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Introduction to Management Accounting Solutions Manual

WASATCH MANUFACTURING
Master Budget

Sales Budget
December January February March April May
Unit sales 5,067 5,340 5,940 5,520 5,700 5,160
Unit selling price $ 15 $ 15 $ 15 $ 15 $ 15 $ 15
Total sales Revenue $ 76,000 $ 80,100 $ 89,100 $ 82,800 $ 85,500 $ 77,400

Req. 1

Cash Collections Budget


January February March Quarter
Cash sales $28,035 $31,185 $28,980 $88,200
Credit sales $ 49,400 $ 52,065 $ 57,915 $159,380
Total collections $77,435 $83,250 $86,895 $247,580

Req. 2

Production Budget
January February March Quarter
Unit sales 5,340 5,940 5,520 $16,800
Plus: Desired ending inventory 594 552 570 570
Total needed 5,934 6,492 6,090 17,370
Lesss: Beginning inventory 507 534 594 507
Units to produce 5,427 5,958 5,496 16,863

Req. 3

Direct Materials Budget


January February March Quarter
Units to be produced 5,427 5,958 5,496 16,863
Multiply by: Quantity of DM needed per unit 2 2 2 2
Quantity of DM needed for production 10,855 11,916 10,992 33,727
Plus: Desired ending inventory of DM 2,383 2,198 2,258 2,258
Total quantity of DM needed 13,238 14,114 13,250 35,985
Less: Beginning inventory of DM 2,171 2,383 2,198 2,198
Quantity of DM to purchase 11,067 11,731 11,052 33,787
Multiply by: Cost per pound $ 1.50 $ 1.50 $ 1.50 $ 1.50
Total cost of DM purchases $16,600 $17,597 $16,578 $50,680

April May
Unit Sales 5,700 5,160
Plus: Desired End Inventory 516
Total Needed 6,216
Less: Beginning Inventory 570
Units to produce 5,646
DM needed per unit 2
Quantity of DM needed for production 11,292

Req. 4

Cash Payments for Direct Material Purchases Budget


January February March Quarter
December purchases (From AP) $43,000 $43,000
January purchases $3,320 $13,280 $16,600
February purchases $3,519 $14,077 $17,597
March purchases $3,316 $3,316
Total disbursements $46,320 $16,800 $17,393 $80,513

Req. 5

Cash Payments for Direct Labor Costs


January February March Quarter
Direct Labor $2,083 $2,317 $2,153 $6,552

Chapter 9: The Master Budget and Responsibility Accounting 1


Introduction to Management Accounting Solutions Manual

Req. 6

Cash Payments for Manufacturing Overhead Budget


January February March Quarter
Rent (fixed) $6,500 $6,500 $6,500 $19,500
Other MOH (fixed) $2,900 $2,900 $2,900 $8,700
Variable manufacturing overhead $ 7,598 $ 8,341 $ 7,694 $23,634
Total disbursements $16,998 $17,741 $17,094 $51,834

Req. 7

Cash Payments for Operating Expenses Budget


January February March Quarter
Variable operating expenses $ 6,408 $ 7,128 $ 6,624 $20,160
Fixed operating expenses $ 1,400 $ 1,400 $ 1,400 $4,200
Total disbursements $7,808 $8,528 $8,024 $24,360

Req. 8

Combined Cash Budget


January February March Quarter
Cash balance, beginning $4,460 $4,386 $19,851
Plus: cash collections (req. 1) 77,435 83,250 86,895 247,580
Total cash available 81,895 87,636 106,746 247,580
Less cash payments:
DM purchases (req. 4) $46,320 $16,800 $17,393 $80,513
Direct labor (req. 5) 2,083 2,317 2,153 6,552
MOH costs (req 6) 16,998 17,741 17,094 51,834
Operating expenses (req 7) 7,808 8,528 8,024 24,360
Tax payment 10,800 10,800
Equipment purchases 5800 11,600 15800 33,200
Total cash payments 79,009 67,785 60,464 207,259
Ending cash before financing 2,886 19,851 46,281 40,321
Financing:
Borrowings 1,500 0 0 1,500
Repayments -500 -500
Interest -56 -56
Total financing 1,500 0 -556 944
Cash balance, ending $4,386 $19,851 $45,725 $45,725

Req. 9

Budgeted Manufacturing Cost per Unit


Direct materials cost per unit $3.00
Direct labor cost per unit $0.39
Variable MOH cost per unit $1.40
Fixed MOH per unit (given in problem) $0.80
Cost of manufacturing each unit $5.59

Req. 10

Damon Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales $ 252,000
Cost of goods sold -93,912
Gross profit 158,088
Operating expenses 24,360
Depreciation expense 4,400
Operating income 129,328
Less: interest expense -56
Less: provision for income tax 38,782
Net income $90,546

Chapter 9: The Master Budget and Responsibility Accounting 2

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