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 Collections (30% Current Month)

Credit Collections (70% Last Month)
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

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Plus: Desired Ending Inventory
Total Needed
Less Beginning Inventory
Number of Products to Produce

Solutions Manual
2,300
10,300
2,000
8,300

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

Req. 3
Direct Materials Budget
January
February
Units to be produced (from Prod Budget)
8,300
9,375
Multiply by Quantity of DM per Unit(lbs)
2
2
Quantity of DM needed for Production
16,600
18,750
Plus: Desired end Inventory of DM
1,875
1,970
Total: Quantity needed (lbs)
18,475
20,720
Less: Beginning Inventory of DM
1,660
1,875
Quantity to Purchas (lbs)
16,815
18,845
2
Multiply by: Cost per Pound
2
Total Cost of DM Purchases
$33,630
$37,690

Units to be produced (from Prod Budget)

Multiply by Quantity of DM per Unit(lbs)
Quantity of DM needed for Production
Plus: Desired end Inventory of DM
Total: Quantity needed (lbs)
Less: Beginning Inventory of DM

April
9,700
2
19,400
1,700
21,100
2,110

May
8,500
2
17,000
0
17,000
1,700

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
January
February
December Purchases
$42,400
January Purchases
$6,726.0
$26,904.0
February Purchases
$7,538.0
March Purchases
Total Disbursements
$49,126
$34,442

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
Rent (fixed)
$5,000
$5,000
Other MOH (fixes)
$3,000
$3,000
Variable Conversion Costs (DL + MOH)
$9,960
$11,250
Total Disbursements
$17,960
$19,250

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
January
February
Variable Operating Expenses
$8,000
$9,200
Fixed Operating Expenses
$1,000
$1,000
Total Disbursements
$9,000
$10,200

Req. 7

Cash Balance, beginning

Add Cash Collections (req. 1)
Total Cash Available
Less Cash Disbursements:
For Materials (req. 4)
For Conversion Costs (req. 5)
For Operating Expenses (req. 6)
For Equipment
For Taxes
Total Disbursements
Excess (deficiency) of Cash
Financing:
Borrowings
Repayments
Interest
Total Financing
Cash Balance, Ending

Total interest

Combined Cash Budget

January
February
$4,500
$4,414
73,000
83,600
77,500
88,014
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

8,000

2,000

8,000
$4,414

2,000
$4,122

$280

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

Req. 8
Budgeted Manufacturing Cost per Unit
Direct Materials: 2 lbs. each * $2 per lb
$4.00
Conversion Costs: $1.20 each unit
$1.20
Fixed MOH: $0.80 per unit
$0.80
Cost of manufacturing each unit
$6.00
Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Cost of Goods Sold ($6.00 * units sold)
Gross Profit
Operating Expenses
Depreciation Expenses
Operating Income
Less: Interest Expense
Less: Provision for Income Tax @ 30%
Net Income

271,000
(162,600)
108,400
28,100
4,800
75,500
(180)
22,596
52,724

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
9,200

March

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

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

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

2,425
34,300
2,000
32,300

March
9,850
2
19,700
1,880
21,580
1,970
19,610
2

Quarter
32,300
2
64,600
1,880
66,480
1,970
55,270
2

$39,220

$110,540

aterial Purchases
March

$30,152.0
$7,844.0
$37,996

Solutions Manual

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

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

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
$1,000
$28,100

March
$4,122
94,100
98,222

Quarter
$4,500
250,700
255,200

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

-9,000
-180
-9,180
$4,326

10,000
-9,000
-180
820
$4,326

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

10