SOLUTION
(60 min.) Comprehensive budgeting problem; activity-based costing, operating and financial
budgets.
1a.
Revenues Budget
For the Month of June, 2018
Units Selling Price Total Revenues
Regular 2,000 $120 $240,000
b.
Production Budget
For the Month of June, 2018
Product
Regular Deluxe
Budgeted unit sales 2,000 3,000
Add: target ending finished goods
c.
Direct Material Usage Budget in Quantity and Dollars
For the Month of June, 2018
Material
Cloth Wood Total
Physical Units Budget
Direct materials required for
Regular (2,150 units × 1.3 yd.; 0 b.f.) 2,795 yds. 0 b.f.
Cost Budget
Available from beginning direct materials
inventory
6-1
To be purchased this period
Direct Materials Purchases Budget
For the Month of June, 2018
Material
Cloth Wood Total
Physical Units Budget
To be used in production 7,220 yds. 5,900 ft
Add: Target ending direct material inventory 386 yds. 295 ft
Cost Budget
Cloth: (6,996 yds. × $5.25 per yd.) $36,729
d.
Direct Manufacturing Labor Costs Budget
For the Month of June, 2018
Output Units Direct Manufacturing Total Hourly Wage Total
Produced Labor-Hours per Unit Hours Rate
Regular 2,150 5 10,750 $15 $161,250
e.
Manufacturing Overhead Costs Budget
For the Month of June 2018
Total
Machine setup
(Regular, 43 batchesa × 2 hrs./batch + Deluxe, 59 batchesb × 3 hrs./batch)
´
$18/hour
$ 4,734
Processing (31,400 DMLH
´
$1.80)
´
6-2
aRegular: 2,150 pairs ÷ 50 pairs per batch = 43; bDeluxe: 2,950 pairs ÷ 50 pairs per batch = 59
f.
Unit Costs of Ending Finished Goods Inventory
For the Month of June, 2018
Regular Deluxe
Cost per
Unit of Input
Input per
Unit of Output Total
Input per
Unit of Output Total
Cloth $ 5.25 1.3 yd $ 6.83 1.5 yd $ 7.88
Wood 7.50 0 b.f. 0.00 2 b.f. 15.00
Ending Inventories Budget
June, 2018
Quantity Cost per unit Total
Direct Materials
Cloth 386 yards $5.25 $2,026.50
Wood 295 b.f. 7.50 2,212.50 $ 4,239
Finished goods
g.
Cost of Goods Sold Budget
For the Month of June, 2018
Beginning finished goods inventory, June 1 ($23,250 + $92,625) $115,875
Direct materials used (requirement c) $ 82,232
6-3
h.
Nonmanufacturing Costs Budget
For the Month of June, 2018
Total
Marketing and general administration
Shipping
2.
Cash Budget
June 30, 2018
Cash balance, June 1 (from Balance Sheet) $ 9,435
Add receipts
Collections from June accounts receivable
($825,000
´
60%)
Deduct cash disbursements
Direct material purchases in June
($77,192
´
80%)
Manufacturing overhead
($68,139
´
70% because 30% is depreciation)
Nonmanufacturing costs
($67,875
´
90% because 10% is depreciation)
Financing
Interest at 6% ($150,000
´
6%
´
1 ÷ 12) (z)
3.
Budgeted Income Statement
For the Month of June, 2018
Revenues $825,000
6-4
Budgeted Balance Sheet
June 30, 2018
Assets
Cash $ 128,546
Inventories
Direct materials $ 4,239
Less: accumulated depreciation
($136,335 + $68,139
´
30% + $67,875 × 10%))
Liabilities and Equity
Accounts payable ($77,192 × 20%) $ 15,438
Interest payable 750
Try It 6-1 Solution
Schedule 1: Revenues Budget
for the Year Ending December 31, 2017
Units Selling Price Total Revenues
Knox 21,000 $25 $525,000
Ayer 10,000 40 400,000
Schedule 2: Production Budget (in Units)
for the Year Ending December 31, 2017
6-5
Product
Knox Ayer
Budgeted sales in units (Schedule 1) 21,000 10,000
Deduct beginning finished goods inventory 3,000 1,000
Try It 6-2 Solution
Schedule 3A: Direct Material Usage Budget in Quantity and Dollars
for the Year Ending December 31, 2017
Material
Metal Fabric Total
Physical Units Budget
Direct materials required for Knox lamps
(20,000 units × 2 pounds and 1 yard)
40,000 pounds 20,000 yards
Direct materials required for Ayer lamps
(10,000 units × 3 pounds and 1.5 yards)
30,000 pounds
15,000 yards
Cost Budget
Available from beginning direct materials
inventory (under a FIFO cost-flow assumption)
(Given)
Fabric: 7,000 yards × $4 per yard $ 28,000
To be purchased and used this period
Schedule 3B: Direct Material Purchases Budget
for the Year Ending December 31, 2017
Material
Metal Fabric Total
Physical Units Budget
To be used in production (from Schedule
3A)
70,000 pounds 35,000 yards
Add target ending inventory 10,000 pounds 5,000 yards
Total requirements 80,000 pounds 40,000 yards
Deduct beginning inventory 12,000 pounds 7,000 yards
Cost Budget
Metal: 68,000 pounds × $3 per pound $204,000
6-6
Schedule 4: Direct Manufacturing Labor Costs Budget
for the Year Ending December 31, 2017
Output Units
Produced
(Schedule 2)
Direct
Manufacturing
Labor-Hours
per Unit Total Hours
Hourly
Wage Rate Total
Knox 20,000 0.15 3,000 $20 $ 60,000
Ayer 10,000 0.2 2,000 20 40,000
Try It 6-3 Solution
Knox Ayer
1. Quantity of lamps to be produced 20,000 lamps 10,000 lamps
2. Number of lamps to be produced per batch 100 lamps/batch 80 lamps/batch
Schedule 5: Manufacturing Overhead Costs Budget
for the Year Ending December 31, 2017
Machine Setup Overhead Costs
Variable costs ($60 per setup-hour × 1,100 setup-hours) $66,000
Try It 6-4 Solution
Schedule 6A: Budgeted Unit Costs of Ending Finished
Goods Inventory December 31, 2017
Product
Knox Ayer
Cost per Unit
of Input
Input per
Unit of
Output Total
Input per
Unit of
Output Total
Metal $ 3 2 pounds. $ 6.00 3 pounds. $ 9.00
Fabric 4 1 yard 4.00 1.5 yards 6.00
6-7
Under the FIFO method, managers use this unit cost to calculate the cost of target ending
inventories of finished goods in Schedule 6B.
Schedule 6B: Ending Inventories Budget December 31, 2017
Quantity Cost per Unit Total
Direct materials
Metal 10,000 $ 3.00 $30,000
Fabric 5,000 4.00 20,000 $ 50,000
Try It 6-5 Solution
Schedule 7: Cost of Goods Sold Budget
for the Year Ending December 31, 2017
From Schedule Total
Beginning finished goods inventory, January 1, 2017 Given $ 76,200
Direct materials used 3A $350,000
Direct manufacturing labor 4 100,000
Deduct ending finished goods inventory, December
6B
Schedule 8: Nonmanufacturing Costs Budget
for the Year Ending December 31, 2017
Business Function Variable Costs Fixed Costs Total Costs
Marketing (Variable cost: $925,000 0.04) $37,000 $ 43,000 $ 80,000
Budgeted Income Statement for Jimenez Corporation
for the Year Ending December 31, 2017
6-8
From Schedule Total
Revenues Given*$925,000
Operating costs
Try It 6-6 Solution
Schedule of Cash Collections
Quarters
1 2 3 4
Accounts receivable balance on
1-1-2017 (Fourth-quarter sales from
2016 collected in first quarter of
From first-quarter 2017 sales
From second-quarter 2017 sales
From third-quarter 2017 sales
From fourth-quarter 2017 sales
6-9