CHAPTER 9 Profit Planning
P 9-47 (Continued)
d. Schedule 4: Direct Labor Budget
January February March Total
Units to be
produced
e. Schedule 5: Overhead Budget
January February March Total
Budgeted direct
9-21
CHAPTER 9 Profit Planning
P 9-47 (Continued)
f. Schedule 6: Selling and Administrative Expenses Budget
January February March Total
Planned sales
(Schedule 1)…………………
…
40,000 50,000 60,000 150,000
× Variable selling
and admistrative
CHAPTER 9 Profit Planning
P 9-47 (Continued)
g. Schedule 7: Ending Finished Goods Inventory Budget
Unit cost computation:
Direct materials:
Metal (10 lbs. × $8)…………………
…
$80
h. Schedule 8: Cost of Goods Sold Budget
Direct materials used (Schedule 3)
Metal (1,660,000 × $8)*…………………………………………
$13,280,000
Components (996,000 × $5)**…………………………………
4,980,000 $18,260,000
Direct labor used (Schedule 4)…………………………………
…
7,096,500
9-23
CHAPTER 9 Profit Planning
P 9-47 (Continued)
i. Schedule 9: Budgeted Income Statement
Sales (Schedule 1)…………………………………………………………………
…
$30,750,000
j. Schedule 10: Cash Budget
January February March Total
Beginning balance…… $ 400,000 $ 50,000 $ 495,004 $ 400,000
Cash receipts…………
…
8,200,000 10,250,000 12,300,000 30,750,000
Cash available………… $8,600,000 $10,300,000 $12,795,004 $31,150,000
Less disbursements:
Note: Depreciation is not a cash item and so does not appear in the cash budget.
2. Answers will vary.
CHAPTER 9 Profit Planning
P 9-48
1. To determine accounts payable as of June 30, a schedule of purchases will be
constructed. This schedule will also be used to build the cash budget.
Let X = Cost of Sales
*0.50 × Next Month’s Cost of Sales
Since purchases are paid for in the following month, accounts payable at the end
of June is $84,000. Inventory for June 30 is $36,000.
Accounts receivable for June 30 is computed as follows:
Assets L & OE
Cash…………………………………………………………………
…
$ 13,550
Accounts receivable………………………..……………………
…
88,200
Inventory…………………..………………………………………
…
36,000
CHAPTER 9 Profit Planning
P 9-48 (Continued)
2.
July
A
ugust September Total
Beginning cash balance……
…
$ 13,550 $ 10,450 $ 10,405 $ 13,550
Cash collections*……………
…
102,600 100,700 113,300 316,600
Total cash available……… $116,150 $111,150 $123,705 $330,150
Cash disbursements:
Minimum cash balance……
…
10,000 10,000 10,000 10,000
Total cash needs…………
…
$121,700 $104,700 $121,700 $328,100
Excess (deficiency)…………
…
$ (5,550) $ 6,450 $ 2,005 $ 2,050
Financing:
Borrowings………………
…
$ 6,000 $ 6,000
*Cash collections:
Cash sales…………………… $ 27,000 $ 30,000 $ 40,500 $ 97,500
Credit sales:
Current month………………
…
12,600 14,000 18,900 45,500
…
Grange Retailers
Cash Budget
For the Quarter Ending September 30, 2014
CHAPTER 9 Profit Planning
P 9-48 (Continued)
3.
Assets L & OE
Cash………………………………………………………………
…
$ 12,005
Accounts receivable a…………………………………………… 96,600
Inventory b…………………………………………………………
…
44,000
4. Cash budgets are important in loan decisions to help determine the company’s
ability to repay the loan. A statement of cash flows would also be helpful to see how
cash has been generated and used in the past. Another key report is the balance
Grange Retailers
Balance Sheet
September 30, 2014
CHAPTER 9 Profit Planning
P 9-49
When Eisenhower said “planning is everything,” he was no doubt referring to the
extensive planning process he undertook to plan the D-Day invasion of Normandy.
That plan was comprehensive and took into account the manpower needed,
9-28
CHAPTER 9 Profit Planning
P 9-50
Beginning cash balance………………………………………………………
…
$ 27,000
Collections:
Cash sales (0.40 × $1,140,000)………….……………………………… 456,000
Credit sales:
July:
With discounta…………………………………………………………
…
150,822
Less disbursements:
Raw materials:
Julye…………………………………………………………….………
…
June
f
…………………………………………………………….………
…
Direct labor………………………………………………………..………
…
…
a(0.60 × $1,140,000) × 0.45 × 0.50 × 0.98 = $150,822
b
(0.60 × $1,140,000) × 0.45 × 0.50 = $153,900
d
f
Feinberg Company
Cash Budget
For the Month of July
$ 156,000
148,200
105,000
9-29
CHAPTER 9 Profit Planning
P 9-51
1. Schedule 1: Sales Budget (units and budgeted sales in thousands)
Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total
2. Schedule 2: Production Budget
Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total
Sales (Sch. 1)…… 65,000 70,000 75,000 90,000 300,000
9-30
CHAPTER 9 Profit Planning
P 9-51 (Continued)
3. Schedule 3: Direct Materials Purchases Budget (in thousands)
Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total
Production……………
…
78 72 80 80 310
× Materials/unit………
…
33333
4. Schedule 4: Direct Labor Budget (in thousands, except per unit/hour data)
Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total
Production……………
…
78 72 80 80 310
…
5. Schedule 5: Overhead Budget (in thousands, except per unit/hour data)
Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total
Budgeted hours………
…
390 360 400 400 1,550
…
6. Schedule 6: Selling and Administrative Expenses Budget
(in thousands, except per unit/hour data)
Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4 Total
Planned sales…………
…
65 70 75 90 300
…
9-31