978-0077633059 Chapter 20 Solution Manual Part 6

Problem 20-4A (130 minutes)

Part 1

ZIGBY MANUFACTURING

Sales Budgets

April, May, and June 2015

Budgeted

Units

Budgeted

Unit Price

Budgeted

Total Dollars

April 2015………………..……………………….….…….…20,500 $23.85 $ 488,925

May 2015………………….………………….….…….……..19,500 23.85 465,075

Part 2

ZIGBY MANUFACTURING

Production Budget

April, May, and June 2015

April May June Total

Next month’s budgeted sales…….……… 19,500 20,000 20,500

Ratio of inventory to future sales......... x 80% x 80% x 80%

Budgeted ending inventory………..…….. 15,600 16,000 16,400

Problem 20-4A (continued)

Part 3

ZIGBY MANUFACTURING

Raw Materials Budget

April, May, and June 2015

April May June Total

Production budget (units)…….…………… 19,700 19,900 20,400

Materials requirement per unit………….. x 0.50 x 0.50 x 0.50

Materials needed for production……..… 9,850 9,950 10,200

Add budgeted ending inventory........... 4,975 5,100 4,000

Part 4

ZIGBY MANUFACTURING

Direct Labor Budget

April, May, and June 2015

April May June Total

Budgeted production (units)………........ 19,700 19,900 20,400

Labor requirements per unit (hours).... x 0.50 x 0.50 x 0.50

Part 5

ZIGBY MANUFACTURING

Factory Overhead Budget

April, May, and June 2015

April May June Total

Labor hours needed.………………………. 9,850 9,950 10,200

Variable factory overhead rate………….

x $2.70 x $2.70 x $2.70

Budgeted variable overhead………....… 26,595 26,865 27,540 $ 81,000

Financial and Managerial Accounting, 6th Edition

Problem 20-4A (continued)

Part 6

ZIGBY MANUFACTURING

Selling Expense Budgets

April, May, and June 2015

April May June Total

Budgeted sales……………...…....…..…....$488,925 $465,075 $477,000

Sales commission percent..................x 8% x 8% x 8%

Part 7

ZIGBY MANUFACTURING

General and Administrative Expense Budgets

April, May, and June 2015

April May June Total

Salaries……………..…….…….…….……..……...$12,000 $12,000 $12,000 $36,000

Problem 20-4A (Continued)

Part 8

ZIGBY MANUFACTURING

Cash Budgets

April, May, and June 2015

April May June

Beginning cash balance……………….…….….……..$ 40,000 $ 83,346 $124,295

Cash receipts from customers (note A)…….......... 488,925 481,770 468,653

Total cash available……………………………………....528,925 565,116 592,948

Cash disbursements

Dividends……………………………………….…….……. 10,000

Loan interest ($12,000 x 1%)………….…………………. 120

Long-term note interest ($500,000 x .0.9%)…………

Purchase of equipment………..….…….…….….….

4,500

_______

4,500

_______

4,500

130,000

Total cash disbursements……………….…….….….. 433,579 440,821 569,700

Preliminary cash balance………………….…….….…95,346 124,295 23,248

Supporting calculations April May June Total

Note A: Cash receipts from customers

Total sales………………………....…..……..…..…....$488,925 $465,075 $477,000 $1,431,000

NOTE: Cash sales are rounded down to the nearest whole dollar. All other amounts are rounded

up to the nearest whole dollar. Student answers will vary slightly if they round differently.

Financial and Managerial Accounting, 6th Edition

Problem 20-4A (Continued)

Part 9

ZIGBY MANUFACTURING

Budgeted Income Statement

For Three Months Ended June 30, 2015

Sales……………..……………………………..……………….….….. $1,431,000

Cost of goods sold (60,000 units @ $19.85)….….….…. 1,191,000

Gross profit…………………………………………..………………. 240,000

Operating expenses

Interest expense…………..……………………………….…….. 120 173,100

Income before taxes…………………...…….….….…….…….. 66,900

Income taxes (35%)……………………………………………….. 23,415

Net income……………..……………………………………..……... $ 43,485

Part 10

ZIGBY MANUFACTURING

Budgeted Balance Sheet

June 30, 2015

ASSETS

Cash……………………….….…….…….…..……... $ 40,000 Cash budget

Accounts receivable…………….…….…….…. 333,900 Note C

Note D

Equipment……………………………………………$730,000 Note F

Less accumulated depreciation............... 210,000 520,000 Note G

Total assets…………………..…………………….. $1,299,440

LIABILITIES AND EQUITY

Accounts payable…………….…….…….…….. $ 182,000 Note H

Bank loan payable……………….………………. 16,752 Cash budget

Problem 20-4A (Concluded)

Supporting Footnotes

Note C

Beginning receivables……………………………………………….$ 342,248

Credit sales…………………………………………..…..…………….. 1,001,701

Less collections……………………………………………………….. (1,010,049 )

Ending receivables……………………………………………..…….$ 333,900

Note D

Note E

Beginning finished goods inventory………..………............$ 325,540

Cost of goods completed during the period……………..... 1,191,000

Less cost of goods sold during the period………………....(1,191,000)

Ending finished goods inventory*……….……..……......…...$ 325,540

*Also equals 16,400 units @ $19.85 = $325,540

Note G

Beginning accumulated depreciation……..…............…....$ 150,000

Depreciation expense…………………………………………..…… 60,000

Total………………………………………………………..………..……..$ 210,000

Note I

ZIGBY MANUFACTURING

Budgeted Statement of Retained Earnings

For Three Months Ended June 30, 2015

Retained earnings, beginning….…….…….……. $208,788

Add: Net income……………..….…….…….…... 43,485

Financial and Managerial Accounting, 6th Edition

Problem 20-5A (60 minutes)

Part 1

KEGGLER’S SUPPLY

Merchandise Purchases Budgets

For March, April, and May

March April May

FOOTWEAR

Budgeted sales for next month……………………….25,000 32,000 35,000

Ratio of ending inventory to future sales........... 30% 30% 30%

Budgeted ending inventory…………….………..……. 7,500 9,600 10,500

SPORTS EQUIPMENT

Budgeted sales for next month……………………….90,000 95,000 90,000

Ratio of ending inventory to future sales........... 30% 30% 30%

Budgeted ending inventory…………….………..…….27,000 28,500 27,000

Add budgeted sales……………………………..…….…. 70,000 90,000 95,000

APPAREL

Budgeted sales for next month……………………….38,000 37,000 25,000

Ratio of ending inventory to future sales........... 30% 30% 30%

Budgeted ending inventory…………….………..…….11,400 11,100 7,500

Problem 20-5A (Continued)

Part 2. Analysis Component

The factor that causes the first month’s purchases to be so much smaller is

the excess inventory that accumulated just prior to the budgeting period.

For example, 20,000 units of footwear are in March’s beginning inventory;

however, March sales are budgeted at only 15,000 units. Accordingly,

budgeted purchases are smaller because it is management’s goal to reduce

the inventory to only 30% of the next month’s sales.

This overstocking factor could exist for a number of reasons, including:

There may have been some potentially disruptive factor (such as a

strike, bad weather, or political uncertainty) that would have temporarily

The company’s suppliers may have only recently become more

dependable than they were in the past.

Competition among suppliers may have caused them to become more

Financial and Managerial Accounting, 6th Edition

Problem 20-6A (50 minutes)

ONEIDA COMPANY

Cash Budget

For September, October, and November

September October November

Beginning balance……………..…..….…….….…..$ 5,000 $ 99,250 $ 69,500

Cash receipts

Collection on accounts receivable*…......... 159,250 249,250 338,100

Receipts from bank loan……..….…….……..… 100,000 _______ _______

Total cash available………………….…….….….… 264,250 348,500 407,600

Cash disbursements

Repayment on bank loan…..…….…….…….... 100,000

Interest on bank loan***……….………………....________ ________ 3,000

Supporting schedules

Collections of credit sales* August September October November

Aug. sales ($215,000)—[25%: 45%: 20%: 9%]..…............$ 53,750 $ 96,750 $ 43,000 $ 19,350

Sept. sales ($250,000)—[25%: 45%: 20%]…………............ – 62,500 112,500 50,000

Payments on credit purchases** August September October November

Aug. purchases ($125,000)—(0%: 80%: 20%)……….……..…….................$ 0 $100,000 $ 25,000 $ –

Sept. purchases ($240,000)—(0%: 80%: 20%)……………....…..................– 0 192,000 48,000

Problem 20-7A (70 minutes)

Part 1

Cash collections of credit sales (accounts receivable)

From sales in Total % Collected June July

April………….……………….….……….$ 720,000 28% $201,600

May…………………….…….…….…….. 360,000 50 180,000

…………….…………….…….…….. 28 $100,800

June………………..………………..…...1,080,000 20 216,000

Part 2

Budgeted ending inventories (in units)

April May June July

Next month’s budgeted sales……………….… 2,000 6,000 5,000 3,800

Ratio of inventory to future sales............... 20% 20% 20% 20%

Part 3

AZTEC COMPANY

Merchandise Purchases Budgets

For May, June, and July

May June July

Budgeted ending inventory (from part 2)…………. 1,300 1,100 860

Add budgeted sales……………….…….……..…….. 2,000 6,000 5,000

Required units of available merchandise…….. 3,300 7,100 5,860

Financial and Managerial Accounting, 6th Edition