(20 min.) E9-52B
Reilly Adventures
Cash Budget
February and March
February
March
Beginning cash balance
$ 16,300
$ 20,000
Cash collections
90,000
80,200
Cash from sale of plant assets
0
2,200
Cash available
106,300
102,400
Less: Cash payments:
Purchases of inventory
$ 50,900
$ 41,600
Operating expenses
47,900
38,000
Total payments
98,800
79,600
(1) Ending cash balance before financing
7,500
22,800
Less: Minimum cash balance desired
(20,000)
(20,000)
Cash excess (deficiency)
(12,500)
2,800
Financing of cash deficiency:
Borrowing (at end of month)
$ 12,500
$ 0
Principal repayments (at end of month)
0
2,604
Interest expense
0
196
(2) Total effects of financing
12,500
(2,800)
Ending cash balance (1) + (2)
$ 20,000
$ 20,000
(15-20 min.) E9-53B
Tempest Readers
Inventory, Purchases, and Cost of Goods Sold Budget
Nine Months Ended September 30
NINE-MONTH
March 31
June 30
Sept.30
TOTAL
Cost of goods sold:
(0.60 × $100,000)
$ 60,000
(0.60 × $150,000)
$ 90,000
(0.60 × $125,000)
$ 75,000
$225,000
Plus: Desired ending inventory
[$15,000 + (0.15 × $90,000)]
28,500
[$15,000 + (0.15 × $75,000)]
26,250
[$15,000 + (0.15 × 0.60 × $220,000)]
34,800
Total inventory required
88,500
116,250
109,800
Less: Beginning inventory
(14,000)
(28,500)
(26,250)
Amount of inventory to purchase
$ 74,500
$ 87,750
$ 83,550
Chapter 9 The Master Budget
Problems (Group A)
(60 min.) P9-54A
Req. 1
Cash Collections Budget
January
February
March
Quarter
Cash sales (35%)
$34,860
$41,580
$40,320
$116,760
Credit sales (65%)
$46,150a
$64,740b
$77,220c
$188,110
Total cash collections
$81,010
$106,320
$117,540
$304,870
a December credit sales: $71,000 x 65% = $46,150
b January credit sales: $99,600 x 65% = $64,740
c February credit sales: $118,800 x 65% = $77,220
Req. 2
Production Budget
January
February
March
Quarter
Unit sales*
8,300
9,900
9,600
27,800
Plus: Desired ending inventory
990
960
900
900
Total needed
9,290
10,860
10,500
28,700
Less: Beginning inventory
(830)
(990)
(960)
(830)
Units to produce
8,460
9,870
9,540
27,870
*Hint: Unit sales = Sales in dollars ÷ Selling price per unit
Req. 3
Direct Materials Budget
January
February
March
Quarter
Units to be produced
8,460
9,870
9,540
27,870
Multiply by: Quantity of DM needed per unit
× 3.0
× 3.0
× 3.0
× 3.0
Quantity of DM needed for production
25,380
29,610
28,620
83,610
Plus: Desired ending inventory of DM
5,922
5,724
5,376
5,376
Total quantity of DM needed
31,302
35,334
33,996
88,986
Less: Beginning inventory of DM
(5,076)
(5,922)
(5,724)
(5,076)
Quantity of DM to purchase
26,226
29,412
28,272
83,910
Multiply by: Cost per pound
× $2.00
× $2.00
× $2.00
× $2.00
Total cost of DM purchases
$52,452
$58,824
$56,544
$167,820
Req. 4
Cash Payments for Direct Material Purchases Budget
January
February
March
Quarter
December purchases
(From AP)
$43,000
$43,000
January purchases
$10,490
$41,962
$52,452
February purchases
$11,765
$47,059
$58,824
March purchases
$11,309
$11,309
Total payments
$53,490
$53,727
$58,368
$165,585
Managerial Accounting 4e Solutions Manual
(continued) P9-54A
Req. 5
Cash Payments for Direct Labor Budget
January
February
March
Quarter
Direct labor
$3,807
$4,442
$4,293
$12,542
Rent (fixed)
Other MOH (fixed)
Total disbursements
Variable operating expenses
$12,375*
Fixed operating expenses
$5,400
Total payments for operating expenses
$12,175
$14,175
Chapter 9 The Master Budget
(continued) P9-54A
Req. 9
Budgeted Manufacturing Cost per Unit
Direct materials cost per unit
$6.00
Direct labor cost per unit
0.45
Variable manufacturing costs per unit
1.10
Fixed manufacturing overhead per unit
$0.70
Cost of manufacturing each unit
$8.25
Req. 10
Damon Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
$333,600
Less: Cost of goods sold
(229,350)
Gross profit
104,250
Less: Operating expenses
(40,150)
Less: Depreciation expense
(4,800)
Operating income
$59,300
Less: interest expense
(490)
Less: income tax expense @ 30%
(17,643)
Net income
$41,167
(60-75 min.) P9-55A
Req. 1
Pauline Spahr, Weaver
Cash Budget
Four Months Ending December 31
Cotton
Linen
Beginning cash balance
$ 25
$ 25
Plus Cash collections:
Cotton sales (25 × $20)
500
–
Linen sales (15 x $50)
–
750
Cash available
$525
$ 775
Less Cash payments:
Sales commissions (10% x $500); (10% x $750)
$50
$75
Accounts payable
$ 74
$ 74
Cost of linen (15 × $18)
–
270
Purchase of new loom
–
1,000
Total cash payments
$ 124
$1,419
Ending cash balance before financing
401
(644)
Financing of cash deficiency:
Borrowing
–
$1,000
Principal payment
–
(200)
Interest payment (4/12 of annual payment)
–
(20)
Ending cash balance
$401
$136
Pauline Spahr, Weaver
Budgeted Income Statement
Four Months Ending December 31
Cotton
Linen
Sales revenue (net):*
Cotton sales (25 x $20)
$500
Linen sales (15 x $50)
$750
Cost of goods sold:
Cotton (25 × $7)
175
Linen (15 × $18)
270
Sales Commissions
Cotton (10% x $500)
50
Linen (10% x $750
75
Depreciation expense:
Old loom (4 × $10)
40
40
New loom (4 × $20)
80
Total expenses
$265
$465
Operating income
$235
$285
Less: Interest expense
20
Net income
$235
$265
__________
*Alternatively, sales revenue may be recorded at gross, and the
10% commission considered an additional expense.
Chapter 9 The Master Budget
(continued) P9-55A
Req. 1
Pauline Spahr, Weaver
Budgeted Balance Sheet
December 31
Cotton
Linen
Cotton
Linen
Current assets
Current liabilities
Cash
$401
$136
Bank loan payable
$0
$800
Inventory of cotton
0
175
Total liabilities
0
800
Total current assets
401
311
Fixed assets:
Owners’ equity
Loom(s)
500
1,500
Cotton loom
621
Accumulated
depreciation:
Cotton loom and linen loom
611
Cotton loom
(280)
(280)
Linen loom
(80)
Total fixed assets
220
1,140
Total assets
$621
$1,451
Total liabilities and owners’ equity
$621
$1,451
Req. 2
Based on financial considerations only, Spahr should continue making cotton placemats and should not purchase
$450
$675
$275
$175
Managerial Accounting 4e Solutions Manual
(continued) P9-55A
Chapter 9 The Master Budget
(30 min.) P9-56A
Miranda Fashions
Schedule of Cost of Goods Sold
May and June
May
June
Beginning inventory
$ 16,000
$ 23,515
Plus: Purchases
26,500
27,030
Cost of goods available for sale
42,500
50,545
Less: Ending inventory
(23,515)
(25,000)
Cost of goods sold
$ 18,985
$ 25,545
Miranda Fashions
Budgeted Income Statements
May and June
May
June
Sales revenue
$ 53,000
$ 54,060
Less: Cost of goods sold
18,985
25,545
Gross profit
34,015
28,515
Less Operating expenses:
Salaries and comm expense
$ 7,240
$ 7,325
Rent expense
2,600
2,600
Depreciation expense
200
200
Insurance expense
100
10,140
100
10,225
Operating income
23,875
18,290
Less: Income tax expense
4,775
3,658
Net income (loss)
$ 19,100
$ 14,632
(30 min.) P9-57A
Req. 1
a. Budgeted cash collections:
Cash Collections Budget
January
February
Cash sales (65%)
$42,250
$46,150
Credit sales
20,510a
23,170b
Total cash collections
$62,760
$69,320
b. Budgeted cash payments for purchases:
Cash Payments for Direct Material Purchases Budget
January
February
December purchases
$11,750
January purchases
10,500
$10,500
February purchases
12,750
Total cash payments for direct material purchases
$22,250
$23,250
January
February
Variable cash operating expenses:
$2,280
$2,600
Total variable cash operating expenses
Fixed cash operating expenses:
11,500
Total fixed cash operating expenses
Chapter 9 The Master Budget
(continued) P9-57A
Req. 2
Combined Cash Budget
January
February
Cash balance, beginning
$23,000
$35,830
Add: cash collections (1a)
62,760
69,320
Total cash available
85,760
105,150
Less: cash payments
Direct material purchases (1b)
22,250
23,250
Operating expenses (1c)
27,680
17,990
Total cash payments
49,930
41,240
Ending cash balance
$35,830
$63,910
Managerial Accounting 4e Solutions Manual
(50-60 min.) P9-58A
Req. 1
Boxton Medical Supply
Budgeted Balance Sheet
April 30
ASSETS
Current assets:
Cash*
$51,000
Accounts receivable
18,000
Inventory*
34,800
Total current assets
$ 103,800
Plant assets:
Equipment
$94,400
Accumulated depreciation
(42,000)
52,400
Total assets
$156,200
LIABILITIES
Current liabilities:
Accounts payable
$18,100
Accrued expenses payable
9,100
Total liabilities
$ 27,200
OWNERS’ EQUITY
Owners’ equity*
129,000
Total liabilities and owners’ equity
$156,200
__________
Computations:
Cash:
Inventory:
Beginning balance……..
$ 40,500
Beginning balance ……………………..
$ 29,100
Cash sales
Purchases
54,000
46,200
Collections
47,700
Cost of goods sold
Ending balance …………………………..
(40,500)
$ 34,800
Payments of March 31
liabilities………………
(17,000)
Cash purchases…………
(10,000)
Payments for April (credit) purchases
(18,100)
Purchase of equipment
(42,200)
Operating expenses
(3,900)
Ending balance…………
$ 51,000
Chapter 9 The Master Budget
(continued) P9-58A
Req. 2
Boxton Medical Supply
Combined Cash Budget
Month Ended April 30
Beginning cash balance
$ 40,500
Plus: Cash collections from customers
101,700
Total cash available
142,200
Less cash payments:
Purchases
$ 45,100
Operating expenses
3,900
Acquisition of equipment
42,200
Total cash payments
91,200
Ending cash balance
$ 51,000
Req. 3
The amount of cash available for equipment purchases in April, before financing, if the minimum desired ending cash
balance is $19,000 (and disregarding the $42,200 initially budgeted for equipment purchases) is $74,200.
Req. 4
4a.
Boxton Medical Supply
Budgeted Balance Sheet
April 30
ASSETS
Current assets:
Cash*
$ 27,000
Accounts receivable
12,000
Inventory*
48,300
Total current assets
$ 87,300
Plant assets:
Equipment
$ 94,400
Accumulated depreciation
(42,000)
52,400
Total assets
$139,700
LIABILITIES
Current liabilities:
Accounts payable
$ 18,100
Accrued expenses payable
9,100
Total liabilities
$ 27,200
OWNERS’ EQUITY
Owners’ equity*
112,500
Total liabilities and owners’ equity
$139,700
__________
*See computations on next page.
Managerial Accounting 4e Solutions Manual
(continued) P9-58A
(4a. continued)
Computations:
Cash:
Inventory:
Beginning balance …………………………..
$ 40,500
Beginning balance….
$ 29,100
Cash sales
Purchases
36,000
46,200
Collections
41,700
Cost of goods sold
Ending balance………
(27,000)
$ 48,300
Payments of March 31
liabilities ……………………………………
(17,000)
Cash purchases ……………………………….
(10,000)
Payments for April
(credit) purchases
(18,100)
Purchase of equipment
(42,200)
Operating expenses
(3,900)
Ending balance ………………………………….
$ 27,000
costs. These costs remain the same whether sales are $90,000 or $60,000.
Because expenses do not decline as much as sales declines, income declines more rapidly than sales. In the original
analysis in Req. 1, income was $36,000. However, when sales decline to $60,000 in Req. 4, income declines to $19,500 .
This is a 45.8% decline in income.
(10-20 min) P9-59A
Cost of goods sold…
November
Copyright © 2015 Pearson Education, Inc.
9-55
(60 min.) P9-60B
Req. 1
Cash Collections
January
February
March
Quarter
Cash sales (35%)
$34,860
$41,580
$40,320
$116,760
Credit sales (65%)
$46,150a
$64,740b
$77,220c
$188,110
Total collections
$81,010
$106,320
$117,540
$304,870
a December credit sales: $71,000 x 65%
b January credit sales: $99,600 x 65%
c February credit sales: $118,800 x 65%
Req. 2
Production Budget
January
February
March
Quarter
Unit sales*
8,300
9,900
9,600
27,800
Plus: Desired ending inventory
990
960
900
900
Total needed
9,290
10,860
10,500
28,700
Less: Beginning inventory
(830)
(990)
(960)
(830)
Units to produce
8,460
9,870
9,540
27,870
*Hint: Unit sales = Sales in dollars ÷ Selling price per unit
Req. 3
Direct Materials Budget
January
February
March
Quarter
Units to be produced
8,460
9,870
9,540
27,870
Multiply by: Quantity of DM needed per unit
× 3.0
× 3.0
× 3.0
× 3.0
Quantity of DM needed for production
25,380
29,610
28,620
83,610
Plus: Desired ending inventory of DM
5,922
5,724
5,376
5,376
Total quantity of DM needed
31,302
35,334
33,996
88,986
Less: Beginning inventory of DM
(5,076)
(5,922)
(5,724)
(5,076)
Quantity of DM to purchase
26,226
29,412
28,272
83,910
Multiply by: Cost per pound
× $2.00
× $2.00
× $2.00
× $2.00
Total cost of DM purchases
$52,452
$58,824
$56,544
$167,820
Req. 4
Cash payments for Direct Material Purchases Budget
January
February
March
Quarter
December purchases
(From AP)
$43,000
$43,000
January purchases
$10,490 a
$41,962 b
$52,452
February purchases
$11,765c
$47,059d
$58,824
March purchases
$11,309e
$11,309
Total payments
$53,490
$53,727
$58,368
165,585
Managerial Accounting 4e Solutions Manual
(continued) P9-60B
Req. 5
Cash Payments for Direct Labor Budget
January
February
March
Quarter
Direct labor
$3,807
$4,442
$4,293
$12,542
Quarter
Rent (fixed)
Other MOH (fixed)
$2,900
overhead costs
Total disbursements
Variable operating expenses
Fixed operating expenses
Total disbursements
$14,175