112. Sunshine Inc. manufactures kiddie pools. On March 31, the company had 750 pools in inventory. Each
pool sells for $25.00. The company’s policy is to maintain a pool inventory equal to 15% of next month’s sales.
The company expects the following sales activity for the second quarter of the year:
April
5,000 units
May
9,000 units
June
16,000 units
In addition, July’s sales are expected to be 20,000 units.
Required:
A.
Prepare a sales budget for the second quarter of the year.
B.
Prepare a production budget for the second quarter of the year.
Sunshine Inc.
Sales Budget
Quarter ending June 30
April
May
June
Total
Estimated sales (units)
5,000
9,000
16,000
30,000
Sales price per unit
$ 25.00
$ 25.00
$ 25.00
$ 25.00
Total budgeted sales
$125,000
$225,000
$400,000
$750,000
Sunshine Inc.
Production Budget
Quarter ending June 30
April
May
June
Total
Estimated sales (units)
5,000
9,000
16,000
30,000
Add: Desired ending inventory
1,350
2,400
3,000
3,000
Total budgeted production needs
6,350
11,400
19,000
33,000
Less: Beginning ending inventory
(750)
(1,350)
(2,400)
(750)
Required production
5,600
10,050
16,600
32,250
113. Grainger Manufacturing Inc. produces outdoor grills. On March 31, the company had 120 grills in
inventory. The company’s policy is to maintain a grill inventory equal to 15% of next month’s sales. The
company expects the following sales activity for the second quarter of the year:
April
800 units
May
2,000 units
June
2,600 units
Sales for July and August are expected to be 1,800 units and 1,400 units, respectively. Each completed unit of finished product requires 3 pounds of a
heat resistant plastic material which costs $4.00 per pound. The company has determined that it needs 20 percent of next month’s raw material needs
on hand at the end of each month. The company had 600 pounds of plastic on hand at the end of March.
Required:
A.
Prepare a production budget for the second quarter of the year.
B.
Prepare a budget for the second quarter of the year showing the projected cost of the direct materials (plastic) that will be needed.
Grainger Manufacturing
Production Budget
Quarter ending June 30
April
May
June
Total
Estimated sales (units)
2,000
2,600
5,400
Add: Desired ending inventory
300
390
270
270
Total budgeted production needs
1,100
2,390
2,870
5,670
Less: Beginning ending inventory
(120)
(300)
(390)
(120)
Required production
980
2,090
2,480
5,550
Grainger Manufacturing
Direct Materials Purchases Budget (Plastic)
Quarter ending June 30
April
May
June
Total
Required production
2,090
2,480
5,550
Plastic needed per unit (lbs)
´ 3 lbs
´ 3 lbs
´ 3 lbs
´ 3 lbs
Material needed for production (lbs)
2,940
6,270
7,440
16,650
Add: Desired ending inventory (lbs)
1,254
1,488
1,044
Total budgeted projected needs (lbs)
4,194
7,758
8,484
17,694
Less: Projected beginning inventory (lbs)
(600)
(1,254)
(1,488)
(600)
Material to be purchased (lbs)
3,594
6,504
6,996
17,094
´ cost per pound
´ $4
´ $4
´ $4
Projected direct materials purchases
$14,376
$26,016
$27,984
$68,376
114. Sallinger Products Inc. makes and sells grill covers. On March 31, the company had 400 covers in
inventory. The company’s policy is to maintain a cover inventory equal to 10% of next month’s projected sales.
The company expects the following sales activity for the second quarter of the year:
April
4,000 units
May
5,000 units
June
7,000 units
Sales for both July and August are expected to be 8,000 units each. Each completed unit of finished product requires 6 yards of a plastic material
which costs $.60 per yard. The company has determined that it needs 15% of next month’s raw material needs on hand at the end of each month. The
company had 3,000 yards of plastic material on hand at the end of March.
Required:
A.
Prepare a production budget for the second quarter of the year.
B.
Prepare a budget for the second quarter of the year showing the projected cost of the direct materials (plastic) that will be needed.
Sallinger Products Inc.
Production Budget
Quarter ending June 30
April
May
June
Total
Estimated sales (units)
4,000
5,000
7,000
16,000
Add: Desired ending inventory
500
700
800
800
Total budgeted production needs
4,500
5,700
7,800
16,800
Less: Beginning ending inventory
(400)
(500)
(700)
(400)
Required production
4,100
5,200
7,100
16,400
Sallinger Products Inc.
Direct Materials Purchases Budget (Plastic material)
Quarter ending June 30
April
May
June
Total
Required production
4,100
5,200
7,100
16,400
Plastic needed per unit (yds)
´ 6 yds
´ 6 yds
´ 6 yds
´ 6 yds
Material needed for production (yds)
24,600
31,200
42,600
98,400
Add: Desired ending inventory (yds)
4,680
6,390
7,200
Total budgeted projected needs (yds)
29,280
37,590
49,800
105,600
Less: Projected beginning inventory (yds)
(3,000)
(4,680)
(6,390)
(3,000)
Material to be purchased (yds)
26,280
32,910
43,410
102,600
´ cost per yard
´ $.60
´ $.60
´ $.60
´ $.60
Projected direct materials purchases
$15,768
$19,746
$26,046
$61,560
115. Franklin Corp. sells glass vases to various florists throughout the country. Each vase sells for $.50. The
following sales forecast (in units) has been prepared for the first six months of 2009:
January
3,000
February
6,000
March
5,000
April
3,000
May
5,000
June
2,000
Historically, the cash collection of sales has been as follows: 60 percent in the month of sale, 35 percent in the month following sale, and 4 percent in
the second month following sale. The remaining 1 percent is uncollectible.
Required: Prepare a cash receipts budget for the second quarter of 2009 (April through June).
Franklin Corp.
Cash Receipts Budget
Feb. sales collected in:
April: 6,000 ´ $.50 ´ 4%
$120
$120
Mar. sales collected in:
April: 5,000 ´ $.50 ´ 35%
May: 5,000 ´ $.5 ´ 4%
$100
April sales collected in:
April: 3,000 ´ $.5 ´ 60%
May: 3,000 ´ $.5 ´ 35%
June: 3,000 ´ $.5 ´ 4%
May sales collected in:
May: 5,000 ´ $.5 ´ 60%
1,500
1,500
June: 5,000 ´ $.5 ´ 35%
June sales collected in:
June: 2,000 ´ $.5 ´ 60%
600
600
Total cash receipts
$1,895
$2,125
$1,535
$5,555
July
August
Estimated sales (units)
8,000
8,000
Add: Desired ending inventory
800
Total budgeted production needs
8,800
Less: Beginning ending inventory
(800)
Required production (units)
8,000
Plastic needed per unit (yds)
´ 6 yds
Material needed for production (yds)
48,000
116. Blooming Blossoms Ltd. sells flower seeds to retailers throughout the country. Each pack of seeds sells for
$.25. The company’s accountant has prepared the following sales forecast (in packs) for the second quarter of
the current year:
April
35,000 packs
May
40,000 packs
June
30,000 packs
Historically, the cash collection of sales has been as follows: 25 percent in the month of sale, 60 percent in the month following sale, and 15 percent
in the second month following sale.
Required: Compute projected cash receipts for the month of June.
117. Dante Enterprises sells hot sauce to restaurants throughout the south. Dante sells each jar of hot sauce for
$.90. The company’s accountant has prepared the following sales forecast (in units) for the fourth quarter of the
current year:
October
8,000 units
November
15,000 units
December
18,000 units
Historically, the cash collection of sales has been as follows: 40 percent in the month of sale, 50 percent in the month following sale, and 10 percent
in the second month following sale.
Required: Compute projected cash receipts for the month of December.
Dante Enterprises
Cash Receipts Budget
For the month of December
Blooming Blossoms Ltd.
Cash Receipts Budget
For the month of June
April sales collected in June:
35,000 ´ $.25 ´ 15%
$1,312.50
May sales collected in June:
40,000 ´ $.25 ´ 60%
6,000.00
June sales collected in June:
30,000 ´ $.25 ´ 25%
1,875.00
Total cash receipts in June
$9,187.50
118. Talley Inc. had the following purchases budgeted for the last quarter of the current year:
October
$230,000
November
300,000
December
375,000
Talley pays for one-fourth of a month’s purchases in the month of purchase and the remainder in the following month. What are expected cash
disbursements for the month of December?
Talley Inc.
Cash Disbursements Budget
For the month of December
November purchases paid for in December:
$300,000 ´ 75%
$225,000
December purchases paid for in December:
$375,000 ´ 25%
93,750
Total cash disbursements in December
$318,750
119. DSP Products Inc. makes and sells boat tarps. The purchasing manager has prepared the production budget
for the second quarter of 2009 as follows:
April
2,500 units
May
4,000 units
June
6,800 units
Production for both July and August are expected to be 7,000 units each. Each completed unit of finished product requires 50 yards of a heavy-duty
plastic material which costs $1.40 per yard. The company has determined that it needs 15% of next month’s raw material needs on hand at the end of
each month. The company had 18,750 yards of plastic material on hand at the end of March.
It is the company’s policy to pay for one-half of a month’s direct materials purchases in the month of purchase and the remainder in the following
month.
Required:
A.
Prepare a direct materials purchases budget for the second quarter of 2009.
B.
Assuming all cash disbursements in the month of June will be for direct materials, prepare a cash disbursements budget for the month of
June.
DSP Products Inc.
Direct Materials Purchases Budget
Quarter ending June 30
April
May
June
Total
Required production
2,500
4,000
6,800
13,300
Plastic needed per unit (yds)
´ 50 yds
´ 50 yds
´ 50 yds
´ 50 yds
Material needed for production (yds)
125,000
200,000
340,000
665,000
Add: Desired ending inventory (yds)
30,000
51,000
52,500
Total budgeted projected needs (yds)
155,000
251,000
392,500
717,500
Less: Projected beginning inventory (yds)
(18,750)
(30,000)
(51,000)
(18,750)
Material to be purchased (yds)
136,250
221,000
341,500
698,750
´ cost per yard
´ $1.40
´ $1.40
´ $1.40
´ $1.40
Projected direct materials purchases
$190,750
$309,400
$478,100
$978,250
* Desired ending inventory for June calculated as follows:
DSP Products Inc.
Cash Disbursements Budget
For the month of June
May purchases paid for in June:
$309,400 ´ 50%
$154,700
June purchases paid for in June:
$478,100 ´ 50%
239,050
Total cash disbursements in June
$393,750
120. O’Malley Inc. manufacturers a unique product. Prior to the start of July, the company’s controller estimated
July’s production to be 4,000 units. Each unit requires one hour of direct labor at a cost of $10 per direct labor
hour.
At the end of July, it was determined that actual production was 4,680 units and actual direct labor cost was
$49,140.
Required:
A.
Prepare a static budget for July.
B.
Prepare a flexible budget for July.
C.
Which type of budget should be compared to the actual direct labor cost for control purposes? Explain.
Static budget
Estimated production
4,000 units
Direct labor per unit
´ 1 hour
Direct labor hours needed
4,000 hours
´ Direct labor cost per hour
´ $10
Projected direct labor cost
$ 40,000
B.
Flexible budget
Estimated production (based on actual production)
4,680 units
Direct labor per unit
´ 1 hour
Direct labor hours needed
4,680 hours
´ Direct labor cost per hour
´ $10
Projected direct labor cost
$ 46,800
121. Leigh Manufacturing produces widgets. Prior to the start of September, the company’s controller estimated
September’s production to be 900 units. Each unit requires two hours of direct labor at a cost of $12 per direct
labor hour.
At the end of September, it was determined that actual production was 860 units and actual direct labor cost was
$19,500.
Required:
A.
Prepare a static budget for September.
B.
Prepare a flexible budget for September.
C.
Which type of budget should be compared to the actual direct labor cost for control purposes? Explain.
Static budget
Estimated production
900 units
Direct labor per unit
´ 2 hours
Direct labor hours needed
1,800 hours
´ Direct labor cost per hour
´ $12
Projected direct labor cost
$ 21,600
B.
Flexible budget
Estimated production (based on actual production)
860 units
Direct labor per unit
´ 2 hours
Direct labor hours needed
1,720 hours
´ Direct labor cost per hour
´ $12
Projected direct labor cost
$ 20,640
122. Hillman Products produces and sells limited edition decorative mugs. The company’s controller has the
following information available from the static budget of one of the product lines for the month of April:
Estimated production
5,000 units
Direct material per unit
12 ounces
Direct material cost per unit
$.20 per ounce
Actual production during April was 5,400 units.
Required: Prepare a flexible budget for the month of April.
Flexible budget
Estimated production (based on actual production)
5,400 units
Direct materials per unit
´ 12 oz
´ cost per ounce
´ $.20
Projected direct materials cost
$ 12,960