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April.....
May......
June......
July.......
August.
TM 9-2
SALES BUDGET
April
Budgeted sales
(units)
Selling price per unit..
Total sales..................
20,000
$10
$200,00
0
May
50,000
$10
$500,00
0
June
Quarter
100,000
30,000
$10
$10
$300,00 $1,000,00
0
0
Accounts receivable
beginning balance......
April sales
70% $200,000.........
25% $200,000.........
May sales
70% $500,000.........
April
$ 30,00
0
May
140,000
$ 50,000
350,000
350,000
$125,00
0
$170,00
0
Quarter
$ 30,00
0
140,000
50,000
25% $500,000.........
June sales
70% $300,000.........
Total cash collections....
June
$400,00
0
210,000
$335,00
0
125,000
210,00
0
$905,00
0
TM 9-3
PRODUCTION BUDGET
Additional data:
The company desires to have inventory on hand at the end of
each month equal to 20% of the following months budgeted
unit sales.
On March 31, 4,000 units were on hand.
Budgeted sales [TM 9-4]......
Add desired ending
inventory.........................
Total needs.........................
Less beginning inventory. . .
Required production...........
April
20,000
May
50,000
10,000
30,000
4,000
26,000
6,000
56,000
10,000
46,000
June
July
30,000 25,000
3,000*
5,000
35,000 28,000
6,000 5,000
29,000 23,000
TM 9-4
DIRECT MATERIALS BUDGET
Additional data:
May
June
Quarter
26,000
5
130,00
0
23,00
0
153,00
0
13,00
0
140,00
0
46,000
5
230,00
0
14,50
0
244,50
0
23,00
0
221,50
0
29,000
5
145,00
0
11,50
0
156,50
0
14,50
0
142,00
0
101,000
5
505,000
11,500
TM 9-5
SCHEDULE OF EXPECTED CASH DISBURSEMENTS FOR
MATERIAL
Additional data:
Half of a months purchases are paid for in the month of
purchase; the other half is paid for in the following month.
No discounts are given for early payment.
The accounts payable balance on March 31 was $12,000.
Accounts payable
beginning balance........
April purchases
50% $56,000.............
50% $56,000.............
May purchases
50% $88,600.............
50% $88,600.............
June purchases
50% $56,800.............
Total cash disbursements
for materials.................
$12,00
0
$
12,000
28,000
28,000
$28,00
0
28,000
44,300
44,300
$44,30
0
44,300
28,40
28,40
0
0
$40,00 $72,30 $72,70 $185,00
0
0
0
0
TM 9-6
DIRECT LABOR BUDGET
Additional data:
Each unit produced requires 0.05 hour of direct labor.
Each hour of direct labor costs the company $10.
Management fully adjusts the workforce to the workload each
month.
April
Units to be produced
26,000
[TM 9-6]........................
Direct labor-hours per
unit.............................
0.05
Total hours of direct
labor time needed.......
1,300
Direct labor cost per
hour............................
$10
Total direct labor cost.... $13,000
May
June
Quarter
46,000
29,000
101,000
0.05
0.05
0.05
2,300
1,450
5,050
$10
$23,000
$10
$14,500
$10
$50,500
Note: Many companies do not fully adjust their direct labor work
force every month and in such companies direct labor behaves
more like a fixed cost, with additional cost if overtime is
necessary.
TM 9-7
MANUFACTURING OVERHEAD BUDGET
Additional data:
Variable manufacturing overhead is $20 per direct labor-hour.
Fixed manufacturing overhead is $50,500 per month. This
includes $20,500 in depreciation, which is not a cash outflow.
April
May
June
Quarter
5,050
$20
$101,00
0
151,50
0
252,500
61,50
0
$191,00
0
TM 9-8
ENDING FINISHED GOODS INVENTORY BUDGET
Additional data:
Royal Company uses absorption costing in its budgeted income
statement and balance sheet.
Manufacturing overhead is applied to units of product on the
basis of direct labor-hours.
The company has no work in process inventories.
Computation of absorption unit product cost:
Direct materials..........
Quantity
pound
5s
Cost
per
$0.40 pound
$10.0
0 per hour
$50.0
0 per hour*
Tota
l
$2.0
0
0.50
2.50
$5.0
0
* Predetermined
Total manufacturing overhead
=
overhead rate
Total direct labor hours
=
$252,500
= $50.00 per hour
5,050 hours
5,000
Unit product cost [see above].......................
$5
Ending finished goods inventory in dollars.... $25,000
9-6]
TM 9-9
SELLING AND ADMINISTRATIVE EXPENSE BUDGET
Additional data:
Variable selling and administrative expenses are $0.50 per unit
sold.
Fixed selling and administrative expenses are $70,000 per
month and include $10,000 in depreciation.
April
Budgeted sales in units
[TM 9-4].......................... 20,000
Variable selling and
administrative expense
per unit.........................
$0.50
Variable selling and
$10,00
administrative expense.
0
Fixed selling and
70,00
administrative expense.
0
Total selling and
administrative expense. 80,000
10,00
Less depreciation............
0
Cash disbursements for
selling and
administrative
$70,00
expenses......................
0
May
June
Quarter
50,000
30,000
100,000
$0.50
$0.50
$25,00 $15,00
0
0
70,00
70,00
0
0
$0.50
$ 50,00
0
210,00
0
95,000 85,000
10,00
10,00
0
0
260,000
30,00
0
$85,00 $75,00
0
0
$230,00
0
TM 9-10
CASH BUDGET
Additional data:
1.
2.
3.
4.
TM 9-11
CASH BUDGET
Royal Company
Cash Budget
For the Quarter Ending June 30
April
$ 40,00
Cash balance, beginning. .
0
Add receipts:
170,00
Cash collections [TM 9-5].
0
210,00
Total cash available..........
0
May
June
$ 30,00 $ 30,00
0
0
400,00
0
430,00
0
Quarter
$ 40,00
0
335,00
0
365,00
0
905,00
0
945,00
0
72,700
14,500
185,00
0
50,500
Less disbursements:
Direct materials [TM 9-8].
Direct labor [TM 9-9].........
Manufacturing overhead
40,000
13,000
[TM 9-10]...........................
56,000
76,000
59,000
[TM 9-12]...........................
70,000
75,000
Equipment purchases....
Total disbursements.........
0
51,00
0
230,00
0
85,000
143,70
0
0
400,00
0
0
270,00
0
191,00
0
230,00
0
192,50
0
51,00
0
900,00
0
Excess (deficiency) of
cash available over
disbursements...............
(20,000
)
30,00
0
95,00
0
45,00
0
Financing:
Borrowings.....................
Repayments...................
50,000
0
Dividends.......................
Interest*........................
Total financing..................
0
50,00
0
72,300
23,000
48,800
0
0
50,000
0 (50,000) (50,000)
0
0
( 2,000)
(52,000
)
( 2,000)
( 2,000)
TM 9-12
$ 30,00
Cash balance, ending.......
0
$ 30,00
0
$
43,000
$ 43,00
0
TM 9-13
BUDGETED INCOME STATEMENT
Royal Company
Budgeted Income Statement
For the Quarter Ending June 30
Net sales [see below]....................................
Less cost of goods sold [see below]..............
Gross margin.................................................
Less selling & administrative expenses [TM
9-12]
$950,000
500,000
450,000
260,000
190,000
2,000
$188,000
TM 9-14
BEGINNING BALANCE SHEET
Royal Company
Balance Sheet
March 31
Current assets:
Cash........................................... $ 40,000 (a)
Accounts receivable....................
30,000 (b)
Raw materials inventory.............
5,200 (c)
$
Finished goods inventory............
20,000
Plant and equipment:
Land............................................
400,000
Buildings and equipment............ 1,610,000
(750,000
Accumulated depreciation..........
)
Total assets...................................
(d)
95,20
0
(e)
(f)
1,260,00
(g)
0
$1,355,20
0
Liabilities:
$
Accounts payable........................
Stockholders equity:
Common stock............................
Retained earnings.......................
Total liabilities and stockholders
equity.........................................
(a)
See TM 9-13
(b)
See TM 9-5
(c)
(d)
(e)
Given
Given
Given
(f)
(g
)
(h
)
(i)
(j)
$ 200,00
0 (i)
1,143,20
0 (j)
12,00
0 (h)
1,343,20
0
$1,355,20
0
Given
Given
See TM 9-8
Given
Given
TM 9-15
BUDGETED BALANCE SHEET
Royal Company
Budgeted Balance Sheet
June 30
Current assets:
$
Cash...........................................
Accounts receivable....................
Raw materials inventory.............
43,00
0 (a)
75,000 (b)
4,600 (c)
(d)
$ 147,60
0
(e)
(f)
(g)
Total assets...................................
1,361,00
0
$1,508,60
0
Liabilities:
$
Accounts payable........................
Stockholders equity:
Common stock............................
Retained earnings.......................
Total liabilities and stockholders
equity.........................................
(a)
See TM 9-14
(b)
(c)
(d)
(e)
$ 200,00
0 (i)
1,280,20
0 (j)
28,40
0 (h)
1,480,20
0
$1,508,60
0
$1,610,000+ $143,700+
(f) $48,800
(g $750,000 + $61,500 +
)
$30,000
(h $56,800 purchases 50%
)
(i) See TM 9-16
(j) $1,143,200 + $188,000
TM 9-16
$51,000