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Quick Study 20-19 (10 minutes)
GUITAR SHOPPE
Cash Receipts Budget
For Month Ended September 30
Cash receipts from September cash sales (40% x $170,000) ............
$ 68,000
Collection of prior month’s receivables (60% x $150,000).................
90,000
Total cash receipts ................................................................................
$158,000
Quick Study 20-20 (10 minutes)
MUSIC WORLD
Cash Receipts Budget
For Month Ended September 30
Cash receipts from August sales (55% x $150,000) ...........................
$ 82,500
Cash receipts from September sales (40% x $170,000) .....................
68,000
Total cash receipts ................................................................................
$150,500
Quick Study 20-21 (10 minutes)
WELLS COMPANY
Budgeted Cash Receipts
For Month Ended November 30
Cash receipts from November cash sales (25% x $80,000) ...............
$ 20,000
Collection of October’s sales (60% x $66,000) ....................................
39,600
Collection of September’s sales (10% x $55,000) ...............................
5,500
Total cash receipts ................................................................................
$ 65,100
Quick Study 20-22 (15 minutes)
Computation of budgeted Accounts Receivable balance as of July 31
Sales month
Total Sales
Credit
Sales*
Percent Still
Uncollected*
Amount
Uncollected
June .....................
$420,000
$168,000
10%
$ 16,800
July ......................
398,000
159,200
80%
127,360
Total ....................
$144,160
* Credit sales are 40% of total sales—of these credit sales, 20% are collected in the sale month,
70% are collected in the month after sale, and 10% are collected in the second month after sale.
Quick Study 20-23 (5 minutes)
MESSERS COMPANY
Cash Budget
For Month Ended February 28
Beginning cash balance ........................................................................
$ 20,000
Cash receipts .........................................................................................
75,000
Total cash available ...............................................................................
95,000
Cash disbursements..............................................................................
(100,250)
Preliminary cash balance ......................................................................
$ (5,250)
Additional loan from bank.....................................................................
10,250
Ending cash balance .............................................................................
$ 5,000
Based on the cash budget above, the company must borrow $10,250 during
February to maintain a $5,000 cash balance.
Quick Study 20-24 (15 minutes)
GADO COMPANY
Cash Budget
For Month Ended March 31
Beginning cash balance ..........................................................
$ 72,000
Cash receipts from sales ........................................................
300,000
Total cash available ................................................................
$372,000
Cash disbursements
Payments for purchases ........................................................
140,000
Salaries ....................................................................................
80,000
Other expenses ................................................................
45,000
Repayment of bank loan ........................................................
20,000
Total cash disbursements......................................................
285,000
Ending cash balance ...............................................................
$ 87,000
Quick Study 20-25 (10 minutes)
Sales ....................................................................................................... BIS
Office salaries paid ............................................................................... BIS
Quick Study 20-26 (10 minutes)
GORDANDS
Cash Disbursements for Merchandise (Budgeted)
For Month Ended September 30
Cash disbursements for September purchases (25% x $720,000) ....
$180,000
Cash disbursements for August purchases (75% x $600,000) ...........
450,000
Total cash disbursements.....................................................................
$630,000
Quick Study 20-27 (10 minutes)
MEYER CO.
Cash Disbursements for Merchandise (Budgeted)
For January, February, and March
January
February
March
Purchases .....................................................
$15,800
$18,600
$20,200
Cash disbursements for
Current month’s purchases (40%) .........
$ 6,320
$ 7,440
$ 8,080
Prior month’s purchases (60%) ...............
22,000*
9,480
11,160
Total cash disbursements for purchases .....
$28,320
$16,920
$19,240
* Accounts payable balance at December 31
Quick Study 20-28 (5 minutes)
RAIDER-X COMPANY
Purchases Budget (in units)
For Month Ended April 30
Budgeted ending inventory (130% x 3,000) .........................................
3,900
Budgeted sales for April (units) ...........................................................
18,000
Required units of available inventory ..................................................
Less beginning inventory (units) .........................................................
21,900
(3,000)
Units to be purchased ...........................................................................
18,900
Quick Study 20-29 (15 minutes)
LEXI COMPANY
Merchandise Purchases Budget
For April, May, and June
April
May
June
Next month’s budgeted sales (units) .........
1,220,000
980,000
1,020,000
Ratio of inventory to future sales ...............
x 30%
x 30%
x 30%
Budgeted ending inventory (units) ............
366,000
294,000
306,000
Add budgeted sales (units) .........................
1,040,000
1,220,000
980,000
Required units of available merch. ...........
1,406,000
1,514,000
1,286,000
Deduct beginning inventory (units) ...........
(280,000)
(366,000)
(294,000)
Units to be purchased ................................
1,126,000
1,148,000
992,000
Quick Study 20-30 (15 minutes)
MONTEL COMPANY
Computation of Budgeted Cost of Purchases
For Month Ended July 31
Budgeted ending inventory ................................................................
$ 40,000
Budgeted cost of goods to be sold [$600,000 x (1 – 40%)]......................
360,000
Required available merchandise ................................................................
400,000
Less budgeted beginning inventory ..........................................................
50,000
Budgeted cost of purchases................................................................
$350,000
Quick Study 20-31 (10 minutes)
1. Activity-based budgeting requires managers to focus on the activities of
2. Traditional budgeting consists of listing the amount of resources
Quick Study 20-32 (10 minutes)
1.
Sales (current year) .................................................................
(in € millions)
€25,400
Sales growth (€25,400 x 3%) ...................................................
762
Budgeted sales (next year) .....................................................
€26,162
2.
Note: Assume budgeted sales of €26,000 for this question.
Budgeted selling expenses (€26,000 x 20%) .........................
€5,200
Budgeted general and admin. expenses (€26,000 x 4%) .....
1,040
EXERCISES
Exercise 20-1 (5 minutes)
1. No 4. No
2. No 5. Yes
3. Yes 6. Yes
Exercise 20-2 (10 minutes)
(1) h (2) d (3) g (4) e (5) i (6) b (7) a (8) f (9) c
Exercise 20-3 (15 minutes)
HOSPITABLE CO.
Production Budget
For April, May, and June
April
May
June
Next month’s budgeted sales (units) .........
580
540
620
Ratio of inventory to future sales ...............
x 25%
x 25%
x 25%
Budgeted ending inventory (units) ...........
145
135
155
Add budgeted sales for the month ............
500
580
540
Required units of available production .....
645
715
695
Deduct beginning inventory (units) ...........
(190)
(145)
(135)
Units to be produced ................................
455
570
560
Exercise 20-4 (15 minutes)
HOSPITABLE CO.
Direct Materials Budget
For April, May, and June
April
May
June
Budgeted production (units)* .....................
455
570
560
Materials requirements per unit .................
x 5
x 5
x 5
Materials needed for production (lbs.) ......
2,275
2,850
2,800
Add budgeted ending inventory** ..............
855
840
810**
Total materials requirements (lbs.) ............
3,130
3,690
3,610
Deduct beginning inventory (lbs.) ..............
(663)
(855)
(840)
Materials to be purchased (lbs.) .................
2,467
2,835
2,770
Cost per lb. ..................................................
Total cost ......................................................
x 4
$9,868
x 4
$11,340
x 4
$11,080
* From Exercise 20-3. **540 units (July’s budgeted production) x 30%
Exercise 20-5 (10 minutes)
MANNER COMPANY
Direct Labor Budget
For July, August, and September
July
August
Sept.
Budgeted production (units).......................
620
680
540
Labor requirements per unit (hours) .........
x 2
x 2
x 2
Total labor hours needed ............................
1,240
1,360
1,080
Labor rate per hour ......................................
$ 20
$ 20
$ 21
Labor dollars ................................................
$24,800
$27,200
$22,680
Exercise 20-6 (15 minutes)
RIDA INC.
Direct Materials Budget
Second Quarter
Units to be produced ...............................................................
240,000
Materials requirement per unit ...............................................
x 0.60
Materials needed for production (pounds) ............................
144,000
Add budgeted materials ending inventory (pounds)* ..........
9,450
Total materials requirements (pounds) ................................
153,450
Deduct beginning inventory (pounds) ................................
Materials to be purchased (pounds) ................................
Material price per pound .........................................................
Total cost of direct materials purchases ...............................
(43,200)
110,250
x $175
$19,293,750
*(52,500 x 0.60) x 30%
Exercise 20-7 (15 minutes)
1.
ADDISON CO.
Direct Labor Budget
Second Quarter
Units to be produced ...............................................................
2,400
Labor requirements per unit (hours) ................................
x 4
Total labor hours needed ........................................................
9,600
Labor rate (per hour) ...............................................................
x $9
Labor dollars ............................................................................
$86,400
Exercise 20-7 (continued)
2.
ADDISON CO.
Factory Overhead Budget
Second Quarter
Total labor hours needed ........................................................
9,600
Variable overhead rate per DL hour .......................................
x $11
Budgeted variable overhead ...................................................
$105,600
Budgeted fixed overhead ........................................................
450,000
Budgeted total overhead .........................................................
$555,600
Exercise 20-8 (20 minutes)
RAD CO.
Direct Materials Budget
For April, May, and June
April
May
June
Budgeted production (units).......................
442
570
544
Materials requirements per unit .................
x 5
x 5
x 5
Materials needed for production (lbs.) ......
2,210
2,850
2,720
Add budgeted ending inventory* ...............
855
816
810
Total materials requirements (lbs.) ............
3,065
3,666
3,530
Deduct beginning inventory (lbs.) ..............
(663)
(855)
(816)
Materials to be purchased (lbs.) .................
2,402
2,811
2,714
*30% of next month’s materials needed for production. July’s materials needed for
production equals 2,700 pounds (540 units x 5).
