Chapter 10: Using Budgets for Planning and Coordination
– 433 –
(d) The above analysis relies on cost estimates based on allocation of other
manufacturing support, selling support, and general and administrative
operations for Ace and Bell.
10–77 (a)
Number of Deliveries
Number of
Deliveries
Required
Delivery
Capacitya
Overtime
Hours
Regular
Wagesc
Overtime
Cost
Total
Cost
Unit
Delivery
Cost
70
80
0
$480
$ 0
$480
$6.857
80
80
0
480
0
480
6.000
90
80
5b
480
90d
570
6.333
a5 workers 8 hours 2 per hour 80 deliveries
(b) Based on the old hiring policy
Number of
Deliveries
Required
Delivery
Capacity
Overtime
Hours
Regular
Hours
Overtime
Cost
Total
Cost
Unit
Delivery
Cost
Monday
65
80
0.0
$480
$0
$480
$7.385
Tuesday
70
80
0.0
480
0
480
6.857
Wednesday
80
80
0.0
480
0
480
6.000
Thursday
85
80
2.5
480
45
525
6.176
Friday
95
80
7.5
480
135
615
6.474
Total
$2,580
Atkinson, Solutions Manual t/a Management Accounting, 6E
– 434 –
Based on the new hiring policy
Number of
Deliveries
Required
Delivery
Capacity
Overtime
Hours
Regular
Hours
Overtime
Cost
Total
Cost
Unit
Delivery
Cost
Monday
65
64
0.5
$384
$9
$393
$6.046
Tuesday
70
64
3.0
384
54
438
6.257
Wednesday
80
80
0.0
480
0
480
6.000
Thursday
85
80
2.5
480
45
525
6.176
Friday
95
96
0.0
576
0
576
6.063
Total
$2,412
The expected savings per week of the new hiring policy:
$ , $ , $2 580 2412 168
Chapter 10: Using Budgets for Planning and Coordination
10–78 Judd’s Reproductions (Calculations were performed in an Excel spreadsheet.)
(a) Original situation
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Unit
production
and sales
– Chairs
900
975
950
1,020
1,191
1,179
1,195
1,200
– Tables
175
188
201
200
237
243
250
252
– Cabinets
90
102
95
109
120
119
126
122
Total
revenuea
$499,500
$547,800
$541,900
$580,200
$667,500
$668,700
$690,800
$686,400
Cash sales:
25% of
revenue
124,875
136,950
135,475
145,050
166,875
167,175
172,700
171,600
Credit card
sales: 35%
of rev.
174,825
191,730
189,665
203,070
233,625
234,045
241,780
240,240
Exporter
sales: 40%
of rev.
199,800
219,120
216,760
232,080
267,000
267,480
276,320
274,560
Bad debts:
3% of
export sales
$6,962
$8,010
$8,024
$8,290
$8,237
Cash sales
discounts:
5% of cash
sales
7,253
8,344
8,359
8,635
8,580
Cred. Card
fees: 3% of
credit card
sales
6,092
7,009
7,021
7,253
7,207
Atkinson, Solutions Manual t/a Management Accounting, 6E
– 436 –
Judd’s Reproductions (Continued)
(a) Original situation (Continued
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
Unit
production
and sales
– Chairs
1,204
1,194
1,199
1,222
1,219
1,207
1,192
– Tables
255
242
253
243
248
244
255
– Cabinets
125
123
121
127
126
126
119
Total
revenuea
$695,300
$678,000
$685,300
$691,700
$693,800
$687,800
$682,100
$8,107,600
Cash sales:
25% of
Revenue
173,825
169,500
171,325
172,925
173,450
171,950
170,525
2,026,900
Credit card
sales: 35%
of rev.
243,355
237,300
239,855
242,095
242,830
240,730
238,735
2,837,660
Exporter
sales: 40%
of rev.
278,120
271,200
274,120
276,680
277,520
275,120
272,840
3,243,040
Bad debts:
3% of
export sales
$8,344
$8,136
$8,224
$8,300
$8,326
$8,254
$8,185
$97,291
– Cash sales
discounts:
5% of cash
sales
8,691
8,475
8,566
8,646
8,673
8,598
8,526
101,345
– Cred. card
fees: 3% of
credit card
sales
7,301
7,119
7,196
7,263
7,285
7,222
7,162
85,130
Chapter 10: Using Budgets for Planning and Coordination
– 437 –
Carpenter and helper hours
Dec.
Jan.
Feb.
Mar.
Apr.
May
June
– Required carpenter hoursb
1,562
1,788.9
1,793.1
1,859
1,842
1,869.1
– Carpentersc
9
9
10
10
11
11
11
– Helpers: 1.5 number of
carpenters
14
14
15
15
17
17
17
– Carpenter regular hours:
172 per carpenter
1,548
1,720
1,720
1,892
1,892
1,892
– Carpenter overtime hours
14
68.9
73.1
0
0
0
– 5% of regular carpenter hrs,
must be > overtime hoursc
77.4
86
86
94.6
94.6
94.6
– Helper regular hours:
172 per helper
2,408
2,580
2,580
2,924
2,924
2,924
– Helper overtime hours
0
103.35
109.65
0
0
0
Carpenter and helper hours
July
Aug.
Sept.
Oct.
Nov.
Dec.
– Required carpenter hoursb
1,820.6
1,838.1
1,858.3
1,863.6
1,848.8
1,828.3
– Carpentersc
11
11
11
11
11
11
– Helpers: 1.5 number of
carpenters
17
17
17
17
17
17
– Carpenter regular hours:
172 per carpenter
1,892
1,892
1,892
1,892
1,892
1,892
– Carpenter overtime hours
0
0
0
0
0
0
– 5% of regular carpenter hrs,
must be > overtime hoursc
94.6
94.6
94.6
94.6
94.6
94.6
– Helper regular hours:
172 per helper
2,924
2,924
2,924
2,924
2,924
2,924
– Helper overtime hours
0
0
0
0
0
0
b Carpenter hours for chairs, tables, and cabinets are 0.4, 2.5, and 6, respectively.
Atkinson, Solutions Manual t/a Management Accounting, 6E
– 438 –
Cash inflows
Jan.
Feb.
Mar.
Apr.
May
June
– From 3 months previous:
17% of export sales
$33,966
$37,250
$36,849
$39,454
$45,390
$45,472
– From 2 months previous:
50% of export sales
109,560
108,380
116,040
133,500
133,740
138,160
– From 1 month previous:
30% of export sales + 97% of
credit card sales
249,003
266,602
306,716
307,268
317,423
315,401
– From current month:
95% of cash sales
137,798
158,531
158,816
164,065
163,020
165,134
– Interest on cash balance:
3%/yr if previous mo. ending
bal > $50,000
0
0
0
0
0
52
– Total cash inflows
$530,327
$570,764
$618,422
$644,286
$659,573
$664,218
Cash inflows
July
Aug.
Sept.
Oct.
Nov.
Dec.
– From 3 months previous:
17% of export sales
$46,974
$46,675
$47,280
$46,104
$46,600
$47,036
– From 2 months previous:
50% of export sales
137,280
139,060
135,600
137,060
138,340
138,760
– From 1 month previous:
30% of export sales + 97% of
credit card sales
319,490
311,541
314,895
317,836
318,801
316,044
– From current month: 95% of
cash sales
161,025
162,759
164,279
164,778
163,353
161,999
– Interest on cash balance:
3%/yr if previous mo. ending
bal. > $50,000
330
120
400
680
592
889
– Total cash inflows
$665,100
$660,155
$662,455
$666,458
$667,686
$664,727
Chapter 10: Using Budgets for Planning and Coordination
– 439 –
Cash outflows
Jan.
Feb.
Mar.
Apr.
May
June
– Carpenter wages: $24 per
regular hr.; $36 per
overtime hr.
$37,656
$43,760
$43,912
$45,408
$45,408
$45,408
– Helper wages: $14 per
regular hr.; $21 per
overtime hr.
33,712
38,290
38,423
40,936
40,936
40,936
– Supplies, etc.: $5 per
carpenter hr.
7,810
8,945
8,966
9,295
9,210
9,346
– Variable support costs:
$20 per carpenter hr.
31,240
35,778
35,862
37,180
36,840
37,382
– Maintenance costs: $15
per carpenter hr.
23,430
26,834
26,897
27,885
27,630
28,037
– Wood costs: $30 per unit
of woodd
127,650
146,610
147,240
152,550
151,380
153,570
– Factory rent: $150,000
per quarter
150,000
0
0
150,000
0
0
– Fixed costs:
$40,000 per month
40,000
40,000
40,000
40,000
40,000
40,000
– Administrative salaries:
$25,000 per month
25,000
25,000
25,000
25,000
25,000
25,000
– Selling costs: $30,000
per month
30,000
30,000
30,000
30,000
30,000
30,000
– Advertising
expenditures:
$50,000 per mo.
50,000
50,000
50,000
50,000
50,000
50,000
– Shipping costse
43,015
49,470
49,545
51,185
50,850
51,510
– Variable selling costs: 6%
of product list prices
34,812
40,050
40,122
41,448
41,184
41,718
– Interest on line of credit:
10%/yr based on last
month’s balance
0
1,242
952
273
747
0
– Mach. purchases:
$5,000 no. of carpenters
(Jan. and July)
45,000
0
0
0
0
0
– Total cash outflows
$679,325
$535,978
$536,917
$701,160
$549,185
$552,906
– 440 –
Cash outflows
July
Aug.
Sept.
Oct.
Nov.
Dec.
– Carpenter wages:
$24 per regular hr.;
$36 per overtime hr.
$45,408
$45,408
$45,408
$45,408
$45,408
$45,408
– Helper wages: $14 per
regular hr.; $21 per
overtime hr.
40,936
40,936
40,936
40,936
40,936
40,936
– Supplies, etc.: $5 per
carpenter hr.
9,103
9,191
9,292
9,318
9,244
9,142
– Variable support costs:
$20 per carpenter hr.
36,412
36,762
37,166
37,272
36,976
36,566
– Maintenance costs: $15
per carpenter hr.
27,309
27,572
27,875
27,954
27,732
27,425
– Wood costs: $30 per unit
of woodd
149,250
151,140
152,130
152,790
151,470
150,510
– Factory rent: $150,000
per quarter
150,000
0
0
150,000
0
0
– Fixed costs:
$40,000 per month
40,000
40,000
40,000
40,000
40,000
40,000
– Administrative salaries:
$25,000 per month
25,000
25,000
25,000
25,000
25,000
25,000
– Selling costs: $30,000
per month
30,000
30,000
30,000
30,000
30,000
30,000
– Advertising
expenditures:
$50,000 per mo.
50,000
50,000
50,000
50,000
50,000
50,000
– Shipping costse
50,245
50,765
51,270
51,415
50,975
50,520
– Variable selling costs:
6% of product list prices
40,680
41,118
41,502
41,628
41,268
40,926
– Interest on line of credit:
10%/yr based on last
month’s balance
0
0
0
0
0
0
– Mach. purch.: $5,000
no. of carpenters (Jan.
and July)
55,000
0
0
0
0
0
– Total cash outflows
$749,343
$547,891
$550,578
$701,721
$549,009
$546,432
Chapter 10: Using Budgets for Planning and Coordination
– 441 –
Cash flow analysis
Dec.
Jan.
Feb.
Mar.
Apr.
May
June
– Opening cash
$50,000
$50,000
$50,000
$50,000
$50,000
$70,806
– Net cash flow: Cash
inflows – cash outflows
–148,998
34,785
81,505
–56,873
110,388
111,312
– Cash before financing
–98,998
84,785
131,505
–6,873
160,388
182,118
– Opening line-of credit
0
148,998
114,213
32,709
89,582
0
– Line-of-credit increase
148,998
0
0
56,873
0
0
– Line-of-credit payment
0
34,785
81,505
0
89,582
0
– Line of credit closing
balance
0
148,998
114,213
32,709
89,582
0
0
– Ending cash: $50,000
minimum
50,000
50,000
50,000
50,000
50,000
70,806
182,118
Cash flow analysis
July
Aug.
Sept.
Oct.
Nov.
Dec.
– Opening cash
$182,118
$97,875
$210,139
$322,016
$286,753
$405,429
– Net cash flow: Cash
inflows – cash outflows
–84,243
112,264
111,877
–35,263
118,677
118,295
– Cash before financing
97,875
210,139
322,016
286,753
405,429
523,724
– Opening line-of credit
0
0
0
0
0
0
– Line-of-credit increase
0
0
0
0
0
0
– Line–of–credit payment
0
0
0
0
0
0
– Line of credit closing
balance
0
0
0
0
0
0
– Ending cash: $50,000
minimum
97,875
210,139
322,016
286,753
405,429
523,724
– 442 –
Judd’s Reproductions
Projected Income Statement
For the Year Ended December 31, 2012
Original Situation
Revenue
Chairs
$2,844,400
Tables
2,629,800
Cabinets
2,633,400
$8,107,600
Variable expenses
Carpenters
534,000
Helpers
478,849
Maintenance
326,577
Variable support
435,436
Selling
486,456
Shipping
600,765
Supplies
108,859
Wood
1,786,290
4,757,232
Contribution margin
$3,350,368
Fixed expenses
Administrative staff
300,000
Depreciationa
46,000
Factory rent
600,000
Selling
360,000
Other factory
480,000
1,786,000
Other expenses
Advertising costs
600,000
Bad debts
97,291
Cash sales discounts
101,345
Credit card fees
85,130
Net interest charges: $3,213 – 3,063
150
883,916
Income before taxes
$680,452
a Depreciation:
Machinery, Jan. 1, 2012
$360,000
Purchases: $45,000 in January and $55,000 in July
100,000
Depreciation expense: 10% of year-end balance
(46,000)
Machinery, Dec. 31, 2012
$414,000