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 Sales
Credit Sales
Total Cash Collections

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

February
$27,600
$56,000
$83,600

Production Budget
January
8,000
2,300
10,300

February
9,200
2,475
11,675

Req. 2

Unit Sales
Plus: Desired end inventory
Total Needed

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Less: Beginning inventory
Number of Units to produce

Solutions Manual
1,750
8,550

2,000
9,675

Req. 3
Direct Materials Budget
January
February
Units to be produced
8,000
9,200
Multiply by Pounds of DM needed per unit
2
2
Quantity (pounds) needed for production
16,000
18,400
Plus: Desired end inventory
1,840
1,980
Total quantity (pounds) needed
17,840
20,380
Less: Beginning inventory of DM
1,600
1,840
Quantity (pounds) to purchase
16,240
18,540
2
Multiply by: Cost per pound
2
Total cost of DM purchases
$32,480
$37,080

Units to be produced
Multiply by pounds of DM needed per unit
Quantity (pounds) needed for production
Plus: Desired end inventory
Total quantity (pounds) needed
Less: Beginning inventoy of DM

April
9,700
2
19,400
1,700

May
8,500
2
17000
1,700

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
January
February
December purchases (from Accounts Payable)
$22,720
January purchases
$6,496
$25,984
February purchases
$7,416
March purchases
Total cash payments for direct material
purchases
$29,216
$33,400

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
Variable conversion costs
$9,600
$11,040
Rent (fixed)
$5,000
$5,000
Other fixed MOH
$3,000
$3,000
Total payments for conversion costs
$17,600
$19,040

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
January
February
Variable operating expenses
$9,600
$11,040
Fixed operating expenses
$10,600
$11,800
Total payments for operating expenses
$20,200
$22,840

Req. 7

Cash balance, beginning

Add cash collections
Total cash available
Less cash payments
Direct material purchases
Conversion costs
Operating expenses
Equipment purchases
Tax payment
Total cash payments
Ending cash balance before financing
Financing
Borrowings
Repayments
Interest payments
Ending cash balance

Total interest

Combined Cash Budget

January
February
$4,984
73,000
83,600
88,584
29,216
17,600
20,200
5,000
0
72,016
984

33,400
19,040
22,840
12,000
10,000
97,280
-8,696

4,000
0
0
4,984

13,000
0
0
4,304

$280

Req. 8

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

Budgeted Manufacturing Cost per Unit

Direct materials cost per unit
Conversion costs per unit
Fixed manufacturing overhead per unit
Budgeted cost of manufacturing per unit
Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Cost of goods sold
Gross profit
Operating expense
Depreciation
Operating income
Less interest expense
Less provision for income taxes
Net income

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

March

9,200

April

9,900

May

9,700

8,500

10

10 $

10

10

92,000

99,000 $

97,000

85,000

March
$29,700
$64,400
$94,100

Quarter
$81,300
$169,400
$250,700

March
9,900
2425
12,325

Quarter
27,100
2,425
34,300

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

2,300
10,025

1,750
28,250

March
9,900
2
19,800
1940
21,740
1,980
19,760
2
$39,520

Quarter
27,100
2
54,200
1,940
54,200
1,600
52,600
2
$105,200

aterial Purchases
March

$29,664
$7,904

Quarter
$22,720
$32,480
$37,080
$7,904

$37,568

$100,184

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

Introduction to Management Accounting

onversion Costs
March
$11,880
$5,000
$3,000
$19,880

Quarter
$32,520
$15,000
$9,000
$56,520

erating Expenses
March
$11,880
$12,500
$24,380

Quarter
$32,520
$34,900
$67,420

March
$4,304
94,100
98,404

Solutions Manual

Quarter
250,700

37,568
19,880
24,380
16,000
0
97,828
576

100,184
56,520
67,420
33,000

4000
0
0
4,576

21,000

257,124

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Chapter 9: The Master Budget and Responsibility Accounting

Solutions Manual

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