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PROBLEM 9-42 (CONTINUED)
4.
Cash disbursements budget:
20x1
January
February
March
First
Quarter
Inventory purchases:
Cash payments for purchases
during the current month* ........
$258,720
$284,592
$298,144
$ 841,456
Cash payments for purchases
Other expenses:
Sales salaries ..................................
$ 42,000
$ 42,000
$ 42,000
$ 126,000
Advertising and promotion ............
32,000
32,000
32,000
96,000
PROBLEM 9-42 (CONTINUED)
5.
Summary cash budget:
20x1
January
February
March
First
Quarter
Cash receipts [from req. (2)] ................
$ 826,000
$ 908,600
$ 999,460
$2,734,060
Cash disbursements
[from req. (4)] ..................................
(766,320)
(809,152)
(851,680)
(2,427,152)
Change in cash balance
6.
Analysis of short-term financing needs:
Projected cash balance as of December 31, 20x0 ......................................
$ 70,000
PROBLEM 9-42 (CONTINUED)
7.
GLOBAL ELECTRONICS COMPANY
BUDGETED INCOME STATEMENT
FOR THE FIRST QUARTER OF 20X1
Sales revenue ........................................................................
$2,912,800
Less: Cost of goods sold .....................................................
2,038,960
8.
GLOBAL ELECTRONICS COMPANY
BUDGETED STATEMENT OF RETAINED EARNINGS
FOR THE FIRST QUARTER OF 20X1
PROBLEM 9-42 (CONTINUED)
9.
GLOBAL ELECTRONICS COMPANY
BUDGETED BALANCE SHEET
MARCH 31, 20X1
Cash ...............................................................................................................
$ 51,908
Accounts receivable* ....................................................................................
718,740
Accounts payable** .......................................................................................
$ 447,216
Bond interest payable ...................................................................................
10,000
Property taxes payable .................................................................................
1,800
*Accounts receivable, 12/31/x0 ....................................................................
$ 540,000
Sales on account [req. (1)] ............................................................................
2,184,600
Chapter 09 - Financial Planning and Analysis: The Master Budget
SOLUTIONS TO CASES
CASE 9-43 (35 MINUTES)
1. Some of the operational and behavioral benefits that are generally attributed to a
participatory budgeting process are as follows:
2. Four deficiencies in Jack Riley’s participatory policy for planning and performance
evaluation, along with recommendations of how the deficiencies can be corrected:
Deficiencies
Recommendations
The setting of constraints on fixed
expenditures includes uncontrollable fixed
costs, thereby mitigating the positive effects
of participatory budgeting.
Rewards should be based on meeting
budget and/or organizational goals or
objectives.
Chapter 09 - Financial Planning and Analysis: The Master Budget
CASE 9-44 (60 MINUTES)
1.
Yes, Triple-F Health Club should be better able to plan its cash receipts with the new
2.
a.
Factors that management should consider before adopting the new membership
plan and fee structure include:
• Costs associated with the plan changeover
3.
Because Triple-F's cash flows should be more predictable, management should be
better able to plan for and control cash disbursements. In addition, management
should be better able to plan for short-term investments when excess cash occurs or
to arrange for short-term financing when there are cash shortages.
Chapter 09 - Financial Planning and Analysis: The Master Budget
CASE 9-45 (120 MINUTES)
1.
Sales budget:
20x4
20x5
4th
Quarter
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Entire
Year
S frame unit
sales ....................
50,000
55,000
60,000
65,000
70,000
250,000
S sales price .....
$10
$10
$10
$10
x $10
$10
Chapter 09 - Financial Planning and Analysis: The Master Budget
CASE 9-45 (CONTINUED)
2.
Cash receipts budget:
20x5
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Entire
Year
Cash sales ..........................................
$ 490,000
$ 540,000
$ 590,000
$ 640,000
$2,260,000
Cash collections from credit
sales made during current
Chapter 09 - Financial Planning and Analysis: The Master Budget
3.
Production budget:
20x4
20x5
4th
Quarter
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Entire
Year
S frames:
Sales (in units) .................
50,000
55,000
60,000
65,000
70,000
250,000
Add: Desired ending
Chapter 09 - Financial Planning and Analysis: The Master Budget
CASE 9-45 (CONTINUED)
4.
Direct-material budget:*
20x4
20x5
4th
Quarter
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Entire
Year
Metal strips:
S frames to be
produced .......................
51,000
56,000
61,000
66,000
71,000
254,000
Metal quantity per
unit (ft.) ..........................
2
2
Chapter 09 - Financial Planning and Analysis: The Master Budget
CASE 9-45 (CONTINUED)
20x4
20x5
4th
Quarter
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Entire
Year
Glass sheets:
S frames to be
produced .......................
51,000
56,000
61,000
66,000
71,000
254,000
.5
Needed for L frame
production .....................
20,500
23,000
25,500
28,000
30,500
107,000
Total glass needed
for production
Price per glass
sheet ..............................
$8
$8
$8
$8
$8
$8
Cost of glass to be
CASE 9-45 (CONTINUED)
5. Cash disbursements budget:*
205
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Entire
Year
Raw-material purchases:
Cash payments for
Direct labor:
Frames produced
(S and L) ...........................
102,000
112,000
122,000
132,000
468,000
Direct-labor hours per
frame .................................
.1
.1
.1
.1
.1
Direct-labor hours to be
CASE 9-45 (CONTINUED)
1st
Quarter
2nd
Quarter
3rd
Quarter
4th
Quarter
Entire
Year
Total cash payments for
Chapter 09 - Financial Planning and Analysis: The Master Budget
CASE 9-45 (CONTINUED)
6.
Summary cash budget:
20x5
1st
Quarter
2nd
Quarter
3nd
Quarter
4th
Quarter
Entire
Year
Cash receipts [from req. (2)] ..........
$1,210,000
$1,335,000
$1,460,000
$1,585,000
$5,590,000
Quarterly installment on loan
principal ......................................
(250,000)
(250,000)
(250,000)
(250,000)
(1,000,000)
Quarterly interest payment* ...........
(25,000)
(18,750)
(12,500)
(6,250)
(62,500)
Change in cash balance during
Chapter 09 - Financial Planning and Analysis: The Master Budget
CASE 9-45 (CONTINUED)
7.
PHOTO ARTISTRY COMPANY
BUDGETED SCHEDULE OF COST OF GOODS MANUFACTURED AND SOLD
FOR THE YEAR ENDED DECEMBER 31, 20X5
Direct material:
Raw-material inventory, 1/1/x5 .................................................
$ 59,200
Total production overhead .......................................................
__ 468,000
*
Cost of goods manufactured .........................................................
$3,918,000
†
*In the budget, budgeted and applied production overhead are equal. The applied
production overhead may be verified independently as follows:
Total number of frames produced ...........................................
468,000
Chapter 09 - Financial Planning and Analysis: The Master Budget
CASE 9-45 (CONTINUED)
†The cost of goods manufactured may be verified independently as follows:
S Frames
L Frames
Frames produced ..................................................................
254,000
214,000
**The finished-goods inventory on 12/31/x5 may be verified independently as follows:
S Frames
L Frames
Projected inventory on 12/31/x5 ...........................................
15,000
13,000
††The cost of goods sold may be verified independently as follows:
S Frames
L Frames
Frames sold ...........................................................................
250,000
210,000
8.
PHOTO ARTISTRY COMPANY
BUDGETED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 20X5
Sales revenue .......................................................................
$5,650,000
CASE 9-45 (CONTINUED)
9.
PHOTO ARTISTRY COMPANY
BUDGETED STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 20X5
10.
PHOTO ARTISTRY COMPANY
BUDGETED BALANCE SHEET
DECEMBER 31, 20X5
Cash ..............................................................................................................
$ 204,500
Accounts receivable* ...................................................................................
192,000
Inventory:
Chapter 09 - Financial Planning and Analysis: The Master Budget
FOCUS ON ETHICS (See page 382 in the text.)
Is padding the budget unethical? Some accountants argue that budget padding is a
vicious cycle: budgets are padded by lower-level managers because they believe top
management will cut the budget, and budgets are cut by top management because they
believe the submitted budget has been padded by lower-level managers. This situation
