BM1915

NAME: DATE: SCORE:

TASK
PERFORMANCE
PROBLEM 1
The following are the information obtained from AMC Company:

July August September

Cash Sales P24,000 P32,000 P36,000
Credit Sales 220,000 300,000 240,000
Purchases 180,000 240,000 220,000
Operating Expenses 30,000 36,000 32,000
Interest Expense - 4,000 -

Credit sales are collected 50% in the month of sale, 40% in the month following, 8% in the second
month following, and 2% uncollectible. Credit sales for May and June are expected to be P200,000
and P180,000, respectively. Purchases of merchandise, all on account, are paid 60% in the month of
purchase and 40% in the month following. Purchases for June are estimated at P160,000. Expenses
include depreciation of P4,000 monthly, and are paid in the month incurred. Cash balance on June
30, 201A is P54,000.

Required: Prepare a cash budget by month for the quarter ending September 30, 201A. Support your
solution with schedules of cash receipts and cash payments.

CASH PAYMENTS

July August September

June (P354,000 x 9%) P4,320
July
P24,000 x 50% 12,000
P24,000 x 50% 9,600
P24,000 x 8% P1,920
August
P32,000 x 50% 16,000
P32,000 x 40% 12,800
P32,000 x 8% P2,560
September
P36,000 x 50% 18,000
P36,000 x 40% 14,400
Total P25,920 P30,720 P34,960

08 Task Performance 1 *Property of STI

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 BM1915

CASH DISBURSEMENTS

June July August

June (P160,000 x 40%) P64,000
July
P180,000 x 60% 108,000
P180,000 x 40% P72,000
August
P240,000 x 60% 144,000
P240,000 x 40% P96,000
September (P220,000 x 60%) 132,000
Total P172,000 P216,000 P228,000

PROBLEM 2
Sanchez Company, a wholesaler, budgeted the following sales for the indicated months of 201A.

Month Cash Sales Credit Sales

June P3,000,000 P400,000
July 3,200,000 420,000
August 3,400,000 440,000

All merchandise is marked up to sell at its invoice cost plus 25%. Merchandise inventory at the
beginning of each month are at 30% of that month’s projected cost of goods sold.

Required: Prepare a schedule of merchandise purchases for the months of June and July 201A.

PURCHASE BUDGET

June July
Expected sales in pesos 3,000,000 3,200,000
Desired ending inventory 750,000 800,000
Total 2,250,000 2,400,000
Expected beginning inventory 900,000 960,000
Purchases in pesos 1,350,000 1,440,000

08 Task Performance 1 *Property of STI

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 BM1915

PROBLEM 3
Novela, Inc. produces office supplies, including pencils. Pencils are bundled in packages; each
package sells for P20. The sales budget for the first four (4) months of the year follows for this
product:

January February March April

Rolls in units 200,000 240,000 220,000 200,000

Company policy requires that ending inventories for each month to be 10% of next month’s sales.
However, due to greater sales in December than anticipated, the ending inventory of pencils for that
month is only 10,000 packages.

Required: Prepare a production budget for the first quarter of the year. Show the number of units
that should be produced each month and for the quarter in total.

PRODUCTION BUDGET

January February March TOTAL

Projected Sales 200,000 240,000 220,000
Desired inventory 24,000 22,000 20,000
Total 224,000 262,000 240,000
Expected Inventory 10,000 24,000 22,000
Production required 214,000 238,000 218,000 670,000

PROBLEM 4
Villegas Company produces various labels, including iron-on name labels, which are sold to parents
of camp- bound children. The camps require campers to have their name on every article of clothing.
Each roll consists of 10 yards of paper strip with 500 copies of the child’s name. Each yard of paper
strips costs P2.00. Manning has budgeted production of the label rolls for the next four (4) months as
follows:

March April May June

Rolls in units 12,000 18,000 30,000 20,000

Inventory policy requires that sufficient paper strip be in ending inventory to satisfy 25% of the
following month’s production needs. The inventory of paper strip at the beginning of March equals
exactly the amount needed to satisfy the inventory policy.

08 Task Performance 1 *Property of STI

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 Required:
a. Prepare a direct material purchases budget for March, April, and May showing purchases in
units and in pesos for each month and in total.
b. Each roll of labels produced requires on average 0.25 direct labor hour. The average cost of
direct labor is P20 per hour. Prepare a direct labor budget for March, April and May showing
the hours needed and the direct labor and the direct labor cost for each month and in total.

DIRECT MATERIAL PURCHASE BUDGET

March April May TOTAL

Units to be produced(Rolls) 12,000 18,000 30,000 60,000
X Paper strip required per roll (in yards) 10 10 10 10
Total needed for production 120,000 180,000 300,000 600,000
Plus:Ending inventory 45,000 75,000 50,000 50,000
Total needs 165,000 255,000 350,000 650,000
Less:Beginning Inventory 30,000 45,000 75,000 30,000
Total yards of Paper strip to be purchased 135,000 210,000 275,000 620,000
X Cost per yard in peso 2 2 2 2
Total Direct material to be purchased 270,000 420,000 550,000 1,240,000

DIRECT LABOR BUDGET

MARCH APRIL MAY TOTAL

Budgeted Production 12,000 18,000 30,000 60,000
Budgeted Direct labor hour per unit 0.25 0.25 0.25 0.25
Total Direct labor hours for production 3,000 4,500 7,500 15,000
Direct labor hour rate per hour (in peso) 20 20 20
Budgeted Direct labor cost 60,000 90,000 150,000 300,000

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