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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
