Professional Documents
Culture Documents
MASTERBUDGETANDRESPONSIBILITYACCOUNTING
61
a.
b.
c.
d.
Thebudgetingcycleincludesthefollowingelements:
Planningtheperformanceofthecompanyasawholeaswellasplanningtheperformance
ofitssubunits.Managementagreesonwhatisexpected.
Providingaframeofreference,asetofspecificexpectationsagainstwhichactualresults
canbecompared.
Investigatingvariationsfromplans.Ifnecessary,correctiveactionfollowsinvestigation.
Planningagain,inlightoffeedbackandchangedconditions.
62 Themasterbudgetexpressesmanagementsoperatingandfinancialplansforaspecified
period(usuallyafiscalyear)andincludesasetofbudgetedfinancialstatements.Itistheinitial
planofwhatthecompanyintendstoaccomplishintheperiod.
63 Strategy, plans, and budgets are interrelated and affect one another. Strategy specifies
how an organization matches its own capabilities with the opportunities in the marketplace to
accomplish itsobjectives.Strategicanalysisunderlies both longrun and shortrunplanning.In
turn,theseplansleadtotheformulationofbudgets.Budgetsprovidefeedbacktomanagersabout
the likely effects of their strategic plans. Managers use this feedback to revise their strategic
plans.
64 We agree that budgeted performance is a better criterion than past performance for
judgingmanagers,becauseinefficienciesincludedinpastresultscanbedetectedandeliminated
inbudgeting.Also,futureconditionsmaybeexpectedtodifferfromthepast,andthesecanalso
befactoredintobudgets.
65 Productionand marketingtraditionally haveoperatedasrelatively independentbusiness
functions. Budgets can assist in reducing conflicts between these two functions in two ways.
ConsiderabeveragecompanysuchasCocaColaorPepsiCola:
Communication. Marketing could share information about seasonal demand with
production.
Coordination.Productioncouldensurethatoutputissufficienttomeet,forexample,
highseasonaldemandinthesummer.
66 Inmanyorganizations,budgetsimpelmanagerstoplan.Withoutbudgets,managersdrift
fromcrisistocrisis.Researchalsoshowsthatbudgetscanmotivatemanagerstomeettargetsand
improvetheirperformance.Thus,manytopmanagersbelievethatbudgetsmeetthecostbenefit
test.
67 A rolling budget, also called a continuous budget, is a budget or plan that is always
availableforaspecifiedfutureperiod,by continually addingaperiod(month,quarter,oryear)to
theperiodthatjustended.Afourquarterrollingbudgetfor2009issupersededbyafourquarter
rollingbudgetforApril2009toMarch2010,andsoon.
61
68
Thestepsinpreparinganoperatingbudgetareasfollows:
1. Preparetherevenuesbudget
2. Preparetheproductionbudget(inunits)
3. Prepare thedirectmaterialusagebudgetanddirectmaterialpurchasesbudget
4. Preparethedirectmanufacturinglaborbudget
5. Preparethemanufacturingoverheadbudget
6. Preparetheendinginventoriesbudget
7. Preparethecostofgoodssoldbudget
8. Preparethenonmanufacturingcostsbudget
9. Preparethebudgetedincomestatement
69 The sales forecast is typically the cornerstone for budgeting, because production (and,
hence,costs)andinventorylevelsgenerallydependontheforecastedlevelofsales.
610 Sensitivity analysis adds an extra dimension to budgeting. It enables managers to
examinehowbudgetedamountschangewithchangesintheunderlyingassumptions.Thisassists
managers in monitoring those assumptions that are most critical to a company in attaining its
budgetandallowsthem tomaketimelyadjustmentstoplanswhenappropriate.
611 Kaizenbudgetingexplicitlyincorporatescontinuousimprovementanticipatedduringthe
budgetperiodintothebudgetnumbers.
612 Nonoutputbasedcostdriverscan be incorporated intobudgeting bytheuseofactivity
based budgeting (ABB). ABB focuses on the budgeted cost of activities necessary to produce
and sell products and services. Nonoutputbased cost drivers, such as the number of part
numbers,numberofbatches,andnumberofnewproductscanbeusedwithABB.
613 The choice of the type of responsibility center determines what the manager is
accountableforandtherebyaffectsthemanagersbehavior.Forexample,ifarevenuecenteris
chosen, the manager will focus on revenues, not on costs or investments. The choice of a
responsibilitycentertypeguidesthevariablestobeincludedinthebudgetingexercise.
614 Budgetinginmultinationalcompaniesmayinvolvebudgetinginseveraldifferentforeign
currencies.Further,managementaccountantsmusttranslateoperatingperformanceintoasingle
currency for reporting to shareholders, by budgeting for exchange rates. Managers and
accountants must understand the factors that impact exchange rates, and where possible, plan
financial strategies to limit the downside of unexpected unfavorable moves in currency
valuations.Indevelopingbudgetsforoperationsindifferentcountries,theymustalsohavegood
understandingofpolitical,legalandeconomicissuesinthosecountries.
615 No. Cash budgets and operating income budgets must be prepared simultaneously. In
preparing their operating income budgets, companies want to avoid unnecessary idle cash and
unexpected cash deficiencies. The cash budget, unlike the operating income budget, highlights
periods of idle cash and periods of cash shortage, and it allows the accountant to plan cost
effectivewaysofeitherusingexcesscashorraisingcashfromoutsidetoachievethecompanys
operatingincomegoals.
62
2009
At2009
Volume SellingPrices
11,000
$250
15,200
$200
Expected2010
ChangeinVolume
+5%
10%
Expected2010
Volume
11,550
13,680
McGrath&SonsSalesBudget
FortheYearEndedDecember31,2010
RadonTests
LeadTests
Selling
Price
$250
$200
Units
Sold
11,550
13,680
Total
Revenues
$2,887,500
2,736,000
$5,623,500
2.
McGrath&Sons
RadonTests
LeadTests
Expected
2010
Expected
2010
2009 Planned2010 Changein
Volume SellingPrices Volume
Volume
11,000
$250
+5%
11,550
15,200
$190
5%
14,440
McGrath&SonsSalesBudget
For theYearEndedDecember31,2010
RadonTests
LeadTests
Selling
Price UnitsSold
$250
11,550
$190
14,440
Total
Revenues
$2,887,500
2,743,600
$5,631,100
Expectedrevenuesatthe new2010pricesare$5,631,100,whicharegreaterthantheexpected
2010 revenues of $5,623,500 if the prices are unchanged. So, if the goal is to maximize sales
revenue and if Jim McGraths forecasts are reliable, the company should lower its price for a
leadtestin2010.
63
617 (5min.)
Salesandproductionbudget.
Budgetedsalesinunits
Addtargetendingfinishedgoodsinventory
Totalrequirements
Deductbeginningfinishedgoodsinventory
Unitstobeproduced
618 (5min.)
200,000
25,000
225,000
15,000
210,000
Directmaterialspurchasesbudget.
Directmaterialstobeusedinproduction(bottles)
Addtargetendingdirectmaterialsinventory(bottles)
Totalrequirements(bottles)
Deductbeginningdirectmaterialsinventory(bottles)
Directmaterialstobepurchased(bottles)
2,500,000
80,000
2,580,000
50,000
2,530,000
Budgetedsales
Addtargetendingfinishedgoodsinventory
Totalrequirements
Deductbeginningfinishedgoodsinventory
Unitstobeproduced
FinishedGoods
(units)
45,000
18,000
63,000
16,000
47,000
DirectMaterialsPurchasesBudget:
Directmaterialsneededforproduction(47,000 3)
Addtargetendingdirectmaterialsinventory
Totalrequirements
Deductbeginningdirectmaterialsinventory
Directmaterialstobepurchased
64
DirectMaterials
(ingallons)
141,000
50,000
191,000
60,000
131,000
12ouncebottles
4gallonunits
a
b
Selling
Price
$0.25
1.50
Units
Sold
4,800,000a
1,200,000b
Total
Revenues
$1,200,000
1,800,000
$3,000,000
400,00012months=4,800,000
100,00012months =1,200,000
2.
Budgetedunitsales(12ouncebottles)
Addtargetendingfinishedgoodsinventory
Totalrequirements
Deductbeginningfinishedgoodsinventory
Unitstobeproduced
4,800,000
600,000
5,400,000
900,000
4,500,000
3.
Beginning = Budgeted +
Target
- Budgeted
inventory
sales
ending inventory production
=1,200,000+200,000 -1,300,000
=100,0004gallonunits
65
Dye
Total
50,000gal.
$ 24,850
225,000
$249,850
$6,267,300
2.
Weavingbudgeted = $18,852, 000 =$3.3664perDMLH
overheadrate
5,600,000DMLH
Dyeingbudgeted = $12,809, 000 =$28.4644perMH
overheadrate
450,000MH
3.
BudgetedUnitCostofBlueRug
Wool
Dye
Directmanufacturinglabor
Dyeingoverhead
Weavingoverhead
Total
Inputper
Unitof
Output
30skeins
0.5gal.
56hrs.
4.51 machhrs.
56DMLH
Costper
UnitofInput
$2
5
15
28.4644
3.3664
Total
$ 60.00
2.50
840.00
128.09
188.52
$1219.11
4.
RevenueBudget
Selling
Units Price TotalRevenues
BlueRugs 100,000 $2,000 $200,000,000
BlueRugs 95,000 $2,000 $190,000,000
5a.
Sales=100,000rugs
CostofGoodsSoldBudget
FromSchedule
Beginningfinishedgoodsinventory
Directmaterialsused
Directmanufacturinglabor($840 100,000)
Dyeingoverhead($128.09100,000)
Weavingoverhead($188.52 100,000)
Costofgoodsavailableforsale
Deductendingfinishedgoodsinventory
Costofgoodssold
66
Total
$
$ 6,267,300
84,000,000
12,809,000
18,852,000
121,928,300
121,928,300
0
$121,928,300
5b.
Sales=95,000rugs
CostofGoodsSoldBudget
FromSchedule
Beginningfinishedgoodsinventory
Directmaterialsused
Directmanufacturinglabor
($840 100,000)
Dyeingoverhead
($128.09 100,000)
Weavingoverhead
($188.52 100,000)
Costofgoodsavailableforsale
Deductendingfinishedgoodsinventory
($1,219.11 5,000)
Costofgoodssold
Total
$0
$6,267,300
84,000,000
12,809,000
18,852,000
121,928,300
121,928,300
6,095,550
$115,832,750
6.
Revenue
Less:Costofgoodssold
Grossmargin
100,000rugssold
$200,000,000
121,928,300
$ 78,071,700
95,000rugssold
$190,000,000
115,832,750
$ 74,167,250
900,000motorcycles 400,000yen=360,000,000,000yen
2.
Budgetedsales(motorcycles)
Addtargetendingfinishedgoodsinventory
Totalrequirements
Deductbeginningfinishedgoodsinventory
Unitstobeproduced
3.
Directmaterialstobeusedinproduction,
880,0002(wheels)
Addtargetendingdirectmaterialsinventory
Totalrequirements
Deductbeginningdirectmaterialsinventory
Directmaterialstobepurchased(wheels)
Costperwheelinyen
Directmaterialspurchasecostinyen
900,000
80,000
980,000
100,000
880,000
1,760,000
60,000
1,820,000
50,000
1,770,000
16,000
28,320,000,000
Notetherelativelysmallinventoryofwheels.InJapan,supplierstendtobelocatedverycloseto
the major manufacturer.Inventoriesarecontrolledby justintimeandsimilarsystems.Indeed,
somedirectmaterialsinventoriesarealmostnonexistent.
67
Budgetedsales(units)
Addtargetendingfinishedgoods
inventorya (units)
16,000
Totalrequirements(units)
26,000
Deductbeginningfinishedgoods
inventory(units)
16,000
Unitstobeproduced
10,000
Directmanufacturinglaborhours
(DMLH)perunit
2.0
Totalhoursofdirectmanufacturing
labortimeneeded
20,000
Directmanufacturinglaborcosts:
Wages($10.00perDMLH)
$200,000
Pensioncontributions
($0.50perDMLH)
10,000
Workerscompensationinsurance
($0.15perDMLH)
3,000
Employeemedicalinsurance
($0.40perDMLH)
8,000
SocialSecuritytax(employersshare)
($10.00 0.075=$0.75perDMLH)
15,000
Totaldirectmanufacturing
laborcosts
$236,000
a
February
12,000
March
8,000
Quarter
30,000
12,500
24,500
13,500
21,500
13,500
43,500
16,000
8,500
12,500
9,000
16,000
27,500
2.0
1.5
17,000
13,500
50,500
6,750
25,250
2,550
2,025
7,575
6,800
5,400
20,200
12,750
10,125
37,875
100%ofthefirstfollowingmonthssalesplus50%ofthesecondfollowingmonthssales.
NotethattheemployeeSocialSecuritytaxof7.5%isirrelevant.Suchtaxesarewithheldfromemployees
wagesandpaidtothegovernmentbytheemployeronbehalfoftheemployeestherefore,the7.5%amountsarenot
additionalcoststotheemployer.
68
Activity
Ordering
$90 142414
Delivery
$82 126219
Shelfstocking
$21 1617294
Customersupport
$0.18 4,600 34,20010,750
Totalbudgetedindirectcosts
Batchlevel
Batchlevel
Outputunit
level
Outputunit
level
Soft
Drinks
Fresh
Produce
Packaged
Food
Total
$1,260
$2,160
$1,260
$4,680
984
5,084
1,558
7,626
336
3,612
1,974
5,922
828
$3,408
6,156
$17,012
1,935
$6,727
8,919
$27,147
13%
63%
25%
Percentageoftotalindirectcosts
(subjecttorounding)
2.
Refer to the last row of the table in requirement 1. Fresh produce, which probably
representsthesmallestportionofCOGS,istheproductcategorythatconsumesthelargestshare
(63%)oftheindirectresources.Freshproducedemandsthehighest levelofordering,delivery,
shelfstocking and customer support resources of all three product categoriesit has to be
ordered,deliveredandstockedinsmall,perishablebatches,andsupermarketcustomersoftenask
foralotofguidanceonfreshproduceitems.
3.
An ABBapproachrecognizes howdifferentproductsrequiredifferentmixesofsupport
activities.Therelativepercentageofhoweachproductareausesthecostdriverateachactivity
areais:
Activity
Ordering
Delivery
Shelfstocking
Customersupport
Cost
Hierarchy
Batchlevel
Batchlevel
Outputunitlevel
Outputunitlevel
Soft
Fresh Packaged
Drinks Produce
Food
27%
46%
27%
13
67
20
6
61
33
9
69
22
Total
100%
100
100
100
Byrecognizingthesedifferences,FS managersarebetterabletobudgetfordifferentunitsales
levelsanddifferentmixesofindividualproductlineitemssold.Usingasinglecostdriver(such
as COGS) assumes homogeneity in the use of indirect costs (support activities) across product
lines which does not occur at FS. Other benefits cited by managers include: (1) better
identification of resource needs, (2) clearer linking of costs with staff responsibilities, and (3)
identification ofbudgetaryslack.
69
CostHierarchy
Batchlevel
Batchlevel
Outputunitlevel
Outputunitlevel
BudgetedCostDriverRates
January February
March
$90.00
$89.82000
$89.64
82.00
81.83600
81.67
21.00
20.95800
20.92
0.18
0.17964
0.179
TheMarch2008ratescanbeusedtocomputethetotalbudgetedcostforeachactivityareain
March2008:
Activity
Ordering
$89.64 142414
Delivery
$81.67 126219
Shelfstocking
$20.92 1617294
Customersupport
$0.179 4,600
34,20010,750
Total
Cost
Hierarchy
Soft
Drinks
Batchlevel
Fresh Packaged
Produce
Food
$1,255 $ 2,151
Total
$1,255
$4,661
Batchlevel
980
5,064
1,552
7,596
Outputunitlevel
335
3,598
1,966
5,899
823
6,122
$3,393 $16,935
1,924
$6,697
8,869
$27,025
Outputunitlevel
2.
A kaizen budgeting approach signals managements commitment to systematic cost
reduction.ComparethebudgetedcostsfromQuestion624and625.
Question624
Question625(Kaizen)
Ordering
$4,680
4,661
Delivery
$7,626
7,596
Shelf
Stocking
$5,922
5,899
Customer
Support
$8,919
8,869
Thekaizenbudgetnumberwillshowunfavorablevariancesformanagerswhoseactivitiesdonot
meet the required monthly cost reductions. This likely will put more pressure on managers to
creatively seek out cost reductions by working smarter within FS or by having better
interactionswithsuppliersorcustomers.
One limitation of kaizen budgeting, as illustrated in this question, is that it assumes small
incremental improvements each month. It is possible that some cost improvements arise from
largediscontinuouschangesinoperatingprocesses,suppliernetworks,orcustomerinteractions.
Companiesneedtohighlighttheimportanceofseekingtheselargediscontinuousimprovements
aswellasthesmallincrementalimprovements.
610
611
ThecashthatTabComp,Inc.,canexpecttocollectduringApril2006iscalculatedbelow.
Aprilcashreceipts:
Aprilcashsales($400,000 .25)
Aprilcreditcardsales($400,000 .30 .96)
Collectionsonaccount:
March($480,000 .45 .70)
February($500,000 .45 .28)
January(uncollectiblenotrelevant)
Totalcollections
$100,000
115,200
151,200
63,000
0
$429,400
2.
(a)TheprojectednumberoftheMZB33computerhardwareunitsthatTabComp,Inc.,
willorderonJanuary25,2006,iscalculatedasfollows.
Marchsales
Plus:Endinginventorya
Totalneeded
Less:Beginninginventoryb
Projectedpurchasesinunits
MZB33
Units
110
27
137
33
104
0.30 90unitsalesinApril
0.30 110unitsalesinMarch
(b)
Sellingprice=$2,025,000 675units,orforMarch,$330,000 110units
=$3,000perunit
$1,800
Purchasepriceperunit,60% $3,000
Projectedunitpurchases
x 104
$187,200
TotalMZB33purchases,$1,800 104
3.
MonthlycashbudgetsarepreparedbycompaniessuchasTabComp,Inc.,inordertoplan
for their cash needs. This means identifying when both excess cash and cash shortages may
occur.Acompanyneedstoknowwhencashshortageswilloccursothatpriorarrangementscan
be made with lending institutions in order to have cash available for borrowing when the
company needs it. Atthesametime,acompany should beawareofwhenthere isexcesscash
availableforinvestmentorforrepayingloans.
612
RevenuesBudget
Unitssold
Sellingprice
Budgetedrevenues
b.
Executive
Line
740
$1,020
$754,800
Chairman
Line
390
$1,600
$624,000
$1,378,800
ProductionBudgetinUnits
Budgetedunitsales
Addbudgetedendingfin.goodsinventory
Totalrequirements
Deductbeginningfin.goods.inventory
Budgetedproduction
c.
Total
Executive
Line
740
30
770
20
750
Chairman
Line
390
15
405
5
400
DirectMaterialsUsageBudget(units)
Oak
ExecutiveLine:
1.Budgetedinputperf.g.unit
2.Budgetedproduction
3.Budgetedusage(12)
ChairmanLine:
4.Budgetedinputperf.g.unit
5.Budgetedproduction
6.Budgetedusage(45)
7.Totaldirectmaterials
usage(3+6)
DirectMaterialsCostBudget
8.Beginninginventory
9.Unitprice(FIFO)
10.CostofDMusedfrom
beginninginventory(89)
11.Materialstobeusedfrom
purchases(78)
12.CostofDMinMarch
13.CostofDMpurchasedand
usedinMarch(1112)
14.Directmaterialstobeused
(10+13)
16
750
12,000
Red
Oak
RedOak
Legs
Total
4
750
3,000
25
400
10,000
4
400
1,600
12,000
10,000
3,000
1,600
320
150
100
40
$18
$23
$11
$17
$5,760
$3,450
$1,100
$680
11,680
$20
9,850
$25
2,900
$12
1,560
$18
$233,600
$246,250
$34,800
$28,080 $542,730
$239,360
$249,700
$35,900
$28,760 $553,720
613
Oak
Legs
$10,990
DirectMaterialsPurchasesBudget
Budgetedusage
(fromline7)
Addtargetendinginventory
Totalrequirements
Deductbeginninginventory
TotalDMpurchases
Purchaseprice(March)
Totalpurchases
d.
RedOak
Oak
Legs
12,000
192
12,192
320
11,872
$20
$237,440
10,000
200
10,200
150
10,050
$25
$251,250
3,000
80
3,080
100
2,980
$12
$35,760
Direct
Output Manuf.Labor
Units
Hoursper
Produced OutputUnit
750
3
400
5
Total
Hours
2,250
2,000
4,250
Total
1,600
44
1,644
40
1,604
$18 ________
$28,872 $553,322
Hourly
Rate
$30
$30
Total
$67,500
60,000
$127,500
ManufacturingOverheadBudget
Variablemanufacturingoverheadcosts (4,250$35)
Fixedmanufacturingoverheadcosts
Totalmanufacturingoverheadcosts
$191,250
Totalmanuf.overheadcostperhour =
=
4,250
$42,500
Fixedmanuf.overheadcostperhour =
=
4,250
f.
RedOak
Legs
DirectManufacturingLaborBudget
ExecutiveLine
ChairmanLine
e.
Oak
$148,750
42,500
$191,250
$45perdirectmanufacturinglaborhour
$10perdirectmanufacturinglaborhour
Computationofunitcostsofendinginventoryoffinishedgoods
Executive
Chairman
Line
Line
Directmaterials
Oaktop($2016,0)
$320
$0
Redoak($250,25)
0
625
Oaklegs($124,0)
48
0
Redoaklegs($180,4)
0
72
Directmanufacturinglabor($303,5)
90
150
Manufacturingoverhead
Variable($353,5)
105
175
Fixed($103,5)
30
50
Totalmanufacturingcost
$593
$1,072
614
EndingInventoriesBudget
CostperUnit
Units
Total
DirectMaterials
Oaktop
Redoaktop
Oaklegs
Redoaklegs
$20
25
12
18
192
200
80
44
$3,840
5,000
960
792
10,592
FinishedGoods
Executive
Chairman
593
1,072
30
15
17,790
16,080
33,870
$44,462
Total
g.
2.
Costofgoodssoldbudget
Budgetedfin.goodsinventory,March1,2009 ($10,480+$4,850)
Directmaterialsused(fromDir.materialspurch.budget)
$553,720
Directmanufacturinglabor(Dir.manuf.laborbudget)
127,500
Manufacturingoverhead(Manuf.overheadbudget)
191,250
Costofgoodsmanufactured
Costofgoodsavailableforsale
Deductendingfin.goodsinventory,March31,2009(Inventoriesbudget)
Costofgoodssold
$15,330
872,470
887,800
33,870
$853,930
Areaswherecontinuousimprovementmightbeincorporatedintothebudgetingprocess:
(a) Direct materials. Either an improvement in usage or price could be budgeted. For
example,thebudgetedusageamountscouldberelatedtothemaximumimprovement
(currentusageminimumpossibleusage)of1squarefootforeitherdesk:
Executive:16squarefeet15squarefeetminimum=1squarefoot
Chairman:25squarefeet24squarefeetminimum=1squarefoot
Thus,a1%reductiontargetpermonthcouldbe:
Executive:15squarefeet+(0.991)=15.99
Chairman:24squarefeet+(0.991)=24.99
Some students suggested the 1% be applied to the 16 and 25 squarefoot amounts.
Thiscanbedonesolongasafterseveralimprovementcycles,thebudgetedamountis
notlessthantheminimumdeskrequirements.
(b)Direct manufacturing labor. The budgeted usage of 3 hours/5 hours could be
continuouslyrevisedonamonthlybasis.Similarly,themanufacturinglaborcostper
hourof$30could becontinuouslyreviseddown.The formerappears more feasible
thanthelatter.
(c) Variablemanufacturingoverhead.Bybudgetingmoreefficientuseoftheallocation
base,asignalisgivenforcontinuousimprovement.Asecondapproachistobudget
continuousimprovementinthebudgetedvariableoverheadcostperunitofthe
allocationbase.
(d) Fixedmanufacturingoverhead.Theapproachhereistobudgetforreductionsinthe
yeartoyearamountsoffixedoverhead.Ifthesecostsareappropriatelyclassifiedas
fixed,thentheyaremoredifficulttoadjustdownonamonthlybasis.
615
$120
Totalrevenues
$2,400,000
2.
DirectMaterialUsageBudgetinQuantityandDollars
FortheQuarterEndingMarch31,20xx
Physicalunitsbudget
Directmaterialsrequired
(20,000units 10oz.)
200,000oz.
Costbudget
Tobepurchasedthisperiod
$8,000,000
(200,000oz. $4peroz.)
Directmaterialstobeusedthisperiod
$8,000,000
3.
DirectManufacturingLaborCostsBudget
FortheQuarterEndingMarch31,20xx
Outputunitsproduced
20,000
Directmanufacturinglaborhoursperunit
2
Totaldirectmanufacturinglaborhours
40,000
Hourlywagerate
$15
Total directmanufacturinglaborcosts
$600,000
4.
ManufacturingOverheadCostsBudget
FortheQuarterEndingMarch31,20xx
Machinesetupoverhead
(400setuphours $80perhour)
$32,0001
Operationsoverhead
64,000
(40,000hours $1.60perhour)
Totalmanufacturingoverheadcosts
$96,000
20,000units =200batches.Eachbatchrequires2setuphours,so
100unitsperbatch
200batches 2setuphoursperbatch=400setuphours
1
616
5.
BudgetedUnitCost
FortheQuarterEndingMarch31,20xx
Costper
Unitof
Inputper
Input
UnitofOutput
Directmaterial
$ 4
10oz.
Directmanufacturinglabor
15
2DMLH
Machinesetupoverhead
80
0.02setuphours1
Operationsoverhead
1.60
2DMLH
Total costpergizmo
Total
$40.00
30.00
1.60
3.20
$74.80
Setuphourspergizmo=400setuphours20,000gizmos=0.02setuphourspergizmo.
Alternatively,
BudgetedUnitCost
FortheQuarterEndingMarch31,20xx
Total
Perunit
(1)
(2)=(1)20,000
Directmaterial costs
(requirement2)
$ 800,000
$40.00
Directmanufacturinglaborcosts
600,000
30.00
(requirement3)
Machinesetupoverheadcosts
32,000
1.60
(requirement4)
Operationsoverheadcosts
64,000
3.20
(requirement4)
Total costs
$1,496,000
$74.80
6.
CostofGoodsSoldBudget
FortheQuarterEndingMarch31,20xx
Total
Beginningfinishedgoodsinventory,Jan.1
Directmaterialsused
Directmanufacturinglabor
Manufacturingoverhead
Costofgoodsmanufactured
Costofgoodsavailableforsale
Deduct:Endingfinishedgoodsinventory,Mar.311
Costofgoodssold
1
72,000
$800,000
600,000
96,000
1,496,000
1,568,000
72,000
$1,496,000
UnderLIFOcostflowassumption,the1,000gizmosinbeginningfinishedgoodsinventory thatremainin
inventory onMarch31continuetobevaluedat$72,000.
617
7.
BudgetedGrossMargin
FortheQuarterEndingMarch31,20xx
Revenues
$2,400,000
Costofgoodssold
1,496,000
Grossmargin
$ 904,000
8.
Directmaterial
Directmanufacturinglabor
Machinesetupoverhead
Operationsoverhead
1st Quarter
Quantity
(1)
10oz
2DMLH
0.02setuphours
2DMLH
2dQuarter
3rd QuarterRevised
RevisedQuantity
Quantity
(3)=(1)(100%(2)) (4)=(3)(100%(2))
9.9oz.
9.8oz.
1.98DMLH
1.96DMLH
0.0194setuphours
0.01882setuphours
1.98DMLH
1.96DMLH
Proposed
Decrease
(2)
1%
1%
3%
1%
BudgetedUnitCost
FortheQuartersEndingJune30andSept.30,20xx
Directmaterial
Directmanufacturinglabor
Machinesetupoverhead
Operationsoverhead
Total
Costper
Unitof
Input
$ 4
15
80
1.60
2dQuarter
Inputper
UnitofOutput
9.9oz.
1.98DMLH
0.0194setuphrs.
1.98DMLH
Budgeted
UnitCost
June30
$39.60
29.70
1.55
3.17
$74.02
BudgetedGrossMargin
FortheQuartersEnding
June30,20xx
$2,400,000
Revenues
Costofgoodssold
($74.02$73.2420,000)
Grossmargin
1,480,400
$ 919,600
3rd Quarter
Inputper
UnitofOutput
9.80oz
1.96DMLH
0.0188setuphr
1.96DMLH
Budgeted
UnitCost
Sept.30
$39.20
29.40
1.50
3.14
$73.24
Sept.30,20xx
$2,400,000
1,464,800
$ 935,200
9.
Reductioninmaterialscanbeaccomplishedby reducingwasteandscrap.Reductionin
directlaborandsetuptimecanbeaccomplishedbyimprovingtheefficiencyofoperationsand
decreasingdowntime.
Employeeswhomakethegizmosmayhavesuggestionsforwaystodotheirjobsmore
efficiently.Forinstance,employeesmayrecommendprocesschangesthatreduceidletime,
setuptime,andscrap. Tomotivateworkerstoimproveefficiency,manycompanieshavesetup
programsthatshareproductivitygainswiththeworkers. Kornamustbecarefulthatproductivity
improvementsandcostreductionsdonotinanywaycompromiseproductquality.
618
inventory
orpurchases inventory materialsused
1.
ScarboroughCorporation
RevenueBudgetfor2010
Thingone
Thingtwo
Budgetedrevenues
2.
Units
60,000
40,000
Total
$9,900,000
10,000,000
$19,900,000
ScarboroughCorporation
ProductionBudget(inunits)for2010
Budgetedsalesinunits
Addtargetfinishedgoodsinventories,
December31,2010
Totalrequirements
Deductfinishedgoodsinventories,
January1,2010
Unitstobeproduced
3.
Price
$165
250
Thingone
60,000
Thingtwo
40,000
25,000
85,000
9,000
49,000
20,000
65,000
8,000
41,000
ScarboroughCorporation
DirectMaterialsPurchasesBudget(inquantities)for2007
A
Directmaterialstobeusedinproduction
Thingone(budgetedproductionof65,000
unitstimes4lbs.ofA,2lbs.ofB)
Thingtwo(budgetedproductionof41,000
unitstimes5lbs.ofA,3lbs.ofB,1lb.ofC)
Total
Addtargetendinginventories,December31,2010
Totalrequirementsinunits
Deductbeginninginventories,January1,2010
Directmaterialstobepurchased(units)
619
DirectMaterials
B
C
260,000
130,000
205,000
465,000
36,000
501,000
32,000
469,000
123,000
253,000
32,000
285,000
29,000
256,000
41,000
41,000
7,000
48,000
6,000
42,000
4.
ScarboroughCorporation
DirectMaterialsPurchasesBudget(indollars)for2010
DirectmaterialA
DirectmaterialB
DirectmaterialC
Budgetedpurchases
5.
Expected
Purchase
Priceperunit
$12
5
3
Total
$5,628,000
1,280,000
126,000
$7,034,000
ScarboroughCorporation
DirectManufacturingLaborBudget(indollars)for2010
Thingone
Thingtwo
Total
6.
Budgeted
Purchases
(Units)
469,000
256,000
42,000
Direct
Budgeted Manufacturing
Production LaborHours
Total
(Units)
perUnit
Hours
65,000
2
130,000
41,000
3
123,000
Rate
per
Hour
$12
16
Total
$1,560,000
1,968,000
$3,528,000
ScarboroughCorporation
BudgetedFinishedGoodsInventory
atDecember31,2010
Thingone:
Directmaterialscosts:
A,4pounds$12
$48
B,2pounds$5
10
Directmanufacturinglaborcosts,
2hours$12
Manufacturingoverheadcostsat$20perdirect
manufacturinglaborhour(2hours$20)
Budgetedmanufacturingcostsperunit
FinishedgoodsinventoryofThingone
$12225,000units
Thingtwo:
Directmaterialscosts:
A,5pounds$12
$60
B,3pounds$5
15
C,1each$3
3
Directmanufacturinglaborcosts,
3hours$16
Manufacturingoverheadcostsat$20perdirect
manufacturinglaborhour(3hours$20)
Budgetedmanufacturingcostsperunit
FinishedgoodsinventoryofThingtwo
$1869,000units
Budgetedfinishedgoodsinventory,December31,2010
620
$58
24
40
$122
$3,050,000
$78
48
60
$186
1,674,000
$4,724,000
$6,996
1,908
$8,904
5,022
3,882
850
159
1,130
900
3,039
$843
Catallac
Dogeriffic
Total
2.
ProductionBudget
FortheMonthofApril
Product
Catallac Dogeriffic
Budgetedunitsales
500
300
Addtargetendingfinishedgoodsinventory
35
15
Totalrequiredunits
535
315
Deductbeginningfinishedgoodsinventory
15
30
Unitsoffinishedgoodstobeproduced
520
285
3a.
DirectMaterialUsageBudgetinQuantityandDollars
FortheMonthofApril
Material
Plastic
Metal
PhysicalUnitsBudget
Directmaterialsrequiredfor
Catallac(520units4lbs.and0.5lb.)
Dogerrific(285units6lbs.and1lb.)
Totalquantityofdirectmaterial tobeused
2,080lbs.
1,710lbs.
3,790lbs.
CostBudget
Availablefrombeginningdirectmaterialsinventory
(underaFIFOcostflowassumption)
Plastic:250lbs.$3.80perlb.
$ 950
Metal:60lbs.$3perlb.
Tobepurchasedthisperiod
.
Plastic:(3,790250)lbs. $4perlb.
14,160
Metal:(54560)lbs. $3perlb.
______
Directmaterialstobeusedthisperiod
$15,110
622
Total
260lbs.
285lbs.
545lbs.
$180
1,455
$1,635
$16,745
DirectMaterialPurchasesBudget
FortheMonthofApril
Material
Plastic
Metal
PhysicalUnitsBudget
Tobeusedinproduction(requirement3)
Addtargetendinginventory
Totalrequirements
Deductbeginninginventory
Purchasestobemade
CostBudget
Plastic:3,920lbs. $4
Metal:540lbs. $3
Purchases
3,790lbs.
380 lbs.
4,170lbs.
250lbs.
3,920lbs.
$15,680
______
$15,680
Total
545lbs.
55 lbs.
600lbs.
60 lbs.
540 lbs.
$1,620
$1,620
$17,300
4.
DirectManufacturingLaborCostsBudget
FortheMonthofApril
Catallac
Dogerrific
Total
OutputUnits
Produced
(requirement2)
520
285
DMLH
perUnit
3
5
Total
Hours
1,560
1,425
Hourly
Wage
Rate
$10
10
Total
$15,600
14,250
$29,850
5. MachineSetupOverhead
Unitstobeproduced
Unitsperbatch
Numberofbatches
Setuptimeperbatch
Totalsetuptime
Catallac
520
20
26
1.5 hrs.
39 hrs.
Dogerrific
285
15
19
1.75 hrs.
33.25 hrs.
Total
72.25hrs.
Budgetedmachinesetupcosts=$100persetuphour 72.25hours
= $7,225
ProcessingOverhead
Budgetedmachinehours(MH)=(10MHperunit520units)+(18MHperunit285units)
=5,200 MH+5,130MH=10,330MH
Budgetedprocessingcosts=$5perMH 10,330MH
=$51,650
InspectionOverhead
Budgetedinspectionhours=(0.5 26batches)+(0.6 19batches)
=13+11.4=24.4inspectionhrs.
Budgetedinspectioncosts=$16perinspectionhr. 24.4inspectionhours
=$390.40
623
ManufacturingOverheadBudget
FortheMonthofApril
Machinesetupcosts
$ 7,225
Processingcosts
51,650
Inspection costs
390
Total costs
$59,265
6.
UnitCostsofEndingFinishedGoodsInventory
April30,20xx
Product
Catallac
Dogerrific
Costper Inputper
Inputper
Unitof Unitof
Unitof
Total
Total
Input Output
Output
Plastic
$ 4
4lbs.
$16.00
6lbs.
$ 24.00
Metal
3
0.5lbs.
1.50
1lb.
3.00
Directmanufacturinglabor 10
3hrs.
30.00
5hrs.
50.00
Machinesetup
100
0.075 hrs.1
7.50
0.1167hr1
11.67
Processing
5
10MH
50.00
18MH
90.00
2
2
Inspection
16
0.025hr
0.40
0.04hr.
0.64
Total
$105.40
$179.31
1
2
EndingInventoriesBudget
April30,20xx
Quantity
DirectMaterials
Plastic
Metals
Finishedgoods
Catallac
Dogerrific
Totalendinginventory
Costperunit
Total
380
55
$4
3
$1,520
165
35
15
$105.40
179.31
$3,689
2,690
624
$1,685
6,379
$8,064
7.
CostofGoodsSoldBudget
FortheMonthofApril,20xx
Beginningfinishedgoodsinventory,April,1($1,500+$5,580)
Directmaterialsused(requirement3)
$16,745
Directmanufacturinglabor(requirement4)
29,850
Manufacturingoverhead(requirement5)
59,265
Costofgoodsmanufactured
Costofgoodsavailableforsale
Deduct:Endingfinishedgoodsinventory,April30(reqmt.6)
Costofgoodssold
8.
NonmanufacturingCostsBudget
FortheMonthofApril,20xx
Salaries($36,0002 1.05)
$18,900
Otherfixedcosts($36,0002)
18,000
Salescommissions($155,000 1%)
1,550
Total nonmanufacturingcosts
$38,450
9.
BudgetedIncomeStatement
FortheMonthofApril,20xx
Revenues
$155,000
Costofgoodssold
106,561
Grossmargin
48,439
Operating(nonmanufacturing)costs
38,450
Operatingincome
$ 9,989
625
$ 7,080
105,860
112,940
6,379
$106,561
626
$ 5,360
15,500
135,315
$156,175
$ 17,150
29,850
39,265
18,900
1,550
8,000
13,700
5,000
$133,415
$ 2,000
20
$ 2,020
$ 20,740
UnitsSellingPrice
1,000
$450
TotalRevenues
$450,000
2. Schedule2:ProductionBudget(inUnits)fortheYearEndedDecember31,2010
Snowboards
Budgetedunitsales(Schedule1)
1,000
Addtargetendingfinishedgoodsinventory
200
Totalrequirements
1,200
Deductbeginningfinishedgoodsinventory
100
Unitstobeproduced
1,100
3. Schedule3A:DirectMaterialsUsageBudgetfor theYearEndedDecember31,2010
Wood
Fiberglass
Total
PhysicalUnitsBudget
Wood:1,1005.00b.f.
Fiberglass:1,1006.00yards
Tobeusedinproduction
CostBudget
Availablefrombeginninginventory
Wood:2,000b.f.$28.00
Fiberglass:1,000b.f.$4.80
Tobeusedfrompurchasesthisperiod
Wood:(5,500 2,000)$30.00
Fiberglass:(6,6001,000)$5.00
Totalcostofdirectmaterialstobeused
5,500
5,500
6,600
6,600
$56,000
$4,800
105,000
$161,000
28,000
$32,800 $193,800
Schedule3B:DirectMaterialsPurchasesBudgetfor theYearEndedDecember31,2010
Wood
PhysicalUnitsBudget
Productionusage(fromSchedule3A)
Addtargetendinginventory
Totalrequirements
Deductbeginninginventory
Purchases
CostBudget
Wood:5,000$30.00
Fiberglass:7,600$5.00)
Purchases
5,500
1,500
7,000
2,000
5,000
Fiberglass Total
6,600
2,000
8,600
1,000
7,600
$150,000
$150,000
627
$38,000
$38,000 $188,000
4. Schedule4:DirectManufacturingLaborBudgetfor theYearEndedDecember31,2010
LaborCategory
Manufacturinglabor
CostDriver
Units
1,100
DMLHoursper
DriverUnit
5.00
Total
Hours
5,500
Wage
Rate
$25.00
Total
$137,500
5. Schedule5:ManufacturingOverheadBudgetfortheYearEndedDecember31,2010
AtBudgetedLevelof5,500
DirectManufacturingLaborHours
Variablemanufacturingoverheadcosts
($7.005,500)
Fixedmanufacturingoverheadcosts
Totalmanufacturingoverheadcosts
$38,500
66,000
$104,500
$104,500
=$19.00perhour
5,500
$104,500
7. Budgetedmanufacturingoverheadcostperoutputunit:
=$95.00peroutputunit
1,100
8. Schedule6A:ComputationofUnitCostsofManufacturingFinishedGoodsin2010
6. Budgetedmanufacturingoverheadrate:
Directmaterials
Wood
Fiberglass
Directmanufacturinglabor
Totalmanufacturingoverhead
Costper
Unitof
Inputa
Inputsb
$30.00
5.00
25.00
5.00
6.00
5.00
Total
$150.00
30.00
125.00
95.00
$400.00
costisperboardfoot,yardorperhour
inputsistheamountofeachinputperboard
9. Schedule6B:EndingInventoriesBudget,December31,2010
Costper
Units
Unit
Total
Directmaterials
Wood
1,500
$30.00
$45,000
Fiberglass
2,000
5.00
10,000
Finishedgoods
Snowboards
200
400.00
80,000
TotalEndingInventory
$135,000
628
629
$17,000
178,000
800,000
$995,000
ProjectedSales
May
Salesinunits
Revenues(Salesinunits$450)
80
June
120
July
200
60
$27,000
40
CollectionsofReceivables
May
June
Fromsalesin:
May(30% $36,000)
June(50%30% $54,000)
July(20%50%30% $90,000)
August(20%50% $45,000)
September(20% $27,000)
Total
July
$10,800
27,000 $16,200
18,000 45,000
9,000
$55,800 $70,200
$ 27,000
22,500
5,400
$54,900
CalculationofPayables
May
MaterialandLaborUse,Units
Budgetedproduction
Directmaterials
Wood(boardfeet)
Fiberglass(yards)
Directmanuf.labor(hours)
June
July
200
100
60
40
1,000
1,200
1,000
500
600
500
300
360
300
200
240
200
$30,000 $15,000
$9,000
DisbursementofPayments
Directmaterials
Wood
(1,000500300 $30)
Fiberglass
(1,200600360 $5)
Directmanuf.labor
(500300200 $25)
Interestpayment
(6% $30,00012)
VariableOverhead Calculation
Variableoverhead rate
Overhead driver
(directmanuf.laborhours)
Variable overheadexpense
630
6,000
3,000
1,800
12,500
7,500
5,000
150
150
150
$7
$7
500
$3,500
300
$2,100
200
$1,400
CashBudgetforthemonthsofJuly,August,September2007
July
August
Beginningcashbalance
$10,000
$5,650
September
$40,100
Addreceipts:Collectionofreceivables
Totalcashavailable
55,800
$65,800
70,200
$75,850
54,900
$95,000
Deductdisbursements:
Materialpurchases
Directmanufacturinglabor
Variablecosts
Fixedcosts
Interestpayments
Totaldisbursements
Endingcashbalance
$36,000
12,500
3,500
8,000
150
60,150
$5,650
$18,000
7,500
2,100
8,000
150
35,750
$40,100
$10,800
5,000
1,400
8,000
150
25,350
$69,650
2.
Yes.Slopeshasabudgetedcashbalanceof$69,650on10/1/2010andso itwillbeina
positiontopayoffthe$30,0001yearnoteonOctober1,2010.
3.
No. Slopes does not maintain a $10,000 minimum cash balance in July. To maintain a
$10,000 cash balance in each of the three months, it could perhaps encourage its customers to
pay earlier by offering a discount. Alternatively, Slopes could seek shortterm credit from a
bank.
631
Cashbalance,beginning
Addreceipts:
Collectionsofreceivables(Schedule1)
(a)Totalcashavailableforneeds
Deductdisbursements:
Formerchandisepurchases(Schedule2)
Forvariablecosts(Schedule3)
Forfixedcosts(Schedule3)
(b)Totaldisbursements
Cashbalance,endofmonth(ab)
December2009
$10,000
January2010
$2,025
235,900
245,900
285,800
287,825
$183,875
50,000
10,000
243,875
$2,025
$141,750
25,000
10,000
176,750
$111,075
EnoughcashshouldbeavailableforrepaymentofthenoteonJanuary31,2010.
Schedule1:CollectionsofReceivables
Collectionsin
December
October
$14,400a
November
$50,000b}
171,500c
20,000d
January
December
$235,900
$60,000e}
205,800f
632
Total
$285,800
Schedule2:PaymentsforMerchandise
Targetendinginventory(inunits)
Addunitssold(sales$100)
Totalrequirements
Deductbeginninginventory(inunits)
Purchases(inunits)
Purchasesindollars(units$70)
Cashdisbursements:
ForDecember,accountspayable
ForJanuary,Decemberspurchasesat50%
Forcurrentmonthspurchasesat50%
December
875a
3,000
3,875
1,250b
2,625
$183,750
January
800c
1,500
2,300
875
1,425
$99,750
December
January
$92,000
91,875
$183,875
$91,875
49,875
$141,750
500units+0.25($150,000$100)
$87,500$70
c
500units+0.25($120,000$100)
b
Schedule3:Marketing,Distribution,andCustomerServiceCosts
Totalannualfixedcosts,$150,000,minus$30,000depreciation
$120,000
Monthlyfixedcostrequiringcashoutlay
$10,000
$400,000 -$150,000
Variablecostratiotosales=
=1/6
$1,500,000
Decembervariablecosts:1/6$300,000sales
$50,000
Januaryvariablecosts:1/6$150,000sales
$25,000
633
Chairs
Tables
Total
Units
172,000
45,000
Selling
Price TotalRevenues
$ 80
$13,760,000
$900
$40,500,000
$54,260,000
2a.Totalbudgetedmarketingcosts=Budgetedvariablemarketingcosts+Budgetedfixedmarketingcosts
=$2,011,200+$4,500,000=$6,511,200
$6,511, 200
Marketingallocationrate=
=$0.12persalesdollar
$54, 260, 000
2b.Totalbudgeteddistributioncosts= Budgetedvariabledistributioncosts+ Budgetedfixeddistributioncosts
=$54,000+$380,000=$434,000
Chairs:
Tables:
Total
172,000units500unitsperdelivery 344deliveries
45,000units500unitsperdelivery 90deliveries
434deliveries
Deliveryallocationrate=
$434, 000
=$1,000perdelivery
434deliveries
3.
ProductionBudget (inUnits)
FortheYearEndingDecember31,2009
Product
Chairs
Tables
Budgetedunitsales
172,000
45,000
Addtargetendingfinishedgoodsinventory
8,500
2,250
Totalrequiredunits
180,500
47,250
Deductbeginningfinishedgoodsinventory
8,000
2,100
Unitsoffinishedgoods tobeproduced
172,500
45,150
634
4a.
Machinesetupoverhead
Unitstobeproduced
Unitsperbatch
Numberof setups
Hourstosetupperbatch
Totalsetuphours
Chairs
Tables
Total
172,500
500
345
3
1,035
45,150
50
903
2
1,806
2,841
Totalbudgetedsetupcosts=Budgetedvariablesetupcosts+Budgetedfixedsetupcosts
=$97,000+$300,740=$397,740
$397,740
Machinesetup =
=$140persetuphour
allocationrate 2,841setuphours
b.
Chairs:
Tables:
Total
172,500units3MHperunit 517,500MH
45,150units5MHperunit 225,750 MH
743,250 MH
Totalbudgetedprocessingcosts=Budgetedvariableprocessingcosts+Budgeted fixedprocessingcosts
=$789,250+$5,900,000=$6,689,250
Processingallocationrate=
$6,689, 250
= $9perMH
743, 250MH
5.
DirectMaterialUsageBudgetinQuantityandDollars
FortheYearEndingDecember31,2009
Material
Wood
Glass
PhysicalUnitsBudget
Directmaterialsrequiredfor
Chairs(172,500units5b.f.and0sheets)
Tables(45,150units7b.f.and2sheets)
Totalquantityofdirectmaterialstobeused
862,500b.f.
316,050 b.f.
1,178,550 b.f.
CostBudget
Availablefrombeginningdirectmaterialsinventory
(underaFIFOcostflowassumption)
$ 170,352
Tobepurchasedthisperiod
Wood: (1,178,550b.f.109,200b.f.)$1.60perb.f. 1,710,960
Glass:(90,300sheets8,750sheets)$12persheet_________
Directmaterialstobeusedthisperiod
$1,881,312
635
Total
90,300sheets
90,300sheets
$ 109,375
978,600
$1,087,975
$2,969,287
DirectMaterialsPurchasesBudget
FortheYear EndingDecember31,2009
Material
PhysicalUnitsBudget
Tobeusedinproduction(requirement5)
Add:Targetendingdirectmaterialinventory
Totalrequirements
Deduct:Beginningdirectmaterialinventory
Purchasestobemade
CostBudget
Wood:1,186,850b.f. $1.60perb.f.
Glass:90,550sheets $12persheet
Purchases
Wood
Glass
1,178,550b.f.
117,500 b.f.
1,296,050b.f.
109,200 b.f.
1,186,850
90,300sheets
9,000sheets
99,300sheets
8,750sheets
90,550sheets
$ 1,898,960
__________
$ 1,898,960
$1,086,600
$ 1,086,600
Total
$2,985,560
Totalbudgeted
materialshandlingcosts= Budgetedvariablematerialshandlingcosts+Budgetedfixedmaterialshandlingcosts
=$342,840+$600,000=$942,840
Materialshandling = $942,840 =$0.80perb.f.
allocationrate
1,178,550b.f.
7.
DirectManufacturingLaborCostsBudget
FortheYearEndingDecember31,2009
Chairs
Tables
Total
OutputUnits
Produced
172,500
45,150
8.
ManufacturingOverheadCostBudget
FortheYearEndingDecember31,2009
Materialshandling
Machinesetup
Processing
Total
Variable
$ 342,840
97,000
789,250
$1,229,090
Fixed
$600,000
300,740
5,900,000
$6,800,740
636
Total
$942,840
397,740
6,689,250
$8,029,830
9.
UnitCostsofEndingFinishedGoodsInventory
FortheYearEndingDecember31,2009
Wood
Glass
Directmanufacturinglabor
Materialshandling
Machinesetup
Processing
Total
1
Costper
Unitof
Input
$1.60
12
15
0.80
140
9
Chair
Table
Inputper
Inputper
Unitof
Unitof
Output
Total
Output
5b.f.
$8.00
7b.f.
2sheets
4hrs.
60.00
8hrs.
5b.f.
4.00
7b.f.
0.006hrs.1
0.84 0.04 setuphr1
3MH
27.00
5MH
$99.84
Total
$11.20
24.00
120.00
5.60
5.60
45.00
$211.40
1,035 setuphours 172,500 units=0.006hours perunit 1,806 setuphours 45,150 units=0.04hours perunit
EndingInventoriesBudget
December31,2009
Quantity
DirectMaterials
Wood
Glass
Finishedgoods
Chairs
Tables
Total endinginventory
Costperunit
Total
117,500b.f.
9,000sheets
$1.60
12.00
$188,000
108,000
8,500
2,250
$99.84
211.40
$848,640
475,650
$ 296,000
1,324,290
$1,620,290
10.
CostofGoodsSoldBudget
FortheYearEndingDecember31,2009
Beginningfinishedgoodsinventory,Jan.1($760,000+$477,000)
Directmaterialsused(requirement5)
$ 2,969,287
Directmanufacturinglabor(requirement7)
15,768,000
Manufacturingoverhead(requirement8)
8,029,830
Costofgoodsmanufactured
Costofgoodsavailableforsale
Deduct:Endingfinishedgoodsinventory,December31 (reqmt.9)
Costofgoodssold
11.
NonmanufacturingCostsBudget
FortheYearEndingDecember31,2009
Marketing
Distribution
Total
Variable
$2,011,200
54,000
$2,065,200
Fixed
$4,500,000
380,000
$4,880,000
637
Total
$6,511,200
434,000
$6,945,200
$ 1,237,000
26,767,117
28,004,117
1,324,290
$26,679,827
12.
BudgetedIncomeStatement
FortheYearEndingDecember31,2009
Revenue
$54,260,000
Costofgoodssold
26,679,827
Grossmargin
27,580,173
Operating(nonmanufacturing)costs
6,945,200
Operatingincome
$20,634,973
638
Large
Giant
Total
b.
ProductionBudget
FortheMonthof June,20xx
Budgetedunitsales
Add:targetendingfinishedgoodsinventory
Totalrequiredunits
Deduct:beginningfinishedgoodsinventory
Unitsoffinishedgoodstobeproduced
639
Product
Large
Giant
3,000
1,800
300
180
3,300
1,980
200
150
3,100
1,830
c.
DirectMaterialUsageBudgetinQuantityandDollars
FortheMonthof June,20xx
Material
Sugar
Sticks
PhysicalUnitsBudget
Directmaterialsrequiredfor
Large(3,100 units0.25lb.1stick)
Giant(1,830units0.50 lb.1stick)
Totalquantityof directmaterialstobeused
775lbs.
915lbs.
1,690lbs.
CostBudget
Availablefrombeginningdirectmaterialsinventory
(underaFIFOcostflowassumption)
$ 64
Tobepurchasedthisperiod
Sugar:(1,690 lbs.125lbs.)$0.50 perlb.
783
Sticks:(4,930 350) $0.30 per stick
____
Directmaterialstobeusedthisperiod
$847
Total
3,100
1,830
4,930
$ 105
1,374
$1,479
$2,326
DirectMaterialsPurchasesBudget
FortheMonthof June,20xx
Material
Sugar
Sticks
PhysicalUnitsBudget
Tobeusedinproduction
Add:Targetendingdirectmaterialinventory
Totalrequirements
Deduct:beginningdirectmaterialinventory
Purchasestobemade
1,690lbs.
240lbs.
1,930lbs.
125 lbs.
1,805lbs.
CostBudget
Sugar:(1,805 lbs.$0.50perlb.)
Sticks:(5,060 $0.30 perstick)
Total
$903
____
$903
Total
4,930
480
5,410
350
5,060
$1,518
$1,518
$2,421
d.
DirectManufacturingLaborCostsBudget
FortheMonthof June,20xx
Large
Giant
Total
OutputUnits
Produced
3,100
1,830
640
Total
$4,960
3,660
$8,620
e.
ManufacturingOverheadCostsBudget
For theMonthofJune20xx
Total
Machinesetup
(Large310batches1 0.08hrs./batch +Giant183batches2 0.09hrs./batch) $20/hour
Processing(1,077.5DMLH $1.70)
Total
$825
1,832
$2,657
Large:3,100units10unitsperbatch=3102Giant:1,830units10unitsperbatch=183
f.
Sugar
Sticks
Directmanufacturinglabor
Machinesetup
Processing
Total
UnitCostsofEndingFinishedGoodsInventory
FortheMonth of June,20xx
Large
Giant
Costper
Inputper
Inputper
Unitof Input
UnitofOutput
Total
UnitofOutput
$ 0.50
0.25lb
$0.125
0.50lb.
0.30
1
0.30
1
8.00
0.2hr.
1.60
0.25hr.
20.00
0.008hr.1
0.16
0.009hr1
1.70
0.2hr
0.34
0.25hr
$2.525
Total
$0.25
0.30
2.00
0.18
0.425
$3.155
EndingInventoriesBudget
June,20xx
DirectMaterials
Sugar
Sticks
Finishedgoods
Large
Giant
Total endinginventory
Quantity
Costperunit
240lbs.
480sticks
$0.50
0.30
$120
144
300
180
$2.525
3.155
$757
568
641
Total
$ 264
1,325
$1,589
g.
CostofGoodsSoldBudget
FortheMonthof June,20xx
Beginningfinishedgoodsinventory,June1($500+$474)
Directmaterialsused(requirementc)
Directmanufacturinglabor(requirementd)
Manufacturingoverhead(requiremente)
Costofgoodsmanufactured
Costofgoodsavailableforsale
Deductendingfinishedgoodsinventory,June30(requirementf)
Costofgoodssold
$ 974
$2,326
8,620
2,657
13,603
14,577
1,325
$13,252
h.
NonmanufacturingCostsBudget
FortheMonthof June,20xx
Total
Marketingandgeneraladministration
10% 16,200
$1,620
2.
CashBudget
June30,20xx
Cashbalance,June30,20xx
Addreceipts
CollectionsfromMayaccountsreceivable
CollectionsfromJuneaccountsreceivable
($16,200 80% 50%)
CollectionsfromJunecashsales
($16,200 20%)
Total collectionfromcustomers
Totalcashavailableforneeds(x)
Deductcashdisbursements
Directmaterial purchasesinMay
Directmaterial purchasesinJune
($2,421 70%)
Directmanufacturinglabor
Manufacturingoverhead
($2,657 60%because40%isdepreciation)
Nonmanufacturingcosts
($1,620 70%because30%isdepreciation)
Taxes
Totaldisbursements(y)
Financing
Interestat12%($20,000 12% 112) (z)
Endingcashbalance,June30(x) (y) (z)
642
587
4,704
6,480
3,240
14,424
$15,011
$
696
1,695
8,620
1,594
1,134
500
$14,239
$ 200
$ 572
3.
BudgetedIncomeStatement
FortheMonthof June,20xx
Revenues
Costofgoodssold
Grossmargin
Operating(nonmanufacturing)costs
Baddebtexpense($16,200 80% 1%)
Interestexpense(forJune)
Netincome
$16,200
13,252
2,948
$1,620
130
200
1,950
$998
Budgeted BalanceSheet
June30,20xx
Assets
Cash
Accountsreceivable($16,200 80% 50%))
Less:allowancefordoubtfulaccounts
Inventories
Directmaterials
Finishedgoods
Fixedassets
Less:accumulateddepreciation
($55,759+2,657 40%+1,620 30%)
Totalassets
$
$6,480
130
6,350
$264
1,325
1,589
$190,000
LiabilitiesandEquity
Accountspayable($2,421 30%)
Interestpayable
Longtermdebt
Commonstock
Retainedearnings($109,279+$998)
Totalliabilitiesandequity
643
572
57,308
132,692
$141,203
726
200
20,000
10,000
110,277
$141,203