ATENEO GRADUATE SCHOOL OF BUSINESS
#20 Rockwell Drive, Rockwell Center, Makati City, 1200 Philippines
Chapter 10-11
Profit Planning
Flexible Budget and Overhead Analysis
Managerial Accounting
Submitted by:
Jantzen D. Bobares
Rafaela Angela R. Camacho
Annie Michelle S. Chong
Alexis Mae M. Cruz
Vera Ramona V. De Jesus
Sarah Frances P. Del Rosario
MBA – Standard Program
Submitted to:
Prof. Anna Bess G. Pingol
Managerial Accounting
October 10, 2013
ATENEO GRADUATE SCHOOL OF BUSINESS 1
Managerial Accounting
Chapter 10-11 Profit Planning Flexible Budget and Overhead Analysis
Exercise 10-7 Cash Budget [LO8]
Garden Depot is a retailer that is preparing its budget for the upcoming fiscal year.
Management has prepared the following summary of its budgeted cash flows:
Total cash receipts
Total cash disbursements
1st Quarter
$ 180,000
$ 260,000
2nd Quarter
$ 330,000
$ 230,000
3rd Quarter
$ 210,000
$ 220,000
4th Quarter
$ 230,000
$ 240,000
balance of $10,000 and may borrow any amount needed from a local bank at a quarterly
interest rate of 3%. The company may borrow any amount at the beginning of any quarter
and may repay its loans, or any part of its loans, at the end of any quarter. Interest payments
are due on any principal at the time it is repaid. For simplicity, assume that
interest is not compounded.
Required:
Prepare the company's cash budget for the upcoming fiscal year
Garden Depot
Cash Budget
Cash balance, beginning
Total cash receipts
Total cash available
Less total cash disbursements
Excess (deficiency) of cash available over disbursements
Financing:
Borrowings (at beginnings of quarters)
Repayments (at ends of quarters)
Interest
Total financing
Cash balance, ending
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
$
20,000 $
10,000 $
35,800 $
25,800
180,000
330,000
210,000
230,000
200,000
340,000
245,800
255,800
260,000
230,000
220,000
240,000
-60,000
110,000
25,800
15,800
$
70,000
0
0
70,000
10,000
$
0
-70,000
-4,200
-74,200
35,800 $
0
0
0
0
25,800
$
0
0
0
0
15,800
$
$
Year
20,000
950,000
970,000
950,000
20,000
70,000
-70,000
-4,200
-4,200
15,800
ATENEO GRADUATE SCHOOL OF BUSINESS 2
Managerial Accounting
Chapter 10-11 Profit Planning Flexible Budget and Overhead Analysis
Exercise 10-8 Budgeted Income Statement [LO9]
Gig Harbor Boating is the wholesale distributor of a small recreational catamaran sailboat.
Management has prepared the following summary data to use in its annual budgeting process:
Budgeted unit sales
Selling price per unit
Cost per unit
Variable selling and administrative expenses (per unit)
Fixed selling and administrative expenses (per year)
Interest expense for the year
$
$
$
$
$
460
1,950
1,575
75
105,000
14,000
Required:
Use the absorption costing income statement method, p
repare the company's budgeted income statement.
Gig Harbor Boating
Budgeted Income Statement
Sales
Cost of goods sold
Gross profit
Selling and administrative expenses
Net operating income
Interest expense
Net income
$
$
897,000
724,500
172,500
139,500
33,000
14,000
19,000
ATENEO GRADUATE SCHOOL OF BUSINESS 3
Managerial Accounting
Chapter 10-11 Profit Planning Flexible Budget and Overhead Analysis
Exercise 10-9 Budgeted Balance Sheet [LO10]
The management of Mecca Copy, a photocopying center located on University Avenue,
has compiled the following data to use in preparing its budgeted balance sheet
for next year:
Ending
Balances
Cash
Accounts receivable
Supplies inventory
Equipment
Accumulated depreciation
Accounts payable
Common stock
Retained earnings
$
$
$
$
$
$
?
8,100
3,200
34,000
16,000
1,800
5,000
?
The beginning balance of retained earnings was $28,000, net income is budgeted
to be $11,500, and dividends are budgeted to be $4,800.
Required:
Prepare the company's budgeted balance sheet.
Assets
Current assets:
Cash
$
Accounts receivable
Supplies inventory
Total current assets
Plant and equipment:
Equipment
Accumulated depreciation
Plant and equipment, net
Total assets
Mecca Copy
Budgeted Balance Sheet
Liabilities and Stockholders' Equity
Current liabilities:
12,200
Accounts payable
8,100
Stockholders' equity:
3,200
Common stock
$
5,000
$ 23,500
Retained earnings
34,700
Total stockholders' equity
34,000
-16,000
18,000
$ 41,500
Total liabilities and stockholders' equity
$
1,800
39,700
41,500
ATENEO GRADUATE SCHOOL OF BUSINESS 4
Managerial Accounting
Chapter 10-11 Profit Planning Flexible Budget and Overhead Analysis
PROBLEM 10–19 Cash Budget; Income Statement; Balance Sheet [LO2, LO4, LO8, LO9, LO10]
Minden Company is a wholesale distributor of premium European chocolates.
The company’s balance sheet as of April 30 is given below:
Minden Company
Balance Sheet
30-Apr
Assets
Cash
Accounts receivable, customers
Inventory
Buildings and equipment, net of depreciation
Total assets
$ 8,000
52,000
28,000
192,000
$280,000
Liabilities and Stockholders’ Equity
Accounts payable, suppliers
Note payable
Capital stock, no par
Retained earnings
Total liabilities and stockholders’ equity
$ 53,000
17,000
170,000
40,000
$280,000
The company is in the process of preparing budget data for May.
A number of budget items have already been prepared, as stated below:
a.
b.
c.
d.
e.
f.
g.
Sales are budgeted at $220,000 for May. Of these sales, $130,000 will be for cash;
the remainder will be credit sales. 60% of a month’s credit sales are collected
in the month the sales are made, and the remainder are collected in the following
month. All of the April 30 receivables will be collected in May.
Purchases of inventory are expected to total $140,000 during May.
These purchases will all be on account. 75% of all purchases are paid for in
the month of purchase; the remainder is paid in the following month.
All of the April 30 accounts payable to suppliers will be paid during May.
The May 31 inventory balance is budgeted at $38,000.
Operating expenses for May are budgeted at $86,000, exclusive of depreciation.
These expenses will be paid in cash. Depreciation is budgeted at $3,000
for the month.
The note payable on the April 30 balance sheet will be paid during May,
with $100 in interest. (All of the interest relates to May.)
New refrigerating equipment costing $8,000 will be purchased for cash during May.
During May, the company will borrow $40,000 from its bank by giving a new note
payable to the bank for that amount. The new note will be due in one year.
ATENEO GRADUATE SCHOOL OF BUSINESS 5
Managerial Accounting
Chapter 10-11 Profit Planning Flexible Budget and Overhead Analysis
Required:
1. Prepare a cash budget for May. Support your budget with a schedule of
expected cash collections from sales and a schedule of expected cash
disbursements for merchandise purchases.
2. Prepare a budgeted income statement for May. Use the absorption
costing income statement format as shown in Schedule 9.
3. Prepare a budgeted balance sheet as of May 31
Solution :
1.)
Cash receipts
Sales - May monthly cash sales
Sales - May credit sales
Sales - April credit sales
Note payable (received)
Total cash receipts
2.)
60,000
70,000
54,000
184,000
20,000
$ 204,000.00
Cash Disbursement
Purchase -May
Purchase-April
Operating expenses
Note payable and interest
Equipment purchase
Total cash disbursement
Net cash
$
48,000
63,000
72,000
14,600
6,500
204,100
(100.00)
Cash beginning of year
Cash End of year
$
9,000
8,900.00
Income statement under absorption costing method
sales
Less : Cost of good sold
Opening inventory
Add: purchase
Less : closing inventory
Gross margin
Selling and administrative expense
depreciation
Interest on notes
Net income
200,000
30,000
120,000
150,000
40,000
72,000
2,000
100
110,000
90,000
74,100
15,900
ATENEO GRADUATE SCHOOL OF BUSINESS 6
Managerial Accounting
Chapter 10-11 Profit Planning Flexible Budget and Overhead Analysis
3.)
Balance sheet as of May
Cash
Account receivables
closing inventory
building and Equipment
Less: depreciation
Refrigeration equipment
8,900
70,000
40,000
207,000
2,000
205,000
6,500
Total Assets
330,400
Account payable
Notes payable
Capital stock
retained earnings opening balance
earnings during the year
72,000
20,000
180,000
Total liabilities
42,500
15,900
58,400
330,400