Problem 22-2A (30 minutes)
(1)
BUILT-TIGHT
Cash Receipts Budget
For July, August, and September
July August Sept.
Sales…………………………………….…….…….….. $64,000 $80,000 $48,000
Less ending accts. receivable (80%).......... 51,200 64,000 38,400
Cash receipts from
Problem 22-2A (continued)
(2)
BUILT-TIGHT
Cash Budget
For July, August, and September
July August Sept.
Cash disbursements
Payments for direct materials……….……..... 16,160 13,440 13,760
Payments for direct labor….….…….….……... 4,040 3,360 3,440
Interest on bank loan**
July (5,000 x 1%)…………………………….……
August ($4,550 x 1%)……………………………
Preliminary cash balance ……….…….….......
50
_______
$15,450
46
$30,054
_______
$49,404
Additional loan from bank……….…….…….…
*July’s beginning cash balance includes a loan payable of $5,000.
** Rounded to the nearest dollar. Answers vary slightly if rounded to the nearest cent.
Problem 22-3A (50 minutes)
Part 1
MERLINE MANUFACTURING
Budgeted Income Statement
For Months of January, February, and March, 2016
January February March
Expenses
Sales commissions (10%)………........... 206,250 226,875 249,563
Advertising ($250,000 x 1.15)..….......... 287,500 287,500 287,500
Net income…………………….….…….…….….$ 196,250 $ 258,125 $ 326,187
* Volume for the next three months increases by 10% per month
Sales Cost of Goods
Units (@ $125) Sold (@ $75)
Part 2: Analysis Component
The plan for increasing sales volume by reducing the price and increasing
advertising would cause the company to generate less net income in each of the
three months of the next quarter than was earned in December. This result is not
Problem 22-4A (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
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 22-4A (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
Total cost of direct material purchases..…. $198,000 $201,500 $182,000 $581,500
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
Total labor hours needed…………….….... 9,850 9,950 10,200 30,000
Part 5
ZIGBY MANUFACTURING
Factory Overhead Budget
April, May, and June 2015
April May June Total
Fixed overhead..….………………………….
20,000 20,000 20,000 60,000
Budgeted total overhead………..………..
$46,595 $46,865 $47,540 $141,000
Problem 22-4A (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
*$500,000 x 0.90%
Problem 22-4A (Continued)
Part 8
ZIGBY MANUFACTURING
Cash Budgets
April, May, and June 2015
April May June
Beginning cash balance…………….…….…….……..$ 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
Payments for raw materials (note B)……….….…..200,500 198,000 201,500
Dividends…………………………………………….….…. 10,000
Loan interest ($12,000 x 1%)…………………………….. 120
Long-term note interest ($500,000 x .0.9%)…………
Purchase of equipment………….…….…….…….…
4,500
_______
4,500
_______
4,500
130,000
Total cash disbursements………..….…….…….…… 433,579 440,821 569,700
Ending cash balance……………………………………..$ 83,346 $124,295 $ 40,000
Loan balance, end of month…………………………..$ 0 $ 0 $ 16,752
Supporting calculations April May June Total
Note A: Cash receipts from customers
Total sales……….…………….….…..……..……..…..$488,925 $465,075 $477,000 $1,431,000
Total cash received…..…………….………….…..…$488,925 $481,770 $468,653 $1,439,348
Note B: Cash payments for raw materials
Month after purchase (100%)…………………..…$200,500 $198,000 $201,500 $ 600,000
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.Problem 22-4A (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
Sales commissions………………..…….…….…….….…….. $114,480
Income taxes (35%)…………………………………………..…... 23,415
Net income……………………………………………………..….…. $ 43,485
Part 10
ZIGBY MANUFACTURING
Budgeted Balance Sheet
June 30, 2015
Finished goods inventory..….…….……......
325,540
Total current assets…………….…….…….….. 779,440
Equipment…………………………………………...$730,000 Note F
Taxes payable………………………………….….. 23,415 Income stmt.
Total current liabilities……………….…….….. 222,167
Long-term note payable..….…….…….……..
Common stock………………….…….…….…….$335,000
500,000 Unchanged
Retained earnings……………………….…….… 242,273 Note I