CHAPTER 9
SOLUTIONS TO PROBLEMS: SET B
PROBLEM 9-1B
MERCER FARM SUPPLY COMPANY
Sales Budget
For the Six Months Ending June 30, 2017
Quarter
Expected unit sales...................
Unit selling price .......................
Total sales .................................
1
40,000
X
$63
$2,520,000
2
50,000
X
$63
$3,150,000
Six
Months
90,000
X
$63
$5,670,000
MERCER FARM SUPPLY COMPANY
Production Budget
For the Six Months Ending June 30, 2017
Quarter
1
Expected unit sales ...........................................40,000
Add: Desired ending finished goods
units.........................................................15,000
Total required units ...........................................55,000
Less: Beginning finished goods units ............10,000
Required production units ................................45,000
2
50,000
20,000
70,000
15,000
55,000
Six
Months
100,000
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
9-1
PROBLEM 9-1B (Continued)
MERCER FARM SUPPLY COMPANY
Direct Materials Budget—Crup
For the Six Months Ending June 30, 2017
Quarter
1
2
Units to be produced .................................
45,000
Direct materials per unit ............................ X
5
Total pounds needed for production .......
225,000
Add: Desired ending direct materials
(pounds) ..........................................
12,000
Total materials required ............................
237,000
Less: Beginning direct materials
(pounds) .........................................
9,000
Direct materials purchases .......................
228,000
Cost per pound ........................................... X
$3.80
Total cost of direct materials
purchases ...............................................
$866,400
Six
Months
55,000
X
5
275,000
15,000
290,000
12,000
278,000
X
$3.80
$1,056,400
$1,922,800
MERCER FARM SUPPLY COMPANY
Direct Labor Budget
For the Six Months Ending June 30, 2017
Quarter
Units to be produced .........................
Direct labor time (hours) per unit ......
Total required direct labor hours ......
Direct labor cost per hour ..................
Total direct labor cost ........................
9-2
1
45,000
X
.25
11,250
X
$12
$135,000
2
55,000
X
.25
13,750
X
$12
$165,000
Six
Months
$300,000
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-1B (Continued)
MERCER FARM SUPPLY COMPANY
Selling and Administrative Expense Budget
For the Six Months Ending June 30, 2017
Quarter
Budgeted sales in units .....................
1
40,000
2
50,000
Six
Months
90,000
Variable (.10 X sales) .........................
Fixed ...................................................
Total ....................................................
$252,000
150,000
$402,000
$315,000
150,000
$465,000
$567,000
300,000
$867,000
MERCER FARM SUPPLY COMPANY
Budgeted Income Statement
For the Six Months Ending June 30, 2017
Sales............................................................................................
Cost of goods sold (90,000 X $40) ............................................
Gross profit.................................................................................
Selling and administrative expenses ........................................
Income from operations.............................................................
Interest expense .........................................................................
Income before income taxes .....................................................
Income tax expense (30%) .........................................................
Net income ..................................................................................
$5,670,000
3,600,000
2,070,000
867,000
1,203,000
70,000
1,133,000
339,900
$ 793,100
Cost Per Bag
Cost Element
Direct materials
Crup ............................................
Dert .............................................
Direct labor ....................................
Manufacturing overhead
(100% of direct labor cost) ........
Total .......................................
Quantity
Unit Cost
Total
5 pounds
10 pounds
.25 hour
$ 3.80
1.50
12.00
$19.00
15.00
3.00
3.00
$40.00
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
9-3
PROBLEM 9-2B
(a)
URBINA INC.
Sales Budget
For the Year Ending December 31, 2017
LN 35
Expected unit sales...............
400,000
Unit selling price ................... X
$25
Total sales ............................. $10,000,000
(b)
Total
000,000,0
$18,400,000
URBINA INC.
Production Budget
For the Year Ending December 31, 2017
Expected unit sales...............................
Add: Desired ending finished
goods units ................................
Total required units...............................
Less: Beginning finished goods
units ............................................
Required production units ...................
9-4
LN 40
240,000
X
$35
$8,400,000
LN 35
400,000
LN 40
240,000
20,000
420,000
25,000
265,000
30,000
390,000
15,000
250,000
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-2B (Continued)
(c)
URBINA INC.
Direct Materials Budget
For the Year Ending December 31, 2017
LN 35
Units to be produced ......................
390,000
Direct materials per unit ................. X
2
Total pounds needed for
production....................................
780,000
Add: Desired ending direct
materials (pounds) ...............
50,000
Total materials required .................
830,000
Less: Beginning direct
materials (pounds) ...............
40,000
Direct materials purchases ............
790,000
Cost per pound ................................ X
$2
Total cost of direct materials
purchases .................................... $1,580,000
(d)
LN 40
Total
250,000
X
3
750,000
10,000
760,000
20,000
740,000
X
$3
$2,220,000
$3,800,000
URBINA INC.
Direct Labor Budget
For the Year Ending December 31, 2017
LN 35
Units to be produced ......................
390,000
Direct labor time (hours) per
unit ................................................ X
.5
Total required direct labor
hours ............................................
195,000
Direct labor cost per hour .............. X
$12
Total direct labor cost ..................... $2,340,000
X
LN 40
Total
250,000
550,000
.75
187,500
X
$12
$2,250,000
322,500
X
$10
$4,590,000
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
9-5
PROBLEM 9-2B (Continued)
(e)
URBINA INC.
Budgeted Income Statement
For the Year Ending December 31, 2017
Sales .....................................
Cost of goods sold ...............
Gross profit ..........................
Operating expenses
Selling expenses ..............
Administrative
expenses .......................
Total operating
expenses ...............
Income from operations ......
Income expense……………
Income before income
taxes………………………….
Interest tax expense
(30%) .................................
Net income............................
(1)
(2)
9-6
LN 35
LN 40
Total
$10,000,000 $8,400,000 $18,400,000
4,800,000 (1) 5,280,000 (2) 10,080,000
5,200,000
3,120,000
8,320,000
750,000
580,000
1,330,000
420,000
380,000
800,000
1,170,000
960,000
2,130,000
$ 4,030,000
$2,160,000
6,190,000
110,000
6,080,000
1,824,000
$ 4,256,000
400,000 X $12.
240,000 X $22.
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-3B
(a)
OGLEBY INDUSTRIES
Sales Budget
For the Year Ending December 31, 2017
Expected unit sales ...................................
Unit selling price ........................................
Total sales ..................................................
Plan A
Plan B
760,000 (1)
950,000 (2)
X
$7.60 X
$6.65 (3)
$5,776,000
$6,317,500
(1)
800,000 X 95% = 760,000.
800,000 + 150,000 = 950,000.
(3)
$7.00 X 95% = $6.65.
(2)
(b)
OGLEBY INDUSTRIES
Production Budget
For the Year Ending December 31, 2017
Expected unit sales ..............................................
Add: Desired ending finished goods units .......
Total required units ..............................................
Less: Beginning finished goods units ...............
Required production units ...................................
Plan A
760,000
90,000
850,000
70,000
780,000
Plan B
950,000
100,000
1,050,000
70,000
980,000
(c) Variable costs = $4.00 per unit ($2.00 + $1.50 + $.50) for both plans.
Plan A
Total variable costs
Total fixed costs
Total costs (a)
Total units (b)
Unit cost (a) ÷ (b)
$3,120,000 (780,000 X $4.00)
980,000
$4,100,000
Plan B
$3,920,000 (980,000 X $4.00)
980,000
$4,900,000
780,000
980,000
$5.26
$5.00
The difference is due to the fact that fixed costs are spread over a larger
number of units (200,000) in Plan B.
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
9-7
PROBLEM 9-3B (Continued)
(d)
Gross Profit
Plan A
Sales
Cost of goods sold
Gross profit
$5,776,000
3,997,600 (760,000 X $5.26)
$1,778,400
Plan B
$6,317,500
4,750,000 (950,000 X $5.00)
$1,567,500
Plan A should be accepted because it produces a higher gross profit
than Plan B.
9-8
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-4B
(a) 1.
Expected Collections from Customers
November ($200,000)..................................
December ($290,000) ..................................
January ($350,000) .....................................
February ($400,000) ....................................
Total collections ................................
2.
January
$ 30,000
72,500
210,000
$312,500
February
$
0
43,500
87,500
240,000
$371,000
Expected Payments for Direct Materials
December ($90,000) ....................................
January ($110,000) .....................................
February ($120,000) ....................................
Total payments ..................................
January
$63,000
33,000
$96,000
February
$
0
77,000
36,000
$113,000
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
9-9
PROBLEM 9-4B (Continued)
(b)
DERBY COMPANY
Cash Budget
For the Two Months Ending February 28, 2017
Beginning cash balance ...................................
Add: Receipts
Collections from customers ..................
[See Schedule (1)]
Interest receivable ..................................
Sale of securities ....................................
Total receipts ..................................
Total available cash ..........................................
Less: Disbursements
Direct materials......................................
[See Schedule 2]
Direct labor .......................................
Manufacturing overhead ..................
Selling and administrative
expenses .......................................
Purchase of land...............................
Total disbursements .................
Excess (deficiency) of available cash
over cash disbursements .............................
Financing
Add: Borrowings..............................................
Less: Repayments ............................................
Ending cash balance ........................................
January
$ 50,000
February
$ 49,500
312,500
371,000
3,000
315,500
365,500
5,000
376,000
425,500
96,000
113,000
85,000
60,000
115,000
75,000
75,000
316,000
80,000
20,000
403,000
49,500
22,500
0
0
$ 49,500
17,500
0
$ 40,000
9-10 Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-5B
(a)
WIDNER COMPANY
Westwood Store
Merchandise Purchases Budget
For the Months of July and August, 2017
July
August
Budgeted cost of goods sold............................. $260,000(1) $292,500
Add: Desired ending merchandise inventory ...
43,875(2)
48,750 (3)
Total .....................................................................
303,875
341,250
Less: Beginning merchandise
inventory ..................................................
39,000(4)
43,875
Required merchandise purchases..................... $264,875 $297,375
(1)
$400,000 X 65% = $260,000
$292,500 X 15% = $ 43,875.
(3)
$500,000 X 65% = $325,000; $325,000 X 15% = $48,750.
(4)
$260,000 X 15% = $ 39,000.
(2)
Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
9-11
PROBLEM 9-5B (Continued)
(b)
WIDNER COMPANY
Westwood Store
Budgeted Income Statement
For the Months of July and August, 2017
Sales ...................................................................
Cost of goods sold
Beginning inventory ...................................
Purchases ...................................................
Cost of goods available for sale ................
Less: Ending inventory .............................
Cost of goods sold .....................................
Gross profit ........................................................
Operating expenses
Sales salaries..............................................
Advertising* ................................................
Delivery expense** .....................................
Sales commissions*** ................................
Rent .............................................................
Depreciation ...............................................
Utilities ........................................................
Insurance ....................................................
Total .....................................................
Income from operations ....................................
Interest expense……………………………………
Income before income taxes…………………….
Income tax expense (30%) ................................
Net income .........................................................
July
$400,000
August
$450,000
39,000
264,875
303,875
43,875
260,000
140,000
43,875
297,375
341,250
48,750
292,500
157,500
50,000
20,000
8,000
16,000
3,000
700
500
300
98,500
41,500
___3,000
38,500
11,550
$ 26,950
50,000
22,500
9,000
18,000
3,000
700
500
300
104,000
53,500
___3,000
50,500
15,150
$ 35,350
*5% of sales
**2% of sales
***4% of sales
9-12 Copyright © 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)