# Assigned Exercises & Problems, Ch 13: Budgeting

### Ch 13: Budgeting

13-19: Estimate Sales Revenues

Market size and our share of market

Our forecast = share x (total forecasted market)

Market size last year?

30%(total market) = 45,000 units;

 total market = 150,000 units

Market size next year = 110% x 150,000 units =

165,000 units

Company share = 25% x 165,000 units = 41,250 units

Sales revenue = 41,250 units x \$11 per unit =

\$453,750

13-19: Estimate Sales Revenues

Stated otherwise:

(25/30) x 110% x 45,000 = 41, 250 units

I.e., we receive 25/30 of what we would have received when the market increased 10%

13-24: Estimate Production and Materials

Requirements

Desired EI of FG.............................. 5,000

Total needs ......................................... 165,000

Less: BI of FG…..................................... 20,000

=Units to produce .............................. 145,000

Our material needs will follow from this.

13-24: Materials Requirements

13-24: Alternate Viewpoint

Production:

BB + Production = Sales + EB

20,000 + P = 160,000 + 5,000

Production = 145,000 units

Materials Requirements:

BB + Purchases = Usage + EB

60,000 + P = (6 x 145,000) + (2 / 12) x 160,000 x

6 oz.

Purchases = 970,000 oz.

13-26: Estimate Purchases And Cash

Disbursements

Note: 10,000 in March @\$45 = \$450,000;

60% x \$450,000 = \$270,000 was paid in March

40% x \$450,000 = \$180,000 will be paid in April

### 13-29: Estimate Cash Collections

Current month, etc.

13-39: Sensitivity Analysis

13-39: Sensitivity Analysis

Ctrl ~ discloses formulas in Excel

Or:

=45000+5*MAX(0,B11-4500)

Pr. 13-44: Production Budget

CHANDER, INC.

Bag production cost data:

Direct materials per bag:

Yards of cotton

Cost of cotton per yard

Yards of canvas finish

Cost of canvas per yard

Direct labor per bag:

Number of hours

Cost per hour

Indirect labor

Indirect materials

Power

Equipment costs

Building occupancy

Normal annual production in units

Annual plant capacity in units

Percentage increase in cost of cotton

Expected sales in coming budget period

Current finished goods inventory in units

Targeted finished goods inventory in units

1.000

\$ 3.00

0.200

\$ 10.00

0.500

\$ 16.00

\$ 0.50

\$ 0.15

\$ 0.30

\$ 1.25

\$ 0.80

\$ 3.00

300,000

375,000

20%

270,000

60,000

105,000

Chander, Inc.

Production Budget

Coming Year

Expected sales

Add: Desired ending inventory of finished goods

Total needs

Less: beginning inventory of finished goods

Units to be produced

270,000

105,000

375,000

60,000

315,000 units units units units units

Estimate of costs:

Direct materials:

Cotton

Canvas

Total direct materials

Direct labor

Indirect labor

Indirect materials

Power

Equipment costs

Building occupancy

Total budgeted production costs

\$1,134,000

630,000

1,764,000

\$2,520,000

\$ 157,500

\$ 47,250

\$ 94,500

\$ 375,000

\$ 240,000

\$ 914,250

\$5,198,250

13-44: Production Budget Continued

13-48: Comprehensive Budget Plan

13-48: Budgeted material purchases

BI + Purchases -

Used

### 13-48: Budgeted Income Statement, May

See top of p. 524