Concept explainers
1.
Prepare the sales budget for the year ended December 31, 2016.
1.
Explanation of Solution
Prepare the sales budget for the year ended December 31, 2016.
SS Incorporation | |||
Sales budget | |||
For the year ended December 31, 2016 | |||
Product | Sales volume (Unit) | Selling price (Unit) | Total sales |
Tables | 30,000 | $175 | $5,250,000 |
Chairs | 120,000 | $75 | $9,000,000 |
Total | 150,000 | $14,250,000 |
Table (1)
2.
Prepare the production budget for the year ended December 31, 2016.
2.
Explanation of Solution
Prepare the production budget for the year ended December 31, 2016.
SS Incorporation | ||
Production budget | ||
For the year ended December 31, 2016 | ||
Particulars | Units | |
Tables | Chairs | |
Sales (From sales budget) | 30,000 | 120,000 |
Add: desired ending inventory, December 31 | 1,500 | 6,000 |
Total | 31,500 | 126,000 |
Less: Estimated beginning inventory, January 1 | 1,000 | 4,000 |
Total production | 30,500 | 122,000 |
Table (2)
3.
Prepare the direct material budget for the year ended December 31, 2016.
3.
Explanation of Solution
Prepare the direct material budget for the year ended December 31, 2016.
SS Incorporation | |||
Direct materials budget | |||
For the year ended December 31, 2016 | |||
Particulars | Direct materials | Total | |
Rattan (Yd.) | Binding cane (Yd.) | ||
Quantities required for production: | |||
Tables: | |||
| 305,000 | ||
| 183,000 | ||
Chairs | |||
| 732,000 | ||
| 366,000 | ||
Add: Desired ending inventory, December 31 | 51,000 | 25,500 | |
Total | 1,088,000 | 574,500 | |
Less: Estimated beginning inventory, January 1 | 34,000 | 17,000 | |
Total quantity to be purchased (A) | 1,054,000 | 557,500 | |
Unit price (B) | $5 | $3 | |
Total direct materials purchases | $5,270,000 | $1,672,500 | $6,942,500 |
Table (3)
4.
Prepare the direct labor budget for the year ended December 31, 2016.
4.
Explanation of Solution
Prepare the direct labor budget for the year ended December 31, 2016.
SS Incorporation | |||
Direct labor budget | |||
For the year ended December 31, 2016 | |||
Particulars | Department | Total | |
Molding | Finishing | ||
Hours required for production: | |||
Tables: | |||
| 15,250 | ||
| 7,625 | ||
Truck tires: | |||
| 30,500 | ||
| 12,200 | ||
Total (A) | 45,750 | 19,825 | |
Hourly rate (B) | $15 | $13 | |
Total direct labor cost | $688,250 | $257,725 | $943,975 |
Table (4)
5.
Prepare the factory overhead budget for the year ended December 31, 2016.
5.
Explanation of Solution
Prepare the factory overhead budget for the year ended December 31, 2016.
SS Incorporation | ||
Factory overhead budget | ||
For the year ended December 31, 2016 | ||
Particulars | Amount ($) | Amount ($) |
Indirect materials | 98,500 | |
Indirect labor | 132,200 | |
57,500 | ||
Power and light | 92,200 | |
Total | $380,400 |
Table (5)
6.
Prepare the cost of goods sold budget for the year ended December 31, 2016.
6.
Explanation of Solution
Prepare the cost of goods sold budget for the year ended December 31, 2016.
SS Incorporation | ||
Cost of goods sold budget | ||
For the year ended December 31, 2016 | ||
Particulars | Amount ($) | Amount ($) |
Finished goods inventory, January 1 | 240,000 | |
Direct materials inventory, January 1 (1) | 221,000 | |
Direct materials purchases | 6,942,500 | |
Total direct materials available | 7,163,500 | |
Less: Direct materials inventory, December 31 (2) | 331,500 | |
Cost of direct materials used | 6,832,000 | |
Direct labor | 943,975 | |
Factory overhead | 380,400 | |
Cost of goods manufactured | 8,156,375 | |
Cost of goods available for sale | 8396,375 | |
Less: Finished goods inventory, December 31 | 360,000 | |
Cost of goods sold | 8,036,375 |
Table (6)
Working note (1):
Calculate the amount of direct materials inventory as on January 1:
Particulars | Calculation | Amount ($) |
Rattan | 170,000 | |
Binding care | 51,000 | |
Total | 171,000 |
Table (7)
Working note (2):
Calculate the amount of direct materials inventory as on December 31:
Particulars | Calculation | Amount ($) |
Rattan | 120,000 | |
Binding care | 18,000 | |
Total | 171,000 |
Table (8)
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Chapter 7 Solutions
PRINCIPLES OF COST ACCOUNTING
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- Budgeted 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_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_forwardThe Sales Department of Minimus Inc. has forecast sales for May 2016 to be 40,000 units. Additional information follows: Materials used in production: Direct labor hours required in production: Prepare the following: a. A production budget for May. b. A direct materials budget for May. c. A direct labor budget for May.arrow_forward
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