MANAGERIAL ACCOUNTING - Fourth Edition

Solutions Manual

WASATCH MANUFACTURING
Master Budget
Sales Budget
January
February

December
Unit Sales

8444

8900

March

9900

April
9200

Price per Unit

9 $

9 $

9 $

9 $

Sales Revenue

76,000 $

80,100 $

89,100 $

82,800 $

Cash Collections Budget

January
February

May

March

9500
9
85,500 $

###
77,400

Quarter

Cash Sales (25%)

20,025 $

22,275 $

20,700 $

63,000

Credit Sales (75%)

60,075 $

66,825 $

62,100 $

189,000

Total Cash Collections

80,100 $

89,100 $

82,800 $

252,000

Production Budget
January
February

8600

March

Quarter

April

Unit Sales

8900

9900

9200

28000

9500

Plus:Desired ending inventory *

1485

1380

1425

1425

1290

10385

11280

10625

29425

10790

Less: Beginning Inventory

1267

1485

1380

1267

1425

Units to Produce

9118

9795

9245

28158

9365

Total needed

*15% of next months sales in units

Chapter 9: The Master Budget

Page 1 of 5

MANAGERIAL ACCOUNTING - Fourth Edition

Solutions Manual

Direct Materials Budget

January
February
Units to be Produced

March

Quarter

9118

9795

9245

28158

9365

Quantity of DM needed for production (lbs.)

18237

19590

18490

56317

18730

Plus: Desired Ending Inventory of DM (lbs.)*

1959

1849

1873

1873

20196

21439

20363

58190

Multiply by: Quantity of DM needed per unit (lbs.)

Total quantity of DM needed (lbs.)

Less: Beginning inventory of DM needed (lbs.)
Quantity of DM to purchase (lbs.)

1824

1959

1849

1824

18372

19480

18514

56366

Multiply by: Cost per pound

1.50 $

1.50 $

1.50 $

1.50

Totoal Cost of DM purchases

27,558 $

29,220 $

27,771 $

84,549

*10% of next months DM needs

Cash Payments for Direct Material Purchases Budget

January
February
March
December Purchases

January Purchases

22,000
8,267 $

February Purchases

22,000

27,558

8,766 $

20,454 $

29,220

8,331 $

8,331

28,057 $

28,785 $

87,109

19,290.60

March Purchases
Total Cash Payments

Quarter

30,267 $

Cash Payments for Direct Labor Budget

January
February

March

Quarter

Units Produced

9118

9795

9245

28158

Multiply by: Hours per Unit

0.03

0.03

0.03

0.03

Direct Labor hours

274

294

277

845

Multiply by: Direct Labor Rate per Hour

13 $

13 $

13 $

13

Direct Labor Cost

3,556 $

3,820 $

3,606 $

10,982

Chapter 9: The Master Budget

Page 2 of 5

MANAGERIAL ACCOUNTING - Fourth Edition

Solutions Manual

Cash Payments for Manufacturing Overhead Budget

January
February
March

Quarter

Rent (fixed)

6,500 $

6,500 $

6,500 $

19,500

Other Manufacturing Overhead (fixed)

2,100 $

2,100 $

2,100 $

6,300

Variable Manufacturing Overhead Costs*

12,766 $

13,713 $

12,943 $

39,422

Cash Payments for Manufacturing Overhead

21,366 $

22,313 $

21,543 $

65,222

*$1.40 per unit produced

Cash Payments for Operating Expenses Budget

January
February

March

Quarter

Variable Operating Expenses*

10,680 $

11,880 $

11,040 $

33,600

Fixed Operating Expenses

1,400 $

1,400 $

1,400 $

4,200

Cash Payments for Operating Expenses

12,080 $

13,280 $

12,440 $

37,800

*$1.20 per unit sold

Combined Cash Budget

January
February

March

Quarter

Beginning Cash Balance

6,000 $

4,831 $

9,661 $

20,492

Plus: Cash collections

80,100 $

89,100 $

82,800 $

252,000

Total Cash Available

86,100 $

93,931 $

92,461 $

272,492

DM Purchases

30,267 $

28,057 $

28,785 $

87,109

Direct Labor

3,556 $

3,820 $

3,606 $

10,982

Manufacturing Overhead Costs

21,366 $

22,313 $

21,543 $

65,222

Operating Expenses

12,080 $

13,280 $

12,440 $

37,800

10,800

Less: Cash Payments

Tax Payment
Equipment Purchases

10,800

15,000 $

6,000 $

4,000 $

25,000

Total Cash Payments

82,269 $

84,270 $

70,374 $

236,913

Ending Cash Before Financing

3,831 $

9,661 $

22,087 $

35,579

1,000

1,000

Financing:
Borrowings

Chapter 9: The Master Budget

Page 3 of 5

MANAGERIAL ACCOUNTING - Fourth Edition

Solutions Manual

Repayments

(1,000) $

(1,000)

Interest Payments

(45) $

(45)

9,661 $

21,042 $

35,534

Ending Cash Balance

Chapter 9: The Master Budget

4,831 $

Page 4 of 5

MANAGERIAL ACCOUNTING - Fourth Edition

Solutions Manual

Budgeted Manufacturing Cost per Unit

Direct Materials Cost per unit (2 Lbs. x $1.50 per unit)

3.00

Direct Labor Cost per unit (.03 labor hours per unit x $13 per hour)

0.39

Variable manufacturing costs per unit ($1.40 per unit)

1.40

Fixed Manufactuing Overhead per unit ($1.20 per unit)

1.20

Cost of manufacturing each unit

5.99

Budgeted Income Statement

Sales Revenue

252,000

Less: Cost of Goods Sold

167,720

Gross Profit

84,280

Less: Operating Expenses

37,800

Less: Depreciation Expense

5,200

Operating Income

41,280

Less: Interest Expense

45.00

Less: Income Tax Expense

11,513

Net Income

29,722

Chapter 9: The Master Budget

Page 5 of 5