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CHAPTER 6

SHORT-TERM BUDGETING
[Problem 1]
Zamboanga Company
Production Budget
For the Third Quarter, July-September, 200X

Budgeted sales
Add: Finished goods end.
(40% x next month's sales)

Total goods available for sale


Less: Finished goods beg.
Budgeted production

July
30,000

August
45,000

September
60,000

Total
135,000

18,000
48,000
10,000
38,000

24,000
69,000
18,000
51,000

20,000
80,000
24,000
56,000

20,000
155,000
10,000
145,000

[Problem 2]
Aparri Company
Budgeted Materials Purchases
For The Year Ended, December 31, 2005

Budgeted production (units)


x Standard materials/unit
Materials used

Q1
80,000
3
240,000

Q2
120,000
3
360,000

Q3
200,000
3
600,000

Q4
180,000
3
240,000

Total
580,000
3
1,740,000

72,000
312,000
42,000
270,000
200 P

120,000
480,000
72,000
408,000
200 P

108,000
708,000
120,000
588,000
200 P

54,000(1)
594,000
108,000
486,000
200 P

54,000
1,794,000
42,000
1,752,000
200

Add: Materials inventory - end


(20% x next quarter's sales)
Total materials
Less: Materials inventory-beg.
Materials purchase (units)

x Standard materials cost per unit P


Budgeted materials purchases
P 54,000,000 P 81,600,000 P117,600,000 P97,200,000 P350,400,000
(pesos)
(1)

90000 x 3 x 20% = 54,000

[Problem 3]

a. Cagayan Corporation
Budgeted Production
For The Second Quarter, April-June 20__
April
90,000

Budgeted sales (units)


Add: Finished goods inventory - ending (1)
Total goods available for sale
Less: Finished goods inventory - beginning
Budgeted Production
(1)

FG, end = 6000 + 20% (next months sales)


FG- 6/30 = 6,000 + 20% (30,000) = 12,000

May
98,000

June
45,000

Total
233,000

25,600 15,000
115,600 113,000
14,000 25,600
101,600 87,400

12,000
57,000
15,000
42,000

12,000
245,000
14,000
231,000

units

b. Cagayan Corporation
Budgeted Raw Materials Purchases
For The Second Quarter, April-June, 20__

Budgeted Production (units)


x Standard materials / unit
Materials used (lbs.)
Add: Materials inventory ending
(1/4 x next months sales)
Total materials
Less: Materials inventory - beginning
Budgeted materials purchase (in lbs.)
(1)

April
101,600
4 lbs.
406,400

May
87,400
4 lbs.
349,600

June
42,000
4 lbs.
168,000

Total
231,000
4 lbs.
924,000

87,400
493,800
60,000
433,800

42,000
391,600
87,400
304,200

30000(1)
198,000
42,000
156,000

30,000
954,000
60,000
894,000

Materials inventory - 6/30 = 30,000 x 4 lbs. x 1/4 = 30,000 lbs.

[Problem 4].
a. JVC Company

Budgeted Production and Direct Labor Costs


For The First Quarter, January March, 20B

Budgeted sales
Add: Finished goods - ending (1)
Total goods
Less: Finished goods - beginning
Budgeted production
x DLH per unit
Budgeted DLH
x DL rate per hour
Budgeted direct labor wages
Pensions contribution (P0.25 / hr)
Workers' compensation insurance

January
February
March
10,000
12,000
8,000
16,000
12,500
13,500
26,000
24,500
21,500
16,000
16,000
12,500
10,000
8,500
9,000
2
2
2
20,000
17,000
18,000
P
8 P
8 P
8
160,000
136,000
144,000
5,000
4,250
4,500

Total
30,000
13,500
43,500
16,000
27,500
2
55,000
P
8
440,000
13,750

2,000

1,700

1,800

5,500

8,000

6,800

7,200

22,000

16,000
13,600
14,400
P 191,000 P 162,350 P 171,900

44,000
P 525,250

(P0.10 per hour)

Employee medical insurance


(P0.40 per hour)

Social security and employment taxes


(10% of wages)

Budgeted direct labor costs

(1)

FG ending = (100% x next months sales) + (50% x 2nd months sales)

b. 1. Budgeted production - also used in direct materials purchase budget, factory overhead
budget and master budget
2. Budgeted direct labor hours - used in budgeted variable factory overhead and master
budget
[Problem 5]
a. Bacolod Corporation
Budgeted Production
For The Third Quarter, July September, 20A
Budgeted sales (units)
Add: Finished goods inventory - ending
(80% x next month's sales)

Total goods available for sale


Less: Finished goods inventory - beginning
Budgeted production (units)
b. Bacolod Corporation
Budgeted Direct Materials Budget
For The Third Quarter, July September, 20A

July
5,000

August
6,000

September
7,000

Total
18,000

4,800
9,800
5,600
4,200

5,600
11,600
4,800
6,800

5,600
12,600
5,600
7,000

5,600
23,600
5,600
18,000

Budgeted production
x Standard materials per unit
Materials requirement
Add: Materials inventory - ending (1)
Total materials
Less: Materials inventory - beginning
Materials purchase (units)
x Materials cost per unit
Materials purchase (pesos)
(1)

P
P

101
18,000
6
108,000
42,000
150,000
35,000
115,000
0.40
46,000

Materials
211
18,000
4
72,000
28,000
100,000
32,000
68,000
P
3.60 P
P
244,800 P

242
18,000
2
36,000
14,000
50,000
14,000
36,000
1.20
43,200

Mat. Inventory 7/30


101 = 7,000 x 6 = 42,000 units
211 = 7,000 x 4 = 28,000 units
242 = 7,000 x 2 = 14,000 units

c. Bacolod Corporation
Budgeted Direct Labor Costs
For The Third Quarter, July September, 20A
Budgeted production (units)
X Standard hours per unit
Budgeted direct labor hours
X Direct labor rate per hour
Budgeted direct labor costs

Forming
18,000
0.80
14,400
P
8.00
P115,200

Assembly
18,000
2.00
36,000
P
8.00
P198,000

d. Bacolod Corporation
Budgeted Factory Overhead
For The Third Quarter, July September, 20A
Flexible
Budget

Variable overhead
Supplies
Electricity
Indirect labor
Other
Total variable overhead

Fixed overhead
Supervision
Property tax
Depreciation
Other
Total fixed overhead

Rate
per unit
(33,000 units)
P
2.20 P 72,600
1.00
33,000
2.00
66,000
0.80
26,400
P
6.00
198,000

30,000
3,600
33,200
16,200
83,000

Finishing
18,000
0.25
4,500
P
8.00
P 27,000

Total
54,900
P340,000

Budgeted factory overhead

P 281,000

[Problem 6]
a. Ilocos Corporation
Sales Budget
For The Year Ended, December 31, 20B

Budgeted sales (units)


x Unit sales price
Budgeted sales (pesos)

Thingone
Thingtwo
60,000
40,000
P
70 P
100
P 4,200,000 P 4,000,000

b. Ilocos Corporation
Budgeted Production
For The Year Ended, December 31, 20B
Budgeted sales (units)
Add: Finished goods inventory - 01/01
Total goods available for use
Less: Afinished good inventory - 12/31
Budgeted production (units)

Thingone
60,000
20,000
80,000
25,000
55,000

Thingtwo
40,000
8,000
48,000
9,000
39,000

c. Ilocos Corporation
Budgeted Raw Materials Purchases
For the Year Ended, December 31,20B
Material
B

A
Budgeted materials need
Thingone (55,000 x 4 lbs.)

220,000 lbs.
110,000 lbs.

(55,000 x 2lbs.)

Thingtwo (39,000 x 4 lbs.)

156,000
78,000

(39,000 x 2lbs.)
(39,000 x 1lb.)

Total materials need


Add: Materials inventory - 12/31
Total
Less: Materials inventory - 01/01
Materials purchases (lbs.)
x Materials cost per lb.
Budgeted materials purchases (pesos)

P
P

376,000
36,000
412,000
32,000
380,000
8 P
3,040,000 P

188,000
32,000
220,000
29,000
191,000
5 P
955,000 P

d. Ilocos Corporation
Budgeted Direct Labor Cost Budget
For The Year ended, December 31, 20B
Budgeted production (units)
x No. of hours per unit
Direct labor hours
x Standard DL rate per hour
Budgeted direct labor cost

Thingone
55,000
2
110,000
P
8
P 880,000

Thingtwo
39,000
3
117,000
P
9
P 1,053,000

39,000 lbs.
39,000
7,000
46,000
6,000
40,000
3
120,000

e. Ilocos Corporation
Budgeted Finished Goods Inventory 12/31
December 31, 20B
Thingone
25,000

Finished goods inventory - 12/31


x Unit costs:
Materials [(4 x P8) + (2 x P5)]

Thingtwo
9,000

42

[(5 x P8) + (3 x P5) + 1 x P3)]

Direct labor (2 x P8)

58

16
27

(3 x P9)

Applied FOH (2 x P2)

( 3 x P2)

Total unit costs


62
Budgeted finished goods inventory - 12/31 P 1,550,000

6
91
819,000

[Problem 7]
a. Sorsogon Corporation
Flexible Budgets

Rate
Variable costs
Direct materials (P2 x 4) P8.00/MH
Direct labor
1.50/MH
Supplies
0.80/MH
Utilities
1.20/MH
Maintenance
0.30/MH
Sub-total
P11.80/MH
Fixed costs
Utilities
Maintenance
Depreciation
Sub-total
Budgeted total costs
b. Variable costs (7,000 MH x P11.80)
Fixed costs
Budgeted cost 7,000 MH
c. Variable costs (8,000 MH x P11.80)
Fixed costs

6,000
P

Machine Hours
7,000
8,000

9,000

48,000 P
9,000
4,800
7,200
1,800
70,800

56,000 P
11,250
5,600
8,400
2,100
83,350

72,000 P
12,000
6,400
9,600
2,400
102,400

176,000
13,500
7,200
10,800
2,700
210,200

4,000
6,000
12,000
22,000
92,800 P

4,000
6,000
12,000
22,000
105,350 P
P 82,600
22,000
P104,600

4,000
6,000
12,000
22,000
124,400 P

4,000
6,000
12,000
22,000
232,200

P 94,400
22,000

Budgeted costs 8,000 MH (standard)

P104,600

d. Actual manufacturing costs


Less: Standard manufacturing costs
Manufacturing variance

P 61,200
104,600
P(43,400) F

[Problem 8]
Abra Company
Schedule of Accounts Receivable Collections
July September 20__

Month of Sale
May
June
July
August
September

Credit
Sales
550,000
600,000
800,000

July
55,000
180,000
188,160
288,000

August

September

900,000

60,000
240,000

211,680
324,000

1,000,000

Budgeted collections from customer


[Problem 9]
1. May sales (P150,000 x 20%)
April sales (P180,000 x 50%)
March sales (P100,000 x 25%)
May collections

711,160
P

2. February sales (P160,000 x 5%)


March sales (P100,000 x 30%)
April sales (P180,000 x 80%)
Accounts receivable - 4/30

3. February sales (P160,000 x 5%)


March sales (P100,000 x 5%)
April sales (P180,000 x 30%)
May sales (P150,000 x 80%)
Accounts receivable - 5/31

80,000

Total
55,000
240,000
796,160

210,000

745,680

235,200
360,000
885,200

595,200

P 835,680

P 2,432,040

30,000
90,000
25,000
145,000
8,000
30,000
144,000
182,000
8,000
5,000
54,000
120,000
187,000

4. Steps to reduce the balance in accounts receivable:


a. Shorter credit period
a1. Risk.
Customer, especially those who have been accustomed with larger and
longer credit term, may negatively react and look for a new supplier that
will offer them a longer credit period so as not to strain their working
capital requirement.

a2. Advantage.It would reduce investment in accounts receivable balance, bad debts,
collection costs and would increase income on investment.
b. Strengthen collection policies:
b1. Risk.
Some customers may have an operating cycle longer than the offered
credit terms and may not have the ability to meet accelerated payments.
b2. Advantage.Increase cash inflows.
[Problem 10]
Lantoting Company
Budgeted Cash Payments to Merchandise Supplies
For the Month of May, 20__

Budgeted sales (in units)


Add: Finished goods inventory - 5/1
(20% x 10,000)

Total goods available for sale


Less: Finished goods inventory - 5/31
(20% x 12,000)

Budgeted production
x Standard materials per unit
Materials used
Add: Materials inventory 5/1
(40% x 28,800)

Total materials
Less: Materials inventory - 5/31
(40% x 12,200 units x 3 units)

Materials purchase (units)


x Materials cost per unit
Budgeted May purchases

P
P

May
10,000

April
9,000

2,000
12,000

1,800
10,800

2,400
9,600
3
28,800

2,000
8,800
3
26,400

11,520
40,320

10,560
36,960

14,640
25,680
20
513,600

11,520
25,440
20
508,800

Payments to:
April purchases (P508,800 x 10/30 x 98%)
May purchases (P513,600 x 20/30 x 98%)

P
P

P
P

(20% x 9,000)

(40% x 26,400)

166,208
335,552
501,760

[Problem 11] Cash paid for purchases in July = ?


Budgeted sales (units)
Add: Finished goods inventory - beginning
Total goods for sale
Less: Finished goods inventory - ending
Budgeted production

June
50,000
5,000
55,000
3,000
52,000

July
30,000
3,000
33,000
3,000
30,000

x Standard materials per unit


Materials used
Add: Materials inventory - beginning
Total materials
Less: Materials inventory - ending
Materials purchase (units)
x Standard materials per unit
Materials purchase (pesos)

3
150,000
20,000
170,000
14,000
156,000
5

3
90,000
14,000
104,000
11,000
93,000
5

780,000

465,000

June purchases paid in July (P 780,000 x 1/3 x 98%)


July purchases paid in July (P 465,000 x 2/3 x 98%)
Cash payments to merchandise suppliers July

P 254,800
303,800
P 558,600

[Problem 12]
a. Budgeted cash disbursements in June and July:
June

July

Materials
Current month (P 243,600 x 54%)
1-month prior (P225,000 x 46%)
Wages and salaries
Marketing, general and administrative expenses

P 131,544 P 132,408 (P 245,000 x 54%)


103,500
112,056 (P 243,600 x 46%)
38,000
38,000

Current month (P49,300 x 54%)

26,622

28,080 (P52,000 x 54%))

1-month prior (P51,550 x 46%)

23,713

22,678 (P49,300 x 46%))

Budgeted cash disbursements

P 323,379 P 333,222

1)
Materials used (units)
Materials inventory - ending
(130% x next months production
requirements)
(12,200 x 130%)

Materials inventory - beginning

May
11,900

June
11,400

14,820

15,600

July
12,000

15,860

(130% x 11,900)

Materials purchases (units)


x Cost of materials per unit
P
Budgeted materials purchases (pesos) P

(15,470)
11,250
20 P
225,000
P

(14,820)
13,180
20 P
243,600
P

(15,600)
12,260
20
245,200

2) M, G and AE = (15% x sales) P 2000


May = (15% x P 357,000) P 2,000 = P 51,550
June = (15% x P 342,000) P 2,000 = P 49,300
July = (15% x P 360,000) P 2,000 = P 52,000
b. Budgeted cash collections in May and June:
From March sales (P 354,000 x 9%)
From April sales (P 363,000 x 60% x 97%)
(P 363,000 x 25%)

May
P 31,860
211,266
90,750

From May sales (P357,000 x 60% x 97%)


(P357,000 x 25%)

Collections from customers

P333,876

June
33,670 (P363,000 x 9%)

207,774
89,250
P329,694

c. Materials purchases in units in July is 13,840 units.


[Problem 13]
V. jovi Band company
Cash Budget
For The Quarter Ending, March 31, January
Collections from sales
January sales

84,672
21,600

February sales

February

March

Total

108,000

136,800

351,072

104,760
27,000

135,000

266,760

111,744
28,800

140,544

March sales

Total collections

106,272

239,760

412,344

758,376

89,200
73,800
36,900
125,000
26,400
17,000
368,300
(262,028)

60,400
90,600
45,300
125,000
33,000
17,000
371,300
(131,540)

65,600
98,400
49,200
125,000
35,200
17,000
390,400
21,944

215,200
262,800
131,400
375,000
94,600
51,000
1,130,000
(371,624)

Payments:
Materials supplies
Direct labor (Bud, Prod x P 30)
Variable OH (Bud. Prod x P 15)
Fixed OH (5000 x P 25)
Var. expenses (Sales x 11)
Fixed expenses (P 12000 x P5000)
Total
Net operating cash inflows (outflows)
Investing and financing activities:

C. Salonga investment
50,000
50,000
Bank loan
150,000
150,000
Acquisition of assets
(200,000)
(200,000)
Interest payments
(3,000)
(3,000)
(3,000)
(9,000)
Principal payments
(30,000)
(30,000)
Net investing and financing activities
(3,000)
(3,000)
(33,000)
(39,000)
Net cash inflows (outflows)
(265,028)
(134,340)
(11,056)
(410,624)
Add: Cash balance, beginning
0
10,000
10,000
0
Cash balance , ending, before
Financing
(265,028)
(124,540)
(1,056)
(410,624)
Borrowings
275,028
134,540
11,056
420,624
Cash balance - end
P 10,000 P 10,000 P 10,000 P
10,000
Schedules:
1.
Budgeted sales (@ 150)
Finished goods inventory - ending
[100 + (10% x next month's sales)]

January
2,400

February
3,000

March
3,200

400

420

500

(340)
2,460

(400)
3020

(420)
3,280

Finished goods inventory - beginning


[100 + (10% x 24,000)]

Budgeted production
2.
Budgeted materials purchases (units)
(2460 + 2000)

x Materials cost/unit
P
Budgeted materials purchase (pesos) P

4,460
20 P
89,200 P

[Problem 14]
a. Schedule of cash collections in September:
July credit sales (P 400,000 x 8%)
August credit sales (P 500,000 x 70%)
September credit sales (P 580,000 x 20%)
September cash sales
September collections
b. Schedule of payments to suppliers in September:
August purchases
September purchases (P 250,000 x 25%)
September payments to suppliers
c. Isabela Corporation

3,020
20 P
60,400 P

P
P
P

32,000
350,000
116,000
280,000
778,000
105,000
62,500
167,500

3,280
20
65,600

Cash budget
For The Month of September, 2000
Cash balance, Sept. 01
P
80,000
Add: Cash collections from sales
778,000
Total cash
858,000
Less: Payments:
To merchandise suppliers
P 167,500
Selling and administrative expenses
80,000
Dividends
40,000
287,500
Cash balance, Sept. 30
P
570,500
[Problem 15]
1. Cricket Company
Cash Budget
For The Month Ended, July 30, 20__
Cash balance, July 1
Add: Collections from customers:
June sales (P 30,000 x 48%)
P 14,400
July sales (P 40,000 x 50%)
20,000
Total cash
Less: Payments:
Merchandise suppliers
June purchase (P10,000 x 50%)
P 5,000
July purchase (P 15,000 x 50%)
7,500
12,500
Marketing and administrative expenses
10,000
Dividends
15,000
Cash balance before financing
Add: Borrowings (P 5,000 1,900)
Cash balance, July 31

5,000
34,400
39,400

37,500
1,900
3,100
5,000

2. Financial actions to be taken:


a. Find ways to reduce cost and expenses
b. Find ways to increase sales
[Problem 16]
a.
La Union Corporation
Budgeted Cash Collections
October December 2000
Month of sales
Previous to October
October sales
November sales
December sales
Collections from
customers

Amount
October
November
December
P
245,000 P
210,000 P
30,000
P
1,050,000
315,000
630,000 P
73,500
900,000
270,000
540,000
850,000
75,000
P

525,000 P

930,000 P

688,500

Total
240,000
1,018,000
810,000
75,000
P2,143,500

b. La Union Corporation
Cash Budget
For The Fourth Quarter, October December 2000

Collections from customers


Payments:
Merchandise purchases
Payroll
Lease payments
Advertising
Equipment purchases
Total
Operating inflows (outflows)
Proceeds of loan
Interest payment
Net cash inflows (outflows)
Cash balance - beginning
Cash balance - ending

October
November
December
525,000 P
930,000 P
688,500 P

Total
2,143,500

520,000
120,000
20,000
70,000
30,000
760,000
(235,000)
300,000
(12,000)
53,000
250,000
303,000 P

1,860,000
345,000
60,000
230,000
30,000
2,525,000
(381,500)
300,000
(36,000)
(117,500)
250,000
132,500

[Problem 17]
a. Collections from customers July 2007
Cash sales
July sales [(P 1,500,000 P 350,000) x 70%]
June sales
July collections
b. Cash payments to suppliers July 2007
July purchases (P 800,000 x 40%)
June purchases
July payments to suppliers
c. Ilocos Norte Corporation
Cash Budget

720,000
110,000
20,000
80,000
930,000
0
(12,000)
(12,000)
303,000
291,000 P

P
P
P
P

620,000
115,000
20,000
80,000
835,000
(146,500)
(12,000)
(158,500)
291,000
132,500 P

350,000
805,000
420,000
1,575,000
320,000
280,000
600,000

For The Month Ended July 31, 2007


Cash balance, July 1
Add: Collections from customers
Other revenues
Bank borrowings
Total cash available for use
Less: Payments
Merchandise suppliers
(1)

Operating expenses
Note payable paid
Equipment purchases
Interest
Cash balance, July 31

(1)

Operating expenses incurred


Accrued expenses beginning
- end
Prepaid expenses beginning
- end
Operating expenses paid

P
P

80,000

1,575,000
30,000
150,000

1,755,000
1,835,000

600,000
316,000
60,000
2,000

1,178,000
657,000

320,000
45,000
(60,000)
(23,000)
34,000
316,000

d. Ilocos Norte Corporation


Income Statement
For The Month Ended, July 31, 2007
Sales
Less: Cost of goods sold:
Inventory, July 1
P
Add: Purchases
Total goods available for use
Less: Inventory, July 31
Gross profit
Less: Operating expenses
Depreciation expense

P
350,000
800,000
1,150,000
400,000
320,000
15,000

1,500,000

750,000
750,000
335,000

Operating Income
Add: Other revenues (1)
Interest expense
Net Income
(1)

415,000
26,500
(2,000)

24,500
439,500

Cash received form other revenues


Accrued income July 1
- July 31
Deferred revenues July 1
- July 31
Other revenues earned

30,000
(12,000)
14,500
3,000
(9,000)
26,500

[Problem 18]
a and b
Revenues earned/Expenses incurred
Accruals beginning
- ending
Prepayments beginning
- ending
Cash received/cash paid

(Revenues)
a
P 120,000
23,000
(40,000)
(22,000)
8,000
P 89,000

(Expenses)
b
P 90,000
12,000
(15,000)
(9,000)
11,000
P 89,000

[Problem 19]
Patz Company
Budgeted Income Statement
For The Second Quarter Ended, June 30, 20xx
Sales (P 500,000 + P 1,000,000)
Less: Cost of goods sold
Gross profit
Less: Operating expenses:
Variable marketing
Fixed marketing
Fixed administrative
Doubtful accounts (2% x 1.5 million)
Depreciation expense (P 800,000/20)
Net income
[Problem 20]
Mexia Inc.
Budgeted Income Statement
For The Year Ended, December 31, 2007

Sales (P 9,000 x 110% x 105%)


Less: Cost of goods sold (P 6,000 x 106% x 105%)
Gross profit
Less: Commercial expenses
Marketing
P
780
Administrative (P 900 + P 420)
1,320
Operating income
Less: Interest expense [P 140 + 10% (P 300)]

150,000
50,000
40,000
30,000
40,000
P

10,395
6,678
3,717
2,100
1,617
170

1,500,000
900,000
600,000

310,000
290,000

Income before income tax


Less: Income tax
Net income

1,447
579
868

[Problem 21]
Easecom Company
Budgeted Income Statement
For The Year Ended, December 31, 2007
(in thousands)
Sales:
Equipment (P 6,000 x 110% x 106%)
P
Maintenance contracts (P 1,800 x 106%)
Less: Cost of goods sold (P 4,600 x 110% x 103%)
Gross profit
Less: Operating expenses:
Marketing (P 600 + P 250)
Administration
Distribution (P 150 x 110%)
Customer maintenance (P 1,000 + P 300)
Operating income

6,996
1,908

850
900
165
1,300
P

8,904
5,212
3,692

3,215
477

[Problem 22]
Mabuhay University
Motor Pool Division
Performance Report
For The Month of March 20xx
Variable Costs
Gasoline
Oil, minor repairs, parts and supplies
Outside repairs
Sub-total

Actual
Costs
5,323.00 P
380.00
50.00
5,753.00

Flexible
Budget
5,512.50 P
378.00
225.00
6,115.50

Variance
UF (F)
(189.50)F
2.00UF
(175.00)F
(362.50)F

Fixed Cost
Insurance
Salaries and benefits
Depreciation
Sub-total
Totals
Cost per mile (Costs + 63,000 miles)
(1)

525.00
2,500.00
2,310.00
5,335.00
11,088.00 P

500.00
2,500.00
2,200.00
5,200.00
11,315.50 P

25.00UF
0.00
110.00UF
135.00UF
(227.50)F

0.1760

0.1796

(0.0036)F

Gasoline = 63,000 x P1.40/16 = P 5,512.50


Oil, etc., = 63,000 x P 0.006 = P 378

[Problem 23]
a.
Triple-F Health Club
Cash Budget
For The Year Ended October 31, 20C
(in thousands)
Receipts:
Annual membership fees (P 355 x 110% x 103%)
Lesson and class fee (P 234 x 234/180)
Miscellaneous (P 2 x 2/1.5)
Payments:
Managers salary and benefits (P 36 x 115%)
Regular employees wages and benefits (P 190 x 115%)
Lesson and class employee wages and benefits
(P 195 x 234/180 x 115%)
Travel and supplies (P 16 x 125%)
Utilities (P 22 x 125%)
Mortgage interest (P360 x 9%)
Miscellaneous (P2 x 125%)
Equipment payable
Accounts payable for supplies and utilities
Amortization of mortgage payable
Purchase of new equipment
Net cash inflows
Add: Cash balance - Oct. 31,20B
Cash balance - Oct. 31, 20C

402.2
304.2
2.7

P 708.9

41.4
218.5
291.5
20.0
27.5
32.4
2.5
10.0
2.5
30.0
25.0

701.3
7.6
7.3
P 14.9

b. Problem(s) discloses by the prepared budget:


1. Incremental revenues are basically determined by the membership base, which
may be considered relatively non-controllable.
2. The presence of the mortgage payable and its attendant interest expense
fundamentally drain the cash position of the health club.
3. Possible areas for cost saving should be identified to compensate the
accelerating trend in costs and expenses.
c. Joy Tan, the club general manager, is correct that the boards goals to purchase the
adjoining property in four or five years time is unrealistic. The adjoining property
costs P300,000 and would be requiring in nominal terms P60,000 annual savings in
the next five years. Considering that the recent net cash inflows from operations is

only P7,600 in 20C, the required P60,000 annual savings would be extremely
difficult for the business to achieve.