CHAPTER 9
SOLUTIONS TO PROBLEMS: SET B
PROBLEM 9-1B
MERCER 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
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
units…………………………………………………
40,000
15,000
50,000
20,000
Total sales …………………………...
PROBLEM 9-1B (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 9-1B (Continued)
MERCER 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
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
$465,000
PROBLEM 9-2B
(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 9-2B (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 9-2B (Continued)
(e) URBINA INC.
Budgeted Income Statement
For the Year Ending December 31, 2017
LN 35
LN 40
Total
Sales ……………………………….
Cost of goods sold ……………
Income from operations ……
Income expense……………
$10,000,000
4,800,000
$ 4,030,000
(1)
$8,400,000
5,280,000
$2,160,000
(2)
$18,400,000
10,080,000
6,190,000
110,000
PROBLEM 9-3B
(a) OGLEBY INDUSTRIES
Sales Budget
For the Year Ending December 31, 2017
Plan A
Plan B
Expected unit sales ……………………………..
760,000
(1)
950,000
(2)
(1)800,000 X 95% = 760,000.
(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 ……………………………………….
Add: Desired ending finished goods units …….
760,000
90,000
950,000
100,000
(c) Variable costs = $4.00 per unit ($2.00 + $1.50 + $.50) for both plans.
Plan A
Plan B
Total variable costs
Total fixed costs
$3,120,000
980,000
(780,000 X $4.00)
$3,920,000
980,000
(980,000 X $4.00)
The difference is due to the fact that fixed costs are spread over a larger
number of units (200,000) in Plan B.
PROBLEM 9-3B (Continued)
(d) Gross Profit
Plan A
Plan B
Sales
$5,776,000
$6,317,500
PROBLEM 9-4B
(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 9-4B (Continued)
(b) DERBY COMPANY
Cash Budget
For the Two Months Ending February 28, 2017
January
February
Beginning cash balance ……………………………..
Add: Receipts
Total available cash ……………………………………
$ 50,000
365,500
$ 49,500
425,500
Ending cash balance ………………………………….
$ 49,500
Less: Disbursements
Direct materials ………………………………..
[See Schedule 2]
Direct labor …………………………………
Excess (deficiency) of available cash
over cash disbursements ………………………..
Financing
Add: Borrowings ……………………………………….
96,000
85,000
49,500
0
113,000
115,000
22,500
17,500
PROBLEM 9-5B
(a) WIDNER COMPANY
Westwood Store
Merchandise Purchases Budget
For the Months of July and August, 2017
July
August
Budgeted cost of goods sold ………………………..
Add: Desired ending merchandise inventory …
$260,000
43,875
(1)
(2)
$292,500
48,750
(3)
Required merchandise purchases…………………
PROBLEM 9-5B (Continued)
(b) WIDNER COMPANY
Westwood Store
Budgeted Income Statement
For the Months of July and August, 2017
July
August
Sales ………………………………………………………….
Cost of goods sold
Beginning inventory ……………………………..
Purchases ……………………………………………
$400,000
39,000
264,875
$450,000
43,875
297,375
Net income …………………………..…………………….
Operating expenses
Sales salaries……………………………………….
Advertising* …………………………..…………….
Delivery expense** ……………………………….
Sales commissions*** …………………………..
Rent …………………………………………………….
50,000
20,000
8,000
16,000
3,000
50,000
22,500
9,000
18,000
3,000
Gross profit ………………………………………………..