CH 23 Exercises Problems

Management Accounting (ACCT 324)
Spring 2018/19
Chapter 23
Budgetary Planning
Part I: Exercises
Ex. 1
Edington Electronics Inc. produces and sells two models of pocket
calculators,
XQ-103 and XQ-104. The calculators sell for $15 and $25, respectively.
Because of the intense competition Edington faces, management budgets
sales semiannually. Its projections for the first 2 quarters of 2017 are as
follows.
Unit Sales
Product Quarter 1 Quarter 2
XQ-103 400,000 200,000
XQ-104 $20 $25
No changes in selling prices are anticipated.
Instructions
Prepare a sales budget for the 2 quarters ending June 30, 2017. List the
products and show for each quarter and for the 6 months, units, selling
price, and total sales by product and in total.
Ex. 2
On January 1, 2017, the Hardin Company budget committee has reached
agreement on the following data for the 6 months ending June 30, 2017.
 Sales units: First quarter 5,000; second quarter 6,000; third quarter
7,000.
 Ending raw materials inventory: 40% of the next quarter’s production
requirements.
 Ending finished goods inventory: 25% of the next quarters expected
sales units.
 Third-quarter production: 7,200 units.
The ending raw materials and finished goods inventories at December 31,
2016, follow the same percentage relationships to production and sales that
occur in 2017. Three pounds of raw materials are required to make each
unit of finished goods. Raw materials purchased are expected to cost $4 per
pound.
Instructions
a. Prepare a production budget by quarters for the 6-month period ended
June 30, 2017.
1
b. Prepare a direct materials budget by quarters for the 6-month period
ended June 30, 2017.
c.
Ex. 3
Danner Company expects to have a cash balance of $45,000 on January 1,
2017. Relevant monthly budget data for the fi rst 2 months of 2017 are as
follows.
 Collections from customers: January $85,000, February $150,000.
 Payments for direct materials: January $50,000, February $75,000.
 Direct labor: January $30,000, February $45,000. Wages are paid in
the month they are incurred.
 Manufacturing overhead: January $21,000, February $25,000. These
costs include depreciation of $1,500 per month. All other overhead costs
are paid as incurred.
 Selling and administrative expenses: January $15,000, February
$20,000.These costs are exclusive of depreciation. They are paid as
incurred.
Sales of marketable securities in January are expected to realize $12,000 in

cash. Danner Company has a line of credit at a local bank that enables it to
borrow up to $25,000. The company wants to maintain a minimum monthly
cash balance of $20,000.
Instructions
Prepare a cash budget for January and February.
2
Part II: Problems
Prob.1
Deleon Inc. is preparing its annual budgets for the year ending December
31,
2017. Accounting assistants furnish the data shown below.
Product Product
JB 50 JB 60
Sales budget:
Anticipated volume in units 400,000 200,000
Unit selling price $20 $25
Production budget:
Desired ending finished goods units 30,000 15,000
Beginning finished goods units 25,000 10,000
Direct materials budget:
Direct materials per unit (pounds 2 3
Desired ending direct materials pounds 30,000 10,000
Beginning direct materials pounds 40,000 15,000
Cost per pound $3 $4
Direct labor budget:
Direct labor time per unit 0.4 0.6
Direct labor rate per hour $12 $12
Budgeted income statement:
Total unit cost $13 $20
An accounting assistant has prepared the detailed manufacturing overhead

budget and the selling and administrative expense budget. The latter shows
selling expenses of $560,000 for product JB 50 and $360,000 for product
JB 60, and administrative expenses of $540,000 for product JB 50 and
$340,000 for product JB 60. Interest expense is $150,000 (not allocated to
products). Income taxes are expected to be 30%.
Instructions
Prepare the following budgets for the year. Show data for each product.
Quarterly budgets should not be prepared.
a. Sales.
b. Production.
c. Direct materials
d. Direct labor
e. Multiple-step income statement (Note: income taxes are not allocated to
the products).
3
Prob.2
Colter Company prepares monthly cash budgets. Relevant data from
operating budgets for 2017 are as follows.
January February
Sales $360,000 $400,000
Direct materials purchases 120,000 125,000
Direct labor 90,000 100,000
Manufacturing overhead 70,000 75,000
Selling and administrative expenses 79,000 85,000
All sales are on account. Collections are expected to be 50% in the month of
sale, 30% in the first month following the sale, and 20% in the second
month following the sale. Sixty percent (60%) of direct materials purchases
are paid in cash in the month of purchase, and the balance due is paid in
the month following the purchase. All other items above are paid in the
month incurred except for selling and administrative expenses that include
$1,000 of depreciation per month.
Other data:
1. Credit sales: November 2016, $250,000; December 2016, $320,000.
2. Purchases of direct materials: December 2016, $100,000.
3. Other receipts: January—collection of December 31, 2016, notes
receivable $15,000; February—proceeds from sale of securities $6,000.
4. Other disbursements: February—payment of $6,000 cash dividend.
The company’s cash balance on January 1, 2017, is expected to be $60,000.

The company wants to maintain a minimum cash balance of $50,000.
Instructions
a. Prepare schedules for (1) expected collections from customers and (2)
expected payments for direct materials purchases for January and
February.
b. Prepare a cash budget for January and February in columnar form.

CH 23 Exercises Problems

Uploaded by

Copyright:

Available Formats

CH 23 Exercises Problems

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CH 23 Exercises Problems

Uploaded by

Copyright:

Available Formats

Management Accounting (ACCT 324)

No changes in selling prices are anticipated.

Sales of marketable securities in January are expected to realize $12,000 in

An accounting assistant has prepared the detailed manufacturing overhead

The company’s cash balance on January 1, 2017, is expected to be $60,000.

You might also like