Tutorial 11

Question 1
Delta Manufacturing has budgeted the following unit sales:
2020 Units
April 25,000
May 40,000
June 60,000
July 45,000
Of the units budgeted, 40% are sold by the Coastal Division at an average price of RM15 per
unit and the remainder are sold by the Central Division at an average price of RM12 per unit.

Instructions
Prepare separate sales budgets for each division and for the company in total for the second
quarter of 2020.

Question 2
Garver Industries has budgeted the following unit sales:
2020 Units
January 10,000
February 8,000
March 9,000
April 11,000
May 15,000
The finished goods units on hand on December 31, 2019, was 2,000 units. Each unit requires
3 pounds of raw materials that are estimated to cost an average of RM4 per pound. It is the
company's policy to maintain a finished goods inventory at the end of each month equal to
20% of next month's anticipated sales. They also have a policy of maintaining a raw materials
inventory at the end of each month equal to 30% of the pounds needed for the following
month's production. There were 8,640 pounds of raw materials on hand at December 31,
2019.
Instructions
For the first quarter of 2020, prepare (1) a production budget and (2) a direct materials
budget.
Question 3
Pulham Company is preparing its direct labor budget for 2020 from the following production
budget based on a calendar year:
Quarter Units
1 60,000
2 30,000
3 45,000
4 75,000
Each unit requires 2 hours of direct labor. The union contract provides for a 10% increase in
wage rate to RM11 per hour on October 1.

Instructions
Prepare a direct labor budget for 2020.

Question 4
The budget components for Park Company for the quarter ended June 30 appear below. Park
sells trash cans for RM12 each. Budgeted sales and production for the next three months are:
Sales Production
April 20,000 units 26,000 units
May 50,000 units 46,000 units
June 30,000 units 29,000 units

Park desires to have trash cans on hand at the end of each month equal to 20 percent of the
following month’s budgeted sales in units. On March 31, Park had 4,000 completed units on
hand. Five pounds of plastic are required for each trash can. At the end of each month, Park
desires to have 10 percent of the following month’s production material needs on hand. At
March 31, Park had 13,000 pounds of plastic on hand. The materials used in production cost
RM0.60 per pound. Each trash can produced requires 0.10 hours of direct labor.

Instructions
Determine how much the materials purchases budget will be for the month ending April 30.

Question 5
Butler Manufacturing manufactures two products, (1) Regular and (2) Deluxe. The budgeted
units to be produced are as follows:
Units of Product
2020 Regular Deluxe Total
July 10,000 15,000 25,000
August 6,000 10,000 16,000
September 9,000 14,000 23,000
October 8,000 12,000 20,000
It takes 2 pounds of direct materials to produce the Regular product and 5 pounds of direct
materials to produce the Deluxe product. It is the company's policy to maintain an inventory of
direct materials on hand at the end of each month equal to 30% of the next month's
production needs for the Regular product and 20% of the next month's production needs for
the Deluxe product. Direct materials inventory on hand at June 30 were 6,000 pounds for the
Regular product and 15,000 pounds for the Deluxe product. The cost per pound of materials
is RM5 Regular and RM8 Deluxe.

Instructions
Prepare separate direct materials budgets for each product for the third quarter of 2020.

Question 6
Benet Company has budgeted the following unit sales:
2017 2016
Quarter Units Quarter Units
1 105,000 1 90,000
2 60,000
3 75,000
4 120,000

The finished goods inventory on hand on December 31, 2015 was 21,000 units. It is the
company's policy to maintain a finished goods inventory at the end of each quarter equal to
20% of the next quarter's anticipated sales.

Instructions
Prepare a production budget for 2016.

Question 7
Leaf Industries is preparing its master budget for 2020. Relevant data pertaining to its sales
budget are as follows:

Sales for the year are expected to total 8,000,000 units. Quarterly sales are 25%, 30%, 15%,
and 30%, respectively. The sales price is expected to be RM2.00 per unit for the first quarter
and then be increased to RM2.20 per unit in the second quarter.
Instructions
Prepare a sales budget for 2020 for Leaf Industries.

Question 8
Shep Company combines its operating expenses for budget purposes in a selling and
administrative expense budget. For the first quarter of 2020, the following data are
developed:
1. Sales: 20,000 units; unit selling price: RM30
2. Variable costs per dollar of sales:
Sales commissions 6%
Delivery expense 2%
Advertising 4%
 3. Fixed costs per quarter:
Sales salaries RM24,000
Office salaries 19,000
Depreciation 6,000
Insurance 2,000
Utilities 1,000

Instructions
Prepare a selling and administrative expense budget for the first quarter of 2020.

Question 9
Thread Company is preparing its manufacturing overhead budget for 2020. Relevant data
consist of the following.
Units to be produced (by quarters): 10,000, 12,000, 14,000, 16,000.
Direct labor: Time is 1 hour per unit.
Variable overhead costs per direct labor hour: Indirect materials RM0.80; indirect labor
RM1.20; and maintenance RM0.50.
Fixed overhead costs per quarter: Supervisory salaries RM42,000; depreciation RM16,000;
and maintenance RM12,000.

Instructions
Prepare the manufacturing overhead budget for the year, showing quarterly data.

Question 10
Walt Bach Company has accumulated the following budget data for the year 2020.
1. Sales: 40,000 units, unit selling price RM50.
2. Cost of one unit of finished goods: Direct materials 2 pounds at RM5 per pound, direct
labor 1.5 hours at RM12 per hour, and manufacturing overhead RM6 per direct labor
hour.
3. Inventories (raw materials only): Beginning, 10,000 pounds; ending, 15,000 pounds.
4. Raw materials cost: RM5 per pound.
5. Selling and administrative expenses: RM200,000.
6. Income taxes: 30% of income before income taxes.

Instructions
(a) Prepare a schedule showing the computation of cost of goods sold for 2020.
(b) Prepare a budgeted income statement for 2020.