Chapter 10: Using Budgets for Planning and Coordination
Judd’s Reproductions
Projected Balance Sheet
December 31, 2012
Original Situation
Cash
$523,724
Accounts receivablea
727,737
Bank loan
$0
Machinery and
equipmentb
414,000
Owners’
equity
1,665,461
Total
Assets
$1,665,461
Total liabilities and
owners’ equity
$1,665,461
a Accounts receivable, December 31, 2012 balance = $727,737 = 97% of Dec. credit
card sales + 97%, 67%, and 17% of Dec., Nov., and Oct. export sales, respectively.
b 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
Atkinson, Solutions Manual t/a Management Accounting, 6E
(b) Cash sales to exporters lead to 5% 40% drop in sales across products
(Multiply original sales quantities by 0.98 and round the result to the nearest unit.)
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Unit production
and sales
– Chairs
900
975
950
1,000
1,167
1,155
1,171
1,176
– Tables
175
188
201
196
232
238
245
247
– Cabinets
90
102
95
107
118
117
123
120
– Total revenuea
$499,500
$547,800
$541,900
$569,000
$654,600
$655,800
$676,100
$673,500
– Cash sales:
(25%+35%)/
95% of revenue
$124,875
$136,950
$135,475
$359,368
$413,432
$414,189
$427,011
$425,368
– Credit card
sales: 35% /95%
of rev.
$174,825
$191,730
$189,665
$209,632
$241,168
$241,611
$249,089
$248,132
– Exporter sales:
40% of rev. in
2011; all cash
in 2012
$199,800
$219,120
$216,760
$0
$0
$0
$0
$0
– Bad debts: 3%
of export sales
$0
$0
$0
$0
$0
– Cash sales
discounts: 5% of
cash sales
$17,968
$20,672
$20,709
$21,351
$21,268
– Cred. card fees:
3% of credit
card sales
$6,289
$7,235
$7,248
$7,473
$7,444
a Chair price is $200, table price is $900, and cabinet price is $1,800.
Chapter 10: Using Budgets for Planning and Coordination
– 445 –
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
Unit production
and sales
– Chairs
1,180
1,170
1,175
1,198
1,195
1,183
1,168
– Tables
250
237
248
238
243
239
250
– Cabinets
123
121
119
124
123
123
117
– Total revenuea
$682,400
$665,100
$672,400
$677,000
$679,100
$673,100
$669,200
$7,947,300
– Cash sales:
(25%+35%)/
95% of revenue
$430,989
$420,063
$424,674
$427,579
$428,905
$425,116
$422,653
$5,019,347
– Credit card
sales: 35%/95%
of rev.
$251,411
$245,037
$247,726
$249,421
$250,195
$247,984
$246,547
$2,927,953
– Exporter sales:
40% of rev. in
2011; all cash
in 2012
$0
$0
$0
$0
$0
$0
$0
$0
– Bad debts: 3%
of export sales
$0
$0
$0
$0
$0
$0
$0
$0
– Cash sales
discounts: 5%
of cash sales
$21,549
$21,003
$21,234
$21,379
$21,445
$21,256
$21,133
$250,967
– Cred. card fees:
3% of credit
card sales
$7,542
$7,351
$7,432
$7,483
$7,506
$7,440
$7,396
$87,839
Atkinson, Solutions Manual t/a Management Accounting, 6E
– 446 –
Carpenter and helper hours
Dec.
Jan.
Feb.
Mar.
Apr.
May
June
– Required carpenter hoursb
1,532
1,754.8
1,759
1,818.9
1,807.9
1,835
– 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
0
34.8
39
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
52.2
58.5
0
0
0
Carpenter and helper hours
July
Aug.
Sept.
Oct.
Nov.
Dec.
– Required carpenter hoursb
1,786.5
1,804
1,818.2
1,823.5
1,808.7
1,794.2
– 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.
Chapter 10: Using Budgets for Planning and Coordination
– 447 –
Cash inflows
Jan.
Feb.
Mar.
Apr.
May
June
– From 3 months previous:
17% of export sales
$33,966
$37,250
$36,849
$0
$0
$0
– From 2 months previous:
50% of export sales
109,560
108,380
0
0
0
0
– From 1 month previous: 30% of
export sales + 97% of credit
card sales
249,003
203,343
233,933
234,362
241,617
240,688
– From current month:
95% of cash sales
341,400
392,760
393,480
405,660
404,100
409,440
– Interest on cash balance: 3%/yr if
previous mo. Ending bal. .> $50,000
0
151
689
1,032
900
1,160
– Total cash inflows
$733,929
$741,884
$664,952
$641,054
$646,616
$651,287
Cash inflows
July
Aug.
Sept.
Oct.
Nov.
Dec.
– From 3 months previous:
17% of export sales
$0
$0
$0
$0
$0
$0
– From 2 months previous:
50% of export sales
0
0
0
0
0
0
– From 1 month previous: 30% of
export sales + 97% of credit
card sales
243,868
237,686
240,295
241,938
242,689
240,545
– From current month:
95% of cash sales
399,060
403,440
406,200
407,460
403,860
401,520
– Interest on cash balance: 3%/yr if
previous mo. Ending bal.> $50,000
1,421
1,173
1,424
1,684
1,575
1,840
– Total cash inflows
$644,349
$642,299
$647,918
$651,083
$648,124
$643,904
– 448 –
Cash outflows
Jan.
Feb.
Mar.
Apr.
May
June
– Carpenter wages:
$24 per regular hr.;
$36 per overtime hr.
$37,152
$42,533
$42,684
$45,408
$45,408
$45,408
– Helper wages:
$14 per regular hr.;
$21 per overtime hr.
33,712
37,216
37,349
40,936
40,936
40,936
– Supplies, etc.:
$5 per carpenter hr.
7,660
8,774
8,795
9,095
9,040
9,175
– Variable support costs:
$20 per carpenter hr.
30,640
35,096
35,180
36,378
36,158
36,700
– Maintenance costs:
$15 per carpenter hr.
22,980
26,322
26,385
27,284
27,119
27,525
– Wood costs:
$30 per unit of woodd
125,190
143,790
144,420
149,280
148,560
150,750
– 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
42,185
48,515
48,590
50,095
49,895
50,555
– Variable selling costs:
6% of product list prices
34,140
39,276
39,348
40,566
40,410
40,944
– 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)
45,000
0
0
0
0
0
– Total cash outflows
$673,659
$526,522
$527,751
$694,041
$542,525
$546,993
– 449 –
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.
8,933
9,020
9,091
9,118
9,044
8,971
– Variable support costs:
$20 per carpenter hr.
35,730
36,080
36,364
36,470
36,174
35,884
– Maintenance costs:
$15 per carpenter hr.
26,798
27,060
27,273
27,353
27,131
26,913
– Wood costs:
$30 per unit of woodd
146,430
148,320
148,860
149,520
148,200
147,690
– 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
49,290
49,810
50,180
50,325
49,885
49,565
– Variable selling costs:
6% of product list prices
39,906
40,344
40,620
40,746
40,386
40,152
– 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
$743,430
$541,978
$543,732
$694,875
$542,163
$540,519
d Units of wood required per chair, table, and cabinet are 1, 8, and 15, respectively.
e Packaging and shipping costs: chairs are $15, tables are $65, and cabinets are $135.
– 450 –
Cash flow analysis
Dec.
Jan.
Feb.
Mar.
Apr.
May
June
– Opening cash
$50,000
$110,270
$325,632
$462,833
$409,846
$513,938
– Net cash flow:
Cash inflows –
cash outflows
60,270
215,362
137,201
–52,987
104,091
104,294
– Cash before
financing
110,270
325,632
462,833
409,846
513,938
618,232
– 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
0
– Ending cash:
$50,000 min.
50,000
110,270
325,632
462,833
409,846
513,938
618,232
Cash flow analysis
July
Aug.
Sept.
Oct.
Nov.
Dec.
– Opening cash
$618,232
$519,151
$619,471
$723,658
$679,865
$785,826
– Net cash flow:
Cash inflows –
cash outflows
–99,081
100,321
104,186
–43,792
105,961
103,385
– Cash before
financing
519,151
619,471
723,658
679,865
785,826
889,211
– 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 min.
519,151
619,471
723,658
679,865
785,826
889,211
Chapter 10: Using Budgets for Planning and Coordination
– 451 –
Judd’s Reproductions
Projected Income Statement
For the Year Ended December 31, 2012
Cash Sales to Exporters
Revenue
Chairs
$2,787,600
Tables
2,576,700
Cabinets
2,583,000
$7,947,300
Variable expenses
Carpenters
531,041
Helpers
476,701
Maintenance
320,141
Variable support
426,854
Selling
476,838
Shipping
588,890
Supplies
106,714
Wood
1,751,010
4,678,189
Contribution margin
$3,269,111
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
0
Cash sales discounts
250,967
Credit card fees
87,839
Net interest charges
–13,047
925,759
Income before taxes
$557,352
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
– 452 –
Judd’s Reproductions
Projected Balance Sheet
December 31, 2012
Cash Sales to Exporters
Cash
$889,211
Accounts
receivablea
239,151
Bank
loan
$0
Machinery and
equipmentb
414,000
Owners’
equity
$1,542,362
Total assets
$1,542,362
Total liabilities and
owners’ equity
$1,542,362
card sales.
B 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