ch09 M

SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE 9-1

Sales
Budget
Production
Budget
Direct
Materials
Budget
Direct
Labor
Budget
Manufacturing
Overhead
Budget
Operating
Budgets
Budgeted
Balance
Sheet
Financial
Budgets
Selling and
Administrative
Expense
Budget
Budgeted
Income
Statement
Capital
Expenditure
Budget
9-6
Cash Budget
Copyright 2010 John Wiley & Sons, Inc.
Weygandt, Managerial Accounting, 5/e, Solutions Manual
(For Instructor Use Only)
BRIEF EXERCISE 9-2

MUSSATTO COMPANY
Sales Budget
For the Year Ending December 31, 2011
Quarter
1
Expected unit
sales
Unit selling
price
Total sales
12,000
14,000
18,000
54,000
$80
X
$80 X
$800,000 $960,000
X
$80
$1,120,000
X
$80
$1,440,000
X
$80
$4,320,000
10,000
Year
BRIEF EXERCISE 9-3

MUSSATTO COMPANY
Production Budget
For the Six Months Ending June 30, 2011
Quarter
1
Expected unit sales
Add: Desired ending finished goods
Total required units
Less: Beginning finished goods inventory
Required production units
a
12,000 X .20
10,000 X .20
10,000
2,400 a
12,400
2,000 b
10,400
2
12,000
2,800 c
14,800
2,400
12,400
Six
Months
22,800
14,000 X .20
9-7
BRIEF EXERCISE 9-4

HANNON COMPANY
Direct Materials Budget
For the Month Ending January 31, 2012
Units to be produced..................................................................
Direct materials per unit............................................................
Total pounds required for production ..................................
Add: Desired ending inventory (20% X 5,500 X 2) .........
Total materials required ............................................................
Less: Beginning materials inventory...................................
Direct materials purchases ......................................................
Cost per pound.............................................................................
Total cost of direct materials purchases.............................
4,000
X
2
8,000
2,200
10,200
1,600
8,600
X
$6
$51,600
BRIEF EXERCISE 9-5

COBB COMPANY
Direct Labor Budget
Quarter
1
Units to be produced
Direct labor time (hours) per unit
Total required direct labor hours
Direct labor cost per hour
Total direct labor cost
9-8
5,000
X
1.5
7,500
X
$14
$105,000
2
6,000
X
1.5
9,000
X
$14
$126,000
Six
Months
$231,000
BRIEF EXERCISE 9-6

ECKERT INC.
Manufacturing Overhead Budget
Quarter
1
Variable costs
Fixed costs
Total manufacturing overhead
Year
$20,000 $24,000 $28,000 $32,000 $104,000

35,000 35,000 35,000 35,000 140,000
$55,000 $59,000 $63,000 $67,000 $244,000
BRIEF EXERCISE 9-7

KASPAR COMPANY
Selling and Administrative Expense Budget
Quarter
1
Year
$25,000 $30,000 $35,000 $40,000 $130,000

Variable expenses
40,000 40,000 40,000 40,000 160,000
Fixed expenses
Total selling and administrative
expenses
$65,000 $70,000 $75,000 $80,000 $290,000
BRIEF EXERCISE 9-8

PAIGE COMPANY
Budgeted Income Statement
Sales.................................................................................................
Cost of goods sold (50,000 X $22)..........................................
Gross profit ....................................................................................
Selling and administrative expenses ....................................
Income before income taxes ....................................................
Income tax expense ....................................................................
Net income .....................................................................................
$2,000,000
1,100,000
900,000
300,000
600,000
150,000
$ 450,000
9-9
BRIEF EXERCISE 9-9

Credit Sales
January, $200,000
February, $260,000
March, $310,000
Collections from Customers

January
February
March
$140,000
$140,000
$ 60,000
182,000
$ 78,000
217,000
$295,000
$242,000
BRIEF EXERCISE 9-10

Budgeted cost of goods sold ($400,000 X 60%).............................
Add: Desired ending inventory ($475,000 X 60% X 20%) .........
Total inventory required.........................................................................
Less: Beginning inventory ($400,000 X 60% X 20%) ...................
Required merchandise purchases for April ....................................
$240,000
57,000
297,000
48,000
$249,000
SOLUTIONS FOR DO IT! REVIEW EXERCISES

DO IT! 9-1
1.
2.
3.
4.
5.
6.
Operating budgets
Master budget
Participative budgeting
Financial budgets
Sales forecast
Long-range plans
DO IT! 9-2
WELLSTONE COMPANY
Production Budget
Quarter
Expected unit sales
Add: Desired ending finished goods inventory
Less: Beginning finished goods inventory
9-10
1
18,000
2,400
20,400
1,800
18,600
2
24,000
3,000
27,000
2,400
24,600
Six
Months
43,200
DO IT! 9-3
OAK CREEK COMPANY
Sales Budget
Quarter
1
Year
Expected unit sales

250,000
250,000
300,000
1,000,000
200,000
Unit selling price
$40 X
$40 X
$45
X
$40 X
$8,000,000 $10,000,000 $10,000,000 $13,500,000 $41,500,000
Total sales
OAK CREEK COMPANY

Production Budget
Quarter
1
Expected unit sales
200,000
Add: Desired ending finished
goods units
50,000
250,000
Less: Beginning finished
goods units
40,000**
210,000
250,000
250,000 300,000
50,000
300,000
60,000
44,000*
310,000 344,000
50,000
250,000
50,000
60,000
260,000 284,000
Year
1,004,000
*Estimated first-quarter 2012 sales volume 200,000 + (200,000 X 10%) = 220,000: 220,000 X 20%.
**20% of estimated first-quarter 2010 sales units (200,000 X 20%).
9-11
DO IT! 9-3 (Continued)

OAK CREEK COMPANY
Quarter
1
Year
210,000
250,000
260,000
284,000
Direct materials per unit
X 2
X 2
X 2
X 2
Total pounds needed for
production
420,000
500,000
520,000
568,000
Add: Desired ending
direct materials
(pounds)
50,000
52,000
56,800
*50,000
Total materials required
470,000
552,000
576,800
618,000
Less: Beginning direct
50,000
52,000
56,800
materials (pounds)
**42,000
Direct materials
purchases
428,000
502,000
524,800
561,200
X $10
X $10
X $10
Cost per pound
X $10
Total cost of direct
materials purchases
$4,280,000 $5,020,000 $5,248,000 $5,612,000 $20,160,000
*Estimated first-quarter 2012 production requirements 500,000 X 10% = 50,000
**10% of estimated first-quarter pounds needed for production.
DO IT! 9-4
(a)
Total unit cost:

Cost Element
Direct materials.....................................
Direct labor.............................................
Manufacturing overhead....................
Total unit cost.............................
9-12
Quantity
Unit Cost
Total
2 pounds
0.3 hours
0.3 hours
$10.00
$14.00
$20.00
$20.00
4.20
6.00
$30.20
DO IT! 9-4 (Continued)

(b)
OAK CREEK COMPANY

Sales (1,000,000) units from sales budget, page 9-11 .........
Cost of goods sold (1,000,000 X $30.20/unit)......................
Gross profit ....................................................................................
Selling and administrative expenses.....................................
Net income......................................................................................
$41,500,000
30,200,000
11,300,000
7,000,000
$ 4,300,000
DO IT! 9-5
VENETIAN COMPANY
Cash Budget
April
Beginning cash balance ........................................................................
Add: Cash receipts for April................................................................
Total available cash.................................................................................
Less: Cash disbursements in April ..................................................
Excess of available cash over cash disbursements ....................
Financing ($20,000 $11,000)..............................................................
Ending cash balance...............................................................................
$ 22,000
245,000
267,000
256,000
11,000
9,000
$ 20,000
To maintain the desired minimum cash balance of $20,000, Venetian Company must borrow $9,000.
9-13
SOLUTIONS TO EXERCISES
EXERCISE 9-1
MEMO
To
Jim Thome
From: Student
Re:
Budgeting
I am glad Raney Company is considering preparing a formal budget. There are

many benefits derived from budgeting, as I will discuss later in this memo.
A budget is a formal written statement of managements plans for a specified
future time period, expressed in financial terms. The master budget generally consists of operating budgets such as the sales budget, production
budget, direct materials budget, direct labor budget, manufacturing overhead
budget, selling and administrative expense budget, and budgeted income
statement; and financial budgets such as the capital expenditure budget,
cash budget, and budgeted balance sheet.
The primary benefits of budgeting are:
1. It requires all levels of management to plan ahead and formalize their
goals.
2. It provides definite objectives for evaluating performance.
3. It creates an early warning system for potential problems.
4. It facilitates the coordination of activities within the business.
5. It results in greater management awareness of the entitys overall
operations.
6. It motivates personnel throughout the organization to meet planned
objectives.
In order maximize these benefits, it is essential that budgeting takes place
within a sound organizational structure, so authority and responsibility for all
phases of operations are clearly defined. Also, the budget should be based on
research and analysis that results in realistic goals. Finally, the effectiveness
of a budget program is directly related to its acceptance by all levels of
management.
If you want further explanation of any of these assumptions, please contact me.
9-14
Units
20,000
12,000
32,000
Product
XQ-103
XQ-104
Totals
$12
25
$240,000
300,000
$540,000
Quarter 1
Selling
Total
Price
Sales
25,000
15,000
40,000
Units
$12
25
$300,000
375,000
$675,000
Quarter 2
Selling
Total
Price
Sales
Units
45,000
27,000
72,000
TRUSLER ELECTRONICS INC.

Sales Budget
$12
25
$ 540,000
675,000
$1,215,000
Six Months
Selling
Total
Price
Sales
EXERCISE 9-2
9-15
9-16
Billable
Hours
8,200a
9,900b
6,000c
Year
Billable
Rate
$ 80
90
100
Billable
Hours
1,600
2,400
1,500
Total
Rev.
$ 656,000
891,000
600,000
$2,147,000
Quarter 1
Billable
Total
Rate
Rev.
$ 80 $176,000
90
270,000
100
150,000
$596,000
2,200 + 1,600 + 2,000 + 2,400

3,000 + 2,400 + 2,000 + 2,500
c
1,500 X 4
Dept.
Auditing
Tax
Consulting
Totals
Dept.
Auditing
Tax
Consulting
Totals
Billable
Hours
2,200
3,000
1,500
Quarter 2
Billable
Rate
$ 80
90
100
Total
Rev.
128,000
216,000
150,000
$494,000
Billable
Hours
2,000
2,000
1,500
Quarter 3
Billable
Total
Rate
Rev.
$ 80 $160,000
90
180,000
100
150,000
$490,000
CREDE AND RENSING, CPAs

Sales Revenue Budget
Billable
Hours
2,400
2,500
1,500
Quarter 4
Billable
Total
Rate
Rev.
$ 80 $192,000
90
225,000
100
150,000
$567,000
EXERCISE 9-3
EXERCISE 9-4
PLETCHER COMPANY
Production Budget
Product HD-240
Quarter
Expected unit sales
Add: Desired ending
finished goods units(1)
Less: Beginning finished
goods units
5,000
7,000
8,000
3,500
8,500
4,000
11,000
5,000
13,000
3,250 (2)
13,250
2,500
6,000
3,500
7,500
4,000
9,000
5,000
8,250
Year
10,000
30,750
(1)
(2)
50% of next quarters sales.

50% X (5,000 X 130%).
9-17
EXERCISE 9-5
DEWITT INDUSTRIES
Direct Materials Purchases Budget
For the Quarter Ending March 31, 2012
Total pounds needed for production
Add: Desired ending direct materials
(pounds)*
Less: Beginning direct materials
(pounds)
Direct materials purchases
Cost per pound
Total cost of direct materials
purchases
January
February
March
10,000
X
3
30,000
8,000
X
3
24,000
5,000
X
3
15,000
7,200
37,200
4,500
28,500
3,600
18,600
9,000
28,200
X
$2
7,200
21,300
X
$2
4,500
14,100
X
$2
$56,400
$42,600
$28,200
*30% of next months production needs.

EXERCISE 9-6
(a)
LOVELL COMPANY
Production Budget
Quarter
1
Expected unit sales
units
Less: Beginning finished goods units
Six
Months
5,000
6,000
1,800 (1)
6,800
1,500 (3)
5,300
2,100 (2)
8,100
1,800
6,300
11,600
(1)
30% X 6,000.
30% X 7,000.
(3)
30% X 5,000.
(2)
9-18
EXERCISE 9-6 (Continued)

(b)
LOVELL COMPANY
Quarter
Total pounds needed for production
Add: Desired ending direct
materials (pounds)
(pounds)
Direct materials purchases
Cost per pound
Purchases
1
5,300
X
3
15,900
9,450 (1)
25,350
2
6,300
X
3
18,900
Six
Months
10,875 (2)
29,775
7,950 (3)
9,450
17,400
20,325
X
$4
X
$4
0000,000
$69,600
$150,900
$81,300
(1)
50% X 18,900.
7,250 X (3 X 50%).
(3)
50% X 15,900.
(2)
EXERCISE 9-7
Finished goods:
Ending inventory..............................................................
Plus: Sales .........................................................................
Total required .........................................................................
Less: beginning inventory...........................................
Production required .............................................................
Direct materials per unit .....................................................
Units of direct material required for production.........
Plus: ending inventory ........................................................
Total required .........................................................................
Less: beginning inventory...........................................
Purchases of direct material required............................
Cost per unit ...........................................................................
Total cost of materials.........................................................
2,190
2,475
4,665
2,230
2,435
X
2
4,870
3,012(a)
7,882
2,922
4,960
$4.00
$19,840
The May raw material purchases would be $19,840.

(a)
2,390 + 2,310 2,190 = 2,510; 2,510 X 2 X .60 = 3,012
9-19
EXERCISE 9-8
GONZALES, INC.
Direct Labor Budget
Quarter
1
Direct labor time
(hours) per unit
Total required direct
labor hours
Direct labor cost per
hour
Total direct labor cost
20,000
X
1.6
25,000
X
1.6
35,000
X
1.6
Year
30,000
X
1.6
32,000
40,000
56,000
48,000
X
$15
$480,000
X
$15
$600,000
X
$16
$896,000
X
$16
$768,000
110,000
.2
$2,744,000
EXERCISE 9-9
CHOO-FOO COMPANY
Production Budget
Sales in units
Plus: desired ending inventory
Total needs
Less: beginning inventory
Production needed
Jan
10,000
16,000
26,000
16,000
10,000
Feb
12,000
12,500
24,500
16,000
8,500
Mar
8,000
13,500
21,500
12,500
9,000
Total
30,000
13,500
43,500
16,000
27,500
CHOO-FOO COMPANY
Direct Labor Budget
Sales in units
Direct labor hours per unit
Total hours needed
Rate per hour
Total direct labor
9-20
Jan
10,000
X
2.00
20,000
X $8.00
$160,000
Feb
12,000
X
2.00
24,000
X $8.00
$192,000
Mar
8,000
X 1.50
12,000
X $8.00
$96,000
Total
$448,000
EXERCISE 9-10
FRIZELL COMPANY
Manufacturing Overhead Budget
Quarter
1
Year
Variable costs
Indirect materials ($.70/hour) $10,500
Indirect labor ($1.20/hour)
18,000
Maintenance ($.50/hour)
7,500
Total variable
36,000
Fixed costs
35,000
Supervisory salaries
16,000
Depreciation
12,000
Maintenance
63,000
Total fixed
Total manufacturing overhead
$99,000
$ 12,600
21,600
9,000
43,200
$ 14,700
25,200
10,500
50,400
$ 16,800
28,800
12,000
57,600
$ 54,600
93,600
39,000
187,200
35,000
16,000
12,000
63,000
$106,200
35,000
16,000
12,000
63,000
$113,400
35,000
16,000
12,000
63,000
$120,600
140,000
64,000
48,000
252,000
$439,200
15,000
18,000
21,000
24,000
78,000
Direct labor hours

Manufacturing overhead rate
per direct labor hour
($439,200 78,000)
$5.63
EXERCISE 9-11
MEDINA COMPANY
Quarter
1
Budgeted sales in units
20,000
22,000
Variable expenses (1)

Sales commissions
Delivery expense
Advertising
Total variable
$20,000
8,000
12,000
40,000
$22,000
8,800
13,200
44,000
Six
Months
$42,000
16,800
25,200
84,000
9-21

MEDINA COMPANY
Selling and Administrative Expense Budget (Continued)
Quarter
Fixed expenses
Sales salaries
Office salaries
Depreciation
Insurance
Utilities
Repairs expense
Total fixed
Total selling and administrative expenses
Six
Months
10,000
6,000
4,200
1,500
800
600
23,100
$63,100
10,000
6,000
4,200
1,500
800
600
23,100
$67,100
20,000
12,000
8,400
3,000
1,600
1,200
46,200
$130,200
(1) Variable costs per dollar of sales are: Sales commissions $.05, Delivery
expense $.02, and Advertising $.03.
EXERCISE 9-12
(a)
ORTIZ COMPANY
Production Budget
For the Two Months Ending February 28, 2011
____________________________________________________________
January
February
Expected unit sales..................................................... 10,000
12,000
Add: desired ending finished goods
inventory ...........................................................
3,000*
3,250*
Total required units..................................................... 13,000
15,250
Less: beginning finished goods inventory........
2,500**
3,000
Required production units ....................................... 10,500
12,250
*25% X next months expected sales
**25% X 10,000
9-22

(b)
ORTIZ COMPANY
For the Month Ending January 31, 2011
____________________________________________________________
January
Units to be produced .......................................................................
10,500
Direct material pounds per unit ...................................................
X
2
Total pounds needed for production .........................................
21,000
Add: desired pounds in ending materials inventory ...........
9,800*
Total materials required .................................................................
30,800
Less: beginning direct materials (pounds) ..............................
8,400**
Direct materials purchases ...........................................................
22,400
Cost per pound..................................................................................
X
$3
Total cost of direct materials purchases ..................................
$67,200
*(12,250 X 2) X 40%
**(10,500 X 2) X 40%
EXERCISE 9-13
(a)
YONO COMPANY
Computation of Cost of Goods Sold
Cost of one unit of finished goods:
Direct materials (2 X $5) ..........................................................................
Direct labor (3 X $12)................................................................................
Manufacturing overhead (3 X $6) .........................................................
Total.....................................................................................................
$10
36
18
$64
30,000 units X $64 = $1,920,000.
9-23

(b)
YONO COMPANY
Sales (30,000 X $80).......................................................................
Cost of goods sold (see part (a))...............................................
Gross profit ......................................................................................
Selling and administrative expenses.......................................
Income before income taxes ......................................................
Income tax expense ($280,000 X 30%) ....................................
Net income........................................................................................
$2,400,000
1,920,000
480,000
200,000
280,000
84,000
$ 196,000
EXERCISE 9-14
MALONE COMPANY
Cash Budget
January
Beginning cash balance ................................................
Add: Receipts
Collections from customers...........................
Sale of marketable securities ........................
Total receipts ......................................................
Total available cash.........................................................
Less: Disbursements
Direct materials ..................................................
Direct labor ..........................................................
Manufacturing overhead .................................
Selling and administrative expenses ..........
Total disbursements.........................................
Excess (deficiency) of available cash over cash
disbursements..............................................................
Financing
Borrowings...............................................................
Repayments.............................................................
Ending cash balance.......................................................
9-24
$ 46,000
February
$ 26,000
85,000
10,000
95,000
141,000
150,000
0
150,000
176,000
50,000
30,000
20,000
15,000
115,000
70,000
45,000
24,000
20,000
159,000
26,000
17,000
0
0
$ 26,000
3,000
0
$ 20,000
EXERCISE 9-15
FULTZ CORPORATION
Cash Budget
For the Quarter Ended March 31, 2011
Beginning cash balance .......................................................................
Add: Receipts
Collections from customers .................................................
Sale of equipment ....................................................................
Total receipts .....................................................................
Total available cash ...............................................................................
Less: Disbursements
Direct materials.........................................................................
Direct labor.................................................................................
Manufacturing overhead........................................................
Selling and administrative expense...................................
Purchase of securities............................................................
Total disbursements........................................................
Excess of available cash over disbursements .............................
Financing
Borrowings.................................................................................
Repayments ...............................................................................
Ending cash balance .............................................................................
$ 31,000
180,000
3,500
183,500
214,500
41,000
70,000
35,000
45,000
12,000
203,000
11,500
13,500
0
$ 25,000
9-25
EXERCISE 9-16
(a)
HARRINGTON COMPANY
Cash Budget
For the Month Ended July 31, 2011
Beginning cash balance ..................................
Cash collections ................................................
Total cash available ..........................................
Cash disbursements
Merchandise purchases .........................
Operating expenses.................................
Equipment purchase ...............................
Total cash disbursements ..............................
Borrowings excess (deficiency) ...................
Ending cash balance ........................................
$45,000
89,000
$134,000
$56,200
36,800
20,500
113,500
20,500
4,500
$ 25,000
Cash disbursements of $113,500 plus the desired ending cash balance

of $25,000 exceeds the $134,000 total cash available by $4,500. Therefore,
Harrington Company will have to borrow $4,500.
(b)
9-26
An advantage of cash budgeting is that it allows cash shortfalls to be

predicted. If the timing of future cash shortfalls is known, arrangements to borrow funds can be made well in advance, which often
means that interest rates may be more favorable than if the funds are
needed on short notice.
EXERCISE 9-17
(a)
CDK COMPANY
Expected Collections from Customers
March cash sales (40% X $270,000).............................................

Collection of March credit sales
[(60% X $270,000) X 10%]............................................................
Collection of February credit sales
[(60% X $220,000) X 50%]............................................................
Collection of January credit sales
[(60% X $200,000) X 36%]............................................................
Total collections...................................................................
(b)
March
$108,000
16,200
66,000
43,200
$233,400
CDK COMPANY
Expected Payments for Direct Materials
March cash purchases (50% X $41,000).....................................

Payment of March credit purchases
[(50% X $41,000) X 40%]..............................................................
Payment of February credit purchases
[(50% X $35,000) X 60%]..............................................................
Total payments.....................................................................
March
$20,500
8,200
10,500
$39,200
9-27
EXERCISE 9-18
(a)
(1)
GREEN LANDSCAPING INC.
Schedule of Expected Collections From Clients
January
November ($90,000).......
December ($80,000) .......
January ($100,000) .........
February ($120,000) .......
March ($130,000).............
Total collections ......
February
$ 9,000
24,000
60,000
______
_______
$93,000
$110,000
March
Quarter
$
8,000
30,000
72,000
$ 10,000
36,000
78,000
$124,000
9,000
32,000
100,000
108,000
78,000
$327,000
(2)
GREEN LANDSCAPING INC.
Schedule of Expected Payments for Landscaping Supplies
______________________________________________________
January
December ($14,000) .......
January ($12,000) ...........
February ($15,000) .........
March ($18,000) ...............
Total payments ........
$ 8,400
4,800
$13,200
February
$ 7,200
6,000
$13,200
March
Quarter
$ 9,000
7,200
$16,200
$ 8,400
12,000
15,000
7,200
$42,600
(b) (1) Accounts receivable at March 31, 2011: ($120,000 X 10%) +

($130,000 X 40%) = $64,000
(2) Accounts payable at March 31, 2011: ($18,000 X 60%) = $10,800
9-28
EXERCISE 9-19
DEITZ DENTAL CLINIC
Cash Budget
For the Two Quarters Ending June 30, 2011
Beginning cash balance ...............................................

Add: Receipts
Collections from clients..............................
Sale of equipment .........................................
Investment interest.......................................
Total receipts ...........................................
Total cash available .......................................................
Less: Disbursements
Professional salaries ...................................
Overhead costs..............................................
Selling and administrative costs .............
Equipment purchase....................................
Payment of income taxes ...........................
Total disbursements .............................
Excess (deficiency) of cash available
over cash disbursements........................................
Financing
Borrowings...................................................................
Repayments .................................................................
Ending cash balance .....................................................
1st Quarter
2nd Quarter
$ 30,000
$ 25,000
230,000
15,000
0
245,000
275,000
380,000
0
5,000
385,000
410,000
140,000
75,000
47,000*
0
0
262,000
140,000
100,000
67,000**
50,000
4,000
361,000
13,000
49,000
12,000
0
$ 25,000
0
12,300
$ 36,700
*$50,000 $3,000
**$70,000 $3,000
9-29
EXERCISE 9-20
(a)
DALBY STORES
Merchandise Purchases Budget
For the Month Ending June 30, 2011
Budgeted cost of goods sold ($500,000 X 70%)......................
Add: Desired ending merchandise inventory
($600,000 X 70% X 40%)..............................................................
Total .......................................................................................................
Less: Beginning merchandise inventory
($350,000 X 40%)...................................................................
Required merchandise purchases...............................................
(b)
168,000
518,000
140,000
$378,000
DALBY STORES
For the Month Ending June 30, 2011
Sales ......................................................................................................
Cost of goods sold (70% X $500,000) .........................................
Gross profit..........................................................................................
9-30
$350,000
$500,000
350,000
$150,000
SOLUTIONS TO PROBLEMS
PROBLEM 9-1A
ZELMER FARM SUPPLY COMPANY

Sales Budget
Quarter
Expected unit sales..........................
Unit selling price ...............................
Total sales ...........................................
28,000
X $60
$1,680,000
42,000
X $60
$2,520,000
Six
Months
70,000
X $60
$4,200,000

Production Budget
Quarter
Expected unit sales ...............................................
units ..............................................................
Total required units ...............................................
Less: Beginning finished goods units...........
Required production units..................................
28,000
42,000
12,000
40,000
8,000
32,000
18,000
60,000
12,000
48,000
Six
Months
80,000
9-31
PROBLEM 9-1A (Continued)

Direct Materials BudgetGumm
Quarter
Units to be produced ..........................................
Direct materials per unit ....................................
Total pounds needed for production ............
Add: Desired ending direct materials
(pounds).....................................................
Total materials required.....................................
(pounds)...................................................
Direct materials purchases...............................
Cost per pound .....................................................
purchases ..........................................................
32,000
X4
128,000
48,000
X 4
192,000
10,000
138,000
13,000
205,000
9,000
129,000
X $4
10,000
195,000
X $4
$516,000
$780,000
Six
Months
$1,296,000

Direct Labor Budget
Quarter
1
Units to be produced..................................
Direct labor time (hours) per unit...........
Total required direct labor hours ...........
Direct labor cost per hour.........................
Total direct labor cost................................
9-32
32,000
X 1/4
8,000
X $14
$112,000
2
48,000
X 1/4
12,000
X $14
$168,000
Six
Months
$280,000

Quarter
Budgeted sales in units
Variable (.15 X sales)................................
Fixed..............................................................
Total...............................................................
1
28,000
2
42,000
Six
Months
70,000
$252,000
175,000
$427,000
$378,000
175,000
$553,000
$630,000
350,000
$980,000

Sales.............................................................................................................
Cost of goods sold (70,000 X $33.75)* ..............................................
Gross profit ................................................................................................
Selling and administrative expenses ................................................
Income from operations.........................................................................
Income tax expense (30%) ....................................................................
Net income .................................................................................................
$4,200,000
2,362,500
1,837,500
980,000
857,500
257,250
$ 600,250
*Cost Per Bag

Cost Element
Quantity
Direct materials
Gumm ...................................................
4 pounds
Tarr ........................................................
6 pounds
Direct labor .............................................. 1/4 hour
Manufacturing overhead
(150% of direct labor cost).............
Total.................................................
Unit Cost
Total
$ 4.00
1.50
14.00
$16.00
9.00
3.50
5.25
$33.75
9-33
PROBLEM 9-2A
(a)
JANTZEN INC.
Sales Budget
JB 50
Expected unit sales .............
Unit selling price ..................
Total sales ..............................
(b)
400,000
X $20
$8,000,000
Total
000,000,0
$13,000,000
JANTZEN INC.
Production Budget
Expected unit sales...................................

Add: Desired ending finished
goods units.....................................
Total required units...................................
Less: Beginning finished goods
units ..................................................
Required production units......................
9-34
JB 60
200,000
X $25
$5,000,000
JB 50
JB 60
400,000
200,000
25,000
425,000
15,000
215,000
30,000
395,000
10,000
205,000
Total
600,000

(c)
JANTZEN INC.
JB 50
Units to be produced........................
Direct materials per unit..................
Total pounds needed for
production .......................................
Add: Desired ending direct
materials (pounds)...............
Total materials required ..................
Less: Beginning direct
materials (pounds)...............
Direct materials purchases ............
Cost per pound...................................
purchases ......................................
(d)
JB 60
395,000
X 2
205,000
X 3
790,000
615,000
30,000
820,000
15,000
630,000
40,000
780,000
X $3
10,000
620,000
X $4
$2,340,000
$2,480,000
Total
$4,820,000
JANTZEN INC.
Direct Labor Budget
JB 50
Units to be produced........................
Direct labor time (hours) per
unit .....................................................
Total required direct labor
hours .................................................
Direct labor cost per hour...............
Total direct labor cost ......................
JB 60
Total
395,000
205,000
650,000
X .4
X .6
158,000
X $12
$1,896,000
123,000
X $12
$1,476,000
301,000
X
$10
$3,372,000
9-35

(e)
JANTZEN INC.
JB 50
Sales............................................
Cost of goods sold .................
Gross profit...............................
Operating expenses
Selling expenses ................
Administrative
expenses...........................
Total operating
expenses .................
Income before income
taxes .......................................
Income tax expense
(30%).......................................
Net income ................................
JB 60
Total
$5,000,000 $13,000,000
$8,000,000
(1)
4,200,000 (2)
9,000,000
4,800,000
3,200,000
800,000
4,000,000
660,000
360,000
1,020,000
540,000
340,000
880,000
1,200,000
700,000
1,900,000
$2,000,000
$ 100,000
2,100,000
630,000
$ 1,470,000
(1)
400,000 X $12.
200,000 X $21.
(2)
9-36
PROBLEM 9-3A
(a)
NIETO INDUSTRIES
Sales Budget
Plan A
Expected unit sales ...........................................
Unit selling price.................................................
Total sales.............................................................
(1)
760,000 (1)
X $8.40
$6,384,000
Plan B
950,000 (2)
X $7.50
$7,125,000
$6,400,000 $8 = 800,000 X 95% = 760,000.

800,000 + 150,000 = 950,000.
(2)
(b)
NIETO INDUSTRIES
Production Budget
Expected unit sales ......................................................

Add: Desired ending finished goods units ........
Total required units ......................................................
Less: Beginning finished goods units ..................
Required production units .........................................
Plan A
Plan B
760,000
950,000
(1)
38,000
50,000
798,000 1,000,000
40,000
40,000
758,000
960,000
(1)
760,000 X 5%
(c) Variable costs = $4.25 per unit ($1.80 + $1.25 + $1.20) for both plans.
Plan A
Total variable costs
Total fixed costs
Total costs (a)
Total units (b)
Unit cost (a) (b)
$3,221,500 (758,000 X $4.25)

1,895,000
$5,116,500
Plan B
$4,080,000 (960,000 X $4.25)
1,895,000
$5,975,000
758,000
960,000
$6.75
$6.22
The difference is due to the fact that fixed costs are spread over a larger
number of units (202,000) in Plan B.
9-37

(d)
Gross Profit
Plan A
Sales
Cost of goods sold
Gross profit
$6,384,000
5,130,000 (760,000 X $6.75)
$1,254,000
Plan B
$7,125,000
5,909,000 (950,000 X $6.22)
$1,216,000
Plan A should be accepted because it produces a higher gross profit than

Plan B.
9-38
PROBLEM 9-4A
(a) (1)
Expected Collections from Customers

January
November ($260,000) ......................................
December ($320,000) ......................................
January ($350,000) ..........................................
February ($400,000) ........................................
Total collections....................................
(2)
February
$ 52,000
96,000
175,000
.
$323,000
0
64,000
105,000
200,000
$369,000
Expected Payments for Direct Materials

January
December ($100,000) ......................................
January ($110,000) ..........................................
February ($130,000) ........................................
Total payments ......................................
February
$ 40,000
66,000
.
$106,000
0
44,000
78,000
$122,000
9-39

(b)
DINKLE COMPANY
Cash Budget
Beginning cash balance .........................................

Add: Receipts
Collections from customers................
[See Schedule (1)]
Notes receivable......................................
Sale of securities.....................................
Total receipts...................................
Total available cash .................................................
Less: Disbursements
Direct materials ......................................
[See Schedule 2]
Direct labor ..............................................
Manufacturing overhead .....................
Selling and administrative
expenses* ............................................
Withdrawal by owner............................
Total disbursements....................
Excess (deficiency) of available cash
over cash disbursements ..................................
Financing
Borrowings .......................................................
Repayments .....................................................
Ending cash balance ...............................................
January
February
$ 60,000
$ 54,000
323,000
369,000
15,000
338,000
398,000
6,000
375,000
429,000
106,000
122,000
90,000
70,000
100,000
75,000
78,000
344,000
85,000
5,000
387,000
54,000
42,000
0
0
$ 54,000
8,000
0
$ 50,000
*Selling and administrative expenses less $1,000 depreciation.
9-40
PROBLEM 9-5A
(a)
HARDESTY COMPANY
San Miguel Store
Merchandise Purchases Budget
For the Months of May and June, 2012
May
Budgeted cost of goods sold................................. $600,000
Add: Desired ending merchandise inventory........ 132,000 (2)
Total ................................................................................ 732,000
Less: Beginning merchandise inventory ........... 120,000 (4)
Required merchandise purchases ....................... $612,000
June
$660,000 (1)
145,200 (3)
805,200
132,000
$673,200
(1)
$800,000 X 110% = $880,000; $880,000 X 75% = $660,000.

$660,000 X 20% = $132,000.
(3)
$880,000 X 110% = $968,000; $968,000 X 75% = $726,000; $726,000 X
20% = $145,200.
(4)
$600,000 X 20% = $120,000.
(2)
9-41

(b)
HARDESTY COMPANY
San Miguel Store
For the Months of May and June, 2012
Sales................................................................................
Cost of goods sold
Beginning inventory .........................................
Purchases.............................................................
Cost of goods available for sale ...................
Less: Ending inventory...................................
Cost of goods sold ...................................
Gross profit...................................................................
Operating expenses
Sales salaries ......................................................
Advertising* .........................................................
Delivery** ..............................................................
Sales commissions*** ......................................
Rent ........................................................................
Depreciation ........................................................
Utilities...................................................................
Insurance..............................................................
Total...............................................................
Income from operations ...........................................
Income tax expense (30%).......................................
Net income ....................................................................
May
June
$800,000
$880,000
120,000
612,000
732,000
132,000
600,000
200,000
132,000
673,200
805,200
145,200
660,000
220,000
30,000
40,000
24,000
32,000
5,000
800
600
500
132,900
67,100
20,130
$ 46,970
30,000
44,000
26,400
35,200
5,000
800
600
500
142,500
77,500
23,250
$ 54,250
*5% of sales.
**3% of sales.
***4% of sales.
9-42
PROBLEM 9-6A
CLARKE INDUSTRIES
Sales (8,000 X $35).............................................................
Cost of goods sold
Finished goods inventory, January 1.................
Cost of goods manufactured
($69,400 + $56,600 + $54,000) ...........................
Cost of goods available for sale ..........................
Finished goods inventory, December 31
(3,000 X $20) ...........................................................
Cost of goods sold ..........................................
Gross profit ..........................................................................
Selling and administrative expenses ..........................
Income from operations...................................................
Interest expense .................................................................
Income before income taxes ..........................................
Income tax expense (30%) ..............................................
Net income ...........................................................................
$280,000
$ 30,000
180,000
210,000
60,000
150,000
130,000
76,000
54,000
3,500
50,500
15,150
$ 35,350
9-43

CLARKE INDUSTRIES
Budgeted Balance Sheet
December 31, 2012
Assets
Current assets
Cash ..................................................................................
Accounts receivable ($84,000 X 40%)....................
Finished goods inventory
(3,000 units X $20)....................................................
Total current assets ............................................
Property, plant, and equipment
Equipment ($40,000 + $19,000) ................................
Less: Accumulated depreciation
($10,000 + $4,000) ............................................
Total assets ...........................................................
$ 7,950
33,600
60,000
$101,550
$59,000
14,000
45,000
$146,550
Liabilities and Stockholders Equity

Liabilities
Notes payable ($25,000 $8,000) ............................
Accounts payable ($8,500* + $5,700) .....................
Income taxes payable .................................................
Total liabilities.......................................................
Stockholders equity
Common stock ..............................................................
Retained earnings
($30,000 + $35,350 $5,000) .................................
Total stockholders equity ................................
Total liabilities and stockholders
equity...................................................................
$17,000
14,200
5,000
$ 36,200
$50,000
60,350
110,350
$146,550
*$17,000 X 50%
9-44

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SOLUTIONS TO BRIEF EXERCISES

BRIEF EXERCISE 9-1

Copyright 2010 John Wiley & Sons, Inc.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

(For Instructor Use Only)

BRIEF EXERCISE 9-2

BRIEF EXERCISE 9-3

Copyright 2010 John Wiley & Sons, Inc.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

(For Instructor Use Only)

BRIEF EXERCISE 9-4

BRIEF EXERCISE 9-5

Copyright 2010 John Wiley & Sons, Inc.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

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BRIEF EXERCISE 9-6

$20,000 $24,000 $28,000 $32,000 $104,000

BRIEF EXERCISE 9-7

$25,000 $30,000 $35,000 $40,000 $130,000

BRIEF EXERCISE 9-8

Copyright 2010 John Wiley & Sons, Inc.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

(For Instructor Use Only)

BRIEF EXERCISE 9-9

Collections from Customers

BRIEF EXERCISE 9-10

SOLUTIONS FOR DO IT! REVIEW EXERCISES

Copyright 2010 John Wiley & Sons, Inc.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

(For Instructor Use Only)

Expected unit sales

OAK CREEK COMPANY

Copyright 2010 John Wiley & Sons, Inc.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

(For Instructor Use Only)

DO IT! 9-3 (Continued)

Total unit cost:

Copyright 2010 John Wiley & Sons, Inc.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

(For Instructor Use Only)

DO IT! 9-4 (Continued)

OAK CREEK COMPANY

Copyright 2010 John Wiley & Sons, Inc.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

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I am glad Raney Company is considering preparing a formal budget. There are

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Weygandt, Managerial Accounting, 5/e, Solutions Manual

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TRUSLER ELECTRONICS INC.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

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Copyright 2010 John Wiley & Sons, Inc.

2,200 + 1,600 + 2,000 + 2,400

CREDE AND RENSING, CPAs

Weygandt, Managerial Accounting, 5/e, Solutions Manual

(For Instructor Use Only)

50% of next quarters sales.

Copyright 2010 John Wiley & Sons, Inc.

Weygandt, Managerial Accounting, 5/e, Solutions Manual

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*30% of next months production needs.