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
19,500
23.85
465,075
20,000
23.85
477,000
60,000
$1,431,000
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
Add budgeted sales ………………………….
20,500
19,500
20,000
Required units to be produced ………….
36,100
35,500
36,400
Deduct beginning inventory ……………..
(16,400)
(15,600)
(16,000)
Units to be produced ………………………..
19,700
19,900
20,400
60,000
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
Total materials requirements (units) ….
14,825
15,050
14,200
Deduct beginning inventory ……………..
(4,925)
(4,975)
(5,100)
Materials to be purchased ………………..
9,900
10,075
9,100
29,075
Material price per unit ……………………...
$ 20
$ 20
$ 20
$ 20
Total cost of direct material purchases …..
$198,000
$201,500
$182,000
$581,500
April, May, and June 2015
April
May
June
Total
x 0.50
$ 15
$ 15
$ 15
$ 15
ZIGBY MANUFACTURING
Factory Overhead Budget
Labor hours needed …………………………
Variable factory overhead rate …………
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%
Sales commissions expense ……………
39,114
37,206
38,160
$114,480
Sales salaries ……………………………..……
3,000
3,000
3,000
9,000
Total selling expenses ………………..……
$ 42,114
$ 40,206
$ 41,160
$123,480
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
Interest on long-term note …………….……..
4,500
4,500
4,500
13,500
Total expenses ……………………………..……..
$16,500
$16,500
$16,500
$49,500
*$500,000 x 0.90%
Problem 20-4A (Continued)
Part 8
ZIGBY MANUFACTURING
Cash Budgets
April, May, and June 2015
April
May
June
$ 40,000
$ 83,346
$124,295
Cash receipts from customers (note A) …………….
488,925
481,770
468,653
528,925
565,116
592,948
200,500
198,000
201,500
Payments for direct labor ………………………..…
147,750
26,595
39,114
149,250
26,865
37,206
153,000
27,540
38,160
3,000
3,000
3,000
12,000
12,000
12,000
10,000
120
Long-term note interest ($500,000 x .0.9%) ……..….
4,500
_______
4,500
_______
4,500
130,000
433,579
440,821
569,700
95,346
124,295
23,248
Additional loan ………………………………………….….
(12,000)
_______
16,752
_______
$ 83,346
$124,295
$ 40,000
$ 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
Cash sales (30%) …………………………………….
146,677
139,522
143,100
429,299
Credit sales (70%) ………………………………..….
342,248
325,553
333,900
1,001,701
Cash collections
Month after sale (100%) ………………………..…
$342,248
$342,248
$325,553
$1,010,049
Cash sales …………………………………………..….
146,677
139,522
143,100
429,299
Total cash received ……………………………..…..
$488,925
$481,770
$468,653
$1,439,348
Month after purchase (100%) ………………..….
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
Sales commissions ……………………………………………..
$114,480
Sales salaries ……………………………………………………...
9,000
General administrative salaries …………………………..
36,000
Long-term note interest ……………………………………….
13,500
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
Raw materials inventory……………………….
Finished goods inventory …………………….
80,000
325,540
Note D
Note E
Total current assets …………………………..
779,440
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
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
Total stockholders’ equity ………………..….
577,273
Total liabilities and equity …………………….
$1,299,440
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
Beginning raw materials inventory …………………………..
$ 98,500
Purchases of raw materials ……………………………………….
581,500
Less materials used in production** ……………………….….
(600,000)
Ending raw materials inventory* …………………………….….
$ 80,000
*Also equals 4,000 units @ $20 = $80,000
**30,000 units x $20 per unit
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 F
Beginning equipment …………………………………………….….
$ 600,000
Purchased in June ………………………………………………..….
130,000
Total …………………………………………………………………….….
$ 730,000
Note G
Beginning accumulated depreciation ……………………..….
$ 150,000
Depreciation expense ……………………………………………….
60,000
Total …………………………………………………………………….….
$ 210,000
Note H
Beginning accounts payable ………………………………….….
$ 200,500
Purchases of raw materials ……………………………………….
581,500
Payments for raw materials ……………………………………….
(600,000)
Ending accounts payable ………………………………………….
$ 182,000
Note I
Retained earnings, beginning ……………………. $208,788
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
Add budgeted sales …………………………………….…
15,000
25,000
32,000
Required units of available merchandise ……..…
22,500
34,600
42,500
Less actual (or budgeted) beginning inventory ….…
(20,000)
(7,500)
(9,600)
Budgeted purchases …………………………………..…
2,500
27,100
32,900
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
Required units of available merchandise ……..…
97,000
118,500
122,000
Less actual (or budgeted) beginning inventory ….…
(80,000)
(27,000)
(28,500)
Budgeted purchases …………………………………..…
17,000
91,500
93,500
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
Add budgeted sales …………………………………….…
40,000
38,000
37,000
Required units of available merchandise ……..…
51,400
49,100
44,500
Less actual (or budgeted) beginning inventory ….…
(50,000)
(11,400)
(11,100)
Budgeted purchases …………………………………..…
1,400
37,700
33,400
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,
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
Payments on accounts payable** ……………
100,000
217,000
228,000
Payroll ……………………………………………………
20,000
22,000
24,000
Rent …………………………………………………….…
10,000
10,000
10,000
Other expenses ………………………………………
35,000
30,000
20,000
Repayment on bank loan ……………………..…
100,000
Interest on bank loan***………………………..…
________
________
3,000
Total cash disbursements…………………….…
165,000
279,000
385,000
Ending cash balance ……………………………..…
$ 99,250
$ 69,500
$ 22,600
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
………………………………….……
50
540,000
July …………………………………..……
900,000
20
_______
180,000
Total collected …………………..……
$597,600
$820,800
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%
Budgeted “base” ending inventory ………..
400
1,200
1,000
760
Plus safety stock …………………………………...
100
100
100
100
Budgeted ending inventory …………………...
500
1,300
1,100
860
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
Deduct beginning inventory …………………….…
(500)
(1,300)
(1,100)
Budgeted purchases (units) …………………….…
2,800
5,800
4,760
Budgeted cost per unit …………………………….…
$110
$110
$110
Budgeted cost of merchandise purchases…..…
$308,000
$638,000
$523,600