Introduction to Management Accounting

Solutions Manual

Problems: Set A
(60 min.) P 9-59A
P9-59A Comprehensive budgeting problem (Learning Objectives 2 & 3)
Requirements
1. Prepare a schedule of cash collections for January, February, and March, and for the quarter
in total.
2. Prepare a production budget.
3. Prepare a direct materials budget.
4. Prepare a cash payments budget for the direct material purchases from Requirement 3.
5. Prepare a cash payments budget for conversion costs.
6. Prepare a cash payments budget for operating expenses.
7. Prepare a combined cash budget.
8. Calculate the budgeted manufacturing cost per unit.
9. Prepare a budgeted income statement for the quarter ending March 31.

Solution:
Given
Sales Budget
December
Unit sales

January

7,000

February

8,000

Unit selling price

10

Total sales Revenue

70,000

10 $
80,000

March

9,200
$

April

9,900

May

9,700

10

10

92,000

99,000 $

8,500

10 $
97,000

10
85,000

Req. 1
Cash Collections
February
$27,600
$
56,000.0
$83,600

March
$29,700
$ 64,400.0
$94,100

Quarter
$81,300
$169,400
$250,700

February
9,200
2,475
11,675
2,300
9,375

March
9,900
2,425
12,325
2,475
9,850

Quarter
27,100
2,425
34,300
1,600
27,925

Direct Materials Budget

January
February
Units to be produced
8,700
9,375
Quantity of DM needed per unit
2
2
Quantity of DM needed for production
17,400
18,750
Desired ending inventory of DM
1,875
1,970
Total quantity of DM needed
19,275
20,720
Beginning inventory of DM
1,740
1,875
Quantity of DM to purchase
17,535
18,845
Cost per pound
2
2
Total cost of DM purchases
$35,070
$37,690

March
9,850
2
19,700
1880
21,580
1,970
19,610
2
$39,220

Quarter
27,925
2
55,850
1,880
57,730
1,740
55,990
2
$111,980

Cash collections (30%)

Credit collections (70%)
Total cash collections

January
$24,000
$
49,000.0
$73,000

Req. 2
Production Budget
Unit Sales *
Desired ending inventory
Total needed
Beginning inventory
Units to produce

January
8,000
2,300
10,300
1,600
8,700

Req. 3

Unite sales
Desired ending inventory (25%)
Total needed
Beginning inventory

April
9,700
2,125
11,825
2,425

Chapter 9: The Master Budget and Responsibility Accounting

May
8,500

Introduction to Management Accounting

Units to produce
DM needed per unit
DM needed for production
10% of DM

Solutions Manual
9,400
2
18,800

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
January
December purchases (from accounts payable
on balance sheet)
January purchases
February purchases
March purchases
total disbursements

$42,400
$7,014

$49,414

Chapter 9: The Master Budget and Responsibility Accounting

February

$28,056
$7,538
$35,594

March

Quarter

$30,152
$7,844
$37,996

$42,400
$35,070
$37,690
$7,844
$123,004

Introduction to Management Accounting

Solutions Manual

Req. 5
Schedule of Expected Cash DisbursementsConversion Costs
January
February
March
Rent (fixed)
$5,000
$5,000
$5,000
Other MOH (fixed)
$3,000
$3,000
$3,000
Variable conversion costs (DL+MOH)
$10,440
$11,250
$11,820
Total disbursements
$18,440
$19,250
$19,820

Quarter
$15,000
$9,000
$33,510
$57,510

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
January
$8,000
$1,000
$9,000

February
$9,200
$1,000
$10,200

March
$9,900
$1,000
$10,900

Quarter
$27,100
$3,000
$30,100

Combined Cash Budget

January
February
$4,500
$4,646
73,000
83,600
77,500
88,246

March
$4,202
94,100
98,302

Quarter
$4,500
250,700
255,200

37,996
19,820
10,900
16,000
84,716
13,586

123,004
57,510
30,100
33,000
10,000
253,614
1,586

-9,000
-280
-9,280
$4,306

12,000
-9,000
-280
2,720
$4,306

Variable operating expenses

Fixed operating expenses
Total disbursements

Req. 7

Cash balance, beginning

Add cash collections
Total cash available
Less cash disbursements:
For materials
For conversion costs
For operating expenses
For equipment
For taxes
Total disbursements
Excess (deficiency) of cash
Financing:
Borrowings
Repayment
Interest
Total financing
Cash balance, ending

Total interest

49,414
18,440
9,000
5,000
81,854
-4,354

35,594
19,250
10,200
12,000
10,000
87,044
1,202

9,000

3,000

9,000
$4,646

3,000
$4,202

$280

Req. 8
Budgeted Manufacturing Cost per Unit
Direct materials (2 pounds, $2 pound)
$4.00
Conversion costs per unit
$1.20
Fixed MOH
$0.80
Cost of manufacturing each unit
$6.00
Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Cost of goods sold
Gross profit
Operating expenses
Depreciation expense
Operating income
Less: interest expense
Less: Provision for income tax
Net income

271,000
-$162,600
$108,400
$30,100
$4,800
$73,500
-$280
-$14,700
$58,520

Chapter 9: The Master Budget and Responsibility Accounting