EXERCISE 9-20
(a) GRAND STORES
Merchandise Purchases Budget
For the Month Ending June 30, 2014
Budgeted cost of goods sold ($500,000 X 75%) ……………… $375,000
Add: Desired ending merchandise inventory
(b) GRAND STORES
Budgeted Income Statement
For the Month Ending June 30, 2014
Sales ………………………………………………………………………….. $500,000
SOLUTIONS TO PROBLEMS
PROBLEM 9-1A
GLENDO FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2014
Quarter
Six
Months
1
Expected unit sales …………………
Unit selling price …………………….
Total sales ……………………………..
30,000
X $60
$1,800,000
72,000
X $60
$4,320,000
GLENDO FARM SUPPLY 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 ………………………..…
30,000
15,000
45,000
8,000
37,000
42,000
18,000
60,000
15,000
45,000
82,000
PROBLEM 9-1A (Continued)
GLENDO FARM SUPPLY COMPANY
Direct Materials Budget—Gumm
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 …………………………………………..
37,000
X 4
148,000
10,000
158,000
9,000
149,000
X $3.80
$566,200
45,000
X 4
180,000
13,000
193,000
10,000
183,000
X $3.80
$695,400
$1,261,600
GLENDO FARM SUPPLY COMPANY
Direct Labor Budget
For the Six Months Ending June 30, 2014
Quarter
Six
Months
1
2
Units to be produced ………………………
Direct labor time (hours) per unit ……..
Total required direct labor hours ……..
Direct labor cost per hour ………………..
Total direct labor cost ……………………..
37,000
X 1/4
9,250
X $16
$148,000
45,000
X 1/4
11,250
X $16
$180,000
$328,000
PROBLEM 9-1A (Continued)
GLENDO FARM SUPPLY COMPANY
Selling and Administrative Expense Budget
For the Six Months Ending June 30, 2014
Quarter
Six
Months
1
2
Budgeted sales in units
Variable (.15 X sales) ……………………..
Fixed …………………………………………….
Total……………………………………………..
30,000
$270,000
175,000
$445,000
42,000
$378,000
175,000
$553,000
72,000
$ 648,000
350,000
$998,000
GLENDO FARM SUPPLY COMPANY
Budgeted Income Statement
For the Six Months Ending June 30, 2014
Sales ………………………………………………………………………………… $4,320,000
Cost of goods sold (72,000 X $34.20)* ………………………………… 2,462,400
Gross profit ………………………………………………………………………. 1,857,600
*Cost Per Bag
Cost Element
Quantity
Unit Cost
Total
Direct materials
Gumm …………………………..……….
Tarr ………………………………………..
Direct labor ………………………………..
Manufacturing overhead
(150% of direct labor cost) ………
Total ………………………………….
4 pounds
6 pounds
1/4 hour
$ 3.80
1.50
16.00
$15.20
9.00
4.00
6.00
$34.20
PROBLEM 9-2A
(a) DELEON INC.
Sales Budget
For the Year Ending December 31, 2014
JB 50
JB 60
Total
Expected unit sales ………..…
Unit selling price ………………
Total sales ……………………..…
400,000
X $20
$8,000,000
200,000
X $25
$5,000,000
000,000,0
$13,000,000
(b) DELEON INC.
Production Budget
For the Year Ending December 31, 2014
JB 50
JB 60
Expected unit sales ………………………...
Add: Desired ending finished
goods units …………………………..
Total required units ………………………...
Less: Beginning finished goods
units …………………………………….
Required production units ……………….
400,000
30,000
430,000
25,000
405,000
200,000
15,000
215,000
10,000
205,000
PROBLEM 9-2A (Continued)
(c) DELEON INC.
Direct Materials Budget
For the Year Ending December 31, 2014
JB 50
JB 60
Total
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 ……………………………..
405,000
X 2
810,000
30,000
840,000
40,000
800,000
X $3
$2,400,000
205,000
X 3
615,000
10,000
625,000
15,000
610,000
X $4
$2,440,000
$4,840,000
(d) DELEON INC.
Direct Labor Budget
For the Year Ending December 31, 2014
JB 50
JB 60
Total
Units to be produced ………………….
Direct labor time (hours) per
unit ………………………………………...
Total required direct labor
hours ……………………………………..
Direct labor cost per hour …………..
Total direct labor cost ………………...
405,000
X .4
162,000
X $12
$1,944,000
205,000
X .6
123,000
X $12
$1,476,000
650,000
—
301,000
X $10
$3,420,000
PROBLEM 9-2A (Continued)
(e) DELEON INC.
Budgeted Income Statement
For the Year Ending December 31, 2014
JB 50
JB 60
Total
Sales …………………………..…...
Cost of goods sold …………...
Gross profit ……………………...
Operating expenses
Selling expenses …………...
Administrative
expenses …………………..
Total operating
expenses …………….
Income before income
taxes …………………………….
Income tax expense
(30%) …………………………….
Net income ……………………….
$8,000,000
5,200,000
2,800,000
560,000
540,000
1,100,000
$1,700,000
(1)
$5,000,000
4,000,000
1,000,000
360,000
340,000
700,000
$ 300,000
(2)
$13,000,000
9,200,000
3,800,000
920,000
880,000
1,800,000
2,000,000
600,000
$ 1,400,000
(1)400,000 X $13.
(2)200,000 X $20.
PROBLEM 9-3A
(a) MARSH INDUSTRIES
Sales Budget
For the Year Ending December 31, 2014
Plan A
Plan B
Expected unit sales ……………………………..
Unit selling price ………………………………….
Total sales …………………………………………..
720,000
X $8.40
$6,048,000
(1)
900,000
X $7.50
$6,750,000
(2)
(3)
(1)$6,400,000 ÷ $8 = 800,000 X 90% = 720,000.
(2)800,000 + 100,000 = 900,000.
(3)$8.00 – $0.50
(b) MARSH INDUSTRIES
Production Budget
For the Year Ending December 31, 2014
Plan A
Plan B
Expected unit sales ……………………………………….
Add: Desired ending finished goods units ……
Total required units ……………………………………….
Less: Beginning finished goods units ……………
Required production units …………………………….
720,000
36,000
756,000
38,000
718,000
(1)
900,000
60,000
960,000
38,000
922,000
(1)720,000 X 5%
Plan A
Plan B
Total variable costs
Total fixed costs
Total costs (a)
Total units (b)
Unit cost (a) ÷ (b)
$3,087,400
1,895,000
$4,982,400
718,000
$6.94
(718,000 X $4.30)
$3,964,600
1,895,000
$5,859,600
922,000
$6.36
(922,000 X $4.30)
number of units (204,000) in Plan B.
PROBLEM 9-3A (Continued)
(d) Gross Profit
Plan A
Plan B
Sales
Cost of goods sold
Gross profit
$6,048,000
4,996,800
$1,051,200
(720,000 X $6.94)
$6,750,000
5,724,000
$1,026,000
(900,000 X $6.36)
Plan B.
PROBLEM 9-4A
(a) (1) Expected Collections from Customers
January
February
November ($250,000) …………………………..
December ($320,000) …………………………..
January ($360,000) ………………………………
February ($400,000) …………………………….
Total collections …………………………
$ 50,000
96,000
180,000
.
$326,000
$ 0
64,000
108,000
200,000
$372,000
(2) Expected Payments for Direct Materials
January
February
December ($100,000) …………………………..
January ($120,000) ………………………………
February ($125,000) …………………………….
Total payments …………………………..
$ 40,000
72,000
.
$112,000
$ 0
48,000
75,000
$123,000