Solutions Manual, Chapter 9 41
Problem 9-24 (45 minutes)
1. a. The reasons that Marge Atkins and Pete Granger use budgetary slack
include the following:
budget.
• Employees are able to blend personal and organizational goals
by:
Also, the use of budgetary slack may affect management decision-
42 Managerial Accounting for Managers, 4th Edition
Problem 9-24 (continued)
2. The use of budgetary slack, particularly if it has a detrimental effect on
Competence
Clear reports using relevant and reliable information should be
prepared.
Confidentiality
Integrity
• Any activity that subverts the legitimate goals of the company should
be avoided.
Objectivity
(Unofficial CMA Solution)
Solutions Manual, Chapter 9 43
Problem 9-25 (45 minutes)
1. Schedule of expected cash collections:
Month
July
August
September
Quarter
From accounts receivable:
May sales
$250,000 × 3% ………
$ 7,500
$ 7,500
June sales
$300,000 × 70% ……..
210,000
210,000
$300,000 × 3% ………
$ 9,000
9,000
From budgeted sales:
July sales
$400,000 × 25% ……..
100,000
100,000
$400,000 × 70% ……..
280,000
280,000
$400,000 × 3% ………
$ 12,000
12,000
August sales
$600,000 × 25% ……..
150,000
150,000
$600,000 × 70% ……..
420,000
420,000
September sales
$320,000 × 25% ……..
80,000
80,000
Total cash collections …….
$317,500
$439,000
$512,000
$1,268,500
44 Managerial Accounting for Managers, 4th Edition
Problem 9-25 (continued)
2. Cash budget:
Month
July
August
Septem-
ber
Quarter
Beginning cash balance ….
$ 44,500
$ 28,000
$ 23,000
$ 44,500
Add receipts:
Collections from
customers ………………
317,500
439,000
512,000
1,268,500
Total cash available ……….
362,000
467,000
535,000
1,313,000
Less cash disbursements:
Merchandise purchases ..
180,000
240,000
350,000
770,000
Salaries and wages ……..
45,000
50,000
40,000
135,000
Advertising ………………..
130,000
145,000
80,000
355,000
Rent payments …………..
9,000
9,000
9,000
27,000
Equipment purchases ….
10,000
0
0
10,000
Total cash disbursements .
374,000
444,000
479,000
1,297,000
Excess (deficiency) of
cash available over
disbursements ……………
(12,000)
23,000
56,000
16,000
Financing:
Borrowings ……………….
40,000
0
0
40,000
Repayments ………………
0
0
(40,000)
(40,000)
Interest ……………………
0
0
(1,200)
(1,200)
Total financing ……………..
40,000
0
(41,200)
(1,200)
Ending cash balance ……..
$ 28,000
$ 23,000
$ 14,800
$ 14,800
have to be carried over to October.
Solutions Manual, Chapter 9 45
Problem 9-26 (60 minutes)
1. a. Schedule of expected cash collections:
Next Year’s Quarter
First
Second
Third
Fourth
Total
Current year—Fourth quarter sales:
$200,000 × 33% …………………….
$ 66,000
$ 66,000
Next year—First quarter sales:
$300,000 × 65% …………………….
195,000
195,000
$300,000 × 33% …………………….
$ 99,000
99,000
Next year—Second quarter sales:
$400,000 × 65% …………………….
260,000
260,000
$400,000 × 33% …………………….
$132,000
132,000
Next year—Third quarter sales:
$500,000 × 65% …………………….
325,000
325,000
$500,000 × 33% …………………….
$165,000
165,000
Next year—Fourth quarter sales:
$200,000 × 65% …………………….
130,000
130,000
Total cash collections ………………….
$261,000
$359,000
$457,000
$295,000
$1,372,000
46 Managerial Accounting for Managers, 4th Edition
Problem 9-26 (continued)
b. Schedule of expected cash disbursements for merchandise purchases for next year:
Quarter
First
Second
Third
Fourth
Total
Current year—Fourth quarter purchases:
$126,000 × 20% ………………………….
$ 25,200
$ 25,200
Next year—First quarter purchases:
$186,000 × 80% ………………………….
148,800
148,800
$186,000 × 20% ………………………….
$ 37,200
37,200
Next year—Second quarter purchases:
$246,000 × 80% ………………………….
196,800
196,800
$246,000 × 20% ………………………….
$ 49,200
49,200
Next year—Third quarter purchases:
$305,000 × 80% ………………………….
244,000
244,000
$305,000 × 20% ………………………….
$ 61,000
61,000
Next year—Fourth quarter purchases:
$126,000 × 80% ………………………….
100,800
100,800
Total cash disbursements ………………….
$174,000
$234,000
$293,200
$161,800
$863,000
Solutions Manual, Chapter 9 47
Problem 9-26 (continued)
2. Budgeted selling and administrative expenses for next year:
Quarter
First
Second
Third
Fourth
Year
Budgeted sales in dollars …………………
$300,000
$400,000
$500,000
$200,000
$1,400,000
Variable selling and administrative
expense rate ………………………………
× 15%
× 15%
× 15%
× 15%
× 15%
Variable selling and administrative
expense …………………………………….
$45,000
$ 60,000
$ 75,000
$30,000
$210,000
Fixed selling and administrative
expenses ……………………………………
50,000
50,000
50,000
50,000
200,000
Total selling and administrative
expenses ……………………………………
95,000
110,000
125,000
80,000
410,000
Less depreciation …………………………..
20,000
20,000
20,000
20,000
80,000
Cash disbursements for selling and
administrative expenses ………………..
$75,000
$ 90,000
$105,000
$60,000
$330,000
48 Managerial Accounting for Managers, 4th Edition
Problem 9-26 (continued)
3. Cash budget for next year:
Quarter
First
Second
Third
Fourth
Year
Beginning cash balance ………….
$ 10,000
$ 12,000
$ 10,000
$ 10,800
$ 10,000
Add collections from customers .
261,000
359,000
457,000
295,000
1,372,000
Total cash available ……………….
271,000
371,000
467,000
305,800
1,382,000
Less cash disbursements:
Merchandise purchases ……….
174,000
234,000
293,200
161,800
863,000
Selling and administrative
expenses (above) …………….
75,000
90,000
105,000
60,000
330,000
Dividends …………………………
10,000
10,000
10,000
10,000
40,000
Land ………………………………..
––
75,000
48,000
––
123,000
Total cash disbursements ……….
259,000
409,000
456,200
231,800
1,356,000
Excess (deficiency) of cash
available over disbursements ..
12,000
(38,000)
10,800
74,000
26,000
Financing:
Borrowings ……………………….
0
48,000
0
0
48,000
Repayments ………………………
0
0
0
(48,000)
(48,000)
Interest
($48,000 × 2.5% × 3) ……..
0
0
0
(3,600)
(3,600)
Total financing ……………………..
0
48,000
0
(51,600)
(3,600)
Ending cash balance ……………..
$ 12,000
$ 10,000
$ 10,800
$ 22,400
$ 22,400
Solutions Manual, Chapter 9 49
Problem 9-27 (120 minutes)
1. Schedule of expected cash collections:
April
May
June
Quarter
Cash sales ………………..
$36,000
*
$43,200
$54,000
$133,200
Credit sales1 ……………..
20,000
*
24,000
28,800
72,800
Total collections …………
$56,000
*
$67,200
$82,800
$206,000
140% of the preceding month’s sales.
* Given.
2. Merchandise purchases budget:
April
May
June
Quarter
Budgeted cost of goods
sold1 ……………………….
$45,000
*
$ 54,000
*
$67,500
$166,500
Add desired ending
merchandise
inventory2 ………………..
43,200
*
54,000
28,800
*
28,800
Total needs …………………
88,200
*
108,000
96,300
195,300
Less beginning
merchandise inventory ..
36,000
*
43,200
54,000
36,000
Required purchases ………
$52,200
*
$ 64,800
$42,300
$159,300
* Given.
Schedule of expected cash disbursements—merchandise purchases
April
May
June
Quarter
March purchases ………….
$21,750
*
$ 21,750
*
April purchases ……………
26,100
*
$26,100
*
52,200
*
May purchases …………….
32,400
$32,400
64,800
June purchases ……………
21,150
21,150
Total disbursements ……..
$47,850
*
$58,500
$53,550
$159,900
* Given.
50 Managerial Accounting for Managers, 4th Edition
Problem 9-27 (continued)
3. Cash budget:
April
May
June
Quarter
Beginning cash balance .
$ 8,000
*
$ 4,350
$ 4,590
$ 8,000
Add collections from
customers ………………
56,000
*
67,200
82,800
206,000
Total cash available …….
64,000
*
71,550
87,390
214,000
Less cash
disbursements:
For inventory …………..
47,850
*
58,500
53,550
159,900
For expenses …………..
13,300
*
15,460
18,700
47,460
For equipment …………
1,500
*
0
0
1,500
Total cash
disbursements …………
62,650
*
73,960
72,250
208,860
Excess (deficiency) of
cash available over
disbursements …………
1,350
*
(2,410)
15,140
5,140
Financing:
Borrowings ……………..
3,000
7,000
0
10,000
Repayments ……………
0
0
(10,000)
(10,000)
Interest ($3,000 ×
1% × 3 + $7,000 ×
1% × 2) ………………
0
0
(230)
(230)
Total financing …………..
3,000
7,000
(10,230)
(230)
Ending cash balance ……
$ 4,350
$ 4,590
$ 4,910
$ 4,910
* Given.