Introduction to Management Accounting

Solutions Manual

Heidi Hyde

Problems: Set A
(60 min.) P 9-59A
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

December
Unit sales
Unit selling price
Total sales Revenue

Sales Budget
January

7,000
$
$

February

8,000

March

9,200

April

9,900

May

9,700

8,500

10 $

10 $

10 $

10 $

10 $

10

70,000 $

80,000 $

92,000 $

99,000 $

97,000 $

85,000

Req. 1

Cash Collections (30%)

Credit Collections (70%)
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
2,000
8,300

February
9,200
2,475
11,675
2,300
9,375

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

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

Req. 2

Unit Sales
Plus: Desired Ending Inventory
Total Needed
Less: Beginning Inventory
Units to Produced

March
9,900
2,425.00
12,325
2,475
9,850

Quarter
27,100
2,425
29,525
2,000
27,525

Req. 3
Direct Materials Budget
January
Units to be Produced
8,300
X Pounds of DM needed per unit
2
Quanity(pounds) needed for production
16,600
Plus Desired ending inventory of DM
1,875
Total quanity needed
18,475
Less:Beginning Inventory of DM
1,660
Quanity to Purchase
16,815
Xcost per pound
$2
Total cost of DM purchases
$33,630

Unit Sales
Plus: Desired Ending Inventory
Total Needed
Less: Beginning Inventory
Units to Produce
Pounds of DM needed per unit
Pounds needed for production
Desired End Inventory of DM for March

April
9,700
2,125
11,825
2,425
9,400
2
18,800
1,880

February
9,375
2
18,750
1,970
20,720
1,875
18,845
$2
$37,690

March
9,850
2
19,700
1,880
21,580
1,970
19,610
$2
$39,220

Quarter
27,525
2
55,050
1,880
56,930
1,660
55,270
$2
$110,540

May
8,500

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
January
February
March
December Purchases
$42,400
January Purchases
$6,726.0
$26,904.0
February Purchases
$7,538.0
$30,152.0

Chapter 9: The Master Budget and Responsibility Accounting

Quarter
$42,400
$33,630
$37,690

Introduction to Management Accounting

March Purchases
Total cash payments for direct material
purchases

Solutions Manual

$49,126

Chapter 9: The Master Budget and Responsibility Accounting

$34,442

$7,844.0

$7,844

$37,996

$121,564

Introduction to Management Accounting

Solutions Manual

Req. 5
Schedule of Expected Cash DisbursementsConversion Costs
January
February
March
Variable conversion costs
$9,960
$11,250
$11,820
Rent (fixed)
$5,000
$5,000
$5,000
Other fixed MOH
$3,000
$3,000
$3,000
Total Payments for conversion costs
$17,960
$19,250
$19,820

Quarter
$33,030
$15,000
$9,000
$57,030

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
January
February
March
Variable Operating Expenses
8000
9200
9900
Fixed Operating Expenses
$1,000
$1,000
$1,000
Total Payments for Operating expenses
$9,000
$10,200
$10,900

Quarter
$27,100
$3,000
$30,100

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

Combined Cash Budget

January
$4,500
73,000
77,500

Total interest

February
$4,414
83,600
88,014

March
$4,122
94,100
98,222

Quarter
$4,500
250,700
255,200

37,996
19,820
10,900
16,000

81,086
-3,586

34,442
19,250
10,200
12,000
10,000
85,892
2,122

84,716
13,506

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

8,000
0
0
4,414

2,000
0
0
4,122

0
9,000
280
4,226

10,000
9,000
280
4,226

49,126
17,960
9,000
5,000

$280

Req. 8
Budgeted Manufacturing Cost per Unit
Direct materials cost per unit
Conversion costs per unit
fixed manufacturing overhead per unit
budgeted cost of manufacturing each unit

$4.00
$2.07
$0.80
$6.87

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
Less Provision for income taxes
Net income

271,000
186,229
84,771
30,100
4,800
49,871
280
14,961
$34,629

Chapter 9: The Master Budget and Responsibility Accounting