Concept explainers
Problem 22-4B Manufacturing: Preparation of a complete
The management of Nabar Manufacturing prepared the following estimated balance sheet for June 2019.
Assets Liabilities and Equity
Cash.............................. $ 40,000 Accounts payable................... $ 51,400
Accounts receivable ................. 249,900 Income taxes payable................ 10,000
Raw materials inventory.............. 35,000 Short-term notes payable ............ 24,000
Finished goods inventory............. 241,080 Total current liabilities ............... 85,400
Total current assets.................. 565,980 Long-term note payable.............. 300,000
Equipment......................... 720,000 Total liabilities...................... 385,400
Accumulated
Equipment.net...................... 430,000
Total
Total assets......................... $1,045,980 Total liabilities and equity ............ $1,045,980
To prepare a master budget for July, August, and September of 2019. Management gathers the following information:
3. Sales were 20,000 units in June.
b. Company policy calls for a given month's ending finished goods inventory to equal 70% of the next month's expected unit sales. The June 30 finished goods inventory is 16,800 units, which does not comply with the policy.
C. Company policy calls for a given month's ending raw materials inventory to equal 20% of the next month's materials requirements. The June 30 raw materials inventory is 4,375 units (which also fails to meet the policy). The budgeted September 30 raw materials inventory is 1,980 units. Raw materials cost $8 per unit. Each finished unit requires 0.50 units of raw materials.
d. Each finished unit requires 0.50 hours of direct labor at a rate of $16 per hour. e.
$20,000 per month is treated as fixed factory overhead. f. Monthly general and administrative expenses include $9,000 administrative salaries and 0.9% monthly interest on the long-term note payable. g. Sales representatives commissions are 10% of sales and are paid in the month of the sales. The sales manager's monthly salary is $3,500.
h. The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none are collected in the month of the sale).
i. All raw materials purchases are on credit, and no payables arise from any other transactions. One month's raw materials purchases are fully paid in the next month.
j. Dividends of $20,000 are to be declared and paid in August.
k. Income taxes payable at June 30 will be paid in July. Income tax expense will be assessed at 35% in the quarter and paid in October.
l. Equipment purchases of $100,000 are budgeted for the last day of September.
m. The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
A sales budget is a budget which is used to estimate the expected units of sales in dollars and also helps to determine the estimated earnings during a period.
Requirement 1-
To prepare:
Monthly sales budget
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
Monthly sales budget | ||||
July | August | September | Total | |
Sales in units | 21,000 | 19,000 | 20,000 | 60,000 |
Selling price per unit | $17 | $17 | $17 | $17 |
Dollar sales value($) | 357,000 | 323,000 | 340,000 | 1,020,000 |
Explanation of Solution
Given,
- Sales units for July = 21,000
- Sales units for August = 19,000
- Sales units for September = 20,000
- Selling price per unit = $17
Dollar sales value for each month is calculated as follows-
Conclusion:
Thus, the monthly sales budget has been prepared.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
Requirement 2-
To prepare:
Production budget
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
Production budgets | ||||
July | August | September | Total | |
Budgeted Sales for the month | 21,000 | 19,000 | 20,000 | |
Ending inventory in units | 13,300 | 14,000 | 16,800 | |
Total Needs | 34,300 | 33,000 | 36,800 | |
Less: Beginning inventory | (16,800) | (13,300) | (14,000) | |
Units to be produced | 17,500 | 19,700 | 22,800 | 60,000 |
Explanation of Solution
First, ending inventory in units is required to be calculated-
Calculation of ending inventory in units is as under-
Now, Merchandise purchases required is to be calculated-
Given, Expected sales of the month-
- July − 21,000 units
- August − 19,000 units
- September − 20,000 units Ending inventory −
- July − 13,300 units
- August − 14,000 units
- September − 16,800 units
- Ending inventory of the previous month shall be beginning inventory of current month.
Beginning inventory-
- July − 16,800 units (given)
- August − 13,300 units
- September − 14,000 units Total requirement for the month of July, August and September-
Conclusion:
Thus, the Production budget has been prepared for the months of July, August and September.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
Requirement 3-
To prepare:
Raw materials Budget
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
Raw Materials budgets | ||||
July | August | September | Total | |
Production Budget | 17,500 | 19,700 | 22,800 | |
Materials requirement per unit | 0.5 | 0.5 | 0.5 | |
Materials needed for production | 8,750 | 9,850 | 11,400 | |
Add: Budgeted ending raw material inventory | 1,970 | 2,280 | 1,980 | |
Total material requirements (units) | 10,720 | 12,130 | 13,380 | |
Less: Desired opening raw material inventory | (4,375) | (1,970) | (2,280) | |
Materials to be purchased | 6,345 | 10,160 | 11,100 | 27,605 |
Materials price per unit | $8 | $8 | $8 | $8 |
Total cost of direct material purchases | $50,760 | $81,280 | $88,800 | $220,840 |
Explanation of Solution
Given,
- Materials requirement per unit = 0.5
- Desired opening raw material inventory for June = 4,375 units
- Desired ending raw material inventory for September = 1,980 units
- Materials price per unit = $8
- Production Budget = Calculated in Req.2
Ending inventory is 50% of next month's Materials requirements-
Beginning raw material inventory-
- Ending raw material inventory of the previous month shall be beginning raw material inventory of current month.
- July − 4,375 units
- August −1,970units
- September − 2,280 units
Now, we need to calculate Materials to be purchased-
Total cost of direct materials purchases is calculated below-
Conclusion:
Thus, Raw materials budget has been prepared.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
Requirement 4-
To prepare:
Direct Labor Budget
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
Direct Labor budgets | ||||
July | August | September | Total | |
Budgeted production (units) | 17,500 | 19,700 | 22,800 | |
Labor requirements per unit (hours) | 0.5 | 0.5 | 0.5 | |
Total labor hours needed | 8,750 | 9,850 | 11,400 | 30,000 |
Labor rate (per hour) | $16 | $16 | $16 | $16 |
Labor Dollars | $140,000 | $157,600 | $182,400 | $480,000 |
Explanation of Solution
Given,
- Production Budget = Calculated in Req.2
- Labor requirements per unit= 0.5
- Labor rate (per hour) = $16
Total labor hours needed is calculated as below-
Now, we need to calculate Labor dollars-
Conclusion:
Thus, Labor budget is prepared.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
Requirement 5-
To prepare:
Factory overhead Budget
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
Factory overhead budget | ||||
July | August | September | Total | |
Labor hours needed | 17,500 | 19,700 | 22,800 | |
Variable factory overhead rate | $1.35 | $1.35 | $1.35 | |
Budgeted variable overhead | $23,625 | $26,595 | $30,780 | $81,000 |
Budgeted fixed overhead | $20,000 | $20,000 | $20,000 | $60,000 |
Budgeted total overhead | $43,625 | $46,595 | $50,780 | $141,000 |
Explanation of Solution
Given,
- Labor hours needed- Calculated in Requirement 4
- Variable factory overhead rate - $1.35
- Budgeted fixed overhead (Depreciation)- $20,000 First we need to calculate Budgeted variable overhead-
Budgeted variable overhead is calculated as under-
Budgeted total overhead-
Conclusion:
Thus, factory overhead budget is prepared.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
Requirement 6-
To prepare:
Selling expense Budget
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
Selling Expense budgets | ||||
July ($) | August ($) | September ($) | Total ($) | |
Sales commissions | 35,700 | 32,300 | 34,000 | 102,000 |
Sales salaries | 3,500 | 3,500 | 3,500 | 10,500 |
Selling expenses | 39,200 | 35,800 | 37,500 | 112,500 |
Explanation of Solution
First we need to calculate Sales commissions.
Calculation of sales commission is as under-
- Sales are calculated in Requirement 1
Sales salary for each month- $3,500 (Given)
Selling expense for each month is calculated as under-
Conclusion:
Thus, the selling expense budget is prepared for the month of July, August and September.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
Requirement 7-
To prepare:
General and administrative expense Budget
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
General and administrative budgets | ||||
July | August | September | Total ($) | |
Salaries | 9,000 | 9,000 | 9,000 | 27,000 |
Interest on long term note | 2,700 | 2,700 | 2,700 | 8,100 |
Total general and administrative expenses | 11,700 | 11,700 | 11,700 | 35,100 |
Explanation of Solution
Given:
- Salaries Expense = $9,000 per month
Interest on long term note-
Total General and administrative expenses for each month is calculated as under-
Conclusion:
Thus, the general and administrative expenses budget is prepared for the month of July, August and September. Expense for each month is $11,700.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
Requirement 8-
To prepare:
Cash Budget
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
Cash Budget | ||||
July | August | September | ||
Beginning cash balance | 40,000 | 96,835 | 141,180 | |
Add: Cash receipts from customers | 357,000 | 346,800 | 328,100 | |
Total cash available | 397,000 | 443,635 | 469,280 | |
Less: Cash disbursements | ||||
Payment for raw materials | 51,400 | 50,760 | 81,280 | |
Payment for direct labor | 140,000 | 157,600 | 182,400 | |
Payments for variable overhead | 23,625 | 26,595 | 30,780 | |
Sales commission | 35,700 | 32,300 | 34,000 | |
Sales salaries | 3,500 | 3,500 | 3,500 | |
General and administrative salaries | 9,000 | 9,000 | 9,000 | |
Dividends | 0 | 20,000 | 0 | |
Loan interest | 240 | 0 | 0 | |
Long term note interest | 2,700 | 2,700 | 2,700 | |
Income taxes | 10,000 | 0 | 0 | |
Purchase of equipment | 0 | 0 | 100,000 | |
Total cash disbursements | 276,165 | 302,455 | 443,660 | |
Excess of cash receipts over cash disbursements | 120,835 | 141,180 | 25,620 | |
Additional loan (Loan repayment) | (24,000) | 14,380 | ||
Ending cash balance | 96,835 | 141,180 | 40,000 |
Explanation of Solution
Given-
- Beginning cash balance = $40,000
- Payment for raw materials − Calculated in Req. 3
- Payment for direct labor - Calculated in Req. 4
- Payments for variable overhead - Calculated in Req. 5
- Sales commission - Calculated in Req. 6
- Sales salaries - Calculated in Req. 6
- General and administrative salaries - Calculated in Req.7
- Long term note interest - Calculated in Req.7
- Dividends - $20,000
- Purchase of equipment - $100,000
- Income taxes - $10,000 Total cash available
Calculation of cash receipts from customers is as under-
-It is given that amount of credit sales will be collected in the month following the sale.
Calculation of cash receipts from customers- | |||
July | August | September | |
Total budgeted sales (Req.1) | 357,000 | 323,000 | 340,000 |
Cash Sales (30%) | 107,100 | 96,900 | 102,000 |
Credit sales (70%) | 249,900 | 226,100 | 238,000 |
Total cash receipts from customers | |||
Current month's cash sales | 107,100 | 96,900 | 102,000 |
Collection of receivables | 249,900 | 249,900 | 226,100 |
Total cash receipts | 357,000 | 346,800 | 328,100 |
Total cash available-
Total cash disbursementsLoan interest-
Total cash disbursements-
Excess of cash receipts over cash disbursements
- It is given that Company need to maintain minimum cash balance of $40,000. In September month they don't have sufficient cash balance so, need to borrow loan to meet minimum cash balance as $40,000.
Loan amount for June month-
Available cash balance=$25,620
-Loan is repaid in the month of July of $24,000.
Ending cash balance-
Conclusion:
Thus, cash budget is prepared with ending cash balance in the month of September $40,000.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
Requirement 9-
To prepare:
Budgeted income statement
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
Income Statement | ||||
Particulars | Amount ($) | Amount ($) | ||
Sales | 1,020,000 | |||
Cost of merchandise sold | 861,000 | |||
Gross Profit | 159,000 | |||
Operating expenses: | ||||
Sales Commissions | 102,000 | |||
Sales Salaries | 10,500 | |||
Long term note interest | 8,100 | |||
General and administrative salaries | 27,000 | |||
Interest expense | 240 | 147,840 | ||
Income before tax | 11,160 | |||
Tax @ 35% | 3,906 | |||
Net operating income | 7,254 |
Explanation of Solution
Given,
- Sales = $1,020,000 Calculated in Req.1
- Sales commission - $102,000 Calculated in Req. 6
- Sales salaries - $10,500 Calculated in Req. 6
- General and administrative salaries - $27,000 Calculated in Req.7
- Long term note interest - $8,100 Calculated in Req.7
- Interest expense -$240 Calculated in Req.8
Cost of merchandise sold-
Gross profit is calculated as under-
Total operating expenses-
Income before tax-
Tax Expense-
Net Operating income is calculated as under-
Conclusion:
Thus, Income statement is prepared for the quarter.
Concept Introduction:
Master Budget-
Master budget is a sum of all lower level budgets which are produced at different functional areas of the company. It helps in providing good coordination among all level managers. It also helps the manager in evaluating the actual performance and comparing it with the standards set by them.
Requirement 10-
To prepare:
Budgeted Balance sheet.
Answer to Problem 4BPSB
NABAR Manufacturing | ||||
Balance sheet as of September 30, 2019 | ||||
Amount ($) | Amount ($) | |||
Assets | ||||
Cash | 40,000 | |||
Accounts receivable | 238,000 | |||
Raw materials Inventory | 15,840 | |||
Finished goods inventory | 241,080 | |||
Total current assets | 534,920 | |||
Equipment | 820,000 | |||
Less: Accumulated depreciation | (300,000) | |||
Equipment net | 520,000 | |||
Total assets | 1,054,920 | |||
Stockholder's Equity and Liabilities | ||||
Accounts payable | 88,800 | |||
Bank loan payable | 14,380 | |||
Tax payable | 3,906 | |||
Current liabilities | 107,086 | |||
Long term note payable | 300,000 | |||
Common stock | 600,000 | |||
Retained earnings | 47,834 | |||
Total Stockholder's Equity | 647,834 | |||
Total Stockholder's Equity and Liabilities | 1,054,920 |
Explanation of Solution
Assets
Given,
- Cash = $40,000 (Req.8)
Calculation of other current assets-
Particulars | Amount ($) |
Accounts Receivables | |
Beginning receivables | 249,900 |
Credit sales | 714,000 |
Less: Collections | (725,900) |
Ending Receivables | 238,000 |
Raw material inventory | |
Beginning raw materials | 35,000 |
Purchases of raw materials | 220,840 |
Less: Materials used in production | (240,000) |
Ending raw materials inventory | 15,840 |
Finished goods inventory | |
Beginning Finished goods inventory | 241,080 |
Cost of goods completed during the period | 861,000 |
Less: Cost of goods sold during the period | (861,000) |
Ending Finished goods inventory | 241,080 |
Total current assets-
Calculation of Equipment-
Particulars | Amount ($) |
Equipment Gross | |
Beginning Equipment | 720,000 |
Purchased in June | 100,000 |
Total (A) | 820,000 |
Accumulated Depreciation | |
Beginning Accumulated Depreciation | 240,000 |
Depreciation expense | 60,000 |
Total (B) | 300,000 |
Equipment (A-B) | 520,000 |
Total Assets-
Stockholder's Equity and Liabilities
Given,
- Bank loan payable = $14,380 (Req.8)
- Taxes payable = $3,906 (Req.9)
- Long −term note payable = $300,000
- Common stock = $600,000
Accounts payable-
Particulars | Amount ($) |
Accounts Payables | |
Beginning accounts payable | 51,400 |
Purchase of raw materials | 220,840 |
Payments of raw materials | (183,440) |
Ending accounts payable | 88,800 |
Total current liabilities-
Retained Earnings-
Particulars | Amount ($) |
Retained Earnings | |
Retained Earnings, Beginning | 60,580 |
Add: Net Income | 7,254 |
67,834 | |
Less: Dividends | (20,000) |
Retained Earnings, Ending | 47,834 |
Total stockholder's equity-
Total Stockholder's Equity and Liabilities-
Conclusion:
Thus, Budgeted balance sheet is prepared with total of $1,054,920.
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Chapter 22 Solutions
FUND. ACCT PRINCIPLES - CONNECT
- Budgeted income statement and balance sheet As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 20Y8, the following tentative trial balance as of December 31, 20Y7, is prepared by the Accounting Department of Mesa Publishing Co.: Cash 26,000 Accounts Receivable 23,800 Finished Goods 16,900 Work in Process 4,200 Materials 6,400 Prepaid Expenses 600 Plant and Equipment 82.000 Accumulated DepreciationPlant and Equipment 32,000 Accounts Payable 14.800 Common Stock. 1.50 par 30,000 Retained Earnings 83,100 159,900 159,900 Factory output and sales for 20Y8 are expected to total 3,800 units of product, which are to be sold at 120 per unit. The quantities and costs of the inventories at December 31, 20Y8, are expected to remain unchanged from the balances at the beginning of the year. Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows: Estimated Costs and Expenses Fixed Variable (Total for Year) (Per Unit Sold) Cost of goods manufactured and sold: Direct materials 30.00 Direct labor B.40 Factory overhead: Depreciation of plant and equipment 4,000 Other factory overhead 1,400 4.30 Selling expenses: Sales salaries and commissions 12,800 13.50 Advertising 13,200 Miscellaneous selling expense 1,000 2.50 Administrative expenses: Office and officers salaries 7,800 7.00 Supplies 500 1.20 Miscellaneous administrative expense 400 2.40 Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of 35,000 on 20Y8 taxable income will be paid during 20Y8. Regular quarterly cash dividends of 0.20 per share are expected to be declared and paid in March, June, September, and December on 20,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for 22,000 cash in May. Instructions 1. Prepare a budgeted income statement for 20Y8. 2. Prepare a budgeted balance sheet as of December 31,20Y8, with supporting calculations.arrow_forwardBudgeted income statement and balance sheet As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January I, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Regina Soap Co.: Cash 85,000 Accounts Receivable........................................ 125,600 Finished Goods............................................ 69,300 Work in Process............................................ 32,500 Materials.................................................. 48,900 Prepaid Expenses.......................................... 2,600 Plant and Equipment....................................... 325,000 Accumulated DepreciationPlant and Equipment........... 156,200 Accounts Payable.......................................... 62,000 Common Stock. 10 par.................................... 180,000 Retained Earnings.......................................... 290,700 688,900 688,900 Factory output and sales for 20Y9 are expected to total 200,000 units of product, which are to be sold at 5.00 per unit. The quantities and costs of the inventories at December 31, 20Y9, are expected to remain unchanged from the balances at the beginning of the year. Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows: Estimated Costs and Expenses Fixed Variable (Total for Year) (Per Unit Sold) Cost of goods manufactured and sold: Direct materials.................................. 1.10 Direct labor...................................... 0.65 Factory overhead: Depreciation of plant and equipment........... 40,000 Other factory overhead........................ 12,000 0.40 Selling expenses: Sales salaries and commissions.................... 46,000 0.45 Advertising...................................... 64,000 Miscellaneous selling expense................... 6,000 0 25 Administrative expenses: Office and officers salaries........................ 72,400 0.12 Supplies......................................... 5,000 0.10 Miscellaneous administrative expense............. 4,000 0.05 Balances of accounts receivable, prepaid expenses, anti accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of 30,000 on 20Y9 taxable income will be paid during 20Y9. Regular quarterly cash dividends of 0.15 per share are expected to be declared and paid in March, June. September, and December on 18,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for 75,000 cash in May. Instructions 1. Prepare a budgeted income statement for 20Y9. 2. Prepare a budgeted balance sheet as of December 31, 20Y9, with supporting calculations.arrow_forwardBudgeted income statement and balance sheet As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 20Y8, the following tentative trial balance as of December 31, 20Y7, is prepared by the Accounting Department of Mesa Publishing Co.: Cash 26,000 Accounts Receivable 23,800 Finished Goods 16,900 Work in Process 4,200 Materials 6,400 Prepaid Expenses 600 Plant and Equipment 82.000 Accumulated DepreciationPlant and Equipment 32,000 Accounts Payable 14.800 Common Stock. 1.50 par 30,000 Retained Earnings 83,100 159,900 159,900 Factory output and sales for 20Y8 are expected to total 3,800 units of product, which are to be sold at 120 per unit. The quantities and costs of the inventories at December 31, 20Y8, are expected to remain unchanged from the balances at the beginning of the year. Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows: Estimated Costs and Expenses Fixed Variable (Total for Year) (Per Unit Sold) Cost of goods manufactured and sold: Direct materials 30.00 Direct labor B.40 Factory overhead: Depreciation of plant and equipment 4,000 Other factory overhead 1,400 4.30 Selling expenses: Sales salaries and commissions 12,800 13.50 Advertising 13,200 Miscellaneous selling expense 1,000 2.50 Administrative expenses: Office and officers salaries 7,800 7.00 Supplies 500 1.20 Miscellaneous administrative expense 400 2.40 Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances. Federal income tax of 35,000 on 20Y8 taxable income will be paid during 20Y8. Regular quarterly cash dividends of 0.20 per share are expected to be declared and paid in March, June, September, and December on 20,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for 22,000 cash in May. Instructions 1. Prepare a budgeted income statement for 20Y8. 2. Prepare a budgeted balance sheet as of December 31,20Y8, with supporting calculations.arrow_forward
- Budgeted income statement and balance sheet As a preliminary to requesting budget estimates of sales, costs, and expenses for the fiscal year beginning January 1, 20Y9, the following tentative trial balance as of December 31, 20Y8, is prepared by the Accounting Department of Mesa Publishing Co.: Cash. 26,000 Finished Goods.............................................. 16,900 Work in Process.............................................. 4,200 Materials.................................................... 6,400 Prepaid Expenses............................................ 600 Plant and Equipment......................................... 82,000 Accumulated DepreciationPlant and Equipment............. 32,000 Accounts Payable............................................ 14,800 Common Stock. 1.50 par..................................... 30,000 Retained Earnings............................................ 83,100 159,900 159,900 Factory output and sales for 20Y9 are expected to total 3,800 units of product, which are to be sold at 120 per unit. The quantities and costs of the inventories at December 31, 20Y9, are expected to remain unchanged from the balances at the beginning of the year. Budget estimates of manufacturing costs and operating expenses for the year are summarized as follows: Estimated Costs and Expenses Fixed Variable (Total for Year) (Per Unit Sold) Cost of goods manufactured and sold: Direct materials................................... 30.00 Direct labor....................................... 840 Factory overhead: Depreciation of plant and equipment............ 4,000 Other factory overhead......................... 1,400 4.80 Selling expenses: Sales salaries and commissions..................... 12,800 13.50 Advertising....................................... 13,200 Miscellaneous selling expense..................... 1,000 2.50 Administrative expenses: Office and officers salaries......................... 7,800 7.00 Supplies.......................................... 500 1.20 Miscellaneous administrative expense.............. 400 2.40 Balances of accounts receivable, prepaid expenses, and accounts payable at the end of the year are not expected to differ significantly from the beginning balances, federal income tax of 35,000 on 20Y9 taxable income will be paid during 20Y9. Regular quarterly cash dividends of 0.20 per share are expected to be declared and paid in March, June, September, and December on 20,000 shares of common stock outstanding. It is anticipated that fixed assets will be purchased for 22,000 cash in May. Instructions 1. Prepare a budgeted income statement for 20Y9. 2. Prepare a budgeted balance sheet as of December 31, 20Y9, with supporting calculations.arrow_forwardBudgeted income statement and supporting budgets The, budget director of Feathered Friends Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for December 2016: a. Estimated .sales for December: Bird house 3,200 units at 50 per unit Bird feeder 3,000 units at 70 per unit b. Estimated inventories at December 1: Direct materials: Finished products: Wood 200 ft Bird house....... 320 units at 27 per unit Plastic 240 lbs. Bird feeder....... 270 units at 40 per unit c. Desired inventories at December 31: Direct materials: Finished products: Wood 220 ft Bird house....... 290 units at 27 per unit Plastic 200 lbs. Bird feeder....... 250 units at 41 per unit d. Direct materials used in production: In manufacture of Bird House: In manufacture of Bird Feeder: Wood 0.80 ft. per unit of product Wood........... 1.20 ft per unit of product Plastic 050 lb. per unit of product Plastic........... 0.75 lb. per unit of product e. Anticipated cost of purchases and beginning and ending inventory of direct materials: Wood 7.00 per ft. Plastic................. 1.00 per lb. f. Direct labor requirements: Bird House: Fabrication Department 0.20 hr. at 16 per hr. Assembly Department 0.30 hr. at 12 per hr. Bird Feeder: Fabrication Department 0.40 hr. at 16 per hr. Assembly Department 0.35 hr. at 12 per hr. g. Estimated factory overhead costs for December. Indirect factory wages 75,000 Power and light 6,000 Depreciation of plant and equipment 23,000 Insurance and property tax 5,000 h. Estimated operating expenses for December: Sales salaries expense 70,000 Advertising expense 18,000 Office salaries expense 21,000 Depreciation expenseoffice equipment 600 Telephone expenseselling 550 Telephone expenseadministrative 250 Travel expenseselling 4,000 Office supplies expense 200 Miscellaneous administrative expense 400 i. Estimated other income and expense for December: Interest revenue 200 Interest expense 122 j. Estimated lax rate: 30% Instructions 1. Prepare a sales budget for December. 2. Prepare a production budget for December. 3. Prepare a direct materials purchases budget for December. 4. Prepare a direct labor cost budget for December. 5. Prepare a factory overhead cost budget for December. 6. Prepare a cost of goods sold budget for December. Work in process at the beginning of December is estimated to be 29,000 and work in process at the end of December is estimated to be 35,400. 7. Prepare a selling and administrative expenses budget for December. 8. Prepare a budgeted income statement for December.arrow_forwardForecast sales volume and sales budget For 20Y6, Raphael Frame Company prepared the sales budget that follows. At the end of December 20Y6, the following unit sales data were reported for the year: Unit Sales 8" 10" Frame 12" 16" Frame East 8,755 3,686 Central 6,510 3,090 West 12,348 5,616 Raphael Frame Company Sales Budget For the Year Ending December 31, 20Y6 Unit Sales Unit Selling Total Product and Area Volume Price Sales 8"10" Frame: East 8,500 16 136,000 Central 6,200 16 99,200 West 12,600 16 201,600 Total 27,300 436,800 12" x 16" Frame: East 3,800 30 5114,000 Central 3,000 30 90,000 West 5,400 30 162,000 Total 12,200 366,000 Total revenue from sales 802,800 For the year ending December 31, 20Y7, unit sales are expected to follow the patterns established during the year ending December 31, 20Y6. The unit selling price for the 8" 10"frame is expected to increase to 17, and the unit selling price for the 12" 16" frame is expected to increase to 32, effective January 1, 20Y7. Instructions 1. Compute the increase or decrease of actual unit sales for the year ended December 31, 20Y6, over budget. Place your answers in a columnar table with the following format: Unit Sales, Year Ended 20Y6 Increase (Decrease) Actual Over Budget Budget Actual Sales Amount Percent 8" 10" Frame: East Central West 12"16" Frame: East Central West 2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 20Y7, compute the unit sales volume to be used for preparing the sales budget for the year ending December 31, 20Y7. Place your answers in a columnar table similar to that in part (1) but with the following column heads. Round budgeted units to the nearest unit. 20Y6 Percentage 20Y7 Actual Increase Budgeted Units (Decrease! Units (rounded) 3. Prepare a sales budget for the year ending December 31, 20Y7.arrow_forward
- Forecast sales volume and sales budget Sentinel Systems Inc. prepared the following sales budget for 20Y8: Sentinel Systems Inc. Sales Budget For the Year Ending December 31, 20 Y8 Unit Sales Unit Selling Total Product and Area Volume Price Sales Home Alert System: United States 1,700 200 340,000 Europe 580 200 116,000 Asia 450 200 90,000 Total 2,730 546,000 Business Alert System: United States 980 750 735,000 Europe 350 750 262,500 Asia 240 750 180,000 Total 1,570 1,177,500 Total revenue from sales 1,723,500 At the end of December 20Y8, the following unit sales data were reported for the year: Unit Sales Home Alert System Business Alert System United States 1,734 1,078 Europe 609 329 Asia 432 252 For the year ending December 31, 20Y9, unit sales are expected to follow the patterns established during the year ending December 31, 20Y8. The unit selling price for the Home Alert System is expected to increase to 250, and the unit selling price for the Business Alert System is expected to be decreased to 820, effective January 1, 20Y9. Instructions 1. Compute the increase or decrease of actual unit sales for the year ended December 31, 20Y8, over budget. Place your answers in a columnar table with the following format: Unit Sales, Year Ended 20Y8 Increase (Decrease) Actual Over Budget Budget Actual Sales Amount Percent Home Alert System: United States Europe Asia Business Alert System: United States Europe Asia 2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 20Y9, compute the unit sales volume to lie used for preparing the sales budget for the year ending December 31, 20Y9- Place your answers in a columnar table similar to that in part (1) but with the following column heads. Round budgeted units to the nearest unit. 20Y8 Actual Units Percentage Increase (Decrease) 20Y9 Budgeted Units (rounded) 3. Prepare a sales budget for the year ending December 31, 20Y9.arrow_forwardForecast sales volume and sales budget Sentinel Systems Inc. prepared the following sales budget for 2016: At the end of December 2016, the following unit sales data were reported for the year: For the year ending December 31 , 2017, unit sales are expected to follow the patterns established during the year ending December 31, 2016. The unit selling price for the Home Alert System is expected to increase to 250, and the unit selling price for the Business Alert System is expected to be decreased to 820, effective January 1, 2017. Instructions 1. Compute the increase or decrease of actual unit sales for the year ended December 31, 2016, over budget. Place your answers in a columnar table with the following format: 2. Assuming that the increase or decrease in actual sales to budget indicated in part (1) is to continue in 2017, compute the unit sales volume to be used for preparing the sales budget for the year ending December 31, 2017. Place your answers in a columnar table similar to that in part (1) but with the following column heads. Round budgeted units to the nearest unit. 3. Prepare a sales budget for the year ending December 31, 2017.arrow_forwardBudgeted income statement and supporting budgets The budget director of Gold Medal Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for March 2016: a. Estimated sales for March: Batting helmet 1,200 units at 40 per unit Football helmet 6,500 units at 160 per unit b. Estimated inventories at March 1: Direct materials: Finished products: Plastic 90 lbs. Batting helmet........ 40 units at 25 per unit Foam lining 80 lbs. Football helmet....... 240 units at 77 per unit c. Desired inventories at March 31: Direct materials: Finished products: Plastic50 lbs. Batting helmet......... 50 units at 25 per unit Foam lining65 lbs. Football helmet........ 220 units at 78 per unit d. Direct materials used in production: In manufacture of batting helmet: Plastic 1.20 lbs. per unit of product Foam lining 0.50 lb. per unit of product In manufacture of football helmet: Plastic 3.50 lbs. per unit of product Foam lining 1.50 lbs. per unit of product e. Anticipated cost of purchases and beginning and ending inventor) of direct materials: Plastic 6.00 per lb. Foam lining 4.00 per lb. f. Direct labor requirements: Batting helmet: Molding Department 0.20 hr. at 20 per hr. Assembly Department 0.50 hr. at 14 per hr. Football helmet: Molding Department 0.50 hr. at 20 per hr. Assembly Department 1.80 hrs. at 14 per hr. g. Estimated factory overhead costs for March: Indirect factory wages 86,000 Power and light 4,000 Depreciation of plant and equipment 12,000 Insurance and property tax 2,300 h. Estimated operating expenses for March: Sales salaries expense 184,300 Advertising expense 87,200 Office salaries expense 32,400 Depreciation expenseoffice equipment 3,800 Telephone expenseselling 5,800 Telephone expenseadministrative 1,200 Travel expense-selling 9,000 Office supplies expense 1,100 Miscellaneous administrative expense 1,000 i. Estimated other income and expense for March: Interest revenue 940 Interest expense 872 j. Estimated tax rate: 30% Instructions 1. Prepare a sales budget for March. 2. Prepare a production budget for March. 3. Prepare a direct materials purchases budget for March. 4. Prepare a direct labor cost budget for March. 5. Prepare a factory overhead cost budget for March. 6. Prepare a cost of goods sold budget for March. Work in process at the beginning of March is estimated to be 15,300, and work in process at the end of March is desired to be 14,800. 7. Prepare a selling and administrative expenses budget for March. 8. Prepare a budgeted income statement for March.arrow_forward
- Budgeted income statement and supporting budgets The budget director of Birds of a Feather Inc., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income statement for January: a. Estimated sales for January: Birdhouse 6.000 units at 55 per unit Bird feeder 4,500 units at 75 per unit b. Estimated inventories at January 1: Direct materials: Finished products: Wood 220 ft. Birdhouse 300 units at 23 per unit Plastic 250 lb. Bird feeder 240 units at 34 per unit c. Desired inventories at January 31: Direct materials: Finished products: Wood 180 ft. Birdhouse 340 units at 23 per unit Plastic 210 lb. Bird feeder 200 units at 34 per unit d. Direct materials used in production: In manufacture of Birdhouse: In manufacture of Bird Feeder: Wood ... 0.80 ft. per unit of product Wood 1.20 ft. per unitof product Plastic . . 0.50 lb. per unit of product Plastic 0.75 lb. per unit of product e. Anticipated cost of purchases and beginning and ending inventory of direct materials: Wood 8.00 per ft. Plastic 1.20 per lb. f. f. Direct labor requirements: Birdhouse: Fabrication Department 0.20 hr. at15 per hr. Assembly Department 0.30 hr. at 12 per hr. Bird Feeder: Fabrication Department 0.40 hr. at15 per hr. Assembly Department 0.35 hr. at 12 per hr. g. Estimated factory overhead costs for January: Indirect factory wages 80,000 Power and light 8,000 Depreciation of plant and equipment 25,000 Insurance and property tax 2,000 h. Estimated operating expenses for January: Sales salaries expense 90,000 Advertising expense 20,000 Office salaries expense 18,000 Depredation expenseoffice equipment 800 Telephone expenseselling 500 Telephone expenseadministrative 200 Travel expenseselling 5,000 Office supplies expense 250 Miscellaneous administrative expense 450 i. Estimated other income and expense for January: Interest revenue 300 Interest expense 224 j. Estimated tax rate: 30% Instructions 1. Prepare a sales budget for January. 2. Prepare a production budget for January. 3. Prepare a direct materials purchases budget for January. 4. Prepare a direct labor cost budget for January. 5. Prepare a factory overhead cost budget for January. 6. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimated to be 29,000, and work in process at the end of January is estimated to be 35,400. 7. Prepare a selling and administrative expenses budget for January. 8. Prepare a budgeted income statement for January.arrow_forwardBudgeted income statement and supporting budgets The budget director of Gold Medal Athletic Co., with the assistance of the controller, treasurer, production manager, and sales manager, has gathered the following data for use in developing the budgeted income .statement for March: a. Estimated sales for March: Batting helmet 1,200 units at 40 per unit Football helmet 6,500 units at 160 per unit b. Estimated inventories at March 1: Direct materials: Finished products: Plastic 90 lb. Batting helmet 40 units at 25 per unit Foam lining 80 lb. Football helmet 240 units at 77 per unit c. Desired inventories at March 31: Direct materials: Finished products: Plastic 50 lb. Batting helmet 50 units at 25 per unit Foam lining 65 lb. Football helmet 220 its at 78 per unit d. Direct materials used in production: In manufacture of batting helmet: Plastic 1.20 lb. per unit of product Foam lining 0.50 lb. per unit of product In manufacture of football helmet: Plastic 3.50 lb. per unit of product Foam lining 1.50lb. per unit of product e. Anticipated cost of purchases and beginning and ending inventory of direct materials: Plastic 6.00 per lb. Foam lining 4.00 per lb. f. Direct labor requirements: Batting helmet: Molding Department 0.20 hr. at 20 per hr. Assembly Department 0.50 hr. at 14 per hr. Football helmet: Molding Department 0.50 hr. at 20 per hr. Assembly Department l.80 hrs.at 14perhr. g. Estimated factory overhead costs for March: Indirect factory wages 86,000 Power and light 4,000 Depreciation of plant and equipment 12,000 Insurance and property tax 2300 h. Estimated operating for March: Sales salaries expense 184,300 Advertising expense 87,200 Office salaries expense 32,400 Depreciation expenseoffice equipment 3,800 Telephone expenseselling 5,800 Telephone expenseadministrative 1,200 Travel expenseselling 9,000 Office supplies expense 1,100 Miscellaneous administrative expense 1,000 i. Estimated other income and expense for March: Interest Revenue 940 Interest Expense 872 j. Estimated tax rate: 30% Instructions 1.Prepare a sales budget for March. 2.Prepare a production budget for March. 3. Prepare a direct materials purchases budget for March. 4. Prepare a direct labor cost budget for March. 5. Prepare a factory overhead cost budget for March. 6. Prepare a cost of goods sold budget for March. Work in process at the beginning of March is estimated to be 15,300, and work in process at the end of March is desired to be 14,800. 7.Prepare a selling and administrative expenses budget for March. 8.Prepare a budgeted income statement for March. 9.Prepare a factory overhead cost budget for March. 10.Prepare a cost of goods .sold budget for March. Work in process at the beginning of March is estimated to the 115,300, and work in process at the end of March is desired to be 14,800. 11.Prepare a selling and administrative expenses budget for March. 12.Prepare a budgeted income statement for March.arrow_forwardCapital expenditures budget On January 1, 2016, the controller of Omicron Inc. is planning capital expenditures for the years 2016-2019. The following interviews helped the controller collect the necessary information for the capital expenditures budget: Director of Facilities: A construction contract was signed in late 2015 for the construction of a new factory building at a contract cost of 10,000,000. The construction is scheduled to begin in 2016 and be completed in 2017. Vice President of Manufacturing Once the new factory budding is finished, we plan to purchase 1.5 million in equipment in late 2017.1 expect that an additional 5200.000 will be needed early in the following year (20181 to test and install the equipment before we can begin production If sates continue to grow. I expect we'll need to invest another 1,000,000 in equipment in 2019. Chief Operating Officer: We have really been growing lately I wouldn't be surprised if we need to expand the size of our new factory building m 2019 by at least 35%. Fortunately, we expect inflation to have minimal impact on construction costs over the next four years. Additionally, I would expect the cost of the expansion to be proportional to the size of the expansion Director of Information Systems: We need to upgrade our information systems to wireless network technology. It doesn't make sense to do this until after the new factory building is completed and producing product. During 2018, once the factory is up and running, we should equip the whole facility with wireless technology. I think it would cost us 800,000 today to install the technology. However, prices have been dropping by 25% per year, so it should be less expensive at a later date. Chief Financial Officer: I am excited about our long-term prospects. My only short-term concern is managing our cash flow while we expend the 4,000,000 of construction costs on the portion of the new factory building scheduled to be completed in 2016. Use this interview information to prepare a capital expenditures budget for Omicron Inc. for the years 2016-2019.arrow_forward
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