Chapter 10: Using Budgets for Planning and Coordination
– 453 –
(c) Increased sales effort
Oct.
Nov.
Dec.
Jan.
Feb.
Mar.
Apr.
May
Unit production
and sales
– Chairs
900
975
950
1,326
1,548
1,533
1,554
1,560
– Tables
175
188
201
260
308
316
325
328
– Cabinets
90
102
95
142
156
155
164
159
– Total revenuea
$499,500
$547,800
$541,900
$717,060
$824,220
$826,500
$853,575
$848,730
– Cash sales:
25% of
revenue
$124,875
$136,950
$135,475
$179,265
$206,055
$206,625
$213,394
$212,183
– Credit card
sales: 35% of
rev.
$174,825
$191,730
$189,665
$250,971
$288,477
$289,275
$298,751
$297,056
– Exporter
sales: 40% of
rev.
$199,800
$219,120
$216,760
$286,824
$329,688
$330,600
$341,430
$339,492
– Bad debts:
3% of export
sales
$8,605
$9,891
$9,918
$10,243
$10,185
– Cash sales
discounts: 5%
of cash sales
$8,963
$10,303
$10,331
$10,670
$10,609
– Cred. card
fees: 3% of
credit card
sales
$7,529
$8,654
$8,678
$8,963
$8,912
Atkinson, Solutions Manual t/a Management Accounting, 6E
– 454 –
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Total
Unit production
and sales
– Chairs
1,565
1,552
1,559
1,589
1,585
1,569
1,550
– Tables
332
315
329
316
322
317
332
– Cabinets
163
160
157
165
164
164
155
– Total
revenuea
$859,940
$837,805
$845,975
$854,240
$856,900
$849,585
$843,410
$10,017,940
– Cash sales:
25% of
revenue
$214,985
$209,451
$211,494
$213,560
$214,225
$212,396
$210,853
$2,504,485
– Credit card
sales: 35% of
rev.
$300,979
$293,232
$296,091
$298,984
$299,915
$297,355
$295,194
$3,506,279
– Exporter
sales: 40% of
rev.
$343,976
$335,122
$338,390
$341,696
$342,760
$339,834
$337,364
$4,007,176
– Bad debts:
3% of export
sales
$10,319
$10,054
$10,152
$10,251
$10,283
$10,195
$10,121
$120,215
– Cash sales
discounts: 5%
of cash sales
$10,749
$10,473
$10,575
$10,678
$10,711
$10,620
$10,543
$125,224
– Cred. card
fees: 3% of
credit card
sales
$9,029
$8,797
$8,883
$8,970
$8,997
$8,921
$8,856
$105,188
Chapter 10: Using Budgets for Planning and Coordination
– 455 –
Carpenter and helper hours
Dec.
Jan.
Feb.
Mar.
Apr.
May
June
– Required carpenter hoursb
2,032.4
2,325.2
2,333.2
2,418.1
2,398
2,434
– Carpentersc
9
12
13
13
14
14
14
– Helpers: 1.5 number of
carpenters
14
18
20
20
21
21
21
– Carpenter regular hours:
172 per carpenter
2,064
2,236
2,236
2,408
2,408
2,408
– Carpenter overtime hours
0
89.2
97.2
10.1
0
26
– 5% of regular carpenter hrs,
must be > overtime hoursc
103.2
111.8
111.8
120.4
120.4
120.4
– Helper regular hours:
172 per helper
3,096
3,440
3,440
3,612
3,612
3,612
– Helper overtime hours
0
47.8
59.8
15.15
0
39
Carpenter and helper hours
July
Aug.
Sept.
Oct.
Nov.
Dec.
– Required carpenter hoursb
2,368.3
2,388.1
2,415.6
2,423
2,404.1
2,380
– Carpentersc
14
14
14
14
14
14
– Helpers: 1.5 number of
carpenters
21
21
21
21
21
21
– Carpenter regular hours:
172 per carpenter
2,408
2,408
2,408
2,408
2,408
2,408
– Carpenter overtime hours
0
0
7.6
15
0
0
– 5% of regular carpenter hrs,
must be > overtime hoursc
120.4
120.4
120.4
120.4
120.4
120.4
– Helper regular hours:
172 per helper
3,612
3,612
3,612
3,612
3,612
3,612
– Helper overtime hours
0
0
11.4
22.5
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
– 456 –
Cash inflows
Jan.
Feb.
Mar.
Apr.
May
June
– From 3 months previous:
17% of export sales
$33,966
$37,250
$36,849
$48,760
$56,047
$56,202
– From 2 months previous:
50% of export sales
109,560
108,380
143,412
164,844
165,300
170,715
– From 1 month previous:
30% of export sales + 97%
of credit card sales
249,003
329,489
378,729
379,777
392,218
389,991
– From current month:
95% of cash sales
170,302
195,752
196,294
202,724
201,573
204,236
– Interest on cash balance:
3%/yr if previous mo.
ending bal > $50,000
0
0
0
0
0
0
– Total cash inflows
$562,831
$670,872
$755,284
$796,105
$815,138
$821,144
Cash inflows
July
Aug.
Sept.
Oct.
Nov.
Dec.
– From 3 months previous:
17% of export sales
$58,043
$57,714
$58,476
$56,971
$57,526
$58,088
– From 2 months previous:
50% of export sales
169,746
171,988
167,561
169,195
170,848
171,380
– From 1 month previous:
30% of export sales +
97% of credit card sales
395,142
384,971
388,726
392,523
393,746
390,384
– From current month:
95% of cash sales
198,979
200,919
202,882
203,514
201,776
200,310
– Interest on cash balance:
3%/yr if previous mo.
ending bal > $50,000
45
0
163
480
428
767
– Total cash inflows
$821,955
$815,592
$817,807
$822,682
$824,325
$820,930
Chapter 10: Using Budgets for Planning and Coordination
– 457 –
Cash outflows
Jan.
Feb.
Mar.
Apr.
May
June
– Carpenter wages:
$24 per regular hr.;
$36 per overtime hr.
$49,536
$56,875
$57,163
$58,156
$57,792
$58,728
– Helper wages:
$14 per regular hr.;
$21 per overtime hr.
43,344
49,164
49,416
50,886
50,568
51,387
– Supplies, etc.:
$5 per carpenter hr.
10,162
11,626
11,666
12,091
11,990
12,170
– Variable support costs:
$20 per carpenter hr.
40,648
46,504
46,664
48,362
47,960
48,680
– Maintenance costs:
$15 per carpenter hr.
30,486
34,878
34,998
36,272
35,970
36,510
– Wood costs:
$30 per unit of woodd
166,080
190,560
191,580
198,420
197,070
199,980
– 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:
$75,000 per mo.
75,000
75,000
75,000
75,000
75,000
75,000
– Shipping costse
55,960
64,300
64,460
66,575
66,185
67,060
– Variable selling costs: 6%
of product list prices
43,024
49,453
49,590
51,215
50,924
51,596
– Interest on line of credit:
10%/yr based on last
month’s balance
0
2,137
2,175
1,529
1,924
884
– Mach. purch.: $5,000 no.
of carpenters (Jan. and July)
60,000
0
0
0
0
0
– Total cash outflows
$819,240
$675,497
$677,712
$843,504
$690,383
$696,996
– 458 –
Cash outflows
July
Aug.
Sept.
Oct.
Nov.
Dec.
– Carpenter wages:
$24 per regular hr.;
$36 per overtime hr.
$57,792
$57,792
$58,066
$58,332
$57,792
$57,792
– Helper wages:
$14 per regular hr.;
$21 per overtime hr.
50,568
50,568
50,807
51,041
50,568
50,568
– Supplies, etc.:
$5 per carpenter hr.
11,842
11,941
12,078
12,115
12,021
11,900
– Variable support costs:
$20 per carpenter hr.
47,366
47,762
48,312
48,460
48,082
47,600
– Maintenance costs:
$15 per carpenter hr.
35,525
35,822
36,234
36,345
36,062
35,700
– Wood costs:
$30 per unit of woodd
194,160
196,380
197,760
198,630
196,950
195,930
– 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:
$75,000 per mo.
75,000
75,000
75,000
75,000
75,000
75,000
– Shipping costse
65,355
65,965
66,650
66,845
66,280
65,755
– Variable selling costs: 6% of
product list prices
50,268
50,759
51,254
51,414
50,975
50,605
– Interest on line of credit:
10%/yr based on last
month’s balance
0
524
0
0
0
0
– Mach. purch.: $5,000 no.
of carpenters (Jan. and July)
70,000
0
0
0
0
0
– Total cash outflows
$902,875
$687,511
$691,161
$843,182
$688,729
$685,850
– 459 –
Cash flow analysis
Dec.
Jan.
Feb.
Mar.
Apr.
May
June
– Opening cash
$50,000
$50,000
$50,000
$50,000
$50,000
$50,000
– Net cash flow: Cash
inflows – cash outflows
–256,409
–4,625
77,572
–47,399
124,755
124,149
– Cash before financing
–206,409
45,375
127,572
2,601
174,755
174,149
– Opening line-of credit
0
256,409
261,034
183,462
230,861
106,106
– Line-of-credit increase
256,409
4,625
0
47,399
0
0
– Line-of-credit payment
0
0
77,572
0
124,755
106,106
– Line of credit closing
balance
0
256,409
261,034
183,462
230,861
106,106
0
– Ending cash:
$50,000 minimum
50,000
50,000
50,000
50,000
50,000
50,000
68,042
– Cash flow analysis
July
Aug.
Sept.
Oct.
Nov.
Dec.
– Opening cash
$68,042
$50,000
$115,203
$241,849
$221,350
$356,946
Net cash flow: Cash
inflows – cash outflows
–80,920
128,081
126,646
–20,499
135,596
135,080
– Cash before financing
–12,877
178,081
241,849
221,350
356,946
492,026
– Opening line-of credit
0
62,877
0
0
0
0
– Line-of-credit increase
62,877
0
0
0
0
0
– Line-of-credit payment
0
62,877
0
0
0
0
– Line of credit closing
balance
62,877
0
0
0
0
0
– Ending cash:
$50,000 minimum
50,000
115,203
241,849
221,350
356,946
492,026
– 460 –
Judd’s Reproductions
Projected Income Statement
For the Year Ended December 31, 2012
Increased Sales Effort
Revenue
Chairs
$3,513,100
Tables
3,249,000
Cabinets
3,255,840
$10,017,940
Variable expenses
Carpenters
685,816
Helpers
598,885
Maintenance
424,800
Variable support
566,400
Selling
601,076
Shipping
781,390
Supplies
141,600
Wood
2,323,500
6,123,467
Contribution margin
$3,894,473
Fixed expenses
Administrative staff
300,000
Depreciationa
49,000
Factory rent
600,000
Selling
360,000
Other factory
480,000
1,789,000
Other expenses
Advertising costs
900,000
Bad debts
120,215
Cash sales discounts
125,224
Credit card fees
105,188
Net interest charges
7,289
1,257,916
Income before taxes
$847,557
1,257,916
a Depreciation:
Machinery, Jan. 1, 2012
$360,000
Purchases: $60,000 in January and $70,000 in July
130,000
Depreciation expense: 10% of year-end balance
(49,000)
Machinery, Dec. 31, 2012
$441,000
– 461 –
Judd’s Reproductions
Projected Balance Sheet
December 31, 2012
Increased Sales Effort
Cash
$492,026
Accounts receivablea
899,539
Bank loan
$0
Machinery and
equipmentb
441,000
Owners’
equity
$1,832,565
Total
assets
$1,832,565
Total liabilities and
owners’ equity
$1,832,565
b Machinery, Jan. 1, 2012
$360,000
Purchases: $60,000 in January and $70,000 in July
130,000
Depreciation expense: 10% of year-end balance
(49,000)
Machinery, Dec. 31, 2012
$441,000
reducing profit even further.
The option in part (c) increases sales and profit dramatically but creates