APPENDIX 3.

1 MASTER BUDGET SCHEDULES

This section illustrates the computations, mechanics and interrelationships in a master budget.
Although the illustrative data are presented separately per sample problem, they are however
interrelated. The concept is to individually show budgetary computations per major account and
later will be consolidated in budgeted financial statements. The data pertain to Charmaine
Corporation.

Sample Problem 3.3. Projected Sales and Estimated Collections from Customers

Charmaine Corporation made the following projections on its sales in the coming year, 2020:

Projected units sold

Economy Q1 Q2 Q3 Q4 Probability
Good 74,000 92,000 80,000 102,000 50%
Fair 50,000 80,000 70,000 90,000 30%
Bad 40,000 50,000 45,000 60,000 20%

The unit sales price is expected to be constant at P 20. All sales are made on credit.
Receivables from customers are collected 60% in the quarter of sales, 30% in the quarter
following sales, and 8% in the second quarter following sale. The remaining 2% is considered
uncollectibles. The account receivables balance on December 31, 2019 is estimated to be P
640,000; 25% of which is coming from the 3rd quarter sales of 2019.

Required:

1. Schedule 1. Projected sales in units and in pesos per quarter and for the year 2020.
2. Schedule 2. Estimated collections from customers per quarter and for the year 2020.

Solutions/ Discussions:
● The projected sales in units are computed by considering the probability of occurrence.
Expected units sold
Q1 Q2 Q3 Q4
Good (projected sales x 50%) 37,000 46,000 40,000 51,000
Fair (projected sales x 30%) 15,000 24,000 21,000 27,000
Bad (projected sales x 20%) 8,000 10,000 9,000 12,000

60,000 80,000 70,000 90,000

(*) For example: Q1 (74,000 units x 50%) 37,000 units
Q2 (50,000 units x 30%) 15,000
Q3 (40,000 units x 20%) 8,000
Expected sales in units 60,000 units

Schedule 1. Budgeted Sales

Q1 Q2 Q3 Q4 Total
Budgeted sales in units 60,000 80,000 70,000 90,000 300,000
X Unit sales price P 20 P 20 P 20 P 20 P 20
Budgeted sales in pesos P 1,200,000 P 1,600,000 P 1,400,000 P 1,800,000 P 6,000,000

Schedule 2. Budgeted Collections from Customers

From sales of Credit sales Q1 Q2 Q3 Q4 Total

Q3, 2019 P 1,600,000 P 128,000 P 128,000

Q4, 2019 1,200,000 360,000 96,000 456,000

Q1, 2020 1,200,000 720,000 360,000 96,000 1,176,000

Q2, 2020 1,600,000 960,000 480,000 128,000 1,568,000

Q3, 2020 1,400,000 840,000 420,000 1,260,000

Q4, 2020 1,800,000 1,080,000 1,080,000

Budgeted collections from P 1,208,000 P 1,416,000 P 1,416,000 P 1,628,000 P 5,568,000

customers

● The collection pattern is 60% - 30% - 8%. The receivables are collected in 3 quarters. Sixty percent in the
quarter of sales, thirty percent in the quarter following sales, and 8% in the second quarter following
sales.
● The credit sales in the third quarter of year 2019 were P 1,600,000 (i.e., P 640,000 x 25% / 10%). Ninety
percent (90%) of this sales has been collected at the end of 2019. Hence, to get the total sales from the
third quarter of 2019, we have to divide the remaining receivable from this quarter by 10%, which is the
remaining receivable balance.
● The credit sales in the fourth quarter of 2019 were P 1,200,000 (i.e., P 640,000 x 75% / 40%). Sixty
percent (60%) of this sales has been collected by the end of 2019. As such, to get the total sales, we
have to divide the remaining receivable from this quarter by 40%, which is the remaining receivable
balance.

Sample Problem 3.4. Budgeted Production, Materials Purchases, and Payments to

Suppliers

Charmaine Corporation has the budgeted units sales of its product in 2019 up to the first quarter
of 2020 as follows:
 2019 1st quarter 60,000
2nd quarter 80,000
3rd quarter 70,000
4th quarter 90,000
2020 1st quarter 75,000

The company has a policy of maintaining finished goods inventory equal to 20% of the next
quarter’s sales and materials inventory of 30% of current quarter’s requirements. It takes 3 lbs.
of material AX-23 to produce unit of product. The materials inventory at the start of the year was
recorded at 75,000 pounds.

Material AX-23 costs P 1.20 per pound to purchase. The terms of the purchase is 2/30, n/45.
The company pays 55% of its purchases in the quarter of purchase and avail of the 2% trade
discount. The remaining balance is paid in the following quarter. The accounts payables at
December 31, 2019 are valued at P 81,000.

Required: For the year 2020:

1. Schedule 3. Budgeted production per quarter and in total.
2. Schedule 4. Budgeted materials purchases per quarter and in total.
3. Schedule 5. Budgeted payments to merchandise suppliers.

Solutions/ Discussions:

Schedule 3. Budgeted Production

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Budgeted sales in units 60,000 80,000 70,000 90,000 300,000
+ Finished gods - end 16,000 14,000 18,000 15,000 15,000
Total needs 76,000 94,000 88,000 105,000 315,000
- Finished goods - beg 12,000 16,000 14,000 18,000 12,000
Budgeted sales in pesos 64,000 78,000 74,000 87,000 303,000

● Finished goods-end = 20% x next quarter’s sales

Q1 = 80,000 units x 20% = 16,000 units

Q2s = 70,000 units x 20% = 14,000
Q3 = 90,000 units x 20% = 18,000
Q4 = 75,000 units x 20% = 15,000

● Finished goods - beg = the ending of the previous quarter

Q1 = 60,000 units x 20% = 12,000 units
 ● The ending inventory of the fourth quarter is the ending inventory of the year and the beginning
inventory of the first quarter is the beginning of the eyar.

Schedule 4. Budgeted Materials Purchases

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Budgeted production 64,000 78,000 74,000 87,000 303,000
x Standard materials per unit 3 lbs 3 lbs 3 lbs 3 lbs 3 lbs
Budgeted materials usages(in 192,000 234,000 222,000 261,000 909,000
lbs)
+ Materials inventory - end 57,600 70,200 66,600 78,300 78,300
Total materials needs 294,600 304,200 288,600 339,300 987,300
- Materials inventory - beg 75,000 57,600 70,200 66,600 78,300
Budgeted materials purchases 174,600 246,600 218,400 272,700 912,300
(in lbs)
x Materials cost per lb P 1.20 P 1.20 P 1.20 P 1.20 P 1.20
Budgeted materials purchases P 209,520 P 295,520 P 262,080 P 327,250 P 1,094,760
(in pesos)

Materials inventory end = 30% x Current quarter’s needs

Q1 = 192,000 units x 30% = 57,600 lbs.

Q2s = 234,000 units x 30% = 70,200
Q3 = 222,000 units x 30% = 66,600
Q4 = 261,000 units x 30% = 78,300

Schedule 5. Budgeted Payments to Merchandise Suppliers

To purchases Credit Q1 Q2 Q3 Q4 Total

of Purchases

Q4, 2019 P 180,000 P 81,000 P 81,000

Q1, 2020 209,520 112,931 P 94,284 207,215

Q2, 2020 295,520 159,501 P 133,164 292,665

Q3, 2020 262,080 141,261 117,936 259,197

Q4, 2020 327,040 176,382 176,382

Budgeted payments to P 193,931 P 253,785 P 274,425 P 294,318 P 1,016,459

merchandise supplier

● The payment pattern is 55% - 45%. Payments to merchandise suppliers are made in 2 quarters; fifty-five
percent are paid in the quarter of purchase and forty-five percent are paid in the following quarter after
purchase.
● The credit purchases in the fourth quarter of 2019 were P 180,000 (i.e., P 81,000 / 45%). The 55% have
been paid in the quarter the purchases were made.
● The payment made to suppliers in the quarter of purchase accounting for 55% of all purchases is subject
to 2% trade discount. Example, payment made in Q1 of 2020 for purchases made in Q1 of 2020 is P
112,931 (i.e., P 209,520 x 55% x 98%). The payment made in the following quarter accounting for the
remaining 45% of the purchases is not subject to 2% trade discount.

Sample Problem 3.5. Budgeted Direct Labor and Factory Overhead

Charmaine Corporation pays its production personnel at a rate of P 20 per direct labor hour. It
takes 0.25 standard hours to complete a finished unit. The corporation pays its labor costs in the
month the payroll is recorded.

The standard variable overhead rate is P 5 per direct labor hour and the standard fixed
overhead rate is P 4 per direct labor hour. The company’s normal capacity is 75,000 units or
18,750 direct labor hours. Thirty percent (30%) of the total fixed overhead is non-cash.
Overhead costs are paid 90%in the quarter the overhead is incurred and the remainder is paid
in the month following the quarter of incurrence. The overhead costs incurred in the fourth
quarter of 2019 are P 84,000 variable and P 70,000 fixed.

The budgeted production in units for 2020 are estimated at: Q1, 64,000 units, Q2, 78,000 units;
Q3, 74,000 units, and Q4, 87,000 units.

Required: For the year 2020:

1. Schedule 6: Budgeted labor costs per quarter and in total.
2. Schedule 7: Budgeted factory overhead in quarter and in total.
3. Schedule 8: Budgeted cash payments for labor and overhead in quarter and in total.

Solutions/ Discussions:

Schedule 6. Budgeted Labor Costs

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Budgeted production 64,000 78,000 74,000 87,000 303,000
X Standard direct labor 0.25 hr 0.25 hr 0.25 hr 0.25 hr 0.25 hr
hours per unit
Budgeted direct labor 16,000 9,500 18,500 21,750 75,750
hours
X Direct labor rate per P 20 P 20 P 20 P 20 P 20
hour
Budgeted direct labor cost P 320,000 P 390,000 P 370,000 P 435,000 P 1,515,000

Schedule 7. Budgeted Factory Overhead

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Variable factory overhead P 80,000 97,500 P 92,500 P 108,750 378,750
Fixed factory overhead 75,000 75,000 75,000 75,000 300,000
Budgeted factory overhead P 155,000 P 172,500 P 167,500 P 183,750 P 678,750

● Variable factory overhead = Production x Variable Overhead rate per DLH

Q1 = 16,000 DLH x P 5 = P 80,000
Q2s = 19,500 DLH x P 5 = 97,500
Q3 = 18,500 DLH x P 5 = 92,500
Q4 = 21,750 DLH x P 5 = 108,750

● Fixed factory overhead = Normal capacity x Fixed overhead rate per DLH
● E.g., Q1 = 18,750 DLH x P 4 = P 75,000

Schedule 8. Budgeted cash payments to labor and overhead

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Direct labor cost P 320,000 P 390,000 P 370,000 P 435,000 P 1,515,000

Factory overhead 132,550 148,250 145,500 159,625 585,925

Budgeted payments to P 452,550 P 538,250 P 515,500 P 594,625 P 2,101,200

conversion costs

a. Payments of factory overhead

Amount Q1 Q2 Q3 Q4 Total

Variable
Overhead
Q4, 2019 P 84,000 P 8,400 P 8,400
Q1, 2020 80,000 72,000 P 8,000 80,000
Q2, 2020 97,500 87,750 P 9,750 97,500
Q3, 2020 92,500 83,250 9,250 92,500
Q4, 2020 108,750 97,875 97,875
Budgeted payments to variable 80,400 95,750 93,000 107,125 376,275
overhead

Cash fixed overhead

Q4, 2019 (70,000x70%) P 49,000 P 4,900 P 4,900

Q1, 2020 (75,000x70%) 52,500 47,250 P 5,250 52,500
Q2, 2020 (75,000x70%) 52,500 47,250 P 5,250 52,500
Q3, 2020 (75,000x70%) 52,500 47,250 5,250 52,500
Q4, 2020 (75,000x70%) 52,500 47,250 47,250
Budgeted payments to variable 52,150 52,500 52,500 152,500 209,650
overhead

Total payments to overhead P 132,550 P 148,250 P 145,500 P 159,625 P 585,925

(Thirty percent (30%) of the fixed overhead is noncash.)

(Overhead is paid 90% in the quarter incurred and 10% in the succeeding quarter.)

Sample Problem 6.6. Budgeted Statement of Profit or Loss

Consider the data and solutions in sample problems “5.3” to “5.5”. The standard costs of
Charmaine Corporation are summarized below:

Units Rate Cost per unit

Direct material 3 lbs. P 1,20 per lb. P 3.60
Direct labor 0.25 hr . 0.20 per hr. 0.05
Variable factory overhead 0.25 hr. 5.00 per hr. 1.25
Fixed factory overhead 0.25 hr. 4.00 per hr. 1.00
Total P 5.90

The standard costs are the same from year 2019 to 2020. The work-in-process inventories are
estimated at 10% of the current production put into the process. The work-in-process on
December 31, 2019 is determined at P75,000. Operating expenses are budgeted at 20% of
sales in a quarter. Non-cash operating expenses including accruals and prepayments are
estimated at 20% of sales. Other income from operations are projected at 5% of sales. The
actual of 2019 and the estimated accrued and prepaid items in 2020 are as follows:

Q4 2019 Q1 Q2 Q3 Q4
___________________________________________________
Accrued expenses P 12,000 P 15,000 P22,000 P 14,000 P 15,000
Prepaid expenses 3,000 6,000 6,500 7,400 8,800
Accrued income 4,400 900 3,500 7,900 8,600
Prepaid income 2,100 3,300 4,400 9,700 8,200
The income tax rate is 40%

Required: For the year 2020

1. Schedule 9. Budgeted cost of goods manufactured and sold.
2. Schedule 10. Budgeted statement of profit or loss.
3. Schedule 11. Budgeted cash payments to operating expenses.
4. Schedule 12. Budgeted cash receipts from other revenues.
 Solutions/Discussions.

Schedule 9. Budgeted cost goods manufactured and sold.

Reference Quarter 1 Quarter 2 Quarter 3 Quarter4 Total

Materials used Schedule 4 P 230,400 P 280,800 P 266,400 P 313,200 P 1,090,800
Direct labor Schedule 6 320,000 390,000 370,000 435,000 1,515,000
Factory overhead Schedule 7 155,000 172,500 167,500 183,750 678,750
____________________________________________________________________
Total factory cost 705,400 843,300 803,900 931,950 3,284,550
+WIP inventory, beginning 75,000 64,440 84,630 80,290 3,284,550
____________________________________________________________________
Total costs put in process 780,400 912,740 887,530 1,012,240 75,000

-WIP inventory ending 69,440 84,630 80,290 94,395 94,395

Cost of goods manufactured 710,960 828,110 808,240 917,845 3,265,155
+FG inventory, Schedule 3 70,800 94,400 82,600 106,200 70,800
beginning
_____________________________________________________________________
Total goods available for sale 781,760 922,510 890,840 1,024,045 3,335,955
-FG inventory, Schedule 2 94,400 82,600 106,200 88,500 88,500
Ending
_____________________________________________________________________
Cost of goods sold Schedule 1 P 687,360 P 839,910 P 784,640 P 935,545 3,247,455
==================================================================

● Material used = Materials used in units x Standard materials cost per unit
Q1 = 192,000 lbs. X P1.20 = P 230,400
Q2 = 234,000 lbs. X P1.20 = P 280,800
Q3 = 222,000 lbs. X P1.20 = P 266,400
Q4 = 261,000 lbs. X P1.20 = P 313,200

● The work-in-process of December 31, 2019 is the beginning work-in-process of 2020.

● Work-in-process inventory, ending = 10% x current production costs put into process.
E.g., Q1 = P694,400 x 10% = P69,440
● Finished goods inventories = FG on hand x Standard unit cost (i.e., P5.90)

Units Costs
________________ _____________
FG - beg FG - end Unit Cost FG - beg FG - end
________________________________________________________________________
Q1 12,000 16,000 P 5.90 P 70,800 P 94,400
Q2 16,000 14,000 5.90 94,400 82,600
Q3 14,000 18,000 5.90 82,600 106,200
Q4 18,000 15,000 5.90 106,200 88,500

Schedule 10. Budgeted Statement of Profit or Loss

Reference Quarter 1 Quarter 2 Quarter 3 Quarter4 Total

Sales Schedule 1 P 1,200,000 P 1,600,000 P 1,400,000 P 800,000 P 6,000,000
Cost of goods sold Schedule 9 687,360 839,910 784,640 935,545 3,247,455
-Operating expenses1 240,000 320,000 280,000 360,000 1,200,000
+other income2 60,000 80,000 70,000 90,000 300,000
____________________________________________________________________
Income before income tax 332,640 843,300 803,900 931,950 3,284,550
-income tax (40%) 133,056 208,036 162,144 237,782 741,018
____________________________________________________________________
Profit (loss) P 199,584 P 312,054 P 243,216 P 356,673 P 1,111,527
=================================================================

1Operating expenses = 20% x Sales; 2Other income = 5% x Sales

Schedule 11. Budgeted Cash Payments to Operating Expenses

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Operating expenses incurred P 240,000 320,000 280,000 360,000 1,200,000
+ Accrued expense - beg 12,000 15,000 22,000 14,000 12,000
Prepaid expenses - end 6,000 6,500 7,400 8,800 8,800
Total 258,000 341,500 309,400 382,800 1,220,800
Less: Accrued Expenses - end 15,000 22,000 14,000 15,000 115,000
Prepaid Expenses - beg 3,000 6,000 6,500 7,400 3,000
Operating expenses paid 240,000 313,500 288,900 360,400 1,202,800

● Refer to computational guidelines. The beginning accrued expenses balance in quarter 1 (i.e., P 12,000) is
the beginning of the year. The ending prepaid expenses balance in quarter 4 is the ending balance of the
year.
● Accrued expense and expense balances do not accumulate. They are continuous and are carried from one
period to another. This observation is also true with regard to accrued income and deferred income.

Schedule 12. Budgeted Cash Receipts from Other Revenues

Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Other revenues earned P 60,000 80,000 70,000 90,000 300,000
+ Accrued income - beg 4,400 900 3,500 7,900 4,400
Deferred income - end 3,300 4,400 9,700 8,200 8,200
Total 67,700 85,300 83,200 106,100 312,600
Less: Accrued income - end 900 3,500 7,900 8,600 8,600
Deferred income - beg 2,100 3,300 4,400 9,700 2,100
Other Revenues Received 64,700 78,500 70,900 87,800 301,900

Sample Problem 3.7. Budgeted Cash Flows

Consider all the data and solutions in sample problems “3.3. To 3.6”. Other cash transactions
and information are as follows:
 a. Non-current assets are to be acquired in the second and third quarters of 2020 in the
amounts of P 200,000 and P 145,000, respectively. Some old non-current assets are to
be sold at its book value for P 174,000 in the third quarter.
b. Dividends are to be paid in February for P 400,000 and July for P 250,000.
c. The minimum cash balance is set at P 400,000. In case of deficit, the corporation can
avail a credit line in multiples of P 25,000 from a financing institution at a rate of 14% per
annum. Interest is paid quarterly based on the outstanding balance at the beginning of
the quarter. Payments to borrowings in multiples of P 25,000 are made whenever cash
is available determined at the beginning of the quarter. The cash balance on January 1,
2020 is expected to equal the minimum cash balance.

Required: For the year 2020:

1. Schedule 13. Cash budget
2. Schedule 14. Budgeted Statement of Cash Flows.

Solutions/ Discussions:

Schedule 13. Cash Budget

Reference Quarter 1 Quarter 2 Quarter 3 Quarter4 Total

Cash Balance - P 400,000 P 436,219 P 469,934 P 659,009 P 400,000
Add: Cash Receipts
Collections from customers Schedule 12 1,208,000 1,416,000 1,416,000 1,628,000 5,668,000
From other revenues Schedule 12 64,700 78,500 70,900 87,800 301,900
Sale of noncurrent assets 174,000 174,000
Total cash available for use 1,672,700 1,930,719 2,130,834 2,372,809 6,543,900
_____________________________________________________________________
Less: Cash payment

Merchandise purchases Schedule 5 (193,931) (253,785) (274,425) (294,318) (1,016,459)

Direct labor Schedule 6 (320,000) (390,000) (370,000) (435,000) (1,515,000)
Factory overhead Schedule 8 (132,500) (148,250) (145,500) (159,625) ( 585,925)
Operating expenses Schedule 11 (240,000) (313,500) (288,900) (360,400) (1,202,800)
Acquisition of noncurrent assets (200,000) (145,000) - ( 345,000)
Dividends (500,000) (250,000) - ( 750,000)
Total Cash Payments (1,386,481) (1,305,535) (1,473,825) (1,249,343) (5,415,184)
Cash balance before financing 286,219 625,184 657,009 1,123,466 1,128,716
Financing Cash:
Borrowings (at beginning) 150,000 150,000
Payments to borrowings (at end) - (150,000) (150,000)
Interests paid (at end) - ( 5,250) ( 5,250)
Net financing 150,000 (155,250) ( 5,250)
Cash balance - ending 436,219 469,934 657,009 1,123,466 P 1,123,466

● Cash balance - ending = Total cash available for needs - Total cash payments + Net Financing
● The cash balance for the year is the cash balance at the beginning of the first quarter and the
ending balance of the year equals the ending balance of the fourth quarter
Schedule 14. Budgeted Statement of Cash Flows

Reference Quarter 1 Quarter 2 Quarter 3 Quarter 4 Total

Operating activities

Collections from Customers Schedule 2 P 1,208,000 P 1,416,000 P 1,416,000 P 1,628,000 P 5,668,000

From other revenue Schedule 12 64,700 78,500 70,900 87,800 301,900

To merchandise suppliers Schedule 5 (193,931) (253,785) (274,425) (294,318) (1,016,459)

To direct labor Schedule 6 (320,000) (390,000) (370,000) (435,000) (1,515,000)

To factory overhead Schedule 7 (132,550) (148,250) (145,500) (159,625) (585,925)

To operating expenses Schedule 11 (240,000) (313,500) (288,900) (360,400) (1,202,800)

Net operating inflows (outfolws) 386,219 388,965 408,575 466,457 1,649,716

Investing activities

Sale of noncurrent assets - - 174,000 - 174,000

Acquisition of noncurrent assets - (200,000) (145,000) - (345,000)

Net investing activities - (200,000) 29,000 - (171,000)

Financing activities

Dividends paid (500,000) - (250,000) - (750,000)

Borrowings 150,000 - - - (150,000)

Payments to borrowings - (150,000) - - (150,000)

Interests paid - (5,250) - - (5,250)

Net financing activities (350,000) (155,250) (250,000) - (755,250)

Net cash inflows (outflows) 36,219 33,715 187,075 466,457 723,466

Add: Cash Balance - beginning 400,000 436,219 469,934 657,009 400,000

Cash balance - ending P 436,219 P 469,934 P 657,009 P 1,123,466 P 1,123,466

● The business needs to borrow in the first quarter of the year to maintain the minimum cash balance of P
400,000. The amount borrowed is computed as follows:
Cash balance - beginning P 400,000
Net operating cash inflows 363,769
Dividends paid (500,000)
Cash balance before financing 263,769
Minimum cash balance (400,000)
Cash need P 136,231
 Borrowings (in multiples of P 25,000) P 150,000

● The cash balance at the end of the second quarter is P 426,869 which i P 26,869 in excess of the minimum
balance of P 400,000. This excess shall be used to pay borrowing in multiples of P 25,000.
● The beginnng cash balance of the first quarter is the beginning cash balance of the year, and the ending cash
balance of the fourth quarter is the ending cash balance of the year.