Chapter 20 – Master Budgets and Planning
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Exercise 20-3 page 802
Manufacturing: Production budget
Exercise 20-3
Exercise 20-3 Alt.
Exercise 20-4 page 802
Manufacturing: Production budget
Exercise 20-4
Exercise 20-4 Alt.
Exercise 20-5 page 802
Manufacturing: Production budget
Exercise 20-5
Exercise 20-5 Alt.
Exercise 20-6 page 802
Manufacturing: Preparing production
budgets (for two periods)
Exercise 20-6
Exercise 20-6 Alt.
Exercise 20-7 page 802
Manufacturing: Direct materials budget
Exercise 20-7
Exercise 20-7 Alt.
Exercise 20-8 page 802
Manufacturing: Direct materials budget
Exercise 20-8
Exercise 20-8 Alt.
Exercise 20-9 page 803
Manufacturing: Direct materials budget
Exercise 20-9
Exercise 20-9 Alt.
Exercise 20-10 page 803
Manufacturing: Direct materials budget
Exercise 20-10
Exercise 20-10 Alt.
Exercise 20-11 page 803
Manufacturing: Direct labor budget
Exercise 20-11
Exercise 20-11 Alt.
Exercise 20-12 page 803
Manufacturing: Direct labor budget
Exercise 20-12
Exercise 20-12 Alt.
Exercise 20-13 page 803
Manufacturing: Direct labor and factory
overhead budgets
Exercise 20-13
Exercise 20-13 Alt.
Exercise 20-14 page 803
Manufacturing: Direct labor and factory
overhead budgets
Exercise 20-14
Exercise 20-14 Alt.
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Chapter 20 – Master Budgets and Planning
Click on links
Exercise 20-15 page 803
Manufacturing: Direct materials, direct
labor, and overhead budgets
Exercise 20-15
Exercise 20-15 Alt.
Exercise 20-16 page 804
Manufacturing: Direct materials, direct
labor, and overhead budgets
Exercise 20-16
Exercise 20-16 Alt.
Exercise 20-17 page 804
Preparation of cash budgets (for three
periods)
Exercise 20-17
Exercise 20-17 Alt.
Exercise 20-18 page 804
Schedule of cash receipts
Exercise 20-18
Exercise 20-18 Alt.
Exercise 20-20 page 804
Cash budget
Exercise 20-20
Exercise 20-20 Alt.
Exercise 20-21 page 804
Cash budget
Exercise 20-21
Exercise 20-21 Alt.
Exercise 20-22 page 805
Manufacturing: Cash budget
Exercise 20-22
Exercise 20-22 Alt.
Exercise 20-23 page 805
Manufacturing: Cash budget
Exercise 20-23
Exercise 20-23 Alt.
Exercise 20-24 page 805
Budgeted income statement
Exercise 20-24
Exercise 20-24 Alt.
Exercise 20-25A page
805
Merchandising: Merchandise purchases
budgets (for three periods)
Exercise 20-25
Exercise 20-25 Alt.
Exercise 20-26A page
805
Merchandising: Computing budgeted
merchandise purchases from accounts
payable
Exercise 20-26
Exercise 20-26 Alt.
Exercise 20-27A page
806
Merchandising: Preparation of a cash budget
Exercise 20-27
Exercise 20-27 Alt.
Exercise 20-30A page
Merchandising: Schedule of cash payments
Exercise 20-30 Exercise 20-30 Alt.
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806
for merchandise
purchases
prior written consent of McGraw Hill.
Chapter 20 – Master Budgets and Planning
Click on links
Exercise 20-31A page
806
Merchandising: Cash budget and schedule of
cash receipts
Exercise 20-31
Exercise 20-31 Alt.
Exercise 20-32A page
807
Merchandising: Cash budget and schedule of
cash receipts
Exercise 20-32
Exercise 20-32 Alt.
Exercise 20-33A page
807
Merchandising: Budgeted balance sheet
Exercise 20-33
Exercise 20-33 Alt.
Exercise 20-34 page 807
Direct labor budget for a service company
Exercise 20-34
Exercise 20-34 Alt.
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Exercise 20-3 page 802
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prior written consent of McGraw Hill.
Ruiz Co. provides the following budgeted sales for the next four months. The company
wants to end each month with ending finished goods inventory equal to 25% of next
month's sales. Finished goods inventory on April 1 is 125 units.
Prepare a production budget for the months of April, May, and June.
Budgeted sales units
April
500
May
580
Ruiz Co.
Production Budget
April
Budgeted sales units
500
Add: Desired ending inventory
Next month's budgeted sales
580
Ratio of inventory to future sales
25%
Desired ending inventory units
145
Total required units
645
Less: Beginning inventory units
(125)
Units to produce
520
Exercise 20-3 page 802
June
540
July
620
May
580
June
540
540
25%
135
715
(145)
570
620
25%
155
695
(135)
560
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prior written consent of McGraw Hill.
Ruiz Co. provides the following budgeted sales for the next four months. The company
wants to end each month with ending finished goods inventory equal to 20% of next
month's sales. Finished goods inventory on April 1 is 128 units.
Prepare a production budget for the months of April, May, and June.
Budgeted sales units
April
640
May
700
June
670
July
740
Ruiz Co.
Production Budget
April
640
May
700
June
670
700
20%
140
780
(128)
652
670
20%
134
834
(140)
694
740
20%
148
818
(134)
684
Budgeted sales units
Add: Desired ending inventory
Next month's budgeted sales
Ratio of inventory to future sales
Desired ending inventory units
Total required units
Less: Beginning inventory units
Units to produce
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Exercise 20-3 page 802 Alternate
Exercise 20-4 page 802
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prior written consent of McGraw Hill.
Blue Wave Co. budgets the following unit sales for the next four months. The company’s policy is to
maintain finished goods inventory equal to 60% of the next month’s unit sales. At the end of August, the
company had 2,400 finished units in inventory. Prepare a production budget for each of the months of
September, October, and November.
Budgeted sales units
September
4,000
October
5,000
November
7,000
December
7,600
Blue Wave Co.
Production Budget
September
4,000
October
5,000
November
7,000
5,000
60%
3,000
7,000
(2,400)
4,600
7,000
60%
4,200
9,200
(3,000)
6,200
7,600
60%
4,560
11,560
(4,200)
7,360
Budgeted sales units
Add: Desired ending inventory
Next month's budgeted sales (units)
Ratio of inventory to future sales
Desired ending inventory units
Total required units
Less: Beginning inventory units
Units to produce
Exercise 20-4 page 802
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prior written consent of McGraw Hill.
Blue Wave Co. budgets the following unit sales for the next four months. The company’s policy is to
maintain finished goods inventory equal to 30% of the next month’s unit sales. At the end of August, the
company had 1,800 finished units in inventory. Prepare a production budget for each of the months of
September, October, and November.
Budgeted sales units
September
6,000
October
8,000
November
7,000
December
9,000
Blue Wave Co.
Production Budget
September
6,000
October
8,000
November
7,000
8,000
30%
2,400
8,400
(1,800)
6,600
7,000
30%
2,100
10,100
(2,400)
7,700
9,000
30%
2,700
9,700
(2,100)
7,600
Budgeted sales units
Add: Desired ending inventory
Next month's budgeted sales (units)
Ratio of inventory to future sales
Desired ending inventory units
Total required units
Less: Beginning inventory units
Units to produce
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Exercise 20-4 page 802 Alternate
Exercise 20-5 page 802
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prior written consent of McGraw Hill.
Tyler Co. budgets the following unit sales for the next four months. The company's policy is to maintain
finished goods inventory equal to 30% of the next month's unit sales. At the end of March, the company
had 900 finished units in inventory. Prepare a production budget for the months of April, May, and June.
Budgeted sales units
April
3,000
May
4,000
June
6,000
July
2,000
Tyler Co.
Production Budget
April
3,000
May
4,000
June
6,000
4,000
30%
1,200
4,200
(900)
3,300
6,000
30%
1,800
5,800
(1,200)
4,600
2,000
30%
600
6,600
(1,800)
4,800
Budgeted sales units
Add: Desired ending inventory
Next month's budgeted sales (units)
Ratio of inventory to future sales
Desired ending inventory units
Total required units
Less: Beginning inventory units
Units to produce
Exercise 20-5 page 802
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Tyler Co. budgets the following unit sales for the next four months. The company's policy is to maintain
finished goods inventory equal to 40% of the next month's unit sales. At the end of March, the company
had 2,800 finished units in inventory. Prepare a production budget for the months of April, May, and June.
Budgeted sales units
April
7,000
May
8,400
June
5,000
July
3,000
Tyler Co.
Production Budget
April
7,000
May
8,400
June
5,000
8,400
40%
3,360
10,360
(2,800)
7,560
5,000
40%
2,000
10,400
(3,360)
7,040
3,000
40%
1,200
6,200
(2,000)
4,200
Budgeted sales units
Add: Desired ending inventory
Next month's budgeted sales (units)
Ratio of inventory to future sales
Desired ending inventory units
Total required units
Less: Beginning inventory units
Units to produce
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Exercise 20-5 page 802 Alternate
Exercise 20-6 page 802
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prior written consent of McGraw Hill.
Electro Company manufactures transmissions for electric cars. Management reports ending finished
goods inventory for the first quarter at 249,000 units. The following unit sales are budgeted during the rest of the
year: second quarter, 498,000 units; third quarter, 460,000 units; and fourth quarter, 254,500 units. Company
policy calls for the ending finished goods inventory of a quarter to equal 50% of the next quarter's budgeted
unit sales. Prepare a production budget for both the second and third quarters that shows the number of
transmissions to manufacture.
Budgeted sales units
Second Quarter Third Quarter
498,000
460,000
Fourth Quarter
254,500
Electro Company Co.
Production Budget
Second Quarter Third Quarter
Budgeted sales units
498,000
460,000
Add: Desired ending inventory
Next quarter's budgeted sales (units)
460,000
254,500
Ratio of inventory to future sales
50%
50%
Desired ending inventory units
230,000
127,250
Total required units
728,000
587,250
Less: Beginning inventory units
(249,000)
(230,000)
Units to produce
479,000
357,250
Exercise 20-6 page 802
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Electro Company manufactures transmissions for electric cars. Management reports ending finished
goods inventory for the first quarter at 120,000 units. The following unit sales are budgeted during the rest of the
year: second quarter, 400,000 units; third quarter, 350,000 units; and fourth quarter, 320,000 units. Company
policy calls for the ending finished goods inventory of a quarter to equal 30% of the next quarter's budgeted
unit sales. Prepare a production budget for both the second and third quarters that shows the number of
transmissions to manufacture.
Budgeted sales units
Second Quarter Third Quarter
400,000
350,000
Fourth Quarter
320,000
Electro Company Co.
Production Budget
Second Quarter Third Quarter
Budgeted sales units
400,000
350,000
Add: Desired ending inventory
Next quarter's budgeted sales (units)
350,000
320,000
Ratio of inventory to future sales
30%
30%
Desired ending inventory units
105,000
96,000
Total required units
505,000
446,000
Less: Beginning inventory units
(120,000)
(105,000)
Units to produce
385,000
341,000
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Exercise 20-6 page 802 Alternate
Exercise 20-7 page 802
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prior written consent of McGraw Hill.
Rida Incorporated is preparing its direct materials budget for the second quarter. It budgets production of
240,000 units in the second quarter and 52,500 units in the third quarter. Each unit requires 0.60 pounds of
direct material, priced at $175 per pound. The company plans to end each quarter with an ending inventory of
materials equal to 30% of next quarter’s budgeted materials requirements. Raw material inventory is 45,000
pounds at the beginning of the second quarter. Prepare a direct materials budget for the second quarter.
Rida, Inc.
Direct Materials Budget
Second quarter
Units to produce
240,000 units
Materials required per unit
0.60 pounds
Materials needed for production (pounds)
144,000 pounds
Add: Desired ending inventory (pounds) (52,500 units x 0.60 pounds per unit x 30%)
9,450 pounds
Total materials required (pounds)
153,450 pounds
Less: Beginning materials inventory (pounds)
(45,000) pounds
Materials to be purchased (pounds)
108,450 pounds
Materials cost per pound
$175
Cost of direct materials purchases
$18,978,750
Exercise 20-7 page 802
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prior written consent of McGraw Hill.
Rida Incorporated is preparing its direct materials budget for the second quarter. It budgets production of 300,000
units in the second quarter and 50,000 units in the third quarter. Each unit requires 0.80 pounds of direct material,
priced at $160 per pound. The company plans to end each quarter with an ending inventory of this material equal to
40% of next quarter’s budgeted materials requirements. Raw material inventory is 96,000 pounds at the beginning
of the second quarter. Prepare a direct materials budget for the second quarter.
Rida, Inc.
Direct Materials Budget
Second quarter
Units to produce
300,000 units
Materials required per unit
0.80 pounds
Materials needed for production (pounds)
240,000 pounds
Add: Desired ending inventory (pounds) (50,000 units x 0.80 pounds per unit x 40%)
16,000 pounds
Total materials required (pounds)
256,000 pounds
Less: Beginning materials inventory (300,000 units x 0.80 pounds per unit x 40%)
(96,000) pounds
Materials to purchase (pounds)
160,000 pounds
Materials cost per pound
$160
Cost of direct materials purchases
$25,600,000
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Exercise 20-7 page 802 Alternate
Exercise 20-8 page 802
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Zira Co. reports the following production budget for the next four months. Each finished unit requires 5
pounds of direct materials, and the company wants to end each month with direct materials inventory equal
to 30% of next month's production needs. Beginning direct materials inventory for April was 683 pounds.
Direct materials cost $4 per pound. Prepare a direct materials budget for April, May, and June.
April
May
570
June
560
July
540
Zira Co.
Direct Materials Budget
April
Units to produce
455
Materials required per unit
5
Materials needed for production (lbs.)
2,275
Add: Desired ending materials inventory (lbs.)
855
Total materials required (lbs.)
3,130
Less: Beginning materials inventory (lbs.)
(683)
Materials to purchase (lbs.)
2,447
Direct materials cost per lb.
$4.00
Cost of direct materials purchases
$9,788
May
570
5
2,850
840
3,690
(855)
2,835
$4.00
$11,340
June
560
5
2,800
810
3,610
(840)
2,770
$4.00
$11,080
Units to produce
455
Calculation of budgeted ending materials inventory (lbs.)
April: 40% of May's production requirement. 40% x 2,850 = 855 lbs.
May: 40% of June's production requirement. 40% x 2,800 = 840 lbs.
June: 40% of July's production requirement. 40% x 2,700* = 810 lbs.
* July's production of 540 units x 5 lbs. per unit = 2,700 lbs.
Exercise 20-8 page 802
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prior written consent of McGraw Hill.
Zira Co. reports the following production budget for the next four months. Each finished unit requires 2
pounds of direct materials, and the company wants to end each month with direct materials inventory equal
to 40% of next month's production needs. Beginning direct materials inventory for April was 400 pounds.
Direct materials cost $6 per pound. Prepare a direct materials budget for April, May, and June.
April
May
620
June
650
July
800
Zira Co.
Direct Materials Budget
April
Units to produce
500
Materials required per unit
2
Materials needed for production (lbs.)
1,000
Add: Desired ending materials inventory (lbs.)
496
Total materials required (lbs.)
1,496
Less: Beginning materials inventory (lbs.)
(400)
Materials to purchase (lbs.)
1,096
Direct materials cost per lb.
$6.00
Cost of direct materials purchases
$6,576
May
620
2
1,240
520
1,760
(496)
1,264
$6.00
$7,584
June
650
2
1,300
640
1,940
(520)
1,420
$6.00
$8,520
Units to produce
500
Calculation of budgeted ending materials inventory (lbs.)
April: 40% of May's production requirement. 40% x 1,240 = 496 lbs.
May: 40% of June's production requirement. 40% x 1,300 = 520 lbs.
June: 40% of July's production requirement. 40% x 1,600* = 640 lbs.
* July's production of 800 units x 2 lbs. per unit = 1,600 lbs.
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Exercise 20-8 page 802 Alternate
Exercise 20-9 page 803
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Ramos Co. provides the following budgeted production for the next four months:
April
Units to produce
442
May
570
June
544
July
540
Each finished unit requires requires 5 pounds of direct materials. The company wants to end
each month with direct materials inventory equal to 30% of next month's production needs.
Beginning direct materials inventory for April was 663 pounds. Direct materials cost $2 per
pound. Prepare a direct materials budget for April, May, and June.
Ramos Co.
Direct Materials Budget
For April, May, and June
April
Units to produce
442
Materials required per unit
5
Materials needed for production (lbs.)
2,210
Add: Desired ending materials inventory (lbs.)
855
Total materials required (lbs.)
3,065
Less: Beginning materials inventory (lbs.)
(663)
Materials to purchase (lbs.)
2,402
Materials cost per pound
$2.00
Cost of direct materials purchases
$4,804
May
570
5
2,850
816
3,666
(855)
2,811
$2.00
$5,622
June
544
5
2,720
810
3,530
(816)
2,714
$2.00
$5,428
Calculation of desired ending materials inventory (lbs.)
April: 30% of May's production requirement. 30% x 2,850 = 855 lbs.
May: 30% of June's production requirement. 30% x 2,720 = 816 lbs.
June: 30% of July's production requirement. 30% x 2,700* = 810 lbs.
* July's production of 540 units x 5.00 lbs. per unit = 2,700 lbs.
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Exercise 20-9 page 803
prior written consent of McGraw Hill.
Ramos Co. provides the following budgeted production for the next four months:
Units to produce
April
640
May
720
June
770
July
760
Each finished unit requires requires 5 pounds of direct materials. The company wants to end
each month with direct materials inventory equal to 40% of next month's production needs.
Beginning direct materials inventory for April was 1,280 pounds. Direct materials cost $5 per
pound. Prepare a direct materials budget for April, May, and June.
Ramos Co.
Direct Materials Budget
For April, May, and June
April
Units to produce
640
Materials required per unit
5
Materials needed for production (lbs.)
3,200
Add: Desired ending materials inventory (lbs.)
1,440
Total materials required (lbs.)
4,640
Less: Beginning materials inventory (lbs.)
(1,280)
Materials to purchase (lbs.)
3,360
Materials cost per pound
$5.00
Cost of direct materials purchases
$16,800
May
720
5
3,600
1,540
5,140
(1,440)
3,700
$5.00
$18,500
June
770
5
3,850
1,520
5,370
(1,540)
3,830
$5.00
$19,150
Calculation of desired ending materials inventory (lbs.)
April: 40% of May's production requirement. 40% x 3,600 = 1,440 lbs.
May: 40% of June's production requirement. 40% x 3,850 = 1,540 lbs.
June: 40% of July's production requirement. 40% x 3,800* = 1,520 lbs.
* July's production of 760 units x 5.00 lbs. per unit = 3,800 lbs.
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prior written consent of McGraw Hill.
Exercise 20-9 page 803 Alternate
Exercise 20-10 page 803
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Electro Company budgets production of 450,000 electric panels in the second quarter and
520,000 electric panels in the third quarter. Each panel requires 0.80 pound of direct
material at a cost of $1.70 per pound. The company aims to end each quarter with an
ending inventory of this material equal to 20% of next quarter’s budgeted materials
requirements. Beginning inventory of this material is 72,000 pounds. Prepare
a direct materials budget for the second quarter.
Electro Company
Direct Materials Budget
Second Quarter
Units to produce
450,000 units
Materials required per unit
0.80 lbs.
Materials needed for production (lbs.)
360,000 lbs.
Add: Desired ending materials inventory (520,000 x 0.80 lbs. x 20%)
83,200 lbs.
Total materials required (lbs.)
443,200 lbs.
Less: Beginning materials inventory
72,000 lbs.
Materials to purchase (lbs.)
371,200 lbs.
Materials cost per pound
$1.70
Cost of direct materials purchases
$631,040
Exercise 20-10 page 803
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Electro Company budgets production of 434,000 electric panels in the second quarter and
422,000 electric panels in the third quarter. Each panel requires 0.50 pounds of direct
material at a cost of $1.80 per pound. The company aims to end each quarter with an
ending inventory of this material equal to 30% of next quarter’s budgeted materials
requirements. Beginning inventory of this material is 65,100 pounds. Prepare
a direct materials budget for the second quarter.
Electro Company
Direct Materials Budget
Second Quarter
Units to produce
434,000 units
Materials required per unit
0.50 lbs.
Materials needed for production (lbs.)
217,000 lbs.
Add: Desired ending materials inventory (422,000 x 0.50 lbs. x 30%)
63,300 lbs.
Total materials required (lbs.)
280,300 lbs.
Less: Beginning materials inventory
65,100 lbs.
Materials to purchase (lbs.)
215,200 lbs.
Materials cost per pound
$1.80
Cost of direct materials purchases
$387,360
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prior written consent of McGraw Hill.
Exercise 20-10 page 803 Alternate
Exercise 20-11 page 803
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
The production budget for Manner Company shows units to produce as follows: July, 620; August,
680; September, 540. Each unit produced requires 2.00 hour of direct labor. The direct labor rate is
budgeted at $20.00 per hour in July and August but is budgeted to be $21.00 per hour in September.
Prepare a direct labor budget for the months of July, August, and September.
Manner Co.
Direct Labor Budget
For July, August, and September
July
Units to produce
620
Direct labor hours required per unit
2.00
Direct labor hours needed
1,240
Direct labor rate per hour
$20.00
Cost of direct labor
$24,800
Exercise 20-11 page 803
August
680
2.00
1,360
$20.00
$27,200
September
540
2.00
1,080
$21.00
$22,680
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prior written consent of McGraw Hill.
The production budget for Manner Company shows units to produce as follows: July, 680; August, 750;
September, 610. Each unit produced requires one hour of direct labor. The direct labor rate is
budgeted at $15 per hour in July and August but is budgeted to be $16 per hour in September.
Prepare a direct labor budget for the months of July, August, and September.
Manner Co.
Direct Labor Budget
For July, August, and September
July
August
Units to produce
680
750
Direct labor hours required per unit
1.00
1.00
Direct labor hours needed
680
750
Direct labor rate per hour
$15.00
$15.00
Cost of direct labor
$10,200
$11,250
September
610
1.00
610
$16.00
$9,760
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Exercise 20-11 page 803 Alternate
Exercise 20-12 page 803
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prior written consent of McGraw Hill.
Branson Belts makes handcrafted belts. The company budgets production of 4,500 belts during the
second quarter. Each belt requires 4.0 direct labor hours, at a cost of $12 per hour. Prepare a direct
labor budget for the second quarter.
Branson Belts
Direct Labor Budget
Second Quarter
Units to produce
Direct labor hours required per unit
Direct labor hours needed
Direct labor cost per hour
Cost of direct labor
Exercise 20-12 page 803
4,500
4.0
18,000
$12.00
$216,000
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prior written consent of McGraw Hill.
Branson Belts makes handcrafted belts. The company budgets production of 7,500 belts during the
second quarter. Each belt requires 3.0 direct labor hours, at a cost of $18 per hour. Prepare a direct
labor budget for the second quarter.
Branson Belts
Direct Labor Budget
Second Quarter
Units to produce
Direct labor hours required per unit
Direct labor hours needed
Direct labor cost per hour
Cost of direct labor
7,500
3.0
22,500
$18.00
$405,000
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Exercise 20-12 page 803 Alternate
Exercise 20-13 page 803
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prior written consent of McGraw Hill.
Addison Co. budgets production of 2,400 units during the second quarter. Other information is as follows:
Direct labor
Each finished unit requires 4 direct labor hours, at a cost of $20 per hour.
Variable overhead Applied at the rate of $11 per direct labor hour.
Fixed overhead
Budgeted at $460,000 per quarter
Prepare a direct labor budget for the second quarter.
Addison Co.
Direct Labor Budget
Second Quarter
Units to produce
Direct labor hours per unit
Direct labor hours needed
Direct labor cost per hour
Cost of direct labor
2,400 units
4.00 hrs.
9,600 hrs.
$20.00
$192,000
Prepare a factory overhead budget for the second quarter.
Addison Co.
Factory Overhead Budget
Second Quarter
Direct labor hours needed
Variable overhead rate per direct labor hour
Budgeted variable overhead
Budgeted fixed overhead
Budgeted total factory overhead
Exercise 20-13 page 803
9,600 hrs.
11.00 per DLH
$105,600
450,000
$555,600
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prior written consent of McGraw Hill.
Addison Co. budgets production of 241,000 units during the second quarter. Other information is as follows:
Direct labor
Each finished unit requires 4 direct labor hours, at a cost of $8 per hour.
Variable overhead Applied at the rate of $10 per direct labor hour.
Fixed overhead
Budgeted at $470,000 per quarter
Prepare a direct labor budget for the second quarter.
Addison Co.
Direct Labor Budget
Second Quarter
Units to produce
Direct labor hours per unit
Direct labor hours needed
Direct labor cost per hour
Cost of direct labor
241,000 units
4.00 hrs.
964,000 hrs.
$8.00
$7,712,000
Prepare a factory overhead budget for the second quarter.
Addison Co.
Factory Overhead Budget
Second Quarter
Direct labor hours per unit
Variable overhead rate per hour
Budgeted variable overhead
Budgeted fixed overhead
Budgeted total factory overhead
964,000 hrs.
10.00 per DLH
$9,640,000
470,000
$10,110,000
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Exercise 20-13 page 803 Alternate
Exercise 20-14 page 803
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prior written consent of McGraw Hill.
Ramos Co. provides the following (partial) production budget for the next three months. Each finished
unit requires 0.50 hour of direct labor at the rate of $16 per hour. The company budgets variable overhead
at the rate of $20 per direct labor hour and budgets fixed overhead of $8,000 per month.
Prepare (1) a direct labor budget and (2) a factory overhead budget for April, May, and June.
Units to produce
Exercise 20-14 page 803
April
442
May
570
June
544
Ramos Co.
Direct Labor Budget
For the months of April, May, and June
April
May
Units to produce
442
570
Direct labor hours required per unit
0.50
0.50
Direct labor hours needed
221
285
Direct labor cost per hour
$16
$16
Cost of direct labor
$3,536
$4,560
June
544
0.50
272
$16
$4,352
Ramos Co.
Factory Overhead Budget
For the months of April, May, and June
April
May
Direct labor hours needed
221
285
Variable overhead rate per direct labor hour
$20
$20
Budgeted variable overhead
$4,420
$5,700
Budgeted fixed overhead
8,000
8,000
Budgeted total factory overhead
$12,420
$13,700
June
272
$20
$5,440
8,000
$13,440
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Ramos Co. provides the following (partial) production budget for the next three months. Each finished
unit requires 0.40 hour of direct labor at the rate of $15 per hour. The company budgets variable overhead
at the rate of $20 per direct labor hour and budgets fixed overhead of $4,000 per month.
Prepare (1) a direct labor budget and (2) a factory overhead budget for April, May, and June.
Units to produce
April
640
May
720
June
770
Ramos Co.
Direct Labor Budget
For the months of April, May, and June
April
May
Units to produce
640
720
Direct labor hours required per unit
0.40
0.40
Direct labor hours needed
256
288
Direct labor cost per hour
$15
$15
Cost of direct labor
$3,840
$4,320
June
770
0.40
308
$15
$4,620
Ramos Co.
Factory Overhead Budget
For the months of April, May, and June
April
May
Direct labor hours needed
256
288
Variable overhead rate per direct labor hour
$20
$20
Budgeted variable overhead
$5,120
$5,760
Budgeted fixed overhead
4,000
4,000
Budgeted total factory overhead
$9,120
$9,760
June
308
$20
$6,160
4,000
$10,160
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Exercise 20-14 page 803 Alternate
Exercise 20-15 page 803
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prior written consent of McGraw Hill.
MCO Leather manufactures leather purses. Each purse requires 2 pounds of direct materials
at a cost of $4 per pound and 0.8 direct labor hours at a rate of $16 per hour. Variable manufacturing
overhead is budgeted at a rate of $2 per direct labor hour. Budgeted fixed manufacturing overhead is $10,000
per month. The company’s policy is to end each month with direct materials inventory equal to 40% of
the next month’s materials requirement. At the end of August, the company had 3,680 pounds of direct
materials in inventory. The company’s production budget reports the following. Prepare budgets for
September and October for (1) direct materials, (2) direct labor, and (3) factory overhead.
Units to be produced
September
4,600
October
6,200
November
5,800
MCO Leather
Direct Materials Budget
For the Months of September and October
September
Units to produce
4,600
Materials required per unit (lbs.)
2.00
Materials needed for production (lbs.)
9,200
Add: Desired ending materials inventory (lbs.)
4,960
Total materials required (lbs.)
14,160
Less: Beginning materials inventory (lbs.)
(3,680)
Materials to purchase (lbs.)
10,480
Material cost per pound
$4.00
Cost of direct materials purchases
$41,920
October
6,200
2.00
12,400
4,640
17,040
(4,960)
12,080
$4.00
$48,320
Desired Ending Inventory = 40% of next month's production requirement.
October: 5,800 units x 2 lbs. per unit = 11,600 lbs. x 40% = 4,640 pounds
Exercise 20-15 page 803
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prior written consent of McGraw Hill.
MCO Leather manufactures leather purses. Each purse requires 2 pounds of direct materials
at a cost of $4 per pound and 0.8 direct labor hours at a rate of $16 per hour. Variable manufacturing
overhead is budgeted at a rate of $2 per direct labor hour. Budgeted fixed manufacturing overhead is $10,000
per month. The company’s policy is to end each month with direct materials inventory equal to 40% of
the next month’s materials requirement. At the end of August, the company had 3,680 pounds of direct
materials in inventory.
Units to be produced
Exercise 20-15 page 803
September
4,600
October
6,200
November
5,800
MCO Leather
Direct Labor Budget
For the Months of September and October
September
Units to produce
4,600
Direct labor hours required per unit
0.80
Direct labor hours needed
3,680
Direct labor cost per hour
$16.00
Cost of direct labor
$58,880
October
6,200
0.80
4,960
$16.00
$79,360
MCO Leather
Factory Overhead Budget
For the Months of September and October
September
Direct labor hours needed
3,680
Variable overhead rate per direct labor hour
$2.00
Budgeted variable overhead
$7,360
Budgeted fixed overhead
10,000
Budgeted total factory overhead
$17,360
October
4,960
$2.00
$9,920
10,000
$19,920
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MCO Leather manufactures leather purses. Each purse requires 3 pounds of direct materials
at a cost of $9 per pound and 1.5 direct labor hours at a rate of $14 per hour. Variable manufacturing
overhead is budgeted at a rate of $6 per direct labor hour. Budgeted fixed manufacturing overhead is $25,000
per month. The company’s policy is to end each month with direct materials inventory equal to 25% of
the next month’s materials requirement. At the end of August, the company had 3,750 pounds of direct
materials in inventory. The company’s production budget reports the following. Prepare budgets for
September and October for (1) direct materials, (2) direct labor, and (3) factory overhead.
Units to be produced
September
5,000
October
8,000
November
10,000
MCO Leather
Direct Materials Budget
For the Months of September and October
September
October
Units to produce
5,000
8,000
Materials required per unit (lbs.)
3.00
3.00
Materials needed for production (lbs.)
15,000
24,000
Add: Desired ending materials inventory (lbs.)
6,000
7,500
Total materials required (lbs.)
21,000
31,500
Less: Beginning materials inventory (lbs.)
(3,750)
(6,000)
Materials to purchase (lbs.)
17,250
25,500
Material cost per pound
$9.00
$9.00
Cost of direct materials purchases
$155,250 $229,500
Desired Ending Inventory = 25% of next month's production requirement.
October: 10,000 units x 3 lbs. per unit = 30,000 lbs. x 25% = 7,500 pounds
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Exercise 20-15 page 803 Alternate
MCO Leather manufactures leather purses. Each purse requires 3 pounds of direct materials
at a cost of $9 per pound and 1.5 direct labor hours at a rate of $14 per hour. Variable manufacturing
overhead is charged at a rate of $6 per direct labor hour. Fixed manufacturing overhead is $25,000
per month. The company’s policy is to end each month with direct materials inventory equal to 25% of
the next month’s materials requirement. At the end of August, the company had 3,750 pounds of direct
materials in inventory.
Units to be produced
September
5,000
October
8,000
November
10,000
MCO Leather
Direct Labor Budget
For the Months of September and October
September
Units to produce
5,000
Direct labor hours required per unit
1.50
Direct labor hours needed
7,500
Direct labor cost per hour
$14.00
Cost of direct labor
$105,000
October
8,000
1.50
12,000
$14.00
$168,000
MCO Leather
Factory Overhead Budget
For the Months of September and October
September
Direct labor hours needed
7,500
Variable overhead rate per direct labor hour
$6.00
Budgeted variable overhead
$45,000
Budgeted fixed overhead
25,000
Budgeted total factory overhead
$70,000
October
12,000
$6.00
$72,000
25,000
$97,000
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Exercise 20-15 page 803 Alternate
Exercise 20-16 page 804
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prior written consent of McGraw Hill.
Garden Yeti manufactures garden sculptures. Each sculpture requires 8 pounds of direct materials at
a cost of $3 per pound and 0.5 direct labor hour at a rate of $18 per hour. Variable overhead is
budgeted at a rate of $3 per direct labor hour. Budgeted fixed overhead is $4,000 per month. The
company’s policy is to maintain direct materials inventory equal to 20% of the next month’s direct
materials requirement. At the end of February the company had 5,280 pounds of direct materials in
inventory. The company’s production budget reports the following. Prepare budgets for March and
April for (1) direct materials, (2) direct labor, and (3) factory overhead.
Units to produce
March
3,300
April
4,600
May
4,800
Garden Yeti
Direct Materials Budget
For the Months of March and April
Units to produce
Materials required per unit
Materials needed for production (lbs.)
Add: Desired ending materials inventory (lbs.)
Total materials required (lbs.)
Less: Beginning materials inventory (lbs.)
Materials to purchase (lbs.)
Materials cost per pound
Cost of direct materials purchases
March
3,300
8.00
26,400
7,360
33,760
(5,280)
28,480
$3.00
$85,440
April
4,600
8.00
36,800
7,680
44,480
(7,360)
37,120
$3.00
$111,360
Desired Ending Inventory = 20% of next month's production requirement.
April: 4,800 units x 8 lbs. per unit = 38,400 lbs. x 20% = 7,680 pounds
Exercise 20-16 page 804
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prior written consent of McGraw Hill.
Garden Yeti manufactures garden sculptures. Each sculpture requires 8 pounds of direct materials at
a cost of $3 per pound and 0.5 direct labor hour at a rate of $18 per hour. Variable overhead is
budgeted at a rate of $3 per direct labor hour. Budgeted fixed overhead is $4,000 per month. The
company’s policy is to maintain direct materials inventory equal to 20% of the next month’s direct
materials requirement. At the end of February the company had 5,280 pounds of direct materials in
inventory. The company’s production budget reports the following.
Units to produce
March
3,300
April
4,600
May
4,800
Garden Yeti
Direct Labor Budget
For the Months of March and April
Units to produce
Direct labor hours required per unit
Direct labor hours needed
Direct labor cost per hour
Cost of direct labor
March
3,300
0.50
1,650
$18.00
$29,700
April
4,600
0.50
2,300
$18.00
$41,400
Garden Yeti
Factory Overhead Budget
For the Months of March and April
Direct labor hours needed
Variable overhead rate per direct labor hour
Budgeted variable overhead
Budgeted fixed overhead
Budgeted total factory overhead
Exercise 20-16 page 804
March
1,650
$3.00
$4,950
4,000
$8,950
April
2,300
$3.00
$6,900
4,000
$10,900
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prior written consent of McGraw Hill.
Garden Yeti manufactures garden sculptures. Each sculpture requires 6 pounds of direct materials at
a cost of $4 per pound and 0.2 direct labor hours at a rate of $20 per hour. Variable overhead is
budgeted at a rate of $4 per direct labor hour. Budgeted fixed overhead is $8,000 per month. The
company’s policy is to maintain direct materials inventory equal to 20% of the next month’s direct
materials requirement. At the end of February the company had 2,400 pounds of direct materials in
inventory. The company’s production budget reports the following. Prepare budgets for March and
April for (1) direct materials, (2) direct labor, and (3) factory overhead.
Units to produce
March
2,000
April
3,200
May
3,600
Garden Yeti
Direct Materials Budget
For the Months of March and April
Units to produce
Materials required per unit
Materials needed for production (lbs.)
Add: Desired ending materials inventory (lbs.)
Total materials required (lbs.)
Less: Beginning materials inventory (lbs.)
Materials to purchase (lbs.)
Materials cost per pound
Cost of direct materials purchases
March
2,000
6.00
12,000
3,840
15,840
(2,400)
13,440
$4.00
$53,760
April
3,200
6.00
19,200
4,320
23,520
(3,840)
19,680
$4.00
$78,720
Desired Ending Inventory = 20% of next month's production requirement.
March: 3,200 units x 6 lbs. per unit = 19,200 pounds x 20% = 3,840 lbs.
April: 3,600 units x 6 lbs. per unit = 21,600 pounds x 20% = 4,320 lbs.
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prior written consent of McGraw Hill.
Exercise 20-16 page 804 Alternate
Garden Yeti manufactures garden sculptures. Each sculpture requires 6 pounds of direct materials at
a cost of $4 per pound and 0.2 direct labor hours at a rate of $20 per hour. Variable overhead is
budgeted at a rate of $4 per direct labor hour. Budgeted fixed overhead is $8,000 per month. The
company’s policy is to maintain direct materials inventory equal to 20% of the next month’s direct
materials requirement. At the end of February the company had 2,400 pounds of direct materials in
inventory. The company’s production budget reports the following.
Units to produce
March
2,000
April
3,200
May
3,600
Garden Yeti
Direct Labor Budget
For the Months of March and April
Units to produce
Direct labor hours required per unit
Direct labor hours needed
Direct labor cost per hour
Cost of direct labor
March
2,000
0.20
400
$20.00
$8,000
April
3,200
0.20
640
$20.00
$12,800
March
400
$4.00
$1,600
8,000
$9,600
April
640
$4.00
$2,560
8,000
$10,560
Garden Yeti
Factory Overhead Budget
For the Months of March and April
Direct labor hours needed
Variable overhead rate per direct labor hour
Budgeted variable overhead
Budgeted fixed overhead
Budgeted total factory overhead
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Exercise 20-16 page 804 Alternate
Exercise 20-17 page 804
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prior written consent of McGraw Hill.
Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and
cash payments (excluding cash payments for loan principal and interest payments) for the
first three months of next year.
January
February
March
Cash
Receipts
$525,000
400,000
450,000
Cash
Payments
$475,000
350,000
525,000
Kayak requires a minimum cash balance of $30,000 at each month-end. Loans taken to meet this
requirement charge 1% interest per month, paid at each month-end. The interest is computed based
on the beginning balance of the loan for the month. Any preliminary cash balance above $30,000 is
used to repay loans at month-end. The company has a cash balance of $30,000 and a loan balance
of $60,000 at January 1. Prepare monthly cash budgets for January, February, and March.
Exercise 20-17 page 804
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prior written consent of McGraw Hill.
January
February
March
Cash
Receipts
$525,000
400,000
450,000
Cash
Payments
$475,000
350,000
525,000
Kayak requires a minimum cash balance of $30,000 at each month-end. Loans taken to meet this
requirement charge 1% interest per month, paid at each month-end. The interest is computed based
on the beginning balance of the loan for the month. Any preliminary cash balance above $30,000 is
used to repay loans at month-end. The company has a cash balance of $30,000 and a loan balance
of $60,000 at January 1.
Exercise 20-17 page 804
Kayak Company
Cash Budget
For January, February, and March
January
February
Beginning cash balance
$30,000
$30,000
Cash receipts
525,000
400,000
Total cash available
555,000
430,000
Cash payments
(475,000)
(350,000)
Interest expense (1% per month)
(600)
(106)
Preliminary cash balance
79,400
79,894
Additional loan (loan repayment)
(49,400)
(10,600)
Ending cash balance
$30,000
$69,294
March
$69,294
450,000
519,294
(525,000)
0
(5,706)
35,706
$30,000
Loan balance
Loan balance - beginning of month
$60,000
Additional loan (loan repayment)
(49,400)
Loan balance - End of month
$10,600
$0
35,706
$35,706
$10,600
(10,600)
$0
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prior written consent of McGraw Hill.
Kayak Co. budgeted the following cash receipts (excluding cash receipts from loans received) and cash
payments (excluding cash payments for loan principal and interest payments) for the first three
months of next year.
January
February
March
Cash
Receipts
$745,000
596,000
715,000
Cash
Payments
$705,000
547,000
778,000
Kayak requires a minimum cash balance of $50,000 at each month-end. Loans taken to meet this
requirement charge 1% interest per month, paid at each month-end. The interest is computed based
on the beginning balance of the loan for the month. Any preliminary cash balance above $50,000 is
used to repay loans at month-end. The company has a cash balance of $50,000 and a loan balance
of $100,000 at January 1. Prepare monthly cash budgets for January, February, and March.
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prior written consent of McGraw Hill.
Exercise 20-17 page 804 Alternate
January
February
March
Cash
Receipts
$745,000
596,000
715,000
Cash
Payments
$705,000
547,000
778,000
Kayak requires a minimum cash balance of $50,000 at each month-end. Loans taken to meet this
requirement charge 1% interest per month, paid at each month-end. The interest is computed based
on the beginning balance of the loan for the month. Any preliminary cash balance above $50,000 is
used to repay loans at month-end. The company has a cash balance of $50,000 and a loan balance
of $100,000 at January 1.
Kayak Company
Cash Budget
For January, February, and March
January
February
Beginning cash balance
$50,000
$50,000
Cash receipts
745,000
596,000
Total cash available
795,000
646,000
Cash payments
(705,000)
(547,000)
Interest expense
(1,000)
(610)
Preliminary cash balance
89,000
98,390
Additional loan (loan repayment)
(39,000)
(48,390)
Ending cash balance
$50,000
$50,000
March
$50,000
715,000
765,000
(778,000)
(126)
(13,126)
63,126
$50,000
Loan balance
Loan balance - beginning of month
$100,000
Additional loan (loan repayment)
(39,000)
Loan balance - End of month
$61,000
$12,610
63,126
$75,736
$61,000
(48,390)
$12,610
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prior written consent of McGraw Hill.
Exercise 20-17 page 804 Alternate
Exercise 20-18 page 804
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prior written consent of McGraw Hill.
Jasper Company has 70% of its sales on credit and 30% for cash. All credit sales are collected in full in the
first month following the sale. The company budgets sales of $525,000 for April, $535,000 for May, and
$560,000 for June. Total sales for March are $500,000. Prepare a schedule of cash receipts from sales for
April, May, and June.
April
$157,500
367,500
$525,000
May
$160,500
374,500
$535,000
June
$168,000
392,000
$560,000
Jasper Company
Budgeted Cash Receipts
For April, May, and June
Cash receipts from:
April
Cash sales
$157,500
Collection of accounts receivable
400,000
Total cash receipts
$557,500
May
$160,500
367,500
$528,000
June
$168,000
374,500
$542,500
Cash Sales
Sales on Account
Total Sales
Exercise 20-18 page 804
30%
70%
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prior written consent of McGraw Hill.
Jasper Company has 60% of its sales on credit and 40% for cash. All credit sales are collected in full in the first month
following the sale. The company budgets sales of $600,000 for April, $650,000 for May and $700,000 for June. Total
sales for March are $500,000. Prepare a schedule of cash receipts from sales for April, May, and June.
Cash Sales
Sales on Account
Total Sales
40%
60%
March
$200,000
300,000
$500,000
Cash receipts from:
Cash sales
Collection of accounts receivable
Total cash receipts
April
$240,000
360,000
$600,000
May
$260,000
390,000
$650,000
June
$280,000
420,000
$700,000
Jasper Company
Budgeted Cash Receipts
April
$240,000
300,000
$540,000
May
$260,000
360,000
$620,000
June
$280,000
390,000
$670,000
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prior written consent of McGraw Hill.
Exercise 20-18 page 804 Alternate
Exercise 20-20 page 804
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prior written consent of McGraw Hill.
Karim Corp. requires a minimum $8,000 cash balance. Loans taken to meet this requirement cost 1% interest
per month (paid at the end of each month). Any preliminary cash balance above $8,000 is used to
repay loans at month-end. The cash balance on July 1 is $8,400, and the company has no outstanding
loans. Budgeted cash receipts (other than for loans received) and budgeted cash payments (other than for
loan or interest payments) follow. Prepare a cash budget for July, August, and September.
July
August
September
Exercise 20-20 page 804
Cash
Receipts
$20,000
26,000
40,000
Cash
Payments
$28,000
30,000
22,000
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Karim Corp. requires a minimum $8,000 cash balance. Loans taken to meet this requirement cost 1% interest
per month (paid at the end of each month). Any preliminary cash balance above $8,000 is used to
repay loans at month-end. The cash balance on July 1 is $8,400, and the company has no outstanding
loans. Budgeted cash receipts (other than for loans received) and budgeted cash payments (other than for
loan or interest payments) follow. Prepare a cash budget for July, August, and September.
July
August
September
Exercise 20-20 page 804
Cash
Receipts
$20,000
26,000
40,000
Cash
Payments
$28,000
30,000
22,000
Karim Corp.
Cash Budget
For July, August, and September
July
August
Beginning cash balance
$8,400
$8,000
Cash receipts
20,000
26,000
Total cash available
28,400
34,000
Cash payments
(28,000)
(30,000)
Interest expense (1% per month)
0
(76)
Preliminary cash balance
400
3,924
Additional loan (loan repayment)
7,600
4,076
Ending cash balance
$8,000
$8,000
September
$8,000
40,000
48,000
(22,000)
(117)
25,883
(11,676)
$14,207
Loan balance
Loan balance - beginning of month
$0
Additional loan (loan repayment)
7,600
Loan balance - End of month
$7,600
$11,676
(11,676)
$0
$7,600
4,076
$11,676
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Karim Corp. requires a minimum $9,700 cash balance. Loans taken to meet this requirement cost 2% interest
per month (paid at the end of each month). Any preliminary cash balance above $9,700 is used to
repay loans at month-end. The cash balance on July 1 is $10,100, and the company has no outstanding
loans. Budgeted cash receipts (other than for loans received) and budgeted cash payments (other than for
loan or interest payments) follow. Prepare a cash budget for July, August, and September.
July
August
September
Cash
Receipts
$25,700
33,000
45,000
Cash
Payments
$33,860
29,700
37,600
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Exercise 20-20 page 804 Alternate
Karim Corp. requires a minimum $9,700 cash balance. Loans taken to meet this requirement cost 2% interest
per month (paid at the end of each month). Any preliminary cash balance above $9,700 is used to
repay loans at month-end. The cash balance on July 1 is $10,100, and the company has no outstanding
loans. Budgeted cash receipts (other than for loans received) and budgeted cash payments (other than for
loan or interest payments) follow.
July
August
September
Cash
Receipts
$25,700
33,000
45,000
Cash
Payments
$33,860
29,700
37,600
Karim Corp.
Cash Budget
For July, August, and September
July
August
Beginning cash balance
$10,100
$9,700
Cash receipts
25,700
33,000
Total cash available
35,800
42,700
Cash payments
(33,860)
(29,700)
Interest expense (2% of loan balance)
0
(155)
Preliminary cash balance
1,940
12,845
Additional loan (loan repayment)
7,760
(3,145)
Ending cash balance
$9,700
$9,700
Loan balance
Loan balance - beginning of month
$0
Additional loan (loan repayment)
7,760
Loan balance - End of month
$7,760
$7,760
(3,145)
$4,615
September
$9,700
45,000
54,700
(37,600)
(92)
17,008
(4,615)
$12,393
$4,615
(4,615)
$0
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prior written consent of McGraw Hill.
Exercise 20-20 page 804 Alternate
Exercise 20-21 page 804
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Foyert Corp. requires a minimum $30,000 cash balance. Loans taken to meet this requirement cost 1%
interest per month (paid at the end of each month). Any preliminary cash balance above $30,000 is used
to repay loans at month-end. The cash balance on October 1 is $30,000, and the company has an
outstanding loan of $10,000. Budgeted cash receipts (other than for loans received) and budgeted cash
payments (other than for loan or interest payments) follow. Prepare a cash budget for October,
November, and December. Round interest payments to the nearest dollar.
October
November
December
Exercise 20-21 page 804
Cash
Receipts
$110,000
80,000
100,000
Cash
Payments
$120,000
75,000
80,000
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prior written consent of McGraw Hill.
Foyert Corp. requires a minimum $30,000 cash balance. Loans taken to meet this requirement cost 1%
interest per month (paid at the end of each month). Any preliminary cash balance above $30,000 is used
to repay loans at month-end. The cash balance on October 1 is $30,000, and the company has an
outstanding loan of $10,000. Budgeted cash receipts (other than for loans received) and budgeted cash
payments (other than for loan or interest payments) follow.
October
November
December
Exercise 20-21 page 804
Cash
Receipts
$110,000
80,000
100,000
Cash
Payments
$120,000
75,000
80,000
Foyert Corp.
Cash Budget
For October, November, and December
October
November
Beginning cash balance
$30,000
$30,000
Cash receipts
110,000
80,000
Total cash available
140,000
110,000
Cash payments
(120,000)
(75,000)
Interest expense (1% per month)
(100)
(201)
Preliminary cash balance
19,900
34,799
Additional loan (loan repayment)
10,100
(4,799)
Ending cash balance
$30,000
$30,000
December
$30,000
100,000
130,000
(80,000)
(153)
49,847
(15,301)
$34,546
Loan balance
Loan balance - beginning of month
$10,000
Additional loan (loan repayment)
10,100
Loan balance - End of month
$20,100
$15,301
(15,301)
$0
$20,100
(4,799)
$15,301
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prior written consent of McGraw Hill.
Foyert Corp. requires a minimum $10,000 cash balance. Loans taken to meet this requirement cost 2%
interest per month (paid at the end of each month). Any preliminary cash balance above $10,000 is used
to repay loans at month-end. The cash balance on October 1 is $10,000, and the company has an outstanding
loan of $5,800. Budgeted cash receipts (other than for loans received) and budgeted cash payments (other than
for loan or interest payments) follow. Prepare a cash budget for October, November, and December.
October
November
December
Cash
Receipts
$20,000
16,000
19,000
Cash
Payments
$24,000
15,000
9,000
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prior written consent of McGraw Hill.
Exercise 20-21 page 804 Alternate
Foyert Corp. requires a minimum $10,000 cash balance. Loans taken to meet this requirement cost 2%
interest per month (paid at the end of each month). Any preliminary cash balance above $10,000 is used
to repay loans at month-end. The cash balance on October 1 is $10,000, and the company has an outstanding
loan of $5,800. Budgeted cash receipts (other than for loans received) and budgeted cash payments (other than
for loan or interest payments) follow. Prepare a cash budget for October, November, and December.
October
November
December
Cash
Receipts
$20,000
16,000
19,000
Cash
Payments
$24,000
15,000
9,000
Foyert Corp.
Cash Budget
For October, November, and December
October
November
Beginning cash balance
$10,000
$10,000
Cash receipts
20,000
16,000
Total cash available
30,000
26,000
Cash payments
(24,000)
(15,000)
Interest expense (2% per month)
(116)
(198)
Preliminary cash balance
5,884
10,802
Additional loan (loan repayment)
4,116
(802)
Ending cash balance
$10,000
$10,000
Loan balance
Loan balance - beginning of month
$5,800
Additional loan (loan repayment)
4,116
Loan balance - End of month
$9,916
$9,916
(802)
$9,114
December
$10,000
19,000
29,000
(9,000)
(182)
19,818
(9,114)
$10,704
$9,114
(9,114)
$0
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prior written consent of McGraw Hill.
Exercise 20-21 page 804 Alternate
Exercise 20-22 page 805
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prior written consent of McGraw Hill.
Use the following information to prepare the September cash budget for PTO Co. The following
information relates to expected cash receipts and cash payments for the month ended September 30.
a. Beginning cash balance September 1, $40,000.
b. Budgeted cash receipts from sales in September $255,000.
c. Direct materials are purchased on credit. Purchase amounts are: August (actual), $80,000,
September (budgeted), $110,000. Payments for direct materials follows 65% in the
month of purchase and 35% in the month following purchase.
d. Budgeted cash payments for direct labor in September, $40,000.
e. Budgeted depreciation expense for September, $4,000.
f. Budgeted cash payment for dividends in September, $20,000.
g. Budgeted cash payment for income taxes in September, $10,000.
h. Budgeted cash payment for loan interest in September, $1,000.
Exercise 20-22 page 805
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prior written consent of McGraw Hill.
a. Beginning cash balance September 1, $40,000.
b. Budgeted cash receipts from sales in September $255,000.
c. Direct materials are purchased on credit. Purchase amounts are: August (actual), $80,000,
September (budgeted), $110,000. Payments for direct materials follows 65% in the
month of purchase and 35% in the month following purchase.
d. Budgeted cash payments for direct labor in September, $40,000.
e. Budgeted depreciation expense for September, $4,000.
f. Budgeted cash payment for dividends in September, $20,000.
g. Budgeted cash payment for income taxes in September, $10,000.
h. Budgeted cash payment for loan interest in September, $1,000.
PTO COMPANY
Cash Budget
For Month Ended September 30
Beginning cash balance
$40,000
Cash receipts from sales
255,000
Total cash available
$295,000
Cash payments:
Direct materials
99,500
Direct labor
40,000
Dividends
60,000
Income taxes
10,000
Interest on bank loan
1,000
Total cash payments
170,500
Ending cash balance
$124,500
-----------------Paid in----------------Payments for Direct Materials
Total
August
September October
August purchases
$80,000
$52,000
$28,000
September purchases
110,000
71,500
38,500
$99,500
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
Exercise 20-22 page 805
prior written consent of McGraw Hill.
Use the following information to prepare the September cash budget for PTO Co. The following
information relates to expected cash receipts and cash payments for the month ended September 30.
a. Beginning cash balance September 1, $65,000.
b. Budgeted cash receipts from sales in September $300,000.
c. Direct materials are purchased on credit. Purchase amounts are: August (actual), $150,000,
September (budgeted), $210,000. Payments for direct materials follows 70% in the
month of purchase and 30% in the month following purchase.
d. Budgeted cash payments for direct labor in September, $95,000.
e. Budgeted depreciation expense for September, $4,000.
f. Budgeted cash payment for dividends in September, $20,000.
g. Budgeted cash payment for income taxes in September, $11,000.
h. Budgeted cash payment for loan interest in September, $1,100.
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prior written consent of McGraw Hill.
Exercise 20-22 page 805 Alternate
a. Beginning cash balance September 1, $65,000.
b. Budgeted cash receipts from sales in September $300,000.
c. Direct materials are purchased on credit. Purchase amounts are: August (actual), $150,000,
September (budgeted), $210,000. Payments for direct materials follows 70% in the
month of purchase and 30% in the month following purchase.
d. Budgeted cash payments for direct labor in September, $95,000.
e. Budgeted depreciation expense for September, $4,500.
f. Budgeted cash payment for dividends in September, $20,000.
g. Budgeted cash payment for income taxes in September, $11,000.
h. Budgeted cash payment for loan interest in September, $1,100.
PTO COMPANY
Cash Budget
For Month Ended September 30
Beginning cash balance
$65,000
Cash receipts from sales
300,000
Total cash available
$365,000
Cash payments
Direct materials
192,000
Direct labor
95,000
Dividends
20,000
Income taxes
11,000
Interest on loan
1,100
Total cash payments
319,100
Ending cash balance
$45,900
--------------------Paid in-------------------Payments for Direct Materials
Total
August
September October
August purchases
$150,000
$105,000
$45,000
September purchases
210,000
147,000
63,000
$192,000
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
Exercise 20-22 page 805 Alternate
prior written consent of McGraw Hill.
Exercise 20-23 page 805
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Motors Corp. manufactures motors for dirt bikes. The company requires a minimum $30,000 cash balance
at each month-end. If necessary, the company borrows to meet this requirement at a cost of 2% interest per
month (paid at the end of each month). Any preliminary cash balance above $30,000 at month-end is used
to repay loans. The cash balance on July 1 is $34,000, and the company has no outstanding loans.
Budgeted cash receipts and budgeted cash payments (other than for loan activity) follow. Prepare a cash
budget for July, August, and September.
July
August
September
Exercise 20-23 page 805
Cash
Receipts
$85,000
111,000
150,000
Cash
Payments
$113,000
99,900
127,400
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Motors Corp. manufactures motors for dirt bikes. The company requires a minimum $30,000 cash balance
at each month-end. If necessary, the company borrows to meet this requirement at a cost of 2% interest per
month (paid at the end of each month). Any preliminary cash balance above $30,000 at month-end is used
to repay loans. The cash balance on July 1 is $34,000, and the company has no outstanding loans.
July
August
September
Exercise 20-23 page 805
Cash
Receipts
$85,000
111,000
150,000
Cash
Payments
$113,000
99,900
127,400
Motors Corp.
Cash Budget
For July, August, and September
July
August
Beginning cash balance
$34,000
$30,000
Cash receipts
85,000
111,000
Total cash available
119,000
141,000
Cash payments
(113,000)
(99,900)
Interest on loan (2% per month)
0
(480)
Preliminary cash balance
6,000
40,620
Additional loan (loan repayment)
24,000
(10,620)
Ending cash balance
$30,000
$30,000
September
$30,000
150,000
180,000
(127,400)
(268)
52,332
(13,380)
$38,952
Loan balance
Loan balance - beginning of month
$0
Additional loan (loan repayment)
24,000
Loan balance - end of month
$24,000
$13,380
(13,380)
$0
$24,000
(10,620)
$13,380
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prior written consent of McGraw Hill.
Motors Corp. manufactures motors for dirt bikes. The company requires a minimum $20,000 cash balance
at each month-end. If necessary, the company borrows to meet this requirement at a cost of 1% interest per
month (paid at the end of each month). Any preliminary cash balance above $20,000 at month-end is used
to repay loans. The cash balance on July 1 is $36,000, and the company has no outstanding loans.
Budgeted cash receipts and budgeted cash payments (other than for loan activity) follow. Prepare a cash
budget for July, August, and September.
July
August
September
Cash
Receipts
$90,000
110,000
150,000
Cash
Payments
$122,000
100,000
120,000
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Exercise 20-23 page 805 Alternate
Motors Corp. manufactures motors for dirt bikes. The company requires a minimum $20,000 cash balance
at each month-end. If necessary, the company borrows to meet this requirement at a cost of 1% interest per
month (paid at the end of each month). Any preliminary cash balance above $20,000 at month-end is used
to repay loans. The cash balance on July 1 is $36,000, and the company has no outstanding loans.
July
August
September
Cash
Receipts
$90,000
110,000
150,000
Cash
Payments
$122,000
100,000
120,000
Motors Corp.
Cash Budget
For July, August, and September
July
August
Beginning cash balance
$36,000
$20,000
Cash receipts
90,000
110,000
Total cash available
126,000
130,000
Cash payments
(122,000)
(100,000)
Interest on loan (1% per month)
0
(160)
Preliminary cash balance
4,000
29,840
Additional loan (loan repayment)
16,000
(9,840)
Ending cash balance
$20,000
$20,000
Loan balance
Loan balance - beginning of month
$0
Additional loan (loan repayment)
16,000
Loan balance - end of month
$16,000
$16,000
(9,840)
$6,160
September
$20,000
150,000
170,000
(120,000)
(62)
49,938
(6,160)
$43,778
$6,160
(6,160)
$0
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prior written consent of McGraw Hill.
Exercise 20-23 page 805 Alternate
Exercise 20-24 page 805
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prior written consent of McGraw Hill.
Fortune, Incorporated is preparing its master budget for the first quarter. The company sells a single product at a price of $25
per unit. Sales (in units) are budgeted at 150,000 for the first quarter. Cost of goods sold is $14 per unit. Other expense
information for the first quarter follows.
Sales commissions
Rent
Advertising
Office salaries
Depreciation
Interest
Tax rate
8% of sales
$42,000 per quarter
$562,500 per quarter
$225,000 per quarter
$120,000 per quarter
1.25% quarterly on a $250,000 note payable
30%
Prepare a budgeted income statement for the first quarter ended March 31.
Exercise 20-24 page 805
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prior written consent of McGraw Hill.
Fortune, Incorporated is preparing its master budget for the first quarter. The company sells a single product at a price of $25
per unit. Sales (in units) are budgeted at 150,000 for the first quarter. Cost of goods sold is $14 per unit. Other expense
information for the first quarter follows.
Sales commissions
Rent
Advertising
Office salaries
Depreciation
Interest
Tax rate
8% of sales
$42,000 per quarter
$562,500 per quarter
$225,000 per quarter
$120,000 per quarter
1.25% quarterly on a $250,000 note payable
30%
Fortune Company
Budgeted Income Statement
For the Quarter Ended March 31
Sales (150,000 units @ $25.00 per unit)
Cost of goods sold (150,000 units @ $14.00 per unit)
Gross profit
Operating expenses
Sales commissions expense (8% of sales)
$300,000
Rent expense
42,000
Advertising expense
562,500
Office salaries expense
225,000
Depreciation expense
120,000
Interest expense ($250,000 x 1.25%)
3,125
Total operating expenses
Income before taxes
Income tax expense ($397,375 x 30%)
Net income
Exercise 20-24 page 805
$3,750,000
2,100,000
1,650,000
1,252,625
397,375
119,213
$278,162
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prior written consent of McGraw Hill.
Fortune, Incorporated is preparing its master budget for the first quarter. The company sells a single product at a price of $30
per unit. Sales (in units) are budgeted at 180,000 for the first quarter. Cost of goods sold is $16 per unit. Other expense
information for the first quarter follows.
Sales commissions
Rent
Advertising
Office salaries
Depreciation
Interest
Tax rate
4% of sales
$60,000 per quarter
$540,000 per quarter
$225,000 per quarter
$120,000 per quarter
1.10% quarterly on a $100,000 note payable
25%
Prepare a budgeted income statement for the first quarter ended March 31.
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Exercise 20-24 page 805 Alternate
Fortune, Incorporated is preparing its master budget for the first quarter. The company sells a single product at a price of $30
per unit. Sales (in units) are budgeted at 180,000 for the first quarter. Cost of goods sold is $16 per unit. Other expense
information for the first quarter follows.
Sales commissions
Rent
Advertising
Office salaries
Depreciation
Interest
Tax rate
4% of sales
$60,000 per quarter
$540,000 per quarter
$225,000 per quarter
$120,000 per quarter
1.10% quarterly on a $100,000 note payable
25%
Fortune Company
Budgeted Income Statement
For the Quarter Ended March 31
Sales (180,000 units @ $30.00 per unit)
Cost of goods sold (180,000 units @ $16.00 per unit)
Gross profit
Operating expenses
Sales commissions expense (4% of sales)
$216,000
Rent expense
60,000
Advertising expense
540,000
Office salaries expense
225,000
Depreciation expense
120,000
Interest expense ($100,000 x 1.10%)
1,100
Total operating expenses
Income before taxes
Income tax expense ($1,357,900 x 25%)
Net income
$5,400,000
2,880,000
2,520,000
1,162,100
1,357,900
339,475
$1,018,425
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prior written consent of McGraw Hill.
Exercise 20-24 page 805 Alternate
Exercise 20-25A page 805
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Walker Company prepares monthly budgets. Company policy is to end each month with merchandise inventory equal to 15% of
budgeted unit sales for the following month. Budgeted sales and merchandise purchases for the next three months follow.
Beginning inventory on July 1 is 27,000 units. The company budgets sales of 200,000 units in October. The merchandise cost
per unit is $2. Prepare the merchandise purchases budget for the months of July, August, and September.
Budgeted sales units
Units to purchase
Budgeted sales units
Add: Desired ending inventory
Next period budgeted sales units
Ratio of inventory to future sales
Desired ending inventory units
Total required units
Less: Beginning inventory units
Units to purchase
Cost per unit
Cost of merchandise purchases
Exercise 20-25 page 805
July
180,000
200,250
August
315,000
308,250
September
270,000
259,500
Walker Company
Merchandise Purchases Budget
July
180,000
August
315,000
September
270,000
315,000
15%
47,250
227,250
(27,000)
200,250
$2.00
$400,500
270,000
15%
40,500
355,500
(47,250)
308,250
$2.00
$616,500
200,000
15%
30,000
300,000
(40,500)
259,500
$2.00
$519,000
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prior written consent of McGraw Hill.
Walker Company prepares monthly budgets. Company policy is to end each month with merchandise inventory equal to 20% of
budgeted unit sales for the following month. Budgeted sales and merchandise purchases for the next three months follow.
Beginning inventory on July 1 is 16,000 units. The company budgets sales of 200,000 units in October. The merchandise cost
per unit is $4. Prepare the merchandise purchases budget for the months of July, August, and September.
July
80,000
78,000
August
70,000
74,000
September
90,000
112,000
Walker Company
Merchandise Purchases Budget
July
80,000
August
70,000
September
90,000
70,000
20%
14,000
94,000
(16,000)
78,000
$4.00
$312,000
90,000
20%
18,000
88,000
(14,000)
74,000
$4.00
$296,000
200,000
20%
40,000
130,000
(18,000)
112,000
$4.00
$448,000
Budgeted sales units
Units to purchase
Budgeted sales units
Add: Desired ending inventory
Next period budgeted sales units
Ratio of inventory to future sales
Desired ending inventory units
Total required units
Less: Beginning inventory units
Units to purchase
Cost per unit
Cost of merchandise purchases
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prior written consent of McGraw Hill.
Exercise 20-25 page 805 Alternate
Exercise 20-26A page 805
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Ahmed Company purchases all merchandise on credit. It recently budgeted the following month-end
accounts payable balances. Cash payments on accounts payable during each month are expected
to be June, $1,490,000; July, $1,425,000; and August, $1,495,000. Use the information to compute
the budgeted merchandise purchases for June, July, and August.
Accounts payable
May 31
$150,000
June 30
$200,000
July 31
$235,000
August 31
$195,000
July 31
$235,000
1,425,000
1,660,000
(200,000)
$1,460,000
August 31
$195,000
1,495,000
1,690,000
(235,000)
$1,455,000
Accounts Payable
Beginning
Purchases
Payments
Ending
Ending Accounts Payable
Payments on account
Subtotal
Beginning Accounts Payable
Purchases on account
Exercise 20-26 page 805
June 30
$200,000
1,490,000
1,690,000
(150,000)
$1,540,000
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prior written consent of McGraw Hill.
Ahmed Company purchases all merchandise on credit. It recently budgeted the following month-end
accounts payable balances. Cash payments on accounts payable during each month are expected
to be June, $1,300,000; July, $1,400,000; and August, $1,550,000. Use the information to compute
the budgeted merchandise purchases for June, July, and August.
May 31
$230,000
Accounts payable
June 30
$180,000
July 31
$210,000
August 31
$160,000
July 31
$210,000
1,400,000
1,610,000
(180,000)
$1,430,000
August 31
$160,000
1,550,000
1,710,000
(210,000)
$1,500,000
Accounts Payable
Beginning
Purchases
Payments
Ending
Ending Accounts Payable
Payments on account
Subtotal
Beginning Accounts Payable
Purchases on account
June 30
$180,000
1,300,000
1,480,000
(230,000)
$1,250,000
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prior written consent of McGraw Hill.
Exercise 20-26 page 805 Alternate
Exercise 20-27A page 806
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Use the following information to prepare the July cash budget for Acco Co.
a. Beginning cash balance on July 1: $50,000
b. Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20%
in the second month after sale. Sales amounts are: May (actual), $1,720,000; June (actual),
$1,200,000; and July (budgeted), $1,400,000.
c. Budgeted cash payments on merchandise purchases: 60% in the month of purchase and 40% in the month
following purchase. Purchases amounts are June (actual), $700,000; and July (budgeted),
$750,000.
d. Budgeted cash payments for salaries in July: $275,000.
e. Budgeted cash payments for sales commissions for July: $200,000.
f. Budgeted cash payment for income taxes in July: $80,000.
g. Budgeted cash payment for loan interest in July: $6,600.
Exercise 20-27 page 806
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
a. Beginning cash balance on July 1: $50,000
b. Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20%
in the second month after sale. Sales amounts are: May (actual), $1,720,000; June (actual),
$1,200,000; and July (budgeted), $1,400,000. Total cash receipts in July: $1,364,000
c. Budgeted cash payments on merchandise purchases: 60% in the month of purchase and 40% in the month
following purchase. Purchases amounts are June (actual), $700,000; and July (budgeted),
$750,000.
Total cash paid for merchandise: $730,000
d. Budgeted cash payments for salaries in July: $275,000.
e. Budgeted cash payments for sales commissions for July: $200,000.
f. Budgeted cash payment for income taxes in July: $80,000.
g. Budgeted cash payment for loan interest in July: $6,600.
Calculation of cash receipts from sales
Sales from: Total sales
May
$1,720,000
June
1,200,000
July
1,400,000
May
$516,000
June
$860,000
360,000
July 31
July
Acts. Rec.
$344,000
$0
600,000
240,000
420,000
980,000
$1,364,000 $1,220,000
Calculation of payments on merchandise purchases
Purchases in:
June
July
Exercise 20-27 page 806
Total
$700,000
750,000
June
$420,000
July
$280,000
450,000
$730,000
July 31
Acts. Pay
$0
300,000
$300,000
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
a. Beginning cash balance on July 1: $50,000
b. Cash receipts from sales: 30% is collected in the month of sale, 50% in the next month, and 20%
in the second month after sale. Sales amounts are: May (actual), $1,720,000; June (actual),
$1,200,000; and July (budgeted), $1,400,000. Total cash receipts in July: $1,364,000
c. Budgeted cash payments on merchandise purchases: 60% in the month of purchase and 40% in the month
following purchase. Purchases amounts are June (actual), $700,000; and July (budgeted),
$750,000.
Total cash paid for merchandise: $730,000
d. Budgeted cash payments for salaries in July: $275,000.
e. Budgeted cash payments for sales commissions for July: $200,000.
f. Budgeted cash payment for income taxes in July: $80,000.
g. Budgeted cash payment for loan interest in July: $6,600.
Acco Company
Cash Budget
For the Month Ended July 31
Beginning cash balance
Cash receipts from sales
Total cash available
Cash payments:
Merchandise
$730,000
Salaries
275,000
Sales commissions
200,000
Income taxes
80,000
Interest on loan
6,600
Total cash payments
Ending cash balance
Exercise 20-27 page 806
$50,000
1,364,000
1,414,000
1,291,600
$122,400
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prior written consent of McGraw Hill.
Use the following information to prepare the July cash budget for Acco Co.
a. Beginning cash balance on July 1: $72,000
b. Cash receipts from sales: 10% is collected in the month of sale, 50% in the next month, and 40%
in the second month after sale. Sales amounts are: May (actual), $1,930,000; June (actual),
$1,540,000; and July (budgeted), $1,690,000.
c. Payments on merchandise purchases: 65% in the month of purchase and 35% in the month
following purchase. Purchases amounts are June (actual), $390,000; and July (budgeted),
$850,000.
d. Budgeted cash payments for salaries in July: $180,000.
e. Budgeted payments for sales commissions for July: $290,000.
f. Budgeted cash payment for income taxes due in July: $70,000.
g. Budgeted cash payment for loan interest in July: $5,000.
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Exercise 20-27 page 806 Alternate
a. Beginning cash balance on July 1: $72,000
b. Cash receipts from sales: 10% is collected in the month of sale, 50% in the next month, and 40%
in the second month after sale. Sales amounts are: May (actual), $1,930,000; June (actual),
$1,540,000; and July (budgeted), $1,690,000.
Total cash receipts in July: $1,711,000
c. Payments on merchandise purchases: 65% in the month of purchase and 35% in the month
following purchase. Purchases amounts are June (actual), $390,000; and July (budgeted),
$850,000.
d. Budgeted cash payments for salaries in July: $180,000.
e. Budgeted payments for sales commissions for July: $290,000.
f. Budgeted cash payment for income taxes due in July: $70,000.
g. Budgeted cash payment for loan interest in July: $5,000.
Calculation of cash receipts from sales
Sales from: Total sales
May
$1,930,000
June
1,540,000
July
1,690,000
May
$193,000
June
$965,000
154,000
July
$772,000
770,000
169,000
$1,711,000
July 31
Acts. Rec.
$0
616,000
1,521,000
$2,137,000
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prior written consent of McGraw Hill.
Exercise 20-27 page 806 Alternate
a. Beginning cash balance on July 1: $72,000
b. Cash receipts from sales: 10% is collected in the month of sale, 50% in the next month, and 40%
in the second month after sale. Sales amounts are: May (actual), $1,930,000; June (actual),
$1,540,000; and July (budgeted), $1,690,000.
Total cash receipts in July: $1,711,000
c. Payments on merchandise purchases: 65% in the month of purchase and 35% in the month
following purchase. Purchases amounts are June (actual), $390,000; and July (budgeted),
$850,000.
Total cash paid in July: $689,000
d. Budgeted cash payments for salaries in July: $180,000.
e. Budgeted payments for sales commissions for July: $290,000.
f. Budgeted cash payment for income taxes due in July: $70,000.
g. Budgeted cash payment for loan interest in July: $5,000.
Calculation of payments on merchandise purchases
Purchases in:
June
July
Total
$390,000
850,000
June
$253,500
July
$136,500
552,500
$689,000
July 31
Acts. Pay
$0
297,500
$297,500
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Exercise 20-27 page 806 Alternate
a. Beginning cash balance on July 1: $72,000
b. Cash receipts from sales: 10% is collected in the month of sale, 50% in the next month, and 40%
in the second month after sale. Sales amounts are: May (actual), $1,930,000; June (actual),
$1,540,000; and July (budgeted), $1,690,000.
Total cash receipts in July: $1,711,000
c. Payments on merchandise purchases: 65% in the month of purchase and 35% in the month
following purchase. Purchases amounts are June (actual), $390,000; and July (budgeted),
$850,000.
Total cash paid in July: $689,000
d. Budgeted cash payments for salaries in July: $180,000.
e. Budgeted payments for sales commissions for July: $290,000.
f. Budgeted cash payment for income taxes due in July: $70,000.
g. Budgeted cash payment for loan interest in July: $5,000.
Acco Company
Cash Budget
For the Month Ended July 31
Beginning cash balance
Cash receipts from sales
Total cash available
Cash payments:
Merchandise
$689,000
Salaries
180,000
Sales commissions
290,000
Income taxes
70,000
Interest on loan
5,000
Total cash payments
Ending cash balance
$72,000
1,711,000
1,783,000
1,234,000
$549,000
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prior written consent of McGraw Hill.
Exercise 20-27 page 806 Alternate
Exercise 20-30A page 806
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Hardy Co. reports budgeted merchandise purchases below. For those purchases, 40% of a month’s
purchases is paid in the month of purchase, and 60% is paid in the first month after purchase. Prepare the
schedule of cash payments for merchandise purchases for September and October.
Budgeted merchandise purchases
Paid in current month - 40%
Paid in following month - 60%
August
$194,400
September
$183,600
October
$157,200
$77,760
$116,640
$73,440
$110,160
$62,880
$94,320
Hardy Company
Schedule of Cash Payments for Merchandise
September
Cash payments for:
Current month purchases
Prior period purchases
Total cash payments for merchandise purchases
Exercise 20-30 page 806
$73,440
116,640
$190,080
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prior written consent of McGraw Hill.
October
$62,880
110,160
$173,040
Hardy Co. reports budgeted merchandise purchases below. For those purchases, 30% of a month’s
purchases is paid in the month of purchase, and 70% is paid in the first month after purchase. Prepare the
schedule of cash payments for merchandise purchases for September and October.
Budgeted merchandise purchases
Paid in current month - 30%
Paid in following month - 70%
August
$150,000
September
$180,000
October
$200,000
$45,000
$105,000
$54,000
$126,000
$60,000
$140,000
Hardy Company
Schedule of Cash Payments for Merchandise
September
Cash payments for:
Current month purchases
Prior period purchases
Total cash payments for merchandise purchases
$54,000
105,000
$159,000
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prior written consent of McGraw Hill.
Exercise 20-30 page 806 Alternate
October
$60,000
126,000
$186,000
Exercise 20-31A page 806
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Castor, Inc. is preparing its master budget for the quarter ended June 30. Budgeted sales and cash payments for
merchandise for the next three months follow:
Budgeted
Sales
Cash payments for merchandise purchases
April
$32,000
20,200
May
$40,000
16,800
June
$24,000
17,200
Sales are 50% cash and 50% on credit. Sales in March were $24,000. All credit sales are collected in the
month following the sale. The March 31 balance sheet includes balances of $12,000 in cash, and $2,000 in
loans payable. A minimum cash balance of $12,000 is required. Loans are obtained at the end of any month
when the preliminary cash balance is below $12,000. Interest is 1% per month based on the beginning-of-themonth loan balance and is paid at each month-end. If a preliminary cash balance above $12,000 at monthend exists, loans are repaid from the excess.Expenses are paid in the month incurred and consist of sales
commissions (10% of sales), shipping (2% of sales), office salaries ($5,000 per month) and rent ($3,000 per
month).
a) Prepare a schedule of cash receipts from sales for April, May, and June.
b) Prepare a cash budget for each of April, May, and June.
Castor Corp.
Schedule of Cash Receipts from Sales
April
Cash receipts
Cash sales
Prior month's credit sales
Total budgeted cash receipts
Exercise 20-31 page 806
$16,000
12,000
$28,000
May
June
$20,000
16,000
$36,000
$12,000
20,000
$32,000
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prior written consent of McGraw Hill.
Budgeted
Sales
Cash payments for merchandise purchases
Total budgeted cash receipts from sales (from part 1)
April
$32,000
20,200
28,000
May
$40,000
16,800
36,000
June
$24,000
17,200
32,000
Sales are 50% cash and 50% on credit. Sales in March were $24,000. All credit sales are collected in the
month following the sale. The March 31 balance sheet includes balances of $12,000 in cash, and $2,000 in
loans payable. A minimum cash balance of $12,000 is required. Loans are obtained at the end of any month
when the preliminary cash balance is below $12,000. Interest is 1% per month based on the beginning-of-themonth loan balance and is paid at each month-end. If a preliminary cash balance above $12,000 at monthend exists, loans are repaid from the excess.Expenses are paid in the month incurred and consist of sales
commissions (10% of sales), shipping (2% of sales), office salaries ($5,000 per month) and rent ($3,000 per month).
Castor Corp.
Cash Budget
Beginning cash balance
Cash receipts from sales
Total cash available
Less: Cash payments for
Merchandise purchases
Sales commissions (10% of sales)
Shipping (2% of sales)
Office salaries ($5,000 per month)
Rent ($3,000 per month)
Interest on loan (1% per month)
Total cash payments
Preliminary cash balance
Additional loan (loan repayment)
Ending cash balance
April
$12,000
28,000
40,000
May
$12,000
36,000
48,000
June
$12,279
32,000
44,279
20,200
3,200
640
5,000
3,000
20
32,060
7,940
4,060
$12,000
16,800
4,000
800
5,000
3,000
61
29,661
18,339
(6,060)
$12,279
17,200
2,400
480
5,000
3,000
0
28,080
16,199
0
$16,199
$2,000
4,060
$6,060
$6,060
(6,060)
$0
$0
0
$0
Loan balance
Loan balance - beginning of month
Additional loan (loan repayment)
Loan balance - End of month
Exercise 20-31 page 806
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Castor, Inc. is preparing its master budget for the quarter ended June 30. Budgeted sales and cash payments for
merchandise for the next three months follow:
Budgeted
Sales
Cash payments for merchandise purchases
April
$30,000
16,000
May
$45,000
12,000
June
$35,000
14,000
Sales are 30% cash and 70% on credit. Sales in March were $20,000. All credit sales are collected in the
month following the sale. The March 31 balance sheet includes balances of $15,000 in cash, and $3,000 in
loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month
when the preliminary cash balance is below $15,000. Interest is 1% per month based on the beginning-of-themonth loan balance and is paid at each month-end. If a preliminary cash balance above $15,000 at monthend exists, loans are repaid from the excess.Expenses are paid in the month incurred and consist of sales
commissions (6% of sales), shipping (1% of sales), office salaries ($6,000 per month) and rent ($4,000 per
month).
a) Prepare a schedule of cash receipts from sales for April, May, and June.
b) Prepare a cash budget for each of April, May, and June.
Castor Corp.
Schedule of Cash Receipts from Sales
April
Cash receipts
Cash sales
Prior month's credit sales
Total budgeted cash receipts from sales
$9,000
14,000
$23,000
May
June
$13,500
21,000
$34,500
$10,500
31,500
$42,000
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prior written consent of McGraw Hill.
Exercise 20-31 page 806 Alternate
The March 31 balance sheet includes balances of $15,000 in cash, and $3,000 in loans payable. A minimum cash balance of
$15,000 is required. Loans are obtained at the end of any month when the preliminary cash balance is below $15,000. Interest is
1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If a preliminary cash balance
above $15,000 at month-end exists, loans are repaid from the excess. Expenses are paid in the month incurred and consist of
sales commissions (6% of sales), shipping (1% of sales), office salaries ($6,000 per month) and rent ($4,000 per month).
Budgeted
Sales
Cash payments for merchandise purchases
Total budgeted cash receipts from sales (from part 1)
April
$30,000
16,000
23,000
May
$45,000
12,000
34,500
June
$35,000
14,000
42,000
April
$15,000
23,000
38,000
May
$15,000
34,500
49,500
June
$16,139
42,000
58,139
16,000
1,800
300
6,000
4,000
30
28,130
9,870
5,130
$15,000
12,000
2,700
450
6,000
4,000
81
25,231
24,269
(8,130)
$16,139
14,000
2,100
350
6,000
4,000
0
26,450
31,689
0
$31,689
$3,000
5,130
$8,130
$8,130
(8,130)
$0
$0
0
$0
Castor Corp.
Cash Budget
Beginning cash balance
Cash receipts from sales
Total cash available
Less: Cash payments for::
Merchandise purchases
Sales commissions (6% of sales)
Shipping (1% of sales)
Office salaries ($6,000 per month)
Rent ($4,000 per month)
Interest on loan (1% per month)
Total cash payments
Preliminary cash balance
Additional loan (loan repayment)
Ending cash balance
Loan balance
Loan balance - beginning of month
Additional loan (loan repayment)
Loan balance - End of month
Exercise 20-31 page 806 Alternate
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
Exercise 20-32A page 807
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Kelsey is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for
merchandise for the next three months follow:
Budgeted
Sales
Cash payments for merchandise purchases
July
$64,000
40,500
August
$80,000
33,600
September
$48,000
34,400
Sales are 20% cash and 80% on credit. Sales in June were $56,250. All credit sales are collected in the
month following the sale. The June 30 balance sheet includes balances of $15,000 in cash, and $5,000 in
loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month
when the preliminary cash balance is below $15,000. Interest is 1% per month based on the beginning-of-themonth loan balance and is paid at each month-end. If a preliminary cash balance above $15,000 at monthend exists, loans are repaid from the excess. Expenses are paid in the month incurred and consist of sales
commissions (10% of sales), office salaries ($4,000 per month) and rent ($6,500 per month).
a) Prepare a schedule of cash receipts from sales for July, August, and September.
b) Prepare a cash budget for each of July, August, and September.
Kelsey Corp.
Schedule of Cash Receipts from Sales
July
Cash receipts
Cash sales (20% of current month’s sales)
Prior month's credit sales (80% of prior month’s sales)
Total budgeted cash receipts from sales
Exercise 20-32 page 807
$12,800
45,000
$57,800
August
$16,000
51,200
$67,200
September
$9,600
64,000
$73,600
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Sales are 20% cash and 80% on credit. Sales in June were $56,250. All credit sales are collected in the
month following the sale. The June 30 balance sheet includes balances of $15,000 in cash, and $5,000 in
loans payable. A minimum cash balance of $15,000 is required. Loans are obtained at the end of any month
when the preliminary cash balance is below $15,000. Interest is 1% per month based on the beginning-of-themonth loan balance and is paid at each month-end. If a preliminary cash balance above $15,000 at monthend exists, loans are repaid from the excess. Expenses are paid in the month incurred and consist of sales
commissions (10% of sales), office salaries ($4,000 per month) and rent ($6,500 per month).
Budgeted
Sales
Cash payments for merchandise purchases
Total budgeted cash receipts from sales (from part 1)
July
$64,000
40,500
57,800
August
$80,000
33,600
67,200
September
$48,000
34,400
73,600
July
$15,000
57,800
72,800
August
$15,000
67,200
82,200
September
$25,403
73,600
99,003
40,500
6,400
4,000
6,500
33,600
8,000
4,000
6,500
34,400
4,800
4,000
6,500
50
57,450
15,350
(350)
$15,000
47
52,147
30,053
(4,650)
$25,403
0
49,700
49,303
0
$49,303
$5,000
(350)
$4,650
$4,650
(4,650)
$0
$0
0
$0
Kelsey Corp.
Cash Budget
Beginning cash balance
Cash receipts from sales
Total cash available
Cash payments for:
Merchandise purchases
Sales commissions (10% of sales)
Office salaries ($4,000 per month)
Rent ($6,500 per month)
Interest on loan (1% per month)
Total cash payments
Preliminary cash balance
Additional loan (loan repayment)
Ending cash balance
Loan balance
Loan balance - beginning of month
Additional loan (loan repayment)
Loan balance - End of month
Exercise 20-32 page 807
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Kelsey is preparing its master budget for the quarter ended September 30. Budgeted sales and cash payments for
merchandise for the next three months follow:
Budgeted
Sales
Cash payments for merchandise purchases
July
$43,000
30,000
August
$80,000
36,000
September
$90,000
50,000
Sales are 60% cash and 40% on credit. Sales in June were $50,000. All credit sales are collected in the
month following the sale. The June 30balance sheet includes balances of $10,000 in cash, and $5,000 in
loans payable. A minimum cash balance of $10,000 is required. Loans are obtained at the end of any month
when the preliminary cash balance is below $10,000. Interest is 1% per month based on the beginning-of-themonth loan balance and is paid at each month-end. If a preliminary cash balance above $10,000 at monthend exists, loans are repaid from the excess. Expenses are paid in the month incurred and consist of sales
commissions (10% of sales), office salaries ($3,000 per month) and rent ($7,500 per month).
a) Prepare a schedule of cash receipts from sales for July, August, and September.
b) Prepare a cash budget for each of July, August, and September.
Kelsey
Schedule of Cash Receipts from Sales
July
Cash receipts
Cash sales
Prior month's credit sales
Total budgeted cash receipts from sales
$25,800
20,000
$45,800
August
September
$48,000
17,200
$65,200
$54,000
32,000
$86,000
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Exercise 20-32 page 807 Alternate
The June 30 balance sheet includes balances of $10,000 in cash, and $5,000 in loans payable. A minimum cash balance of
$10,000 is required. Loans are obtained at the end of any month when the preliminary cash balance is below $10,000. Interest is
1% per month based on the beginning-of-the-month loan balance and is paid at each month-end. If a preliminary cash balance
above $10,000 at month-end exists, loans are repaid from the excess. Expenses are paid in the month incurred and consist of
sales commissions (10% of sales), office salaries ($3,000 per month) and rent ($7,500 per month).
Budgeted
Sales
Cash payments for merchandise purchases
Total budgeted cash receipts from sales (from part 1)
July
$43,000
30,000
45,800
August
$80,000
36,000
65,200
September
$90,000
50,000
86,000
July
$10,000
45,800
55,800
August
$10,000
65,200
75,200
September
$16,609
86,000
102,609
30,000
4,300
3,000
7,500
36,000
8,000
3,000
7,500
50,000
9.000
3,000
7,500
50
44,850
10,950
(950)
$10,000
41
54,541
20,659
(4,050)
$16,609
0
69,500
33,109
0
$33,109
$5,000
(950)
$4,050
$4,050
(4,050)
$0
$0
0
$0
Kelsey
Cash Budget
Beginning cash balance
Cash receipts from sales
Total cash available
Less: Cash payments for:
Merchandise purchases
Sales commissions (10% of sales)
Office salaries ($3,000 per month)
Rent ($7,500 per month)
Interest on loan (1% per month)
Total cash payments
Preliminary cash balance
Additional loan (loan repayment)
Ending cash balance
Loan balance
Loan balance - beginning of month
Additional loan (loan repayment)
Loan balance - End of month
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Exercise 20-32 page 807 Alternate
Exercise 20-33A page 807
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Prepare a budgeted balance sheet at March 31 using the following information for Zimmer Company:
a. The cash budget for March shows an ending loan balance of $10,000 and an ending cash balance of $50,000.
b. The sales budget for March shows sales of $140,000. Accounts receivable at the end of March are budgeted to be 70% of March
sales.
c. The merchandise purchases budget shows that $89,000 in merchandise will be purchased on credit in March. Purchases on
account are paid 100% in the month following the purchase.
d. Ending inventory for March is budgeted to be 600 units at a cost of $35 each.
e. Income taxes payable of $26,000 are budgeted at the end of March.
f.
The balance sheet at the end of March show budgeted equipment of $84,000 with accumulated depreciation of $47,000.
g. Common stock of $25,000 and retained earnings of $56,000 are budgeted at the end of March.
Assets
Cash
Accounts receivable
Merchandise inventory
Total current assets
Equipment
Accumulated depreciation
Equipment, net
Total assets
Exercise 20-33 page 807
Zimmer Company
Budgeted Balance Sheet
As of March 31
Liabilities and Equity
$50,000
Accounts payable
98,000
Income taxes payable
21,000
Bank loan payable
$169,000
Total liabilities
84,000
(47,000)
Stockholders' equity
37,000
Common stock
Retained earnings
Total Stockholders' equity
$206,000
Total Liabilities and Equity
$89,000
26,000
10,000
$125,000
25,000
56,000
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prior written consent of McGraw Hill.
81,000
$206,000
Prepare a budgeted balance sheet at March 31 using the following information for Zimmer Company:
a. The cash budget for March shows an ending loan balance of $20,000 and an ending cash balance of $60,000.
b. The sales budget for March shows sales of $200,000. Accounts receivable at the end of March are budgeted to be
65% of March sales.
c. The merchandise purchases budget shows that $70,000 in merchandise will be purchased on credit in March.
Purchases on credit are paid 100% in the month following the purchase.
d. Ending inventory for March is budgeted to be 1,000 units at a cost of $25 each.
e. Income taxes payable of $25,000 are budgeted at the end of March.
f. Accounting records at the end of March show budgeted equipment of $137,000 with accumulated depreciation of $52,000.
g. Common stock of $60,000 and retained earnings of $125,000 are budgeted at the end of March.
Zimmer Company
Budgeted Balance Sheet
As of March 31
Assets
Liabilities and Equity
Liabilities
Cash
$60,000
Accounts payable
Accounts receivable ($200,000 x 65%)
130,000
Income taxes payable
Merchandise inventory (1,000 units @ $25) 25,000
Bank loan payable
Total current assets
$215,000
Equipment
Accumulated depreciation
Equipment, net
Total assets
137,000
(52,000)
$70,000
25,000
20,000
Total liabilities
85,000
$300,000
Stockholders' equity
Common stock
Retained earnings
Total Stockholders' equity
Total Liabilities and Equity
$115,000
60,000
125,000
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Exercise 20-33 page 807 Alternate
185,000
$300,000
Exercise 20-34 page 807
Copyright © 2022 by McGraw Hill. All rights reserved. No reproduction or distribution without the
prior written consent of McGraw Hill.
Render CPA is preparing direct labor budgets for the current year. The partners budget billable hours for
the year as follows:
Data entry
Auditing
Tax
Consulting
2,200
4,800
4,300
750
12,050
hours
hours
hours
hours
The company budgets $15.00 per hour to data entry clerks, $30.00 per hour to auditing
personnel, $40.00 per hour to tax personnel, and $50.00 per hour to consulting personnel.
Prepare a direct labor budget for this service company for the year.
Render CPA
Direct Labor Budget
For the Year Ending December 31
Direct Labor Direct Labor Direct Labor
hours
cost per hour
Cost
Data entry
2,200
$15.00
$33,000
Auditing
4,800
$30.00
144,000
Tax
4,300
$40.00
172,000
Consulting
750
$50.00
37,500
Total
12,050
$386,500
Exercise 20-34 page 807
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prior written consent of McGraw Hill.
Render CPA is preparing direct labor budgets for the current year. The partners budget billable hours for
the year as follows:
Data entry
Auditing
Tax
Consulting
500
2,600
2,300
600
6,000
hours
hours
hours
hours
The company budgets $22.00 per hour to data entry clerks, $42.00 per hour to auditing personnel,
$54.00 per hour to tax personnel, and $54.00 per hour to consulting personnel.
Prepare a direct labor budget for this service company for the year.
Render CPA
Direct Labor Budget
For the Year Ending December 31
Direct Labor Direct Labor Direct Labor
hours
cost per hour
Cost
Data entry
500
$22.00
$11,000
Auditing
2,600
$42.00
109,200
Tax
2,300
$54.00
124,200
Consulting
600
$54.00
32,400
Total
6,000
$276,800
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prior written consent of McGraw Hill.
Exercise 20-34 page 807 Alternate