9-24

1 Production (in units) required for the year Sales for the year Add: Desired ending finished goods inventory on Dec 31 Less: Beginning finished goods inventory on Jan 1 Required production during the year Units 480,000 50,000 (80,000) 450,000

2 Purchases of raw material (in units), assuming production of 500,000 finished units: Raw material required for production (500,000 x 2) Add: Desired ending inventory on Dec 31 Less: Beginning inventory on Jan 1 Required raw material purchases during the year Units 1,000,000 45,000 (35,000) 1,010,000

1 Sales Less: Allowances for doubtful accounts Less: Increase in trade accounts receivable during month Estimated December cash receipts from operations

350,000 (3,500) (10,000) 336,500

2 Materials, general and administrative expense: Fixed ($35,500 - $20,000) Variable ($350,000 x 15%) - 3500) Cost of Goods sold (350,000 x 70%) Increase in inventory during month Estimated December cash disbursements from operations

15,500 49,000 245,000 5,000 314,500

The SCHIMDT COMPANY FORECAST INCOME STATEMENT SECOND QUARTER 2009 Sales Cost of Goods Sold (70%) Gross Profit (30%) Commercial Expenses Uncolltecible Accounts (1%) Depreciation Marketing : Variable (12%) Fixed Administrative: Variable (3%) Fixed Income before Income tax $ 720,000 504,000 1,224,000 7,200 10,000

86,400 48,000

21,600 34,200

(207,400) $8,600

DEPARTMENTAL FORECAST BUDGET

Budget for coming year (based on "last year") Sales value of output (180,000 units @ $.7125) Materials cost ($.15 per unit) Direct Labour ($0.30 per unit) Factory overhead: Fixed Variable ($ 0.175 per unit) Departmental profit 128,250 27,000 54,000 15,000 31,500 46,500 127,500 750

142,500 200,000

= 0.71 50,000 total factory overhead (15,000) fixed factory overhead 35,000 variable factory overhead = 0.15 35,000 200,000 = 0.3 = 0.18

30,000 200,000

60,000 200,000

2) The use of an overhead rate based on normal production of 360,000 units would seem more logical th next year's expected actual production which is causing an increased rate because of decreasing prod A rate based on normal production instead expected actual production wuld avoid the possiblility of setting sales prices unncessarily high if they are based on abnormally high unit costs.

3) Factory overhead is not really increasing; it is the decreased production and its effect per unit on fixed costs which is causing an increasing unit cost for overhead. What the department need is the increased volume rather than higher sales price. Effect of production on the cost per unit: $15,000 fixed overhead 180,000 units = 0.8333 unit cost

$15,000 fixed overhead 200,000 units $15,000 fixed overhead 300,000 units

= 0.075 unit cost

= 0.05 unit cost

seem more logical than se of decreasing production. d the possiblility

ffect per unit epartment need is

MARQUETTE INC Projected Cost of Goods Sold Statement for the year ended Dec 31 2010
Materials Beginning Inventory Purchases Material available for use Less: Ending Inventory Cost of material consumed Labour Factory Overhead Add opening inventory of work in process Less: closing inventory of work in process Cost of goods manufactured Add: Opening inventory of finished goods Less: Closing inventory of finished goods Cost of Goods Sold

500,000 2,400,000 2,900,000 (400,000) 2,500,000 4,340,000 1,840,000 8,680,000 100,000 8,780,000 (300,000) 8,480,000 800,000 9,280,000 (1,000,000) 8,280,000

Earnings (6% of $20,000,000 = $1,200,000) Marketing, administrative and financial expenses Cost of goods sold ($8,280,000)

10% of sales 21% 31% of sales 69% 100% of sales

Cost of Goods Sold 8,280,000 Cost of Goods Manufactured 8,480,000 Total manufacturing Cost 8,680,000 Cost of materials consumed 2,500,000

Ending Finished Goods Inventory 1,000,000 Ending Inventory Work In Process

300,000 Labour (50% of manufacturing cost) 4,340,000 Ending materials inventory 400,000

Beginning Finished Goods Inventory 800,000 =

Cost of Goods Manufactured 8,480,000

Beginning Inventory Total manufacturing cost Work In Process (materials, labour, and factory overhead) 100,000 = 8,680,000 cost of materials consumed 2,500,000 Beginning material inventory 500,000 factory overhead = 1,840,000 Materials purchases = 2,400,000

CASH BUDGET FOR A MANUFACTURER

1 From December sales { ($39,150 / 45%) x 13%} from January sales ($65,000 x 30%) from February sales ($54,000 / x 55%) Expected cash collection during February 2 Cash balance, January 1 Expected cash collection during January: From November Sales {13,500 / 15%) x 13%} From December Sales { ($39,150 / 45%) x 30%} From January Sales ($65,000 x 55%)

11,310 19,500 29,700 60,510 5,000 11,700 26,100 35,750

73,550 78,550

Expected cash disbursement during January: December materials purchases paid in January Other cash expenditures Expected cash balance, February 1 3 Expected cash balance, February 1 Expected cash collection during February Expected cash disbursement during February January materials purchases paid in February Other cash expenditures Expected cash balance, February 28

10,000 41,000

(51,000) 27,550 27,550 60,510 88,060

12,500 41,000

(53,500) 34,560

CASH BUDGET FOR A RETAILER

1 Trade Accounts Receivable, Dec 31, 19A, collected in 19B Budgeted 19B cash sales ($1,200,000 x 20%) Budgeted 19B credit sales ($1,200,000 x 80%) Less: Uncollectible accounts expense Trade accounts receivable, Dec 19B Cash collected in 19B 2 Cost of Goods Sold, 19B Inventory, Dec 31, 19B Cost of goods available for sale Inventory, Dec 31, 19A Purchases 19B Incease in accounts payable -merchandise Cash disbursed in 19B for purchases of merchandise 3 Variable general and administrative expenses: 19B expenss of $120,000 50% paid in 19B 19A expenses of $110,000 (10% of sales), 50% paid in 19B

Fixed general and administrative expenses Total for each year Less: depreciation and uncollectible accounts expense Fixed gen. and admin expenses involving cash payment 19A paid in 19B ($60,000 x 20%) 19B paid in 19B (60,000 x 80%) Cash disbursed in 19B for variable and fixed gen. and Admin Exp

administrative expenses

TAILER
84,000 240,000 960,000 (5,000) (78,000) (83,000) 1,201,000 840,000 140,000 980,000 (150,000) 830,000 (3,000) 827,000

60,000 55,000 115,000

100,000 (40,000) 60,000 12,000 48,000

nd Admin Exp

60,000 175000