REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
16th Edition
ISBN: 9780134789705
Author: Srikant M. Datar, Madhav V. Rajan
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Concept explainers
Videos
Textbook Question
Chapter 6, Problem 6.42P
Comprehensive operating budget. Skulas, Inc., manufactures and sells snowboards. Skulas manufactures a single model, the Pipex. In late 2017, Skulas’s
Materials and Labor Requirements
| Direct materials | |
| Wood | 9 board feet (b.f.) per snowboard |
| Fiberglass | 10 yards per snowboard |
| Direct manufacturing labor | 5 hours per snowboard |
Skulas’s CEO expects to sell 2,900 snowboards during January 2018 at an estimated retail price of $650 per board. Further the CEO expects 2018 beginning inventory of 500 snowboards and would like to end January 2018 with 200 snowboards in stock.
Direct Materials Inventories
| Beginning Inventory 1/1/2018 | Ending Inventory 1/31/2018 | |
| Wood | 2,040 b.f. | 1,540 b.f. |
| Fiberglass | 1,040 yards | 2,040 yards |
Variable manufacturing overhead is $7 per direct manufacturing labor-hour. There are also $81,000 in fixed manufacturing overhead costs budgeted for January 2018. Skulas combines both variable and fixed manufacturing overhead costs budgeted for January 2018. Skulas combines both variable and fixed manufacturing overhead into a single rate based on direct manufacturing labor-hours. Variable marketing costs are allocated at the rate of $250 per sales visit. The marketing plan calls for 38 sales visits during January 2018. Finally, there are $35,000 in fixed nonmanufacturing costs budgeted for January 2018. Other data include:
| 2017 | 2018 | |
| Unit Price | Unit Price | |
| Wood | $32.00 per b.f. | $34.00 per b.f. |
| Fiberglass | $ 8.00 per yard | $ 9.00 per yard |
| Direct manufacturing labor | $28.00 per hour | $29.00 per hour |
The inventoriable unit cost for ending finished-goods inventory on December 31, 2017, is $374.80. Assume Skulas uses a FIFO inventory method for both direct materials and finished goods. Ignore work in process in your calculations.
- 1. Prepare the January 2018 revenues budget (in dollars).
- 2. Prepare the January 2018 production budget (in units).
- 3. Prepare the direct material usage and purchases budgets for January 2018.
- 4. Prepare a direct
manufacturing labor costs budget for January 2018. - 5. Prepare a manufacturing overhead costs budget for January 2018.
- 6. What is the budgeted manufacturing overhead rate for January 2018?
- 7. What is the budgeted manufacturing overhead cost per output unit in January 2018?
- 8. Calculate the cost of a snowboard manufactured in January 2018.
- 9. Prepare an ending inventory budget for both direct materials and finished goods for January 2018.
- 10. Prepare a cost of goods sold budget for January 2018.
- 11. Prepare the
budgeted income statement for Skulas, Inc., for January 2018. - 12. What questions might the CEO ask the management team when reviewing the budget? Should the CEO set stretch targets? Explain briefly.
- 13. How does preparing the budget help Skulas’s management team better manage the company?
Expert Solution & Answer
Learn your wayIncludes step-by-step video
schedule20:34
Chapter 6 Solutions
REVEL for Horngren's Cost Accounting: A Managerial Emphasis -- Access Card (16th Edition) (What's New in Accounting)
Ch. 6 - What are the four elements of the budgeting cycle?Ch. 6 - Define master budget.Ch. 6 - Strategy, plans, and budgets are unrelated to ore...Ch. 6 - Budgeted performance is a better criterion than...Ch. 6 - Production managers and marketing managers are...Ch. 6 - Budgets meet the cost-benefit test. They force...Ch. 6 - Define rolling budget. Give an example.Ch. 6 - Outline the steps in preparing an operating...Ch. 6 - The sales forecast is the cornerstone for...Ch. 6 - Prob. 6.10Q
Ch. 6 - Define Kaizen budgeting.Ch. 6 - Prob. 6.12QCh. 6 - Explain how the choice of the type of...Ch. 6 - What are some additional considerations that arise...Ch. 6 - Prob. 6.15QCh. 6 - Master budget. Which of the following statements...Ch. 6 - Operating and financial budgets. Which of the...Ch. 6 - Production budget. Superior Industries sales...Ch. 6 - Responsibility centers. Elmhurst Corporation is...Ch. 6 - Cash budget. Mary Jacobs, the controller of the...Ch. 6 - Sales budget, service setting. In 2017 Hart Sons,...Ch. 6 - Sales and production budget. The Coby Company...Ch. 6 - Direct material budget. Dawson Co. produces wine....Ch. 6 - Material purchases budget. The McGrath Company has...Ch. 6 - Revenues, production, and purchases budgets. The...Ch. 6 - Revenues and production budget. Saphire, Inc.,...Ch. 6 - Budgeting; direct material usage, manufacturing...Ch. 6 - Budgeting, service company. Ever Clean Company...Ch. 6 - Budgets for production and direct manufacturing...Ch. 6 - Activity-based budgeting. The Jerico store of...Ch. 6 - Kaizen approach to activity-based budgeting...Ch. 6 - Responsibility and controllability. Consider each...Ch. 6 - Responsibility, controllability, and stretch...Ch. 6 - Cash flow analysis, sensitivity analysis....Ch. 6 - Budget schedules for a manufacturer. Hale...Ch. 6 - Budgeted costs, Kaizen improvements environmental...Ch. 6 - Revenue and production budgets. (CPA, adapted) The...Ch. 6 - Budgeted income statement. (CMA, adapted) Smart...Ch. 6 - Prob. 6.39PCh. 6 - Comprehensive problem with ABC costing. Animal...Ch. 6 - Cash budget (continuation of 6-40). Refer to the...Ch. 6 - Comprehensive operating budget. Skulas, Inc.,...Ch. 6 - Cash budgeting, budgeted balance sheet....Ch. 6 - Comprehensive problem; ABC manufacturing, two...Ch. 6 - Cash budget. (Continuation of 6-44) (Appendix)...Ch. 6 - Budgeting and ethics. Jayzee Company manufactures...Ch. 6 - Kaizen budgeting for carbon emissions. Apex...Ch. 6 - Comprehensive budgeting problem; activity-based...
Additional Business Textbook Solutions
Find more solutions based on key concepts
Calculate profit margin on sales ratio. (LO 5). Suppose a firm had sales of $200,000 and net income of $7,000 f...
Financial Accounting
(
Journalize the following sales transactions for Antique Hall. Explanations are not required. The company est...
Horngren's Accounting (12th Edition)
Prepare income statements (Learning Objective 5) Part One: In 2015, Patsy Jackson opened Patsys Posies, a small...
Managerial Accounting (5th Edition)
Quick ratio and current ratio (Learning Objective 7) 1520 min. Consider the following data COMPANY A B C D Cash...
Financial Accounting, Student Value Edition (4th Edition)
Discussion Questions 1. What characteristics of the product or manufacturing process would lead a company to us...
Managerial Accounting (4th Edition)
Describe the distinctive characteristic of FIFO computations in assigning costs to units completed and to units...
Cost Accounting (15th Edition)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Operating Budget, Comprehensive Analysis Allison Manufacturing produces a subassembly used in the production of jet aircraft engines. The assembly is sold to engine manufacturers and aircraft maintenance facilities. Projected sales in units for the coming 5 months follow: The following data pertain to production policies and manufacturing specifications followed by Allison Manufacturing: a. Finished goods inventory on January 1 is 32,000 units, each costing 166.06. The desired ending inventory for each month is 80% of the next months sales. b. The data on materials used are as follows: Inventory policy dictates that sufficient materials be on hand at the end of the month to produce 50% of the next months production needs. This is exactly the amount of material on hand on December 31 of the prior year. c. The direct labor used per unit of output is 3 hours. The average direct labor cost per hour is 14.25. d. Overhead each month is estimated using a flexible budget formula. (Note: Activity is measured in direct labor hours.) e. Monthly selling and administrative expenses are also estimated using a flexible budgeting formula. (Note: Activity is measured in units sold.) f. The unit selling price of the subassembly is 205. g. All sales and purchases are for cash. The cash balance on January 1 equals 400,000. The firm requires a minimum ending balance of 50,000. If the firm develops a cash shortage by the end of the month, sufficient cash is borrowed to cover the shortage. Any cash borrowed is repaid at the end of the quarter, as is the interest due (cash borrowed at the end of the quarter is repaid at the end of the following quarter). The interest rate is 12% per annum. No money is owed at the beginning of January. Required: 1. Prepare a monthly operating budget for the first quarter with the following schedules. (Note: Assume that there is no change in work-in-process inventories.) a. Sales budget b. Production budget c. Direct materials purchases budget d. Direct labor budget e. Overhead budget f. Selling and administrative expenses budget g. Ending finished goods inventory budget h. Cost of goods sold budget i. Budgeted income statement j. Cash budget 2. CONCEPTUAL CONNECTION Form a group with two or three other students. Locate a manufacturing plant in your community that has headquarters elsewhere. Interview the controller for the plant regarding the master budgeting process. Ask when the process starts each year, what schedules and budgets are prepared at the plant level, how the controller forecasts the amounts, and how those schedules and budgets fit in with the overall corporate budget. Is the budgetary process participative? Also, find out how budgets are used for performance analysis. Write a summary of the interview.arrow_forwardCash budget The controller of Bridgeport Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in the month following the sale and the remainder the following month (second month following sale). Depreciation, insurance, and property tax expense represent 50,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in January, and the annual property taxes are paid in December. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of September 1 include cash of 40,000, marketable securities of 75,000, and accounts receivable of 300,000 (60,000 from July sales and 240,000 from August sales). Sales on account for July and August were 200,000 and 240,000, respectively. Current liabilities as of September 1 include 40,000 of accounts payable incurred in August for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 55,000 will be made in October. Bridgeports regular quarterly dividend of 25,000 is expected to be declared in October and paid in November. Management desires to maintain a minimum cash balance of 50,000. Instructions Prepare a monthly cash budget and supporting schedules for September, October, and November. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?arrow_forwardSales, production, direct materials, direct labor, and factory overhead budgets King Tire Co.s budgeted unit sales for the year 2016 were: The budgeted selling price for truck tires was 200 per tire, and for passenger car tires it was 65 per tire. The beginning finished goods inventories were expected to be 2,000 truck tires and 5,000 passenger tires, for a total cost of 326,478, with desired ending inventories at 2,500 and 6,000, respectively, with a total cost of 400,510. There was no anticipated beginning or ending work-in- process inventory for either type of tire. The standard materials quantities for each type of tire were as follows: The purchase prices of rubber and steel were 2 and 3 per pound, respectively. The desired ending inventories for rubber and steel were 60,000 and 6,000 lb, respectively. The estimated beginning inventories for rubber and steel were 75,000 and 7,000 lb, respectively. The direct labor hours required for each type of tire were as follows: The direct labor rate for each department is as follows: Budgeted factory overhead costs for 2016 were as follows: Required: Prepare each of the following budgets for King for the year ended December 31, 2016: 1. Sales budget. 2. Production budget. 3. Direct material budget. 4. Direct labor budget. 5. Factory overhead budget. 6. Cost of goods sold budget.arrow_forward
- Digital Solutions Inc. uses flexible budgets that are based on the following data: Prepare a flexible selling and administrative expenses budget for October for sales volumes of 500,000, 750,000, and 1,000,000.arrow_forwardBudgeted income statement and supporting budgets for three months Bellaire Inc. gathered the following data for use in developing the budgets for the first quarter (January, February, March) of its fiscal year: Estimated sales at 125 per unit: Estimated finished goods inventories: Work in process inventories are estimated to be insignificant (zero). Estimated direct materials inventories: Manufacturing costs: Selling expenses: Instructions Prepare the following budgets using one column for each month and a total column for the first quarter, as shown for the sales budget: Prepare a sales budget for March. Prepare a production budget for March. Prepare a direct materials purchases budget for March. Prepare a direct labor cost budget for March. Prepare a factory overhead cost budget for March. Prepare a cost of goods sold budget for March. Prepare a selling and administrative expenses budget for March. Prepare a budgeted income statement with budgeted operating income for March.arrow_forwardBudgeted income statement and supporting budgets The budget director of Birding Homes Feeders 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: Estimated sales for January: Estimated inventories at January 1: Desired inventories at January 31: Direct materials used in production: Anticipated cost of purchases and beginning and ending inventory of direct materials: Direct labor requirements: Estimated factory overhead costs for January: Estimated operating expenses for January: Estimated other revenue and expense for January: Estimated tax rate: 25% Instructions Prepare a sales budget for January. Prepare a production budget for January. Prepare a direct materials purchases budget for January. Prepare a direct labor cost budget for January. Prepare a factory overhead cost budget for January. Prepare a cost of goods sold budget for January. Work in process at the beginning of January is estimated to be 9,000, and work in process at the end of January is estimated to be 10,500. Prepare a selling and administrative expenses budget for January. Prepare a budgeted income statement for January.arrow_forward
- CASH BUDGETING Helen Bowers, owner of Helens Fashion Designs, is planning to request a line of credit from her bank. She has estimated the following sales forecasts for the firm for parts of 2019 and 2020: Estimates regarding payments obtained from the credit department are as follows: collected within the month of sale, 10%; collected the month following the sale, 75%; collected the second month following the sale, 15%. Payments for labor and raw materials are made the month after these services were provided. Here are the estimated costs of labor plus raw materials: General and administrative salaries are approximately 27,000 a month. Lease payments under long-term leases are 9,000 a month. Depreciation charges are 36,000 a month. Miscellaneous expenses are 2,700 a month. Income tax payments of 63,000 are due in September and December. A progress payment of 180,000 on a new design studio must be paid in October. Cash on hand on July 1 will be 132,000, and a minimum cash balance of 90,000 should be maintained throughout the cash budget period. a. Prepare a monthly cash budget for the last 6 months of 2019. b. Prepare monthly estimates of the required financing or excess fundsthat is, the amount of money Bowers will need to borrow or will have available to invest. c. Now suppose receipts from sales come in uniformly during the month (that is, cash receipts come in at the rate of 1/30 each day), but all outflows must be paid on the 5th. Will this affect the cash budget? That is, will the cash budget you prepared be valid under these assumptions? If not, what could be done to make a valid estimate of the peak financing requirements? No calculations are required, although if you prefer, you can use calculations to illustrate the effects. d. Bowers sales are seasonal, and her company produces on a seasonal basis, just ahead of sales. Without making any calculations, discuss how the companys current and debt ratios would vary during the year if all financial requirements were met with short-term bank loans. Could changes in these ratios affect the firms ability to obtain bank credit? Explain.arrow_forwardCash budget The controller of Mercury Shoes Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information: The company expects to sell about 10% of its merchandise for cash. Of sales on account, 60% are expected to be collected in the month following the sale and the remainder the following month (second month after sale). Depreciation, insurance, and property tax expense represent 12,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in February, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month. Current assets as of June 1 include cash of 42,000, marketable securities of 25,000, and accounts receivable of 198,000 (150,000 from May sales and 48,000 from April sales). Sales on account in April and May were 120,000 and 150,000, respectively. Current liabilities as of June 1 include 13,000 of accounts payable incurred in May for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. An estimated income tax payment of 24,000 will be made in July. Mercury Shoes regular quarterly dividend of 15,000 is expected to be declared in July and paid in August. Management desires to maintain a minimum cash balance of 40,000. Instructions Prepare a monthly cash budget and supporting schedules for June, July, and August. On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?arrow_forwardBudgeted income statement and supporting budgets The budget director of Jupiter Helmets 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 May: Prepare a cost of goods sold budget for May. Work in process at the beginning of May is estimated to be $4200. and work in process at the end of May is desired to be $3800.arrow_forward
- Before the year began, the following static budget was developed for the estimated sales of 50,000. Sales are higher than expected and management needs to revise its budget. Prepare a flexible budget for 100,000 and 110,000 units of sales.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: Estimated sales for March: Estimated inventories at March 1: Desired inventories at March 31: Direct materials used in production: Anticipated cost of purchases and beginning and ending inventory of direct materials: Direct labor requirements: Estimated factory overhead costs for March: Estimated operating expenses for March: Estimated other revenue and expense for March: Estimated tax rate: 30% Instructions Prepare a sales budget for March. Prepare a production budget for March. Prepare a direct materials purchases budget for March. Prepare a direct labor cost budget for March. Prepare a factory overhead cost budget for March. 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. Prepare a selling and administrative expenses budget for March. Prepare a budgeted income statement for March.arrow_forwardTIB makes custom guitars and prepared the following sales budget for the second quarter It also has this additional information related to its expenses: Direct material per unit $55, Direct labor per hour 20, Variable manufacturing overhead per hour 3.50, Fixed manufacturing overhead per month 3,000, Sales commissions per unit 20, Sales salaries per month 5,000, Delivery expense per unit 0.50, Utilities per month 4,000. Administrative salaries per month 20,000, Marketing expenses per month 8,000, Insurance expense per month 11,000, Depreciation expense per month 9,000. Prepare a sales and administrative expense budget for each month in the quarter ended June 30. 2018.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
Principles of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College
Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,
Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
Principles of Accounting Volume 2
Accounting
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax College
Financial And Managerial Accounting
Accounting
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:Cengage Learning,
Principles of Cost Accounting
Accounting
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Responsibility Accounting| Responsibility Centers and Segments| US CMA Part 1| US CMA course; Master Budget and Responsibility Accounting-Intro to Managerial Accounting- Su. 2013-Prof. Gershberg; Author: Mera Skill; Rutgers Accounting Web;https://www.youtube.com/watch?v=SYQ4u1BP24g;License: Standard YouTube License, CC-BY