9,700
2
19,400
1,700
21,100
1940
19,160
2
38,320

May
8,500
2
17000

Req. 4
Schedule of Expected Cash Disbursements—Material Purchases
January
February
20% of current month DM purchases
$7,700
$8,650
80% of last month's DM Purchases
$
56,000
$30,802
Total Cash payments
$63,700
$39,452

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Req. 5
Schedule of Expected Cash Disbursements—Conversion Costs
January
February
Variable manufacturing overhead costs
$11,400
$12,906
Rent (fixed)
$5,000
$5,000
Other fixed MOH
$3,000
$3,000
Cash payments for manufacturing overhead

$19,400

$20,906

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
January
February
Variable operating expenses
8000
9200
Fixed operating expenses
$1,000
$1,000
Cash payments for operating expenses
$9,000
$10,200

Req. 7

Beginning Cash Balance
Plus: Cash collections
Total Cash Available
Less Cash Payments:
Direct materials purchases
Conversion costs
Operating expenses
Equipment purchases
Tax payment
Total Disbursements
Ending Cash balance before financing
Plus: New barrowings
Less: Debt Repayments
Less : Interest Payments

Combined Cash Budget
January
February
$4,500
$5,598
73,000
83,600
77,500
89,198
38,502
19,400
9,000
5000

43,252
20,906
10,200
12,000
10,000
96,358
-7,160
12,000

71,902
5,598

Ending Cash Balance

$5,598

Interest Owed

0

Total interest

$230

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Req. 8
Budgeted Manufacturing Cost per Unit
Direct Materials Cost per unit
$4.00
Coversion costs per unit
$1.20
Fixed Manufacturing overhead per unit
$0.80
Budgeted cost of manuf. Each unit
$6.00
Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales Revenue
Less: Cost of goods sold
Gross Profit
Operating Expenses
Less: Depreceiation expense
Operating Income
Less: Interest expense
Less: Income tax expense
Net Income

$

271,000
-162,600
108,400
-30,100
-4,800
73,500
($230)
-21,981
$51,289

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(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
$29,700
$
64,400
$94,100

Quarter
$81,300
$169,400
$250,700

March
9,900

Quarter
27,100

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Introduction to Management Accounting
2,425
12,325
990
11,335

2,425
29,525
800
28,725

March
11,335
2
22,670
1940
24,610
2,267
22,343
2

Quarter
28,725
2
57,450
1,940
59,390
1,900
57,490
2

$44,686

$114,980

aterial Purchases
March
$8,937
$34,602
$43,539

Quarter
$22,996
$121,403
$144,399

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onversion Costs
March
$13,602
$5,000
$3,000

Quarter
$37,908
$15,000
$9,000

$21,602

$61,908

erating Expenses
March
9900
$1,000
$10,900

Quarter
$27,100
$3,000
$30,100

March
$4,840
94,100
98,940

Quarter
$4,500
250,700
255,200

44,686
21,602
10,900
16000

-1,000
-230

126,440
61,908
30,100
33,000
10,000
261,448
-6,248
12,000
-1,000
-230

$4,522

$4,522

93,188
5,752

110

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Overhead
Variable per Unit

Jan
Feb
Mar
Q1 Total

$

8,000.00
1.2

Units
80,000
92,000
99,000
271,000

Budget Per Unit
Overhead
Variable
$
0.10
1.2 $
$
0.09
1.2 $
$
0.08
1.2 $
0.09
1.2

Total
1.30
1.29
1.28
1.29