DO IT! 9-3
ASH CREEK COMPANY
Sales Budget
For the Year Ending December 31, 2014
Quarter
1
2
3
4
Year
Expected unit sales
Unit selling price
Total sales
200,000
X $40
$8,000,000
200,000
X $40
$8,000,000
300,000
X $40
$12,000,000
300,000
X $45
$13,500,000
1,000,000
—
$41,500,000
ASH CREEK COMPANY
Production Budget
For the Year Ending December 31, 2014
Quarter
1
2
3
4
Year
Expected unit sales
Add: Desired ending finished
goods units
Total required units
Less: Beginning finished
goods units
Required production units
200,000
50,000
250,000
50,000**
200,000
200,000
75,000
275,000
50,000
225,000
300,000
75,000
375,000
75,000
300,000
300,000
60,000*
360,000
75,000
285,000
1,010,000
*Estimated first-quarter 2015 sales volume 200,000 + (200,000 X 20%) = 240,000: 240,000 X 25%.
**25% of estimated first-quarter 2014 sales units (200,000 X 25%).
DO IT! 9-3 (Continued)
ASH CREEK COMPANY
Direct Materials Budget
For the Year Ending December 31, 2014
Quarter
1
2
3
4
Year
Units to be produced
Direct materials per unit
Total pounds needed for
production
Add: Desired ending
direct materials
(pounds)
Total materials required
Less: Beginning direct
materials (pounds)
Direct materials
purchases
Cost per pound
Total cost of direct
materials purchases
200,000
X 2
400,000
45,000
445,000
**40,000
405,000
X $12
$4,860,000
225,000
X 2
450,000
60,000
510,000
45,000
465,000
X $12
$5,580,000
300,000
X 2
600,000
57,000
657,000
60,000
597,000
X $12
$7,164,000
285,000
X 2
570,000
*45,000
615,000
57,000
558,000
X $12
$6,696,000
$24,300,000
*Estimated first-quarter 2015 production requirements 450,000 X 10% = 45,000
**10% of estimated first-quarter pounds needed for production.
DO IT! 9-4
(a) Total unit cost:
Cost Element
Quantity
Unit Cost
Total
DO IT! 9-4 (Continued)
(b) ASH CREEK COMPANY
Budgeted Income Statement
For the Year Ending December 31, 2014
Sales (1,000,000) units from sales budget, page 9–11 ……. $41,500,000
Cost of goods sold (1,000,000 X $34.50/unit) ……………… 34,500,000
DO IT! 9-5
BATISTA COMPANY
Cash Budget
April
Beginning cash balance ……………………………………………………. $ 25,000
Add: Cash receipts for April ……………………………………………… 245,000
Total available cash ………………………………………………………….. 270,000
SOLUTIONS TO EXERCISES
EXERCISE 9-1
MEMO
To Jim Dixon
From: Student
Re: Budgeting
I am glad Adler Company is considering preparing a formal budget. There are
many benefits derived from budgeting, as I will discuss later in this memo.
A budget is a formal written statement of management’s plans for a specified
future time period, expressed in financial terms. The master budget gener–
ally consists of operating budgets such as the sales budget, production
The primary benefits of budgeting are:
goals on a recurring basis.
level of responsibility.
5. It results in greater management awareness of the entity’s overall
trends.
6. It motivates personnel throughout the organization to meet planned
objectives.
In order to maximize these benefits, it is essential that budgeting take place
within a sound organizational structure, so authority and responsibility for all
If you want further explanation of any of these topics, please contact me.
EXERCISE 9-2
Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solutions Manual (For Instructor Use Only) 9-15
EDINGTON ELECTRONICS INC.
Sales Budget
For the Six Months Ending June 30, 2014
Quarter 1
Quarter 2
Six Months
Product
Units
Selling
Price
Total
Sales
Units
Selling
Price
Total
Sales
Units
Selling
Price
Total
Sales
XQ–103
XQ–104
Totals
20,000
12,000
32,000
$15
25
$300,000
300,000
$600,000
22,000
15,000
37,000
$15
25
$330,000
375,000
$705,000
42,000
27,000
69,000
$15
25
$ 630,000
675,000
$1,305,000
9-16 Copyright © 2012 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 6/e, Solutions Manual (For Instructor Use Only)
GARZA AND NEELY, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2014
Quarter 1
Quarter 2
Quarter 3
Quarter 4
Billable
Billable
Total
Billable
Billable
Total
Billable
Billable
Total
Billable
Billable
Total
Dept.
Hours
Rate
Rev.
Hours
Rate
Rev.
Hours
Rate
Rev.
Hours
Rate
Rev.
Auditing
2,300
$ 80
$184,000
1,600
$ 80
128,000
2,000
$ 80
$160,000
2,400
$ 80
$192,000
Tax
3,000
90
270,000
2,200
90
198,000
2,000
90
180,000
2,500
90
225,000
Consulting
1,500
100
150,000
1,500
100
150,000
1,500
100
150,000
1,500
100
150,000
Totals
$604,000
$476,000
$490,000
$567,000
Year
Billable
Billable
Total
Dept.
Hours
Rate
Rev.
Auditing
8,300a
$ 80
$ 664,000
Tax
9,700b
90
873,000
Consulting
6,000c
100
600,000
Totals
$2,137,000
a2,300 + 1,600 + 2,000 + 2,400
b3,000 + 2,200 + 2,000 + 2,500
c1,500 X 4
EXERCISE 9-3
EXERCISE 9-4
TURNEY COMPANY
Production Budget
For the Year Ending December 31, 2014
Product HD-240
Quarter
1
2
3
4
Year
Expected unit sales
Add: Desired ending
finished goods units(1)
Total required units
Less: Beginning finished
goods units
Required production units
5,000
2,800
7,800
2,000
5,800
7,000
3,200
10,200
2,800
7,400
8,000
4,000
12,000
3,200
8,800
10,000
2,500
12,500
4,000
8,500
(2)
30,500
(1)40% of next quarter’s sales.
(2)40% X (5,000 X 125%).
EXERCISE 9-5
DALLAS INDUSTRIES
Direct Materials Purchases Budget
For the Quarter Ending March 31, 2014
January
February
March
Units to be produced
Direct materials per unit
Total pounds needed for production
Add: Desired ending direct materials
(pounds)*
Total materials required
Less: Beginning direct materials
(pounds)
Direct materials purchases
Cost per pound
Total cost of direct materials
purchases
10,000
X 2
20,000
3,200
23,200
4,000
19,200
X $2
$38,400
8,000
X 2
16,000
2,000
18,000
3,200
14,800
X $2
$29,600
5,000
X 2
10,000
1,600
11,600
2,000
9,600
X $2
$19,200
*20% of next month’s production needs.
EXERCISE 9-6
(a) HARDIN COMPANY
Production Budget
For the Six Months Ending June 30, 2014
Quarter
Six
Months
1
2
Expected unit sales
Add: Desired ending finished goods
units
Total required units
Less: Beginning finished goods units
Required production units
5,000
1,500
6,500
1,250
5,250
(1)
(3)
6,000
1,750
7,750
1,500
6,250
(2)
11,500
(1)25% X 6,000.
(2)25% X 7,000.
(3)25% X 5,000.
EXERCISE 9-6 (Continued)
(b) HARDIN COMPANY
Direct Materials Budget
For the Six Months Ending June 30, 2014
Quarter
Six
Months
1
2
Units to be produced
Direct materials per unit
Total pounds needed for production
Add: Desired ending direct
materials (pounds)
Total materials required
Less: Beginning direct materials
(pounds)
Direct materials purchases
Cost per pound
Total cost of direct materials
Purchases
5,250
X 3
15,750
7,500
23,250
6,300
16,950
X $4
$67,800
(1)
(3)
6,250
X 3
18,750
8,640
27,390
7,500
19,890
X $4
$79,560
(2)
0000,000
$147,360
(1)40% X 18,750.
(2)7,200 X (3 X 40%).
(3)40% X 15,750.
EXERCISE 9-7
Finished goods:
Sales ……………………………………………………………… 2,475
Plus: Ending inventory ……………………………………. 2,200
Total required …………………………………………………….. 4,675
Less: beginning inventory ……………………………… 2,230
Production required ……………………………………………. 2,445
The May raw material purchases would be $19,780.
EXERCISE 9-8
RODRIQUEZ, INC.
Direct Labor Budget
For the Year Ending December 31, 2014
Quarter
1
2
3
4
Year
Units to be produced
Direct labor time
(hours) per unit
Total required direct
labor hours
Direct labor cost per
hour
Total direct labor cost
20,000
X 1.5
30,000
X $16
$480,000
25,000
X 1.5
37,500
X $16
$600,000
35,000
X 1.5
52,500
X $18
$945,000
30,000
X 1.5
45,000
X $18
$810,000
110,000
.2
$2,835,000
EXERCISE 9-9
DONNEGAL COMPANY
Production Budget
For the Quarter Ending March 31, 2014
Jan Feb Mar Total
Sales in units 12,000 14,000 10,000 36,000
Plus: desired ending inventory 18,000(1) 14,400(2) 15,400(3) 15,400
Total needs 30,000 28,400 25,400 51,400