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 Sells (30%)

Credit Sells made one month ago (70%)
Total Cash Collections

Cash Collections
January
$
24,000
$
49,000.0
$
73,000

February
$
27,600
$
56,000.0
$
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 End Inventory
Poduction Need
Less: Beginning Inventory
Units to be Produced

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
8,300
9,375
Multiply: Quantity of DM Needed per Unit
2
2
DM Pounds Needed for Production
16,600
18,750
Plus: Desired end Inventory of DM
1,875
1,970
Total DM Lbs. Needed
18,475
20,720
Minus: Beginning Inventory
-1,660
-1,875
DM Pounds to Purchase
16,815
18,845
2
DM Cost per Pound
2
Total Cost of DM
$33,630
$37,690

Unit Sales
Plus: Desired End Inventory
Poduction Need
Less: Beginning Inventory
Units to be Produced
Multiply: Quantity of DM Needed per Unit
DM Pounds Needed for Production
Ending Inventory for Previous Month (10%)

April
9,700
2,125
11,825
-2,425
9,400
2
18,800

May
8,500

1,880

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
January
February
December Purchases
$42,400
January Purchases
$6,726.0
$26,904.0
Febuary 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 (Fixed)
$3,000
$3,000
Veriable Conversion Costs
$9,960
$11,250
Total Payments for Conversion Costs
$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 Payments for Operating Expenses
$9,000
$10,200

Req. 7

Cash Balance, Beginning

Add Cash Collections
Total Cash Available
Less: Cash Payments
Direct Material Purchases
Conversion Costs
Operating Expenses
Equipment Purchases
Tax Payments
Total Cash Payments
Ending Cash Balance Before Financing
Financing:
Borrowings
Repayments
Interest Payments
Total Financing
Ending Cash Balance

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
0
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 Cost per Unit
$4.00
Conversion Cost per Unit
$1.00
Fixed Manufacturing Overhead per Unit
$0.80
Budgeted Cost of Manufacturing each Unit
$5.80
Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Depreciation
Operating Income
Less Interest Expense
Loss Provision for Income Taxes
Net Income

271,000
-157,180
113,820
-30,100
-4,800
78,920
-280
-23,592
$55,048

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
Quarter
$
29,700 $
81,300
$ 64,400.0 $ 169,400.0
$
94,100 $
250,700

March
9,900

Quarter
27,100

7000

9700

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

2,425.00
12,325
-2,475
9,850

2,425
29,525
-2,000
27,525

March
9,850
2
19,700
1880
21,580
-1,970
19,610
2

Quarter
27,525
2
55,050
1,880
56,930
-1,660
55,270
2

$39,220

$110,540

aterial Purchases
March

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

Solutions Manual

2000
9000
1750
7250

2125
11825
2425
9400

7250

9400

2
14500
1660

18800

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
$3,000
$30,100

March
$4,122
94,100
98,222

Quarter
$4,500
250,700
255,200

37,996
19,820
10,900
16,000
0
84,716
13,506

121,564
57,030
30,100
33,000
10,000
251,694
3,506

-9,000
-280
-9,280
$4,226

10,000
-9,000
-280
720
$4,226

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