Chapter 8 243
accessible website, in whole or in part.
d.
Mfg. OH
January
February
March
Total
Production
6,220
5,640
7,520
19,380
Var. cost per unit
$1.30
$1.30
$1.30
$1.30
Total var. mfg. cost
$ 8,086
$ 7,332
$ 9,776
$25,194
Fixed mfg. cost
14,000
14,000
14,000
42,000
Total mfg. OH
$22,086
$21,332
$23,776
$67,194
S&A costs:
January
February
March
Total
Sales revenue
$128,000
$104,000
$148,000
$380,000
VC (10% of sales)
0.10
0.10
0.10
0.10
Total var. S&A cost
$ 12,800
$ 10,400
$ 14,800
$ 38,000
Fixed S&A cost
13,600
13,600
13,600
40,800
Total S&A OH
$ 26,400
$ 24,000
$ 28,400
$ 78,800
Total mfg. OH
$ 22,086
$ 21,332
$ 23,776
$ 67,194
Total S&A OH
26,400
24,000
28,400
78,800
Total cash OH cost
$ 48,486
$ 45,332
$ 52,176
$145,994
e.
January
February
March
Total
Beg. Balance
$ 18,320.00
$ 10,472.11
$ 10,651.62
$ 18,320.00
Collections
116,200.00
81,300.00
101,500.00
299,000.00
Cash available
$134,520.00
$ 91,772.11
$112,151.62
$317,320.00
Cash needed:
Purchases
$ 48,207.89
$ 52,840.49
$ 61,201.70
$162,250.08
Overhead
48,486.00
45,332.00
52,176.00
145,994.00
DL*
4,354.00
3,948.00
5,264.00
13,566.00
Bonuses
35,000.00
0.00
0.00
35,000.00
Tax pymt.
0.00
0.00
5,000.00
5,000.00
Total
$136,047.89
$102,120.49
$123,641.70
$361,810.08
Cash exc. (def.)
$ (1,527.89)
$ (10,348.38)
$ (11,490.08)
$ (44,490.08)
Min. balance
(10,000.00)
(10,000.00)
(10,000.00)
(10,000.00)
(Needed) Avail.
$ (11,527.89)
$ (20,348.38)
$ (21,490.08)
$ (54,490.08)
Financing:
Borrow (repay)
12,000.00
21,000.00
22,000.00
55,000.00
Sell (invest)
Rec. (pay) int.
End. Balance
$ 10,472.11
$ 10,651.62
$ 10,509.92
$ 10,509.92
*Direct labor = $0.70 per bookstand
January: 6,220 $0.70 = $4,354
51. a. $1,500,000 ÷ 0.60 = $2,500,000
c. Total expenses = 85% of sales
Total variable costs = 70% of sales
244 Chapter 8
d. Cash receipts: $2,500,000 0.55 = $1,375,000
Total expenses ($2,500,000 0.85)
$2,125,000
Depreciation
(45,000)
Pending expenses
$2,080,000
Percent paid in cash
0.65
Cash disbursements
$1,352,000
52. a.
April
May
June
Quarter
Sales in units
60,000
140,000
46,000
246,000
Per-unit selling price
$12
$12
$12
$12
Total revenues
$720,000
$1,680,000
$552,000
$2,952,000
b.
April
May
June
Quarter
Cash sales (20%)
$144,000
$ 336,000
$ 110,400
$ 590,400
Collections from
4/1/13 A/R balance
36,000
295,000
331,000
Credit sales
April ($576,000)
144,000
316,800
103,680
564,480
May ($1,344,000)
336,000
739,200
1,075,200
June ($441,600)
110,400
110,400
Total collections
$324,000
$1,283,800
$1,063,680
$2,671,480
c.
Beginning A/R
$ 346,000
Credit sales ($2,952,000 0.80)
2,361,600
Collections ($2,671,480 – $590,400)
(2,081,080)
Ending A/R
$ 626,520
Alternative:
Beginning A/R not collected ($346,000 – $331,000)
$ 15,000
April credit sales not collected ($576,000 2%)
11,520
May credit sales not collected ($1,344,000 20%)
268,800
June credit sales not collected ($441,600 75%)
331,200
Ending A/R
$626,520
d. Estimated bad debts expense = $2,361,600 2% = $47,232
e.
Accounts Receivable
$626,520
Allowance ($35,000 – $15,000 + $47,232)
(67,232)
Net realizable value
$559,288
f. Beginning inventory $ ÷ Cost per bear = $208,000 ÷ $8 = 26,000 bears
April
May
June
Quarter
Sales in units
60,000
140,000
46,000
246,000
EI (40%)
56,000
18,400
12,000
12,000
BI
(26,000)
(56,000)
(18,400)
(26,000)
Purchases
90,000
102,400
39,600
232,000
Per-unit cost
$8
$8
$8
$8
Total purchases
$720,000
$819,200
$316,800
$1,856,000
Chapter 8 245
g.
April
May
June
Quarter
Beginning A/P
$455,000
$ 455,000
April ($720,000)
216,000
$504,000
720,000
May ($819,200)
245,760
$573,440
819,200
June ($316,800)
95,040
95,040
Total payments
$671,000
$749,760
$668,480
$2,089,240
h. Ending A/P = $316,800 70% = $221,760
b. Collections = ($144,000 0.48) + ($240,000 0.50)
c.
BI + P – CGS = EI
April 1 beginning inventory
$ 104,800
Purchases during April: 60% of April’s CGS + 30% of
May’s CGS = ($240,000 0.65 0.60) + ($260,000
0.65 0.30) = $93,600 + $50,700
144,300
Cost of Goods Sold ($240,000 0.65)
(156,000)
Ending inventory
$ 93,100
Sales
$ 240,000
CGS
(156,000)
Gross margin
$ 84,000
Selling & administrative expenses
(43,000)
Expected net income
$ 41,000
Beginning balance, RE
$ 79,520
Expected net income
41,000
Dividends declared
(20,000)
Ending balance
$ 100,520
e. Beginning balance
$ 24,000
Cash collections
189,120
Cash available
$ 213,120
Cash disbursements:
Accounts Payable
$140,400
S&A expenses ($43,000 – $8,000)
35,000
Dividends paid
20,000
(195,400)
Cash available
$ 17,720
246 Chapter 8
54. a. Schedule A (Collections from Customers):
2014
2015
Sales
$900,000
$1,080,000
Beg. A/R (liquidated in 2013)
0
75,000
Total
$900,000
$1,155,000
End. A/R (1/12 of sales)
(75,000)
(90,000)
Collections
$825,000
$1,065,000
Schedule B (Disbursements for Direct Material):
2014
2015
Unit sales
10,000
12,000
Required ending inventory1
2,000
2,500
Total needed
12,000
14,500
Beginning inventory (liq. in 2013)
0
(2,000)
Production
12,000
12,500
Times DM cost per unit
$20
$20
Total purchases
$240,000
$250,000
Delayed payment (1/12)
(20,000)
(20,833)
Paid previous balance
0
20,000
Disbursements for DM
$220,000
$249,167
= 2,500
Vassar Corp.
Cash Budget
For Years Ending March 31, 2014 and 2015
2014
2015
Beginning cash balance
$ 0
$ (95,000)
Collections—Sch. A
825,000
1,065,000
Total
$ 825,000
$ 970,000
Disbursements:
DM—Sch. B
$220,000
$249,167
DL ($30 per unit)
360,000
375,000
VOH ($10 per unit)
120,000
125,000
Fixed costs
130,000
130,000
Total
(830,000)
(879,167)
Cash available
$ (5,000)
$ 90,833
Payments to creditors*
(90,000)
(90,833)
Ending cash balance
$ (95,000)**
$ 0
A/P = ($600,000 60%) – ($50,000 + $40,000) = $360,000 – $90,000 = $270,000 at 4/1/13;
$270,000 – $90,833 = $179,167 still owed to creditors at 3/31/15.
The solution is not feasible, given the creditors’ condition of full payment on or
by 3/31/15.
(CPA adapted)
Chapter 8 247
55. a. & b. (Supporting calculations for these requirements are keyed to the
amounts and follow the cash budgets.)
CME, INC.
Cash Budgets (in thousands)
For Year Ending
For Month Ending
December 31, 2014
January 31, 2014
Cash balance, Jan.1
$ 750
$ 750
Cash receipts:
Program revenue
12,000
1,440c
Membership income
10,000a
0
Total cash available
$ 22,750
$ 2,190
Cash outflows:
Seminar
Instruction fees
$ 8,400b
$ 0
Facilities
5,600
672d
Promotion
1,000
100e
Total
$ 15,000
$ 772
Salaries
960
80f
Benefits, staff
240
18g
Office lease
240
20h
Gen. admin.
1,500
125
Gen. promotion
600
50i
Research grants
3,000
500
Capital equipment
510
102j
Total
(22,050)
(1,667)
Ending cash balance
$ 700
$ 523
Supporting calculations:
a100,000 members $100 = $10,000,000
b$12,000,000 70% = $8,400,000
c$12,000,000 12% = $1,440,000
(CPA adapted)
56. a. Accounts Receivable Collections (in thousands):
Apr.
May
June
Prior month’s sales (60%)
$2,160
$2,640
$3,000
Two months’ prior sales (40%)
1,600
1,440
1,760
Total collections
$3,760
$4,080
$4,760
248 Chapter 8
accessible website, in whole or in part.
Material Purchases (in thousands):
Feb.
Mar.
Apr.
May
June
July
Sales
$4,000
$3,600
$4,400
$5,000
$5,600
$6,000
Mat. cost (50%)
$2,000
$1,800
$2,200
$2,500
$2,800
$3,000
Material Receipts:
This month’s
costs (40%)
$ 800
$ 720
$ 880
$1,000
$ 1,120
Next month’s
costs (60%)
1,080
1,320
1,500
1,680
1,800
Total receipts
$1,880
$2,040
$2,380
$2,680
$ 2,920
Material Payments:
Prior month’s
goods (80%)
$1,632
$1,904
$2,144
Two months’
prior goods (20%)
376
408
476
Total payments
$2,008
$2,312
$2,620
Admin. Expenses (in thousands):
Salaries (1/12 of annual)
$ 80
$ 80
$ 80
Promotion (1/12 of annual)
110
110
110
Prop. taxes (1/4 of annual)
120
Insurance (1/12 of annual)
60
60
60
Utilities (1/12 of annual)
50
50
50
Total expense
$ 300
$ 300
$ 420
Income Tax expense:
= $1,224,000 ÷ 0.6
= $2,040,000
Blackman Corp.
Budgeted Schedule of Cash Receipts and Disbursements
Second Quarter 2014
(in thousands)
April
May
June
Beginning cash balance
$ 200
$ 200
$ 200
A/R collections
3,760
4,080
4,760
Cash available
$3,960
$4,280
$4,960
Disbursements:
Material purchases
$2,008
$2,312
$2,620
Wages (20% of sales)
880
1,000
1,120
Administrative
300
300
420
Income tax
816
Total disbursements
$4,004
$3,612
$4,160
Cash excess (deficiency)
$ (44)
$ 668
$ 800
Cash borrowed (invested)
244
(468)
(600)
Ending cash balance
$ 200
$ 200
$ 200
Chapter 8 249
b. Cash budgeting is particularly important for a rapidly expanding company
because, as sales increase, so do expenditures for product purchases. These
vals.
(CPA adapted)
57. a.
Sales
Budget
Jan.
Feb.
March
Total
Unit sales
25,000
30,000
32,000
87,000
Selling
price
$18
$18
$18
$18
Total sales
$450,000
$540,000
$576,000
$1,566,000
b.
Production Budget
Jan.
Feb.
March
Total
Unit sales
25,000
30,000
32,000
87,000
EI
7,500
8,000
8,750
8,750
BI
(0)
(7,500)
(8,000)
(0)
Production
32,500
30,500
32,750
95,750
c.
Purchases Budget
Jan.
Feb.
March
Total
Production
32,500
30,500
32,750
95,750
EI
6,100
6,550
6,800
6,800
BI
(0)
(6,100)
(6,550)
(0)
Units
38,600
30,950
33,000
102,550
Pounds per
unit
2
2
2
2
Total lbs.
77,200
61,900
66,000
205,100
Price per lb.
$0.75
$0.75
$0.75
$0.75
Purchases
$57,900
$46,425
$49,500
$153,825
d.
Direct Labor Budget
Jan.
Feb.
March
Total
Production
32,500
30,500
32,750
95,750
DL time
per unit
0.5
0.5
0.5
0.5
DLHs
16,250
15,250
16,375
47,875
DL rate
$15
$15
$15
$15
DL cost
$243,750
$228,750
$245,625
$718,125
250 Chapter 8
e.
Overhead Budget
Jan.
Feb.
March
Total
Production
32,500
30,500
32,750
95,750
VOH unit
rate
$2
$2
$2
$2
Total
VOH
$65,000
$61,000
$65,500
$191,500
FOH cost
25,000
25,000
25,000
75,000
Total OH
$90,000
$86,000
$90,500
$266,500
f.
Cash Receipts Schedule
Jan.
Feb.
March
Total
Jan.
$109,125
$315,000
$ 424,125
Feb.
130,950
$378,000
508,950
March
139,680
139,680
Total
$109,125
$445,950
$517,680
$1,072,755
Cash Payments Schedule
Jan.
Feb.
March
Total
Jan.
$34,740
$23,160
$ 57,900
Feb.
27,855
$18,570
46,425
March
29,700
29,700
Total
$34,740
$51,015
$48,270
$134,025
58. a.
Accounts receivable at July 31:
July sales (0.75 $184,000)
$138,000
June sales (0.15 $204,000)
30,600
Balance
$168,600
Accounts payable at July 31 = 0.40 of month’s purchases = 0.40
$116,000 = $46,400
b.
August cash collections:
From June sales (0.15 $204,000)
$ 30,600
From July sales (0.60 $184,000)
110,400
From August sales (0.25 $232,000)
58,000
Total August collections
$199,000
c.
August cash disbursements:
July purchases (0.40 $116,000)
$ 46,400
August purchases (0.98 0.60 $160,000)
94,080
Monthly expenses [$48,000 + (0.12 $232,000)]
75,840
Total August disbursements
$216,320
Chapter 8 251
d. Davide’s Arrangements
Cash Budget
For Month Ending August 31, 2014
Beginning balance
$ 28,470
Cash collections in August
199,000
Total cash available exclusive of financing
$ 227,470
Disbursements
(216,320)
Cash excess
$ 11,150
Minimum cash balance desired
(28,000)
Cash needed
$ (16,850)
Borrowings
17,000
Ending cash balance
$ 28,150
e. Davide’s Arrangements
Income Statement
For Month Ending August 31, 2014
Sales
$ 232,000
Cost of goods sold (0.55 $232,000)
(127,600)
Gross profit
$ 104,400
Operating expenses:
Monthly expenses [from (c)]
$75,840
Depreciation
8,000
(83,840)
Net income before taxes
$ 20,560
to manage inventory levels.
59. a.
Fixed production cost [($2,600,000 1.075) 0.80]
$2,236,000
Estimated production
÷ 400,000
Estimated fixed production cost per unit
$ 5.59
Variable production cost ($55 1.15)
63.25
Total production cost per unit
$68.84
b. Selling price = $68.84 1.25 = $86.05; selling price = $86
c.
Sales ($86 400,000)
$ 34,400,000
CGS ($68.84 400,000)
(27,536,000)
Gross margin
$ 6,864,000
Variable S&A ($34,400,000 0.08)
(2,752,000)
Fixed S&A ($2,600,000 1.075 0.20)
(559,000)
Income before taxes
$ 3,553,000
400,000X – $27,536,000 – 0.08(400,000X) – $559,000 = 0.25(400,000X)