CHAPTER 23
SOLUTIONS TO PROBLEMS: SET B
PROBLEM 23–1B
MERCER FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
Total sales …………………………...
Expected unit sales ……………….
40,000
50,000
90,000
MERCER FARM SUPPLY COMPANY
Production Budget
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
100,000
Expected unit sales …………………………………….
Add: Desired ending finished goods
40,000
50,000
PROBLEM 23-1B (Continued)
MERCER FARM SUPPLY COMPANY
Direct Materials Budget—Crup
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
Units to be produced …………………………...
Direct materials per unit ……………………….
Total pounds needed for production …….
Add: Desired ending direct materials
45,000
X 5
225,000
55,000
X 5
275,000
MERCER FARM SUPPLY COMPANY
Direct Labor Budget
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
Units to be produced …………………….
Direct labor time (hours) per unit ……
45,000
X .25
55,000
X .25
PROBLEM 23-1B (Continued)
MERCER FARM SUPPLY COMPANY
Selling and Administrative Expense Budget
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
$465,000
Budgeted sales in units …………………
40,000
50,000
90,000
MERCER FARM SUPPLY COMPANY
Budgeted Income Statement
For the Six Months Ending June 30, 2017
Sales ……………………………………………………………………………….. $5,670,000
Cost of goods sold (90,000 X $40) …………………………………….. 3,600,000
Gross profit ……………………………………………………………………… 2,070,000
Cost Per Bag
Cost Element
Quantity
Unit Cost
Total
Direct materials
Crup ……………………………………..
5 pounds
$ 3.80
$19.00
PROBLEM 23–2B
(a) URBINA INC.
Sales Budget
For the Year Ending December 31, 2017
LN 35
LN 40
Total
Expected unit sales ……………
400,000
240,000
(b) URBINA INC.
Production Budget
For the Year Ending December 31, 2017
LN 35
LN 40
Less: Beginning finished goods
Expected unit sales ………………………….
Add: Desired ending finished
400,000
240,000
PROBLEM 23-2B (Continued)
(c) URBINA INC.
Direct Materials Budget
For the Year Ending December 31, 2017
LN 35
LN 40
Total
Units to be produced ………………….
Direct materials per unit ……………..
Total pounds needed for
390,000
X 2
250,000
X 3
(d) URBINA INC.
Direct Labor Budget
For the Year Ending December 31, 2017
LN 35
LN 40
Total
Units to be produced ………………….
Direct labor time (hours) per
390,000
250,000
550,000
PROBLEM 23-2B (Continued)
(e) URBINA INC.
Budgeted Income Statement
For the Year Ending December 31, 2017
LN 35
LN 40
Total
Sales ……………………………….
Cost of goods sold ……………
Gross profit ……………………..
Income from operations ……
Income expense……………
Income before income
$10,000,000
4,800,000
5,200,000
$ 4,030,000
(1)
$8,400,000
5,280,000
3,120,000
$2,160,000
(2)
$18,400,000
10,080,000
8,320,000
6,190,000
110,000
PROBLEM 23–3B
(a) OGLEBY INDUSTRIES
Sales Budget
For the Year Ending December 31, 2017
Plan A
Plan B
Expected unit sales ……………………………..
Unit selling price ………………………………….
760,000
X $7.60
(1)
950,000
X $6.65
(2)
(3)
(b) OGLEBY INDUSTRIES
Production Budget
For the Year Ending December 31, 2017
Plan A
Plan B
Total required units …………………………..…………..
Required production units ……………………………..
Expected unit sales ……………………………………….
760,000
950,000
(c) Variable costs = $4.00 per unit ($2.00 + $1.50 + $.50) for both plans.
Plan A
Plan B
Total variable costs
$3,120,000
(780,000 X $4.00)
$3,920,000
(980,000 X $4.00)
PROBLEM 23-3B (Continued)
(d) Gross Profit
Plan A
Plan B
Sales
$5,776,000
$6,317,500
PROBLEM 23–4B
(a) 1. Expected Collections from Customers
January
February
November ($200,000) …………………………....
December ($290,000) …………………………….
$ 30,000
72,500
$ 0
43,500
2. Expected Payments for Direct Materials
January
February
$113,000
December ($90,000) ………………………………
$63,000
$ 0
PROBLEM 23-4B (Continued)
(b) DERBY COMPANY
Cash Budget
For the Two Months Ending February 28, 2017
January
February
Beginning cash balance ……………………………..
Add: Receipts
Collections from customers ………………
Total available cash ……………………………………
$ 50,000
312,500
365,500
$ 49,500
371,000
425,500
Ending cash balance ………………………………….
$ 49,500
Less: Disbursements
Direct materials ………………………………..
[See Schedule 2]
Direct labor …………………………………
96,000
85,000
113,000
115,000
PROBLEM 23–5B
(a) WIDNER COMPANY
Westwood Store
Merchandise Purchases Budget
For the Months of July and August, 2017
July
August
Required merchandise purchases…………………
Budgeted cost of goods sold ………………………..
Add: Desired ending merchandise inventory …
$260,000
43,875
(1)
(2)
$292,500
48,750
(3)
PROBLEM 23-5B (Continued)
(b) WIDNER COMPANY
Westwood Store
Budgeted Income Statement
For the Months of July and August, 2017
July
August
Gross profit ………………………………………………..
Sales …………………………..……………………………..
Cost of goods sold
Beginning inventory ……………………………..
Purchases ……………………………………………
Cost of goods available for sale …………….
$400,000
39,000
264,875
303,875
$450,000
43,875
297,375
341,250
Net income …………………………..…………………….
Operating expenses
Sales salaries……………………………………….
Advertising* …………………………..…………….
Insurance …………………………………………….
Total ……………………………………………..
50,000
20,000
300
98,500
50,000
22,500
300
104,000