Cost ACC chapter 6_6-29, 40, 41
6-29
1. Budgets for production and direct manufacturing labor (First Quarter)
Jan
Feb
Mar
Total
Bugeted sales
10,000
14,000
7,000
Target ending finished goods
17,500
11,000
12,000
Total requirements
27,500
25,000
19,000
Beginning finished goods
17,500
17,500
11,000
Units to be produced
10,000
7,500
8,000
2
2
1.5
20,000
15,000
12,000
240,000
180,000
144,000
10,000
7,500
6,000
Workers' compensation insurance
4,000
3,000
2,400
Employee medical insurance
6,000
4,500
3,600
18,000
13,500
10,800
278,000
208,500
166,800
DMLH per unit
laobr time needed
47,000
Direct manufacturing labor costs:
Wages
Pension contributions
Social security tax
Total direct manufacturing labor costs
653,300
2. The budget process would prompt Roletter’s management to look for ways to reduce finished
goods inventories, the manufacturing labor hours before and after installing new labor-saving
machinery
3. Continue to work with employees to increase productivity
6-40
1. Revenue Budget
Units
Selling price Total Revenues
Cat-allac
530
$205
108,650
Dog-eriffic
225
$310
69,750
Total
178,400
2. Production budget in units
Cat-allac Dog-eriffic
Budgeted unit sales
Target ending finished goods inventory
Total required units
Beginning finished goods inventory
Units of finished goods to be produced
530
225
30
10
560
235
10
25
550
210
3. Direct material usage budget
Plastic
Metal
Total
Physical Units Budget
Direct materials required for
Cat-allac
2,200
275
Dog-eriffic
1,260
210
3,460
485
Total quanityty of direc material
Cost Budget
Available from beginning direc materials inventory
Plastic
1,102
Metal
217
To be purchased
Plastic
15,850
Metal
1,660
Direct materials to be used
16,952
1,877
18,829
Direct material purchases budget
Plastic
Metal
Total
Physical Units Budget
To be used in production
Target ending inventory
Total requirements
Beginning inventory
Purchases to be made
3,460
485
410
65
3,870
550
290
70
3,580
480
Cost Budget
Plastic
17900
Metal
1,920
Purchases
17900
1920
19,820
4. Direct manufacturing labor cost budget
Output units produced DMLH per unit
Total hours
Wage
Total
Cat-allac
550
3
1,650
10
16,500
Dog-eriffic
210
5
1,050
10
10,500
Total
5. Machine setup overhead:
27,000
Cat-allac
Dog-eriffic
Total
Units to be produced
550
210
Units per batch
25
9
# of batches
22
24
Setup time
1.5
1.75
Total setup time
33
42
75
Budgeted machine set up costs = 105*75 = ＄7,875
Processing Overhead:
Budgeted machine hours = (11*550) + (19*210) = 10,040 MH
Budgeted processing costs = 10*10,040 = ＄100,400
Inspection Overhead:
Budgeted inspection hours = (0.5*22) + (0.7*24) = 27.8 hrs
Budgeted inspection costs = 15*27.8 = ＄417
Total = 7,875 + 100,400 + 417 = ＄108,692
6. Budgeted unit cost of ending finished-goods inventory
Cat-allac
Cost per unit
Input per
of input
unitof output
Dog-eriffic
Input per unit
Total
of output
Total
Plastic
5
4
20
6
30
Metal
4
0.5
2
1
4
10
3
30
5
50
105
0.06
6.3
0.2
21
Processing
10
11
110
19
190
Inspection
15
0.02
0.3
0.08
Direct manufacturing labor
Machine setup
Total
Ending inventories budget
168.6
1.2
296.2
Total
Quantity
Cost per unit
410
5
2,050
65
4
260
Direct Materials
Plastic
Metal
2,310
Finished goods
Cat-allac
30
168.6
5,058
Dog-eriffic
10
296.2
2,962
Total ending inventory
8,020
10,330
7. COGS budget
Beginning fished goods
5,650
Direct materials
18,829
Direct manufacutriing labor
27,000
Manufacturing overhead
108,692
COG manufactured
154,521
GOG available for sale
160,171
Ending finished goods
8,020
GOCS
152,151
8. Nonmanufacturing cots budget
Salaries
16,800
Other fixed costs
16,000
Sales commissions
1,784
Total nonmanufacutring costs
34,584
9. Budgeted income statement
Revenues
178,400
COGS
152,151
Gross margin
26,249
Operating costs
34,584
Operating income
(8,335)
10. Helps manage costs based on revenues and production needs; So managers are able to find
out how to increase productivity and efficiencies and reduce costs.
6-41
1. Cash Budget
Cash balance
5,900
Add receipts
Cash sales
17,840
Credit card sales
157,349
Total cahs available
181,089
Cash disbursements
Direct materials
17,910
Direct manufacturing labor
27,000
Manufacturing overhead
83,692
Non-manufacturing salaries
16,800
Sales commissions
1,784
Other non-manufacturing fixed costs
6,000
Machinery purchase
Income taxes
Total disbursements
13,000
5,000
171,186
Financing
Repayment of loan
Interest (24%)
2,000
40
Total effects of financing
2,040
Ending cash balance
7,863
2. Cash budget may help Animal Gear’s managers think about the expectations and plans for
the future. It is important to follow cash budget, unless unforeseen circumstances arise,
because adherence to a plan can discipline spending. By predicting cash requirements,
managers can also evaluate future business opportunities in part based on an opportunity’s
probable financing needs and costs.