SolutiontoChapter9

921,22,24,25(1)(2)E29(1)P935

EXERCISE 9-21 (20 MINUTES)

1.

The total required production is 131,144 units, computed as follows:

Budgeted Sales
(in units)
June
July
August
September
October

40,000 (given)
42,000 (40,000 1.05)
44,100 (42,000 1.05)
46,305 (44,100 1.05)

Planned Ending Inventory

(in units)
32,000 (40,000 80%)
37,044 (46,305 80%)

Sales in units:

2.

July ................................................................................................................
August ...........................................................................................................
September.....................................................................................................
Total for third quarter...................................................................................
Add: Desired ending inventory, September 30 .........................................
Subtotal .........................................................................................................
Deduct: Desired ending inventory, June 30 ..............................................
Total required production............................................................................

40,000
42,000
44,100
126,100
37,044
163,144
32,000
131,144

Assumed production during third quarter (in units).................................

Raw-material requirements per unit of product (in pounds)....................
Raw material required for production in third quarter (in pounds) .........
Add: Desired ending raw-material inventory, September 30
(480,000 25%)....................................................................................
Subtotal .........................................................................................................
Deduct: Ending raw-material inventory, June 30 ......................................
Raw material to be purchased during third quarter (in pounds) .............
Cost per pound of raw material ..................................................................
Total raw-material purchases during third quarter ...................................

120,000

4
480,000
120,000
600,000
140,000
460,000
$1.40
$ 644,000

EXERCISE 9-22 (25 MINUTES)

1.

Cash collections in October:

Month of Sale
July...............................................................
August .........................................................
September ...................................................
October ........................................................
Total .............................................................

Amount Collected in October

$150,000 4%
$ 6,000
175,000 10%
17,500
200,000 15%
30,000
225,000 70%
157,500
$211,000

Notice that the amount of sales on account in June, $122,500 was not needed to
solve the exercise.
2.

Cash collections in fourth quarter from credit sales in fourth quarter.

Amount Collected
Month of Sale
October ............................................
November ........................................
December ........................................
Total .................................................
Total collections in fourth quarter
from credit sales in fourth
quarter .........................................

3.

Credit
Sales
$225,000
250,000
212,500

October
$157,500

$157,500

November
$ 33,750
175,000

208,750

December
$ 22,500
37,500
148,750
$208,750
$575,000

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EXERCISE 9-24 (15 MINUTES)

1.

Production (in units) required for the year:

Sales for the year ...........................................................................................
Add: Desired ending finished-goods inventory on December 31..............
Deduct: Beginning finished-goods inventory on January 1 ......................
Required production during the year ...........................................................

2.

3,360,000
350,000
560,000
3,150,000

Purchases of raw material (in units), assuming production of 3,500,000 finished units:
Raw material required for production (3,500,000 2) ................................

7,000,000

Add: Desired ending inventory on December 31 ........................................

Deduct: Beginning inventory on January 1 .................................................
Required raw-material purchases during the year......................................

315,000
245,000
7,070,000

EXERCISE 9-25 (20 MINUTES)

1.

WHITE MOUNTAIN FURNITURE COMPANY

EXPECTED CASH COLLECTIONS
NOVEMBER
Month
September.........................................
October .............................................
November..........................................
Total ..............................................

2.

Sales
$150,000
195,000
165,000

Percent
9%
20%
70%

WHITE MOUNTAIN FURNITURE COMPANY

EXPECTED CASH DISBURSEMENTS
NOVEMBER
October purchases to be paid in November................................................
Less: 2% cash discount ................................................................................
Net ...............................................................................................................
Cash disbursements for expenses...............................................................
Total ............................................................................................................

3.

Expected
Collections
$ 13,500
39,000
115,500
$168,000

$135,000
2,700
$132,300
36,000
$168,300

WHITE MOUNTAIN FURNITURE COMPANY

EXPECTED CASH BALANCE
NOVEMBER 30
Balance, November 1.....................................................................................
Add: Expected collections ............................................................................
Less: Expected disbursements ....................................................................
Expected balance.......................................................................................

$ 55,000
168,000
168,300
$ 54,700

EXERCISE 9-29 (20 MINUTES)

1.
Total Sales in January 20x5
$200,000
$260,000
$320,000
Cash receipts in January, 20x5

From December sales on account ...........

From January cash sales ..........................
From January sales on account ...............
Total cash receipts ....................................

$ 14,250*
150,000
40,000**
$ 204,250

$ 14,250
195,000
52,000
$261,250

$ 14,250
240,000
64,000
$318,250

*$14,250 = $380,000 .25 .15

$150,000 = $200,000 .75
**$40,000 = $200,000 .25 .80
2.

Operational plans depend on various assumptions. Usually there is uncertainty about

these assumptions, such as sales demand or inflation rates. Financial planning helps
management answer "what if" questions about how the budget will look under various
sets of assumptions.

PROBLEM 9-35 (25 MINUTES)

1.

Sales budget
Sales (in sets)..............................................
Sales price per set ......................................
Sales revenue..............................................

2.

August
6,000

$60
$360,000

September
7,500

$60
$450,000

July
5,000
1,200
6,200
1,000
5,200

August
6,000
1,500
7,500
1,200
6,300

September
7,500
1,500
9,000
1,500
7,500

Production budget (in sets)

Sales ............................................................
Add: Desired ending inventory .................
Total requirements .....................................
Less: Projected beginning inventory........
Planned production ....................................

3.

July
5,000

$60
$300,000

Raw-material purchases
Planned production (sets) ............................
Raw material required per set
(board feet).................................................
Raw material required for production
(board feet).................................................

July
5,200

10
52,000

August
6,300

10
63,000

September
7,500

10
75,000

Add: Desired ending inventory of raw

material (board feet)..................................
Total requirements ........................................
Less: Projected beginning inventory of
raw material (board feet)...........................
Planned purchases of raw material
(board feet).................................................
Cost per board foot .......................................
Planned purchases of raw material
(dollars) ......................................................

6,300
58,300

7,500
70,500

8,000
83,000

5,200

6,300

7,500

53,100
$.60

64,200
$.60

75,500
$.60

$ 31,860

$ 38,520

$ 45,300

July
5,200

1.5
7,800

$21
$163,800

August
6,300

1.5
9,450

$21
$198,450

September
7,500

1.5
11,250

$21
$236,250

PROBLEM 9-35 (CONTINUED)

4.

Direct-labor budget
Planned production (sets) ............................
Direct-labor hours per set.............................
Direct-labor hours required ..........................
Cost per hour .................................................
Planned direct-labor cost..............................

5.
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