PE22-1A
At the beginning of the period the assembly Department budgeted direct labor of
$110,500 and property taxes of $50,000 for 8,500 hours of production. The department
actually completed 10,000 hours of production. Determine the budget for the department,
assuming that it uses flexible budgeting?
PE22-2A
OnTime Publishers Inc. projected sales of 220,000 schedule planners for 2008. The
estimated January 1, 2008, inventory is 15,000 units, and the desired December 31, 2008,
Inventory is 11,000 units. What is the budgeted production (in units) for 2008?
PE22-3A
OnTime Publishers Inc. budgeted production of 216,000 schedule planners in 2008.
Paper is required to produce a planner. Assume 90 square feet of paper are required for
each planner. The estimated January 1, 2008, paper inventory is 100,000 square feet. The
desired December 31,2008, paper inventory is 160,000 square feet. If paper costs $0.08
per square foot, determine the direct materials purchase budget for 2008.
PE22-4A
OnTime Publishers Inc. budgeted production of 216,000 schedule planners in 2008. Each
planner requires assembly. Assume that 15 minutes are required to assemble each
planner. If assembly labor costs $12.50 per hour, determine the direct labor cost budget
for 2008.
PE22-5A
Prepare a cost of goods sold budget for OnTime Publishers Inc. using the information in
Practice Exercises 22-3B AND 22-4B. Assume the estimated inventories on January 1,
2008, for finished goods and work in process were $43,000 and $22,000, respectively.
Also assume the desired inventories on December 31, 2008, for finished goods and work
in process were $40,000 and $25,000, respectively. Factory overhead was budgeted at
$245,000.
PE22-3B
New England Candle, Co. budgeted production of 95,600 candles in 2008. Wax is
required to produce a candle. Assume 8 ounces (one half a pound) of wax is required for
each candle. The estimated January 1, 2008, inventory is 1,400 pounds. The desired
December 31, 2008, wax inventory is 1,100 pounds. If candle wax costs $3.60 per pound,
determine the direct materials purchases budget for 2008.
PE22-4B
New England Candle Co. budgeted production of 95,600 candles in 2008. Each candle
requires molding. Assume that 12 minutes are required to mold each candle. If molding
labor costs $14.per hour, determine the direct labor cost budget for 2008.
PE22-6A
OnTime Publishers Inc. collects 30% of its sales on account in the month of the sale and
70% in the month following the sale. If sales on account are budgeted to be $400,000 for
June and $360,000 for July, what are the budgeted cash receipts from sales on account for
July?
EX22-4
Steelcase Inc. is one of the largest manufactures of office furniture in the United States.
In Grand Rapids, Michigan, it produces filling cabinets in two departments: Fabrication
and trim Assembly. Assume the following information for the Fabrication Department:
Steel peer filing cabinet 50 pounds
Direct labor per filling cabinet 18 minuets
Supervisor salaries $130,000 per month
Depreciation $20,000 per month
Direct labor rate $16 per hour
Steel cost $1.25 per pound
Prepare a flexible budget for 12,000, 15,000 and 18,000 filing cabinets for the month of
October 2008, assuming that inventories are not significant.
EX22-8
Roma Frozen Pizza Inc. has determined from its production budget the following
estimated production volume for 12’’ and 16’’ frozen pizzas for November 2008:
UNITS
12’’Pizza 16’’Pizza
Budget production volume 16,400 25,600
There are three direct materials used in producing the two types of pizza. The quantities
at direct materials expected to be used for each pizza are as follows:
12’’ Pizza 16’’ Pizza
Direct Materials:
Dough 1.00lb. per unit 1.50lbs. per unit
Tomato 0.60 0.90
Cheese 0.80 1.30
In addition, Roma has determined the following information about each material:
Dough Tomato Cheese
Estimated inventory, Nov. 1, 2008 675 lbs. 190 lbs. 525 lbs.
Desired inventory, Nov. 30, 2008 480 lbs. 250 lbs. 375 lbs.
Price per pound $1.20 $2.40 $2.85
Prepare November’s direct materials purchases budget for Roma Frozen Pizza Inc.
PR22-4A
The Controller of Santa Fe Housewares Inc. instructs you to prepare a monthly cash
budget for the next three months. You are presented with the following budget
information:
August September October
Sales $630,000 $715,000 $845,000
Manufacturing cost 350,000 360,000 410,000
Selling and administrative expenses 170,000 205,000 235,000
Capital expenditures 150,000
The company expects to sell about 10% of its merchandise for cash. Of sales on account,
70% are expected to be collected in full in the month following the sale and the
remainder the following month. Depreciation, insurance, and property tax expense
represent $25,000 of the estimated monthly manufacturing costs. The annual insurance
premium is paid in July, and the annual property taxes are paid in November. Of the
remainder of the manufacturing costs, 80% are expected to be paid in the month in which
they are incurred and the balance in the following month.
Current assets as of August 1 include cash of $50,000, marketable securities of $85,000,
and accounts receivable of $635,000 ($500,000 from July sales and $135,000 from June
sales).Sales on account for June and July were $450,000 and $500,000, respectively.
Current liabilities as of August 1 include s $100,000, 15%, 90-day note payable due
October 20 and $65,000 of accounts payable incurred in July for manufacturing costs. All
selling and administrative expenses are paid in cash in the period they are incurred. It is
expected that $1,800 in dividends will be received in August. An estimated income tax
payment of $39,000 will be made in September. Santa Fe’s regular quarterly dividend of
$12,000 is expected to be declared in September and paid in October. Management
desires to maintain a minimum cash balance of $40,000.
Prepare a monthly cash budget and supporting schedules for August, September, and
October.
On the basis of the cash budget prepared in part (1), what recommendation should be made to
the controller?
PE 22–1A
Variable cost:
Direct labor (10,000 hours × $13* per hour) .......................................
$130,000
Fixed cost:
Property tax ............................................................................................
Total department costs ................................................................................
50,000
$180,000
*$110,500/8,500 hours
PE 22–2A
Expected units to be sold .............................................................................
Plus desired ending inventory, December 31, 2008 ..................................
Total ..............................................................................................................
Less estimated beginning inventory, January 1, 2008 ..............................
Total units to be produced ..........................................................................
220,000
11,000
231,000
15,000
216,000
PE 22–3A
Square feet required for production:
Schedule planner (216,000 × 90 sq. ft.) ................................................
Plus desired ending inventory, December 31, 2008 ..................................
Total ..............................................................................................................
Less estimated beginning inventory, January 1, 2008 ..............................
Total square feet to be purchased...............................................................
Unit price (per square foot) .........................................................................
Total direct materials to be purchased ......................................................
×
19,440,000
160,000
19,600,000
100,000
19,500,000
$0.08
$1,560,000
PE 22–4A
Hours required for assembly:
Schedule planner (216,000 × 15 min.) ..................................................
min.
Convert minutes to hours ......................................................................
Assembly hours ......................................................................................
hrs.
Hourly rate ...................................................................................................
Total direct labor cost ..................................................................................
3,240,000
/
×
$
60 min.
54,000
$12.50
675,000
PE 22–5A
Finished goods inventory, January 1, 2008 ....................
Work in process inventory, January 1, 2008 ..................
Direct materials:
Direct materials inventory, January 1, 2008
(100,000 × $0.08).................................................... $
Direct materials purchases (from PE 22–3A) ...........
Cost of direct materials available for use .................
Less direct materials inventory,
December 31, 2008 (160,000 × $0.08) ..................
Cost of direct materials placed in production ..........
Direct labor (from PE 22–4A) ..........................................
Factory overhead ..............................................................
Total manufacturing costs ................................................
Total work in process during period ...............................
Less work in process inventory, December 31, 2008 .....
Cost of goods manufactured ............................................
Cost of finished goods available for sale .........................
Less finished goods inventory, December 31, 2008 ........
Cost of goods sold ..............................................................
$
22,000
$
43,000
8,000
1,560,000
$1,568,000
12,800
$1,555,200
675,000
245,000
2,475,200
$2,497,200
25,000
2,472,200
$2,515,200
40,000
$2,475,200
PE 22–3B
Pounds of wax required for production:
Candle [(95,600 × 8 oz.)/16 oz.] .............................................................
Plus desired ending inventory, December 31, 2008 ..................................
Total ..............................................................................................................
Less estimated beginning inventory, January 1, 2008 ..............................
Total pounds to be purchased .....................................................................
Unit price (per pound) .................................................................................
Total direct materials to be purchased
$171,000
×
47,800
1,100
48,900
1,400
47,500
$3.60
PE 22–4B
Hours required for assembly:
Candle (95,600 × 12 min.) ......................................................................
min.
Convert minutes to hours ......................................................................
Molding hours ........................................................................................
hrs.
1,147,200
/
60 min.
19,120
Hourly rate ...................................................................................................
Total direct labor cost ..................................................................................
×
$
$14.00
267,680
PE 22–6A
July
Collections from June sales (70% × $400,000) ..........................................
Collections from July sales (30% × $360,000) ...........................................
Total receipts from sales on account ..........................................................
$280,000
108,000
$388,000
Ex. 22–4
A
B
C
D
STEELCASE INC.—FABRICATION DEPARTMENT
Flexible Production Budget
October 2008
(assumed data)
1 Units of production
2
3 Variable cost:
4 Direct labor
5 Direct materials
6
Total variable cost
7
8 Fixed cost:
9 Supervisor salaries
10 Depreciation
11
Total fixed cost
12 Total department cost
13
14 112,000 × 18/60 × $16
15 215,000 × 18/60 × $16
16 318,000 × 18/60 × $16
17 412,000 × 50 × $1.25
18 515,000 × 50 × $1.25
19 618,000 × 50 × $1.25
Ex. 22–8
12,000
15,000
18,000
57,6001 $
72,0002 $
86,4003
750,0004
937,5005 1,125,0006
$ 807,600 $ 1,009,500 $ 1,211,400
$
$
$
$
130,000 $ 130,000 $
130,000
20,000
20,000
20,000
150,000 $ 150,000 $ 150,000
957,600 $ 1,159,500 $ 1,361,400
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
A
B
C
D
E
ROMA FROZEN PIZZA INC.
Direct Materials Purchases Budget
For the Month Ending November 30, 2008
Dough
Units required for
production:
2 12” pizza
3 16” pizza
Plus desired inventory,
4
November 30, 2008
5 Total
Less estimated inventory,
6
November 1, 2008
7 Total units to be purchased
8 Unit price
Total direct materials to be
9
purchased
10
11 116,400 × 1 lb.
12 216,400 × 0.60 lb.
13 316,400 × 0.80 lb.
14 425,600 × 1.50 lbs.
15 525,600 × 0.90 lb.
16 625,600 × 1.30 lbs.
*Rounded to the nearest
17
dollar
Tomato
Cheese
Total
1
1
16,4001
38,4004
9,8402
23,0405
13,1203
33,2806
480
250
375
4
55,280
33,130
46,775
5
675
190
525
6
54,605
× $1.20
32,940
× $2.40
46,250
× $2.85
7
8
$ 65,526
$
$131,813*
$276,395 9
79,056
2
3
10
11
12
13
14
15
16
17
Prob. 22–4A
1.
A
B
C
D
SANTA FE HOUSEWARES INC.
Cash Budget
For the Three Months Ending October 31, 2008
August
1 Estimated cash receipts from:
2 Cash sales
3 Collection of accounts receivablea
$
63,000
485,000
September
$
71,500
546,900
October
1
$ 84,500 2
620,550 3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Dividends
Total cash receipts
Estimated cash payments for:
Manufacturing costsb
Selling and administrative expenses
Capital expenditures
Other purposes:
Note payable (including interest)
Income tax
Dividends
Total cash payments
Cash increase or (decrease)
Cash balance at beginning of month
Cash balance at end of month
Minimum cash balance
Excess or (deficiency)
1,800
$ 549,800
$ 618,400
$ 325,000
170,000
$ 333,000
205,000
$
39,000
$ 495,000
$ 54,800
50,000
$ 104,800
40,000
$ 64,800
$ 577,000
$ 41,400
104,800
$ 146,200
40,000
$ 106,200
20 Computations:
21 a Collections of accounts receivable:
August
September
1
22 June sales
$ 135,000
23 July sales
350,0002 $ 150,0003
24 August sales
396,9004
25 September sales
26
Total
$ 485,000 $ 546,900
1
27
$450,000 × 30% = $135,000
2
28
$500,000 × 70% = $350,000
3
29
$500,000 × 30% = $150,000
4
30
$630,000 × 90% × 70% = $396,900
5
31
$630,000 × 90% × 30% = $170,100
6$715,000 × 90% × 70% = $450,450
32
33 bPayments for manufacturing costs:
August
September
Payment of accounts payable, beginning
34
$ 65,000 $ 65,000
of month balance*
35 Payment of current month’s cost**
260,000
268,000
36
Total
$ 325,000 $ 333,000
37 *Accounts payable, August 1 balance = $65,000
38 ($350,000 – $25,000) × 20% = 65,000
39 ($360,000 – $25,000) × 20% = $67,000
40 **($350,000 – $25,000) × 80% = $260,000
41 ($360,000 – $25,000) × 80% = $268,000
$
$
$
$
4
705,050 5
6
375,000 7
235,000 8
150,000 9
10
103,750 11
12
12,000 13
875,750 14
(170,700) 15
146,200 16
(24,500) 17
40,000 18
(64,500) 19
20
October
21
22
23
5
$ 170,100 24
450,4506 25
$ 620,550 26
27
28
29
30
31
32
October
33
$
67,000 34
308,000 35
$ 375,000 36
37
38
39
40
41
42 ($410,000 – $25,000) × 80% = $308,000
2.
The budget indicates that the minimum cash balance will not be maintained in
October. This is due to the capital expenditures and note repayment requiring
significant cash outflows during this month. This situation can be corrected by
borrowing and/or by the sale of the marketable securities, if they are held for
such purposes. At the end of August and September, the cash balance will
exceed the minimum desired balance, and the excess could be considered for
temporary investment.
42