CHAPTER 9
SOLUTIONS TO EXERCISES—SET B
EXERCISE 9-1B
JARGON ELECTRONICS INC.
Sales Budget
For the Six Months Ending June 30, 2017
Quarter 1
Quarter 2
Six Months
Product
Units
Selling
Price
Total
Sales
Units
Selling
Price
Total
Sales
Units
Selling
Price
Total
Sales
XQ–103
20,000
$10
$200,000
25,000
$10
$250,000
45,000
$10
$450,000
VARGA AND MENENDEZ, CPAs
Sales Revenue Budget
For the Year Ending December 31, 2017
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
2,200
$60
$132,000
1,600
$60
96,000
2,000
$60
$120,000
2,400
$60
$144,000
Year
Billable
Billable
Total
Dept.
Hours
Rate
Rev.
Auditing
8,200a
$ 60
$ 492,000
Tax
9,900b
693,000
Consulting
6,000c
$1,665,000
Tax
3,000
210,000
2,400
2,000
140,000
2,500
175,000
Consulting
1,500
1,500
1,500
1,500
$462,000
$380,000
$439,000
EXERCISE 9-3B
VILLA COMPANY
Production Budget
For the Year Ending December 31, 2016
Product HD-240
Quarter
1
2
3
4
Year
Expected unit sales
Add: Desired ending
finished goods units(1)
6,000
2,100
7,000
2,700
9,000
3,000
10,000
2,250
(2)
EXERCISE 9-4B
ROSE INDUSTRIES
Direct Materials Purchases Budget
For the Quarter Ending March 31, 2017
January
February
March
Units to be produced
Direct materials per unit
Total pounds needed for production
Add: Desired ending direct materials
10,000
X 3
30,000
8,000
X 3
24,000
5,000
X 3
15,000
EXERCISE 9-5B
(a) MOLLY COMPANY
Production Budget
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
Expected unit sales
Add: Desired ending finished goods
units
5,000
2,100
(1)
6,000
2,450
(2)
EXERCISE 9-5B (Continued)
(b) MOLLY COMPANY
Direct Materials Budget
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
5,350
X 2
10,700
6,350
X 2
12,700
EXERCISE 9-6B
Finished goods:
Ending inventory ……………………………………………………….. 2,190
Plus: Sales ………………………………………………………………… 2,475
Total required ………………………………………………………………… 4,665
Less: beginning inventory …………………………..…………….. 2,230
Production required ……………………………………………………….. 2,435
EXERCISE 9-7B
MASON, INC.
Direct Labor Budget
For the Year Ending December 31, 2017
Quarter
1
2
3
4
Year
Units to be produced
Direct labor time
20,000
25,000
35,000
30,000
110,000
EXERCISE 9-8B
WANG COMPANY
Production Budget
For the Quarter Ending March 31, 2017
Jan Feb Mar Total
Sales in units 12,000 14,000 10,000 36,000
WANG COMPANY
Direct Labor Budget
For the Quarter Ending March 31, 2017
Jan Feb Mar Total
Production in units 11,000 10,000 11,000
Direct labor hours per unit X 3.00 X 3.00 X 2.50
Total direct labor cost
EXERCISE 9-9B
CHAD COMPANY
Manufacturing Overhead Budget
For the Year Ending December 31, 2017
Quarter
1
2
3
4
Year
($462,000 ÷ 82,500)
Variable costs
Indirect materials ($.70/hour)
Indirect labor ($1.20/hour)
Maintenance ($.50/hour)
Fixed costs
Supervisory salaries
Depreciation
$ 10,500
18,000
7,500
35,000
16,000
$ 12,600
21,600
9,000
35,000
16,000
$ 15,750
27,000
11,250
35,000
16,000
$ 18,900
32,400
13,500
35,000
16,000
$ 57,750
99,000
41,250
140,000
64,000
EXERCISE 9-10B
MORGAN COMPANY
Selling and Administrative Expense Budget
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
136,000
Budgeted sales in units
Variable expenses (1)
Sales commissions
33,000
$33,000
35,000
$35,000
$ 68,000
(1) Variable costs per dollar of sales are: Sales commissions $.05,
Delivery expense $.02, and Advertising $.03.
EXERCISE 9-10B (Continued)
MORGAN COMPANY
Selling and Administrative Expense Budget (Continued)
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
Fixed expenses
Sales salaries
Office salaries
Depreciation
15,000
6,000
4,200
15,000
6,000
4,200
30,000
12,000
8,400
EXERCISE 9-11B
(a) CHRIS COMPANY
Production Budget
For the Two Months Ending February 28, 2017
______________________________________________________________
January
February
Expected unit sales ………………………………………..
15,000
17,000
Add: Desired ending finished goods inventory …
4,250*
4,500*
(b) CHRIS COMPANY
Direct Materials Budget
For the Month Ending January 31, 2017
______________________________________________________________
January
Units to be produced …………………………..……………………….
15,500
Direct material pounds per unit……………………………………..
X 2
Total pounds needed for production ……………………………..
31,000
Add: Desired pounds in ending materials inventory ………
6,900*
Total materials required ………………………………………………..
Less: Beginning direct materials (pounds) …………………….
Direct materials purchases ……………………………………………
31,700
Cost per pound …………………………………………………………….
X $5
Total cost of direct materials purchases ………………………..
Total required units …………………………..……………
Less: Beginning finished goods inventory ………
Required production units ………………………………
EXERCISE 9-12B
(a) SAMUELS COMPANY
Computation of Cost of Goods Sold
For the Year Ending December 31, 2017
Cost of one unit of finished goods:
Direct materials (2 X $5) ………………………………………………… $10
(b) SAMUELS COMPANY
Budgeted Income Statement
For the Year Ending December 31, 2017
Sales (34,000 X $75) …………………………………………………. $2,550,000
Cost of goods sold (see part (a)) ………………………………. 2,176,000
EXERCISE 9-13B
CHINA COMPANY
Cash Budget
For the Two Months Ending February 28, 2017
January
February
Beginning cash balance ……………………………………
Add: Receipts
Collections from customers …………………..
Sale of marketable securities …………………
Total receipts …………………………………….
Total available cash ………………………………………….
Less: Disbursements
$ 40,000
90,000
10,000
100,000
140,000
$ 25,000
200,000
0
200,000
225,000
EXERCISE 9-14B
MANGO CORPORATION
Cash Budget
For the Quarter Ended March 31, 2017
Beginning cash balance ……………………………………………………
Add: Receipts
Collections from customers …………………………………..
Less: Disbursements
Direct materials …………………………………………………….
Direct labor …………………………..………………………………
Manufacturing overhead ………………………………………..
$ 25,000
180,000
45,000
70,000
35,000
EXERCISE 9-15B
(a) ADAMS COMPANY
Cash Budget
For the Month Ended July 31, 2017
Beginning cash balance ………………………. $ 55,000
Less: Disbursements
Merchandise purchases ……………. $71,300
Operating expenses ………………….. 36,800
Equipment purchase ………………… 20,500
Total cash disbursements …………………… (128,600)
(b) An advantage of cash budgeting is that it allows cash shortfalls to
be predicted. If the timing of future cash shortfalls is known,
EXERCISE 9-16B
(a) APPLE COMPANY
Schedule of Expected Collections from Customers
For the Month of March
March
March cash sales (40% X $300,000)………………………………..
$120,000
Collection of March credit sales
[(60% X $300,000) X 10%] …………………………………………..
18,000
Collection of February credit sales
(b) APPLE COMPANY
Schedule of Expected Payments for Direct Materials
For the Month of March
March
March cash purchases (50% X $45,000) ………………………….
$22,500
[(50% X $45,000) X 60%] …………………………………………….
[(50% X $35,000) X 40%] …………………………………………….
7,000
Total payments ………………………………………………….
$43,000
[(60% X $210,000) X 50%] …………………………………………..
63,000
[(60% X $190,000) X 36%] …………………………………………..
41,040
Total collections ………………………………………………..
EXERCISE 9-17B
(a) (1)
GUARD YARDS LANDSCAPING INC.
Schedule of Expected Collections From Clients
For the Quarter Ending March 31, 2017
January
February
March
Quarter
November ($100,000) ……………………………………..
December ($70,000) ……………………………………….
$10,000
28,000
$ 7,000
$ 10,000
35,000
(2)
GUARD YARDS LANDSCAPING INC.
Schedule of Expected Payments for Landscaping Supplies
For the Quarter Ending March 31, 2014
_______________________________________________________
January
February
March
Quarter
December ($16,000) ……………………………………….
$ 6,400
$ 6,400
(b)
(1)
Accounts receivable at March 31, 2017: ($120,000 X 10%) +
($130,000 X 50%) = $77,000
(2)
Accounts payable at March 31, 2017: ($20,000 X 40%) = $8,000
EXERCISE 9-18B
AVANTE DENTAL CLINIC
Cash Budget
For the Two Quarters Ending June 30, 2017
1st Quarter
2nd Quarter
$ 20,000
Beginning cash balance ……………………………………
Add: Receipts
Collections from clients …………………………
Sale of equipment ………………………………….
Less: Disbursements
Professional salaries ……………………………..
Excess (deficiency) of cash available
over cash disbursements …………………………..…
Financing
Borrowings ………………………………………………….
$ 30,000
245,000
12,000
145,000
0
20,000
$ 20,000
390,000
0
145,000
31,000
EXERCISE 9-19B
(a) ABDUL STORES
Merchandise Purchases Budget
For the Month Ending June 30, 2017
Budgeted cost of goods sold ($520,000 X 65%) ……………… $338,000
Add: Desired ending merchandise inventory
(b) ABDUL STORES
Budgeted Income Statement
For the Month Ending June 30, 2017
Sales…………………………………………………………………………… $520,000
SOLUTIONS TO PROBLEMS—SET C
PROBLEM 9-1C
BOLIVAR FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
Expected unit sales ………………
40,000
50,000
90,000
BOLIVAR 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
Total sales …………………………...
PROBLEM 9-1C (Continued)
BOLIVAR 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 6
270,000
55,000
X 6
330,000
BOLIVAR FARM SUPPLY COMPANY
Direct Labor Budget
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
Units to be produced ……………………..
45,000
55,000
PROBLEM 9-1C (Continued)
BOLIVAR FARM SUPPLY COMPANY
Selling and Administrative Expense Budget
For the Six Months Ending June 30, 2017
Quarter
Six
Months
1
2
Budgeted sales in units …………………
40,000
50,000
90,000
BOLIVAR FARM SUPPLY COMPANY
Budgeted Income Statement
For the Six Months Ending June 30, 2017
Sales ………………………………………………………………………………. $5,400,000
Cost of goods sold (90,000 X $49) …………………………………….. 4,410,000
Gross profit …………………………………………………………………….. 990,000
Cost Per Bag
Cost Element
Quantity
Unit Cost
Total
Direct materials
Crup ……………………………………..
6 pounds
$ 4.00
$24.00
PROBLEM 9-2C
(a) BACON INC.
Sales Budget
For the Year Ending December 31, 2017
LN 35
LN 40
Total
Expected unit sales ……………
400,000
240,000
(b) BACON INC.
Production Budget
For the Year Ending December 31, 2017
LN 35
LN 40
Total
Less: Beginning finished goods
410,000
Expected unit sales …………………………
Add: Desired ending finished
400,000
240,000
PROBLEM 9-2C (Continued)
(c) BACON 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
410,000
X 2
245,000
X 3
(d) BACON 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
410,000
245,000
550,000
$3,880,000
PROBLEM 9-2C (Continued)
(e) BACON INC.
Budgeted Income Statement
For the Year Ending December 31, 2017
LN 35
LN 40
Total
Sales ………………………………..
Cost of goods sold ……………
expenses …………………..
Total operating
expenses ……………
Income before income
$12,000,000
4,400,000
520,000
1,370,000
(1)
$8,400,000
4,800,000
180,000
570,000
(2)
$20,400,000
9,200,000
700,000
1,940,000
PROBLEM 9-3C
(a) RUPERT INDUSTRIES
Sales Budget
For the Year Ending December 31, 2017
Plan A
Plan B
Expected unit sales ……………………………..
Unit selling price …………………………………
720,000
X $7.60
(1)
900,000
X $6.30
(2)
(3)
(b) RUPERT INDUSTRIES
Production Budget
For the Year Ending December 31, 2017
Plan A
Plan B
Total required units ……………………………………….
Required production units ……………………………..
Expected unit sales ……………………………………….
Add: Desired ending finished goods units …….
720,000
94,000
900,000
100,000
(c) Variable costs = $4.00 per unit ($2.00 + $1.50 + $.50) for both plans.
Plan A
Plan B
Total variable costs
$2,976,000
(744,000 X $4.00)
$3,720,000
(930,000 X $4.00)
The difference is due to the fact that fixed costs are spread over a
larger number of units (186,000) in Plan B.
PROBLEM 9-3C (Continued)
(d) Gross Profit
Plan A
Plan B
Sales
$5,472,000
$5,670,000
PROBLEM 9-4C
(a) (1) Expected Collections from Customers
January
February
November ($200,000) …………………………….
December ($280,000) …………………………….
$ 20,000
112,000
$ 0
28,000
(2) Expected Payments for Direct Materials
January
February
$117,000
December ($80,000) ………………………………
$56,000
$ 0
PROBLEM 9-4C (Continued)
(b) MURDOCK COMPANY
Cash Budget
For the Two Months Ending February 28, 2017
January
February
Beginning cash balance …………………………….
Add: Receipts
Collections from customers ………………
[See Schedule (1)]
$ 50,000
307,000
$ 50,000
368,000
PROBLEM 9-5C
(a) ALE COMPANY
Weston Store
Merchandise Purchases Budget
For the Months of July and August, 2017
July
August
Budgeted cost of goods sold ………………………..
Add: Desired ending merchandise inventory ….
$270,000
60,000
*
(1)
$300,000
66,000
**
(2)
PROBLEM 9-5C (Continued)
(b) ALE COMPANY
Weston Store
Budgeted Income Statement
For the Months of July and August, 2017
July
August
Sales ………………………………………………………….
Cost of goods sold
Beginning inventory …………………………….
Purchases …………………………………………..
$450,000
54,000
276,000
$500,000
60,000
306,000
Gross profit ………………………………………………..