978-0077862275 Chapter 22 Solution Manual Part 9

Problem 22-4B (130 minutes)

Part 1

NABAR MANUFACTURING

Sales Budgets

July, August, and September 2015

Budgeted

Units

Budgeted

Unit Price

Budgeted

Total Dollars

July 2015…………………………………………………….21,000 $17.00 $ 357,000

Part 2

NABAR MANUFACTURING

Production Budget

July, August, and September 2015

July August Sept. Total

Next month’s budgeted sales…………… 19,000 20,000 24,000

Ratio of inventory to future sales……… x 70% x 70% x 70%

Budgeted ending inventory……………… 13,300 14,000 16,800

Problem 22-4B (continued)

Part 3

NABAR MANUFACTURING

Raw Materials Budget

July, August, and September 2015

July August Sept. Total

Production budget (units)………………… 17,500 19,700 22,800

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

Part 4

NABAR MANUFACTURING

Direct Labor Budget

July, August, and September 2015

July August Sept. Total

Budgeted production (units)…………….. 17,500 19,700 22,800

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

Part 5

NABAR MANUFACTURING

Factory Overhead Budget

July, August, and September 2015

July August Sept. Total

Budgeted production (units)…………... 17,500 19,700 22,800

Variable factory overhead rate*………..

x $1.35 x $1.35 x $1.35

Problem 22-4B (continued)

Part 6

NABAR MANUFACTURING

Selling Expense Budgets

July, August, and September 2015

July August Sept. Total

Budgeted sales……………………………….$357,000 $323,000 $340,000

Sales commission percent………………x 10% x 10% x 10%

Part 7

NABAR MANUFACTURING

General and Administrative Expense Budgets

July, August, and September 2015

July August Sept. Total

Salaries………………………………………………$ 9,000 $ 9,000 $ 9,000 $27,000

Problem 22-4B (Continued)

Part 8

NABAR MANUFACTURING

Cash Budgets

July, August, and September 2015

July August Sept.

Beginning cash balance……………………………….$ 40,000 $ 96,835 $141,180

Cash receipts from customers (note A)……………. 357,000 346,800 328,100

Total cash available……………………………………..397,000 443,635 469,280

Cash disbursements

Supporting calculations July August Sept. Total

Note A: Cash receipts from customers

Total sales………………………………………………..$357,000 $323,000 $340,000 $1,020,000

Cash sales (30%)……………………………………… 107,100 96,900 102,000 306,000

Problem 22-4B (Continued)

Part 9

NABAR MANUFACTURING

Budgeted Income Statement

For Three Months Ended September 30, 2015

Sales…………………………………………………………………… $1,020,000

Cost of goods sold (60,000 units @ $14.35)…….....…. 861,000

Gross profit…………………………………………………………. 159,000

Operating expenses

Part 10

NABAR MANUFACTURING

Budgeted Balance Sheet

September 30, 2015

ASSETS

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

Accounts receivable…………………………… 238,000 Note C

Raw materials inventory………………………

15,840

Note D

Problem 22-4B (Concluded)

Supporting Footnotes

Note C

Beginning receivables………………………………………………… $ 249,900

Note D

Beginning raw materials inventory……………………………… $ 35,000

Purchases of raw materials………………………………………… 220,840

Note E

Beginning finished goods inventory…………………………… $ 241,080

Note F

Beginning equipment…………………………………………………. $ 720,000

Note G

Beginning accumulated depreciation…………………………. $ 240,000

Note I

NABAR MANUFACTURING

Budgeted Statement of Retained Earnings

For Three Months Ended September 30, 2015

Retained earnings, beginning……….………….. $60,580

Add: Net income…………………………………. 7 ,254

Problem 22-5B (60 minutes)

Part 1

H2O SPORTS CORPORATION

Merchandise Purchases Budgets

For April, May, and June

April May June

WATER SKIS

Budgeted sales for next month………………………90,000 130,000 100,000

Ratio of ending inventory to future sales……..… 10% 10% 10%

TOW ROPES

Budgeted sales for next month………………………90,000 110,000 100,000

Ratio of ending inventory to future sales……..…

10% 10% 10%

LIFE JACKETS

Budgeted sales for next month………………………190,000 200,000 120,000

Ratio of ending inventory to future sales……..… 10% 10% 10%

Problem 22-5B (Concluded)

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.

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

Management may have simply lost sight of inventory levels, thereby

allowing them to reach inappropriately high levels.

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

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