SALES BUDGET

Sales (in sets)

Sales price per set
Sales budget

PRODUCTION BUDGET
Sales
Add: Desired Ending inventory
Total requirements
Less: Projected beginning inventory
Planned Production

RAW MATERIAL PURCHASES

Planned productions (sets)

Raw materials required per set (board feet)
Raw materials required for production (board feet)
Add: Desired ending inventory of RM, in board feet
Total requirements
Less: Projected beginning inventory of RM
Planned purchases of RM (board feet)
Cost per board foot
Planned purchases of RM (in dollars)

DIRECT LABOR BUDGET

Planned production sets
DL per set
DL Hours required
Cost per hour
Planned direct labor cost
 JULY AUGUST SEPTEMBER
5,000 6,000 7,500
60 60 60
300,000 360,000 450,000

JULY AUGUST SEPTEMBER

5,000 6,000 7,500
1,200 1,500 1,500
6,200 7,500 9,000
1,000 1,200 1,500
5,200 6,300 7,500

JULY AUGUST SEPTEMBER

5,200 6,300 7,500
10 10 10
uction (board feet) 52,000 63,000 75,000
of RM, in board feet 6,300 7,500 8,000
58,300 70,500 83,000
tory of RM 5,200 6,300 7,500
53,100 64,200 75,500
0.60 0.60 0.60
31,860 38,520 45,300

JULY AUGUST SEPTEMBER

5,200 6,300 7,500
1.50 1.50 1.50
7,800 9,450 11,250
21 21 21
163,800 198,450 236,250
Solution: 20X4 20X5
Requirement 1 1ST
SALES BUDGET 4TH QTR QTR
S FRAME UNIT SALES 50,000 55,000
X S SALE PRICE 10 10
S FRAME SALES REVENUE 500,000 550,000

L FRAME UNIT SALES 40,000 45,000

X L SALE PRICE 15 15
L FRAME SALES REVENUE 600,000 675,000
TOTAL SALES REVENUE 1,100,000 1,225,000
CASH SALES 440,000 490,000
SALES ON ACCOUNT 660,000 735,000
20X5
Requirement 2 1ST
CASH RECEIPTS BUDGET QTR
Cash sales 490,000
Cash collections from credit sales
made during current quarter 588,000
Cash collections from credit sales
made during previous quarter 132,000
Total cash receipts 1,210,000

Requirement 3 20X4 20X5

PRODUCTION BUDGET 1ST
4TH QTR QTR
S Frames:
Sales in units 50,000 55,000
Add: Desired ending inventory 11,000 12,000
Total units needed 61,000 67,000
Less: expected beginning inventory 10,000 11,000
Units to be produced 51,000 56,000

L Frames:
Sales in units 40,000 45,000
Add: Desired ending inventory 9,000 10,000
Total units needed 49,000 55,000
Less: expected beginning inventory 8,000 9,000
Units to be produced 41,000 46,000

Requirement 4 20X4 20X5

DIRECT MATERIALS BUDGET 1ST
4TH QTR QTR
Metal strips:
S frames to be produced 51,000 56,000
X Metal quantity per unit (ft.) $ 2.00 $ 2.00
Needed for S frame production 102,000 112,000
L frames to be produced 41,000 46,000
X Metal quantity per unit (ft.) $ 3.00 $ 3.00
Needed for L frame production 123,000 138,000
Total metal needed for production 225,000 250,000
to be purchased (ft.)
X Price per foot $ 1.00 $ 1.00
Cost of metal strips to be purchased 225,000 250,000

Glass sheets:
S frames to be produced 51,000 56,000
X Glass quantity per unit (sheets) 1/4 1/4
Needed for S frame production 12,750 14,000
L frames to be produced 41,000 46,000
X Glass quantity per unit (sheets) 1/2 1/2
Needed for L frame production 20,500 23,000
Total glass needed for production (she 33,250 37,000
Add: Desired ending inventory 7,400 8,150
Total glass needs 40,650 45,150
Less: expected beginning inventory 6,650 7,400
Glass to be purchased 34,000 37,750
X Price per glass sheet $ 8.00 $ 8.00
Cost of glass to be purchased 272,000 302,000
Total raw materials purchases 497,000 552,000
(metals and glasses)

Requirement 5: 20X5
1ST
CASH DISBURSEMENT BUDGET QTR
Raw material purchases
Cash payment for purchases
during the current quarter 441,600
Cash payment for purchases
during the preceding quarter 99,400
Total cash payments for 541,000
raw materials purchases
Direct labor
Frames produced (S and L) 92,000
x Direct labor hours per frame 0.1
Direct labor hours to be used 9,200
x Rate per direct labor hour $ 20.00
Total cash payments for direct labor 184,000
Production Overhead
Indirect material 10,200
Indirect labor 40,800
Other 31,000
Total cash payments for overhead 82,000
Cash payments for selling and admin 100,000
Total cash disbursements 907,000

Requirement 6 20X5
1ST
SUMMARY CASH BUDGET QTR
Cash receipts 1,210,000
Less: Cash disbusements 907,000
Change in cash balance due to operations 303,000
Payment to dividends - 50,000
Proceeds from bank loan 1,000,000
Purchase of equipment - 1,000,000
Quarterly installment on loan principal - 250,000
Quarterly interest payment - 2,500
Change in cash balance during the period 500
Cash balance, beginning 95,000
Cash balance, ending 95,500
 20X5
2ND 3RD 4TH ENTIRE
QTR QTR QTR YEAR
60,000 65,000 70,000 250,000
10 10 10 10
600,000 650,000 700,000 2,500,000

50,000 55,000 60,000 210,000

15 15 15 15
750,000 825,000 900,000 3,150,000
1,350,000 1,475,000 1,600,000 5,650,000
540,000 590,000 640,000 2,260,000
810,000 885,000 960,000 3,390,000
20X5
2ND 3RD 4TH ENTIRE
QTR QTR QTR YEAR
540,000 590,000 640,000 2,260,000

648,000 708,000 768,000 2,712,000

147,000 162,000 177,000 618,000

1,335,000 1,460,000 1,585,000 5,590,000

20X5
2ND 3RD 4TH ENTIRE
QTR QTR QTR YEAR

60,000 65,000 70,000 250,000

13,000 14,000 15,000 15,000
73,000 79,000 85,000 265,000
12,000 13,000 14,000 11,000
61,000 66,000 71,000 254,000

50,000 55,000 60,000 210,000

11,000 12,000 13,000 13,000
61,000 67,000 73,000 223,000
10,000 11,000 12,000 9,000
51,000 56,000 61,000 214,000

20X5
2ND 3RD 4TH ENTIRE
QTR QTR QTR YEAR

61,000 66,000 71,000 254,000

$ 2.00 $ 2.00 $ 2.00 $ 2.00
122,000 132,000 142,000 508,000
51,000 56,000 61,000 214,000
$ 3.00 $ 3.00 $ 3.00 $ 3.00
153,000 168,000 183,000 642,000
 275,000 300,000 325,000 1,150,000

$ 1.00 $ 1.00 $ 1.00 $ 1.00

275,000 300,000 325,000 1,150,000

61,000 66,000 71,000 254,000

1/4 1/4 1/4 1/4
15,250 16,500 17,750 63,500
51,000 56,000 61,000 214,000
1/2 1/2 1/2 1/2
25,500 28,000 30,500 107,000
40,750 44,500 48,250 170,500
8,900 9,650 10,400 10,400
49,650 54,150 58,650 180,900
8,150 8,900 9,650 7,400
41,500 45,250 49,000 173,500
$ 8.00 $ 8.00 $ 8.00 $ 8.00
332,000 362,000 392,000 1,388,000
607,000 662,000 717,000 2,538,000

20X5
2ND 3RD 4TH ENTIRE
QTR QTR QTR YEAR

485,600 529,600 573,600 2,030,400

110,400 121,400 132,400 463,600

596,000 651,000 706,000 2,494,000

102,000 112,000 122,000 132,000

0.1 0.1 0.1 0.1
10,200 11,200 12,200 13,200
$ 20.00 $ 20.00 $ 20.00 $ 20.00
204,000 224,000 244,000 264,000

11,200 12,200 13,200 46,800

44,800 48,800 52,800 187,200
36,000 41,000 46,000 154,000
92,000 102,000 112,000 388,000
100,000 100,000 100,000 100,000
992,000 1,077,000 1,162,000 3,246,000

20X5
2ND 3RD 4TH ENTIRE
QTR QTR QTR YEAR
1,335,000 1,460,000 1,585,000 5,590,000
992,000 1,077,000 1,162,000 3,246,000
 343,000 383,000 423,000 2,344,000
- 50,000 - 50,000 - 50,000 - 200,000
1,000,000
- 1,000,000
- 250,000 - 250,000 - 250,000 - 1,000,000
- 2,500 - 2,500 - 2,500 - 10,000
40,500 80,500 120,500 242,000
95,500 136,000 216,500 95,000
136,000 216,500 337,000 337,000
1,800 9,000
3,750
900 900
615
1,800
6,450 12,315
3,600 5,865
2,265
Material Variance

Price Variance
Quantity Variance
5 materials
3 materials

Rate Variance
Efficiency

1,800 unfavorable

ACTUAL > STANDARD

SOLUTION:
1. Actual output (in drums) A
Standard allowed quantity on Material 15,000
 Standard quantity per output 10
1,500

2. Direct material: A
a. Standard quantity per drum 10 pounds
b. Standard price $5 per pound
(given)
c. Standard cost per drum $ 50.00
d. Standard quantity allowed, given 15,000 pounds
actual output
e. Actual quantity purchased 18,000 pounds
f. Actual price $ 4.50
g. Actual quantity used 15,750 pounds
h. Purchase Price Variance 9,000 F
i. Quantity Variance 3,750 UF

3. Direct Labor MIXERS

a. Standard hours per drum 2 hours
b. Standard rate per hour $ 15.00
c. Standard cost per drum $ 30.00
d. Standard quantity allowed, given
actual output 3,000
e. Actual rate per hour $ 15.28
f. Actual hours 3,240 hours
g. Rate Variance 900 UF
h. Efficiency Variance 3600 UF

4. Total of all variances for the month

Price Variance - Material A - 9,000

Price Variance - Material B 1,800
Quantity Variance - Material A 3,750
Quantity Variance - Material B - 900
Rate Variance - Labor I 900
Rate Variance - Labor II - 615
Efficiency Variance - Labor I 3,600
Efficiency Variance - Labor II - 1,800
- 2,265
 B
pounds 7,500 gallons
 pounds 5 gallons
units 1,500 units

B
5 gallons Standard cost of Mat B per drum $ 15.00
$3 per gallon Divide by Std gallons per drum 5
Standard price per gallon $ 3.00
$ 15.00
7,500 gallons Actual Quantity purchased x Actual Price $ 28,800.00 $ 3.20
Actual Quantity purchased x Std Price $ 27,000.00
9,000 gallons Purchase Price Variance - Material B $ 1,800.00 Unfavorable
$ 3.20
7,200 gallons Actual Quantity used x Standard Price $ 78,750.00 15,750
1,800 UF Standard Quantity x Standard Price $ 75,000.00
900 F Quantity Variance - Material A $ 3,750.00 Unfavorable

PACKERS Actual Quantity purchased x Actual Price 81,000

4 hours Actual Quantity purchased x Std Price 90,000
$ 12.00 Purchase Price Variance - Material A $ -9,000.00 Favorable
$ 48.00
Actual Quantity used x Standard Price $ 21,600.00
6,000 Standard Quantity x Standard Price $ 22,500.00
$ 11.90 Quantity Variance - Material B $ -900.00 Favorable
6,150 hours
615 F Standard rate per hour - mixer $ 15.00
1,800 UF Multiply by Standard labor per drum 2 hours
Standard labor cost per drum - mixer $ 30.00

Standard rate per hour - packer $ 12.00

F Multiply by Standard labor per drum 4 hours
UF Standard labor cost per drum - packer $ 48.00
UF
F Actual hours x Actual Rate 49,500 $ 15.28
UF Actual hours x Std Rate 48,600
F Direct Labor Rate Variance - Labor I 900 Unfavorable
UF
UF Actual hours x Actual Rate 73,185 $ 11.90
F Actual hours x Std Rate 73,800
Direct Labor Rate Variance - Labor II - 615 Favorable

Actual hours x Std Rate 48,600 3,240

Standard hours x Std Rate 45,000
Efficiency Variance - Labor I 3,600 Unfavorable

Actual hours x Std Rate 73,800 6,150

Standard hours x Std Rate 72,000
Efficiency Variance - Labor II 1,800 Unfavorable
 Actual Price of Material B

Unfavorable

Actual Quantity Used

Unfavorable

Favorable

Favorable

Unfavorable

actual rate

Favorable

actual hours

Unfavorable

actual hours

Unfavorable