This Accounting Materials are brought to you by www.everything.freelahat.com CHAPTER 6 BUDGETING [Problem 1] Zamboanga Company Production Budget For the Third Quarter, July-September, 200X July August September Total Budgeted sales 30,000 45,000 60,000 135,000 Add: Finished goods – end. (40% x next month's sales) 18,000 24,000 20,000 20,000 Total goods available for sale 48,000 69,000 80,000 155,000 Less: Finished goods – beg. 10,000 18,000 24,000 10,000 Budgeted production 38,000 51,000 56,000 145,000 [Problem 2] Aparri Company Budgeted Materials Purchases For The Year Ended, December 31, 2005 Q1 Q2 Q3 Q4 Total Budgeted production (units) 80,000 120,000 200,000 180,000 580,000 x Standard materials/unit 3 3 3 3 3 Materials used 240,000 360,000 600,000 240,000 1,740,000 Add: Materials inventory - end (20% x next quarter's sales) 72,000 120,000 108,000 54,000 (1) 54,000 Total materials 312,000 480,000 708,000 594,000 1,794,000 Less: Materials inventory-beg. 42,000 72,000 120,000 108,000 42,000 Materials purchase (units) 270,000 408,000 588,000 486,000 1,752,000 x Standard materials cost per unit P 200 P 200 P 200 P 200 P 200
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CHAPTER 6BUDGETING
[Problem 1]Zamboanga CompanyProduction BudgetFor the Third Quarter, July-September, 200X
July August September Total
Budgeted sales 30,000 45,000 60,000 135,000
Add: Finished goods – end.
(40% x next month's sales) 18,000 24,000 20,000 20,000
Total goods available for sale 48,000 69,000 80,000 155,000
x Standard materials cost per unit P 200 P 200 P 200 P 200 P 200Budgeted materials purchases (pesos) P 54,000,000 P 81,600,000 P117,600,000 P97,200,000 P350,400,000(1) 90000 x 3 x 20% = 54,000
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Materials101 211 242
Budgeted production 18,000 18,000 18,000x Standard materials per unit 6 4 2Materials requirement 108,000 72,000 36,000Add: Materials inventory - ending (1) 42,000 28,000 14,000Total materials 150,000 100,000 50,000Less: Materials inventory - beginning 35,000 32,000 14,000Materials purchase (units) 115,000 68,000 36,000x Materials cost per unit P 0.40 P 3.60 P 1.20Materials purchase (pesos) P 46,000 P 244,800 P 43,200
(1) Mat. Inventory – 7/30101 = 7,000 x 6 = 42,000 units211 = 7,000 x 4 = 28,000 units242 = 7,000 x 2 = 14,000 units
c. Bacolod Corporation Budgeted Direct Labor Costs For The Third Quarter, July – September, 20A
Forming Assembly Finishing TotalBudgeted production (units) 18,000 18,000 18,000X Standard hours per unit 0.80 2.00 0.25Budgeted direct labor hours 14,400 36,000 4,500 54,900X Direct labor rate per hour P 8.00 P 8.00 P 8.00Budgeted direct labor costs P115,200 P198,000 P 27,000 P340,000
d. Bacolod Corporation Budgeted Factory Overhead For The Third Quarter, July – September, 20A
Flexible Rate Budget
Variable overhead per unit (33,000 units)
Supplies P 2.20 P 72,600Electricity 1.00 33,000Indirect labor 2.00 66,000Other 0.80 26,400 Total variable overhead P 6.00 198,000
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Budgeted factory overhead P 281,000
[Problem 6]a. Ilocos Corporation Sales Budget For The Year Ended, December 31, 20B
Thingone ThingtwoBudgeted sales (units) 60,000 40,000x Unit sales price P 70 P 100Budgeted sales (pesos) P 4,200,000 P 4,000,000
b. Ilocos Corporation Budgeted Production For The Year Ended, December 31, 20B
Thingone ThingtwoBudgeted sales (units) 60,000 40,000Add: Finished goods inventory - 01/01 20,000 8,000Total goods available for use 80,000 48,000Less: Afinished good inventory - 12/31 25,000 9,000Budgeted production (units) 55,000 39,000
c. Ilocos Corporation Budgeted Raw Materials Purchases For the Year Ended, December 31,20B
MaterialA B C
Budgeted materials need Thingone (55,000 x 4 lbs.) 220,000 lbs. (55,000 x 2lbs.) 110,000 lbs. Thingtwo (39,000 x 4 lbs.) 156,000 (39,000 x 2lbs.) 78,000 (39,000 x 1lb.) 39,000 lbs.Total materials need 376,000 188,000 39,000Add: Materials inventory - 12/31 36,000 32,000 7,000Total 412,000 220,000 46,000Less: Materials inventory - 01/01 32,000 29,000 6,000Materials purchases (lbs.) 380,000 191,000 40,000x Materials cost per lb. P 8 P 5 P 3Budgeted materials purchases (pesos) P 3,040,000 P 955,000 P 120,000
d. Ilocos Corporation Budgeted Direct Labor Cost Budget For The Year ended, December 31, 20B
Thingone ThingtwoBudgeted production (units) 55,000 39,000x No. of hours per unit 2 3Direct labor hours 110,000 117,000x Standard DL rate per hour P 8 P 9Budgeted direct labor cost P 880,000 P 1,053,000
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e. Ilocos Corporation Budgeted Finished Goods Inventory – 12/31 December 31, 20B
Thingone ThingtwoFinished goods inventory - 12/31 25,000 9,000x Unit costs: Materials [(4 x P8) + (2 x P5)] P 42 [(5 x P8) + (3 x P5) + 1 x P3)] P 58 Direct labor (2 x P8) 16 (3 x P9) 27 Applied FOH (2 x P2) 4 ( 3 x P2) 6 Total unit costs 62 91Budgeted finished goods inventory - 12/31 P 1,550,000 P 819,000
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d. Actual manufacturing costs P 61,200 Less: Standard manufacturing costs 104,600 Manufacturing variance P(43,400) F
[Problem 8] Abra Company Schedule of Accounts Receivable Collections July – September 20__
CreditMonth of Sale Sales July August September Total
May P 550,000 P 55,000 P 55,000June 600,000 180,000 P 60,000 240,000July 800,000 188,160 240,000 P 80,000 796,160
288,000 August 900,000 211,680 210,000 745,680
324,000 September 1,000,000 235,200 595,200
360,000 Budgeted collections from customer P 711,160 P 835,680 P 885,200 P 2,432,040
[Problem 9]1. May sales (P150,000 x 20%) P 30,000
April sales (P180,000 x 50%) 90,000March sales (P100,000 x 25%) 25,000May collections P 145,000
2. February sales (P160,000 x 5%) P 8,000March sales (P100,000 x 30%) 30,000April sales (P180,000 x 80%) 144,000Accounts receivable - 4/30 P 182,000
3. February sales (P160,000 x 5%) P 8,000March sales (P100,000 x 5%) 5,000April sales (P180,000 x 30%) 54,000May sales (P150,000 x 80%) 120,000Accounts receivable - 5/31 P 187,000
4. Steps to reduce the balance in accounts receivable: a. Shorter credit period a1. Risk. Customer, especially those who have been accustomed with larger and
longer credit term, may negatively react and look for a new supplier that will offer them a longer credit period so as not to strain their working capital requirement.
a2. Advantage.It would reduce investment in accounts receivable balance, bad debts, collection costs and would increase income on investment.
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b. Strengthen collection policies: b1. Risk. Some customers may have an operating cycle longer than the offered
credit terms and may not have the ability to meet accelerated payments. b2. Advantage.Increase cash inflows.
[Problem 10] Lantoting Company Budgeted Cash Payments to Merchandise Supplies For the Month of May, 20__
May AprilBudgeted sales (in units) 10,000 9,000Add: Finished goods inventory - 5/1 (20% x 10,000) 2,000 1,800 (20% x 9,000)
Total goods available for sale 12,000 10,800Less: Finished goods inventory - 5/31 (20% x 12,000) 2,400 2,000Budgeted production 9,600 8,800x Standard materials per unit 3 3Materials used 28,800 26,400Add: Materials inventory 5/1 (40% x 28,800) 11,520 10,560 (40% x 26,400)
Total materials 40,320 36,960Less: Materials inventory - 5/31 (40% x 12,200 units x 3 units) 14,640 11,520Materials purchase (units) 25,680 25,440x Materials cost per unit P 20 P 20Budgeted May purchases P 513,600 P 508,800
Payments to: April purchases (P508,800 x 10/30 x 98%) P 166,208 May purchases (P513,600 x 20/30 x 98%) 335,552
P 501,760
[Problem 11] Cash paid for purchases in July = ?June July
June purchases paid in July (P 780,000 x 1/3 x 98%) P 254,800July purchases paid in July (P 465,000 x 2/3 x 98%) 303,800Cash payments to merchandise suppliers – July P 558,600
[Problem 12]a. Budgeted cash disbursements in June and July:
June July
Materials
Current month (P 243,600 x 54%)
P 131,544
P 132,408 (P 245,000 x 54%)
1-month prior (P225,000 x 46%) 103,500 112,056 (P 243,600 x 46%)
Wages and salaries 38,000 38,000Marketing, general and administrative expenses
Current month (P49,300 x 54%) 26,622 28,080 (P52,000 x 54%))
1-month prior (P51,550 x 46%) 23,713 22,678 (P49,300 x 46%))
Budgeted cash disbursements P 323,379
P 333,222
1) May June July
Materials used (units) 11,900 11,400 12,000
Materials inventory - ending (130% x next month’s production requirements) 14,820 15,600
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x Cost of materials per unit P 20 P 20 P 20
Budgeted materials purchases (pesos) P 225,000 P 243,600 P 245,200
2) M, G and AE = (15% x sales) – P 2000 May = (15% x P 357,000) – P 2,000 = P 51,550 June = (15% x P 342,000) – P 2,000 = P 49,300 July = (15% x P 360,000) – P 2,000 = P 52,000
b. Budgeted cash collections in May and June: May June
From March sales (P 354,000 x 9%) P 31,860 P -From April sales (P 363,000 x 60% x 97%) 211,266 33,670 (P363,000 x 9%)
(P 363,000 x 25%) 90,750 From May sales (P357,000 x 60% x 97%) 207,774
(P357,000 x 25%) 89,250 Collections from customers P333,876 P329,694
c. Materials purchases in units in July is 13,840 units.
[Problem 13] V. jovi Band company Cash Budget For The Quarter Ending, March 31, -
January February March TotalCollections from sales January sales 84,672 108,000 136,800 351,072
21,600 February sales 104,760 135,000 266,760
27,000 March sales 111,744 140,544
28,800
Total collections 106,272 239,760 412,344 758,376
Payments:
Materials supplies 89,200 60,400 65,600 215,200 Direct labor (Bud, Prod x P 30) 73,800 90,600 98,400 262,800 Variable OH (Bud. Prod x P 15) 36,900 45,300 49,200 131,400 Fixed OH (5000 x P 25) 125,000 125,000 125,000 375,000 Var. expenses (Sales x 11) 26,400 33,000 35,200 94,600 Fixed expenses (P 12000 x P5000) 17,000 17,000 17,000 51,000 Total 368,300 371,300 390,400 1,130,000Net operating cash inflows (outflows) (262,028) (131,540) 21,944 (371,624)Investing and financing activities: C. Salonga investment 50,000 - - 50,000 Bank loan 150,000 - - 150,000
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Acquisition of assets (200,000) - - (200,000) Interest payments (3,000) (3,000) (3,000) (9,000) Principal payments - - (30,000) (30,000) Net investing and financing activities (3,000) (3,000) (33,000) (39,000)Net cash inflows (outflows) (265,028) (134,340) (11,056) (410,624)Add: Cash balance, beginning 0 10,000 10,000 0Cash balance , ending, before Financing (265,028) (124,540) (1,056) (410,624)Borrowings 275,028 134,540 11,056 420,624Cash balance - end P 10,000 P 10,000 P 10,000 P 10,000
Schedules:
1. January February March
Budgeted sales (@ 150) 2,400 3,000 3,200
Finished goods inventory - ending
[100 + (10% x next month's sales)] 400 420 500
Finished goods inventory - beginning
[100 + (10% x 24,000)] (340) (400) (420)
Budgeted production 2,460 3020 3,280
2.
Budgeted materials purchases (units)
(2460 + 2000) 4,460 3,020 3,280
x Materials cost/unit P 20 P 20 P 20
Budgeted materials purchase (pesos) P 89,200 P 60,400 P 65,600
[Problem 14] a. Schedule of cash collections in September:
July credit sales (P 400,000 x 8%) P 32,000August credit sales (P 500,000 x 70%) 350,000September credit sales (P 580,000 x 20%) 116,000September cash sales 280,000September collections P 778,000
b. Schedule of payments to suppliers in September:August purchases P 105,000September purchases (P 250,000 x 25%) 62,500September payments to suppliers P 167,500
c. Isabela Corporation Cash budget For The Month of September, 2000
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Fixed Cost
Insurance 525.00 500.00 25.00UF
Salaries and benefits 2,500.00 2,500.00 0.00
Depreciation 2,310.00 2,200.00 110.00UF
Sub-total 5,335.00 5,200.00 135.00UF
Totals P 11,088.00 P 11,315.50 P (227.50)F
Cost per mile (Costs + 63,000 miles) P 0.1760 P 0.1796 P (0.0036)F
(1) Gasoline = 63,000 x P1.40/16 = P 5,512.50Oil, etc., = 63,000 x P 0.006 = P 378
[Problem 23] a. Triple-F Health Club Cash Budget For The Year Ended October 31, 20C (in thousands)
Receipts: Annual membership fees (P 355 x 110% x 103%) P 402.2 Lesson and class fee (P 234 x 234/180) 304.2 Miscellaneous (P 2 x 2/1.5) 2.7 P 708.9Payments: Manager’s salary and benefits (P 36 x 115%) 41.4 Regular employees wages and benefits (P 190 x 115%) 218.5 Lesson and class employee wages and benefits (P 195 x 234/180 x 115%) 291.5 Travel and supplies (P 16 x 125%) 20.0 Utilities (P 22 x 125%) 27.5 Mortgage interest (P360 x 9%) 32.4 Miscellaneous (P2 x 125%) 2.5 Equipment payable 10.0 Accounts payable for supplies and utilities 2.5 Amortization of mortgage payable 30.0 Purchase of new equipment 25.0 701.3Net cash inflows 7.6Add: Cash balance - Oct. 31,20B 7.3Cash balance - Oct. 31, 20C P 14.9
b. Problem(s) discloses by the prepared budget:1. Incremental revenues are basically determined by the membership base, which
may be considered relatively non-controllable.2. The presence of the mortgage payable and its attendant interest expense
fundamentally drain the cash position of the health club.3. Possible areas for cost saving should be identified to compensate the
accelerating trend in costs and expenses.
c. Joy Tan, the club general manager, is correct that the board’s goals to purchase the adjoining property in four or five years time is unrealistic. The adjoining property costs P300,000 and would be requiring in nominal terms P60,000 annual savings in the next five years. Considering that the recent net cash inflows from operations is only P7,600 in 20C, the required P60,000 annual savings would be extremely difficult for the business to achieve.