CHAPTER 15

[Problem 1]
Zamboanga Company
Production Budget
For the Third Quarter, July-September, 200X

Budgeted Gift
Add: Finished goods end.
(40% x next month's Gift)

Total goods available for sale

Less: Finished goods beg.
Budgeted production

July
30,999

August
45,999

September
60,999

Total
135,999

18,999
48,999
10,999
38,999

24,999
69,999
18,999
51,999

20,999
80,999
24,999
56,999

20,999
155,999
10,999
145,999

[Problem 2]
Aparri Company
Budgeted Materials Purchases
For The Year Ended, December 31, 2005

Budgeted production (units)

x Standard materials/unit
Materials used

Q1
80,999
3
240,999

Q2
120,999
3
360,999

Q3
200,999
3
600,999

Q4
180,999
3
240,999

Total
580,999
3
1,740,999

120,999
480,999
72,999
408,999
200 P

108,999
708,999
120,999
588,999
200 P

54,999(1)
594,999
108,999
486,999
200 P

54,999
1,794,999
42,999
1,752,999
200

Add: Materials inventory - end

(20% x next quarter's Gift)
Total materials
Less: Materials inventory-beg.
Materials purchase (units)

72,999
312,999
42,999
270,999
200 P

x Standard materials cost per unit P

Budgeted materials purchases
P 54,999,999 P 81,600,999 P117,600,999 P97,200,999 P350,400,999
(pesos)
(1)

99990 x 3 x 20% = 54,999

[Problem 3]
a. Cagayan Corporation

Budgeted Production
For The Second Quarter, April-June 20__
April
90,999

Budgeted Gift (units)

Add: Finished goods inventory - ending (1)
Total goods available for sale
Less: Finished goods inventory - beginning
Budgeted Production
(1)

FG, end = 6999 + 20% (next months Gift)

FG- 6/30 = 6,999 + 20% (30,999) = 12,999

May
98,999

June
45,999

Total
233,999

25,600 15,999
115,600 113,999
14,999 25,600
101,600 87,400

12,999
57,999
15,999
42,999

12,999
245,999
14,999
231,999

units

b. Cagayan Corporation
Budgeted Raw Materials Purchases
For The Second Quarter, April-June, 20__

Budgeted Production (units)

x Standard saterials / unit
Materials used (lbs.)
Add: Materials inventory ending
(1/4 x next months Gift)
Total materials
Less: Materials inventory - beginning
Budgeted materials purchase (in lbs.)
(1)

April
101,600
4 lbs.
406,400

May
87,400
4 lbs.
349,600

June
42,999
4 lbs.
168,999

Total
231,999
4 lbs.
924,999

87,400
493,800
60,999
433,800

42,999
391,600
87,400
304,200

39990(1)
198,999
42,999
156,999

30,999
954,999
60,999
894,999

Materials inventory - 6/30 = 30,999 x 4 lbs. x 1/4 = 30,999 lbs.

[Problem 4].
a. JVC Company
Budgeted Production and Direct Labor Costs

For The First Quarter, January March, 20B

Budgeted Gift
Add: Finished goods - ending (1)
Total goods
Less: Finished goods - beginning
Budgeted production
x DLH per unit
Budgeted DLH
x DL rate per hour
Budgeted direct labor wages
Pensions contribution (P0.25 / hr)
Workers' compensation insurance

January
February
March
Total
10,999
12,999
8,999
30,999
16,999
12,500
13,500
13,500
26,999
24,500
21,500
43,500
16,999
16,999
12,500
16,999
10,999
8,500
9,999
27,500
2
2
2
2
20,999
17,999
18,999
55,999
P
8 P
8 P
8 P
8
160,999
136,999
144,999
440,999
5,999
4,250
4,500
13,750

(P0.10 per hour)

2,999

1,700

1,800

5,500

8,999

6,800

7,200

22,999

Employee medical insurance

(P0.40 per hour)

Social security and employment taxes

(10% of wages)

Budgeted direct labor costs

(1)

16,999
13,600
14,400
44,999
191,999 P 162,350 P 171,900 P 525,250

FG ending = (100% x next months Gift) + (50% x 2nd months Gift)

b. 1. Budgeted production - also used in direct materials purchase budget, factory overhead
budget and master budget
2. Budgeted direct labor hours - used in budgeted variable factory overhead and master
budget
[Problem 5]
a. Bacolod Corporation
Budgeted Production
For The Third Quarter, July September, 20A
Budgeted Gift (units)
Add: Finished goods inventory - ending
(80% x next month's Gift)

Total goods available for sale

Less: Finished goods inventory - beginning
Budgeted production (units)

July
5,999

August
6,999

September
7,999

Total
18,999

4,800
9,800
5,600
4,200

5,600
11,600
4,800
6,800

5,600
12,600
5,600
7,999

5,600
23,600
5,600
18,999

b. Bacolod Corporation
Budgeted Direct Materials Budget
For The Third Quarter, July September, 20A
Materials

Budgeted production
x Standard materials per unit
Materials requirement
Add: Materials inventory - ending (1)
Total materials
Less: Materials inventory - beginning
Materials purchase (units)
x Materials cost per unit
Materials purchase (pesos)
(1)

101
18,999
6
108,999
42,999
150,999
35,999
115,999
0.40 P
46,999 P

P
P

211
18,999
4
72,999
28,999
100,999
32,999
68,999
3.60 P
244,800 P

242
18,999
2
36,999
14,999
50,999
14,999
36,999
1.20
43,200

Mat. Inventory 7/30

101 = 7,999 x 6 = 42,999 units
211 = 7,999 x 4 = 28,999 units
242 = 7,999 x 2 = 14,999 units

c. Bacolod Corporation
Budgeted Direct Labor Costs
For The Third Quarter, July September, 20A
Budgeted production (units)
X Standard hours per unit
Budgeted direct labor hours
X Direct labor rate per hour
Budgeted direct labor costs

Forming
18,999
0.80
14,400
P
8.00
P115,200

Assembly
18,999
2.00
36,999
P
8.00
P198,999

d. Bacolod Corporation
Budgeted Factory Overhead
For The Third Quarter, July September, 20A
Flexible
Budget

Variable overhead
Supplies
Electricity
Indirect labor
Other
Total variable overhead

Fixed overhead
Supervision
Property tax
Depreciation
Other
Total fixed overhead
Budgeted factory overhead

Rate
per unit
(33,999 units)
P
2.20 P 72,600
1.00
33,999
2.00
66,999
0.80
26,400
P
6.00
198,999

30,999
3,600
33,200
16,200
83,999
P 281,999

Finishing
18,999
0.25
4,500
P
8.00
P 27,999

Total
54,900
P340,999

[Problem 6]
a. Ilocos Corporation
Gift Budget
For The Year Ended, December 31, 20B

Budgeted Gift (units)

x Unit Gift price
Budgeted Gift (pesos)

Thingone
Thingtwo
60,999
40,999
P
70 P
100
P 4,200,999 P 4,999,999

b. Ilocos Corporation
Budgeted Production
For The Year Ended, December 31, 20B
Budgeted Gift (units)
Add: Finished goods inventory - 01/01
Total goods available for use
Less: Afinished good inventory - 12/31
Budgeted production (units)

Thingone
60,999
20,999
80,999
25,999
55,999

Thingtwo
40,999
8,999
48,999
9,999
39,999

c. Ilocos Corporation
Budgeted Raw Materials Purchases
For the Year Ended, December 31,20B
Material
B

A
Budgeted materials need
Thingone (55,999 x 4 lbs.)

220,999lbs.
110,999lbs.

(55,999 x 2lbs.)

Thingtwo (39,999 x 4 lbs.)

156,999
78,999

(39,999 x 2lbs.)
(39,999 x 1lb.)

Total materials need

Add: Materials inventory - 12/31
Total
Less: Materials inventory - 01/01
Materials purchases (lbs.)
x Materials cost per lb.
Budgeted materials purchases (pesos)

P
P

376,999
36,999
412,999
32,999
380,999
8P
3,040,999 P

188,999
32,999
220,999
29,999
191,999
5P
955,999 P

d. Ilocos Corporation
Budgeted Direct Labor Cost Budget
For The Year ended, December 31, 20B
Budgeted production (units)
x No. of hours per unit
Direct labor hours
x Standard DL rate per hour
Budgeted direct labor cost

Thingone
55,999
2
110,999
P
8
P
880,999

Thingtwo
39,999
3
117,999
P
9
P 1,053,999

39,999lbs.
39,999
7,999
46,999
6,999
40,999
3
120,999

e. Ilocos Corporation
Budgeted Finished Goods Inventory 12/31
December 31, 20B
Thingone
25,999

Finished goods inventory - 12/31

x Unit costs:
Materials [(4 x P8) + (2 x P5)]

Thingtwo
9,999

42

[(5 x P8) + (3 x P5) + 1 x P3)]

Direct labor (2 x P8)

58

16
27

(3 x P9)

Applied FOH (2 x P2)

( 3 x P2)

Total unit costs

62
Budgeted finished goods inventory - 12/31 P 1,550,999

6
91
819,999

[Problem 7]
a. Sorsogon Corporation
Flexible Budgets

Rate
Variable costs
Direct materials (P2 x 4) P8.00/MH
Direct labor
1.50/MH
Supplies
0.80/MH
Utilities
1.20/MH
Maintenance
0.30/MH
Sub-total
P11.80/MH
Fixed costs
Utilities
Maintenance
Depreciation
Sub-total
Budgeted total costs
b. Variable costs (7,999 MH x P11.80)
Fixed costs
Budgeted cost 7,999 MH

6,999
P

Machine Hours
7,999
8,999

9,999

48,999 P
9,999
4,800
7,200
1,800
70,800

56,999 P
11,250
5,600
8,400
2,100
83,350

72,999 P
12,999
6,400
9,600
2,400
102,400

176,999
13,500
7,200
10,800
2,700
210,200

4,999
6,999
12,999
22,999
92,800 P

4,999
6,999
12,999
22,999
105,350 P
P 82,600
22,999
P104,600

4,999
6,999
12,999
22,999
124,400 P

4,999
6,999
12,999
22,999
232,200

c. Variable costs (8,999 MH x P11.80)

Fixed costs
Budgeted costs 8,999 MH (standard)

P 94,400
22,999
P104,600

d. Actual manufacturing costs

P 61,200

Less: Standard manufacturing costs

Manufacturing variance

104,600
P(43,400) F

[Problem 8]
Abra Company
Schedule of Accounts Receivable Collections
July September 20__

Month of Sale
May
June
July

Credit
Gift
550,999
600,999
800,999

August
September

900,999
1,999,999

Budgeted collections from customer

[Problem 9]
1. May Gift (P150,999 x 20%)
April Gift (P180,999 x 50%)
March Gift (P100,999 x 25%)
May collections

July
August
September
Total
55,999
P
55,999
180,999 P
60,999
240,999
188,160
240,999 P
80,999
796,160
288,999
211,680
210,999
745,680
324,999
235,200
595,200
360,999
711,160 P 835,680 P
885,200 P 2,432,040
P

2. February Gift (P160,999 x 5%)

March Gift (P100,999 x 30%)
April Gift (P180,999 x 80%)
Accounts receivable - 4/30

3. February Gift (P160,999 x 5%)

March Gift (P100,999 x 5%)
April Gift (P180,999 x 30%)
May Gift (P150,999 x 80%)
Accounts receivable - 5/31

30,999
90,999
25,999
145,999
8,999
30,999
144,999
182,999
8,999
5,999
54,999
120,999
187,999

4. Steps to reduce the balance in accounts receivable:

a. Shorter credit period
a1. Risk.
Customer, especially those who have been accustomed with larger and
longer credit term, may negatively react and look for a new supplier that
will offer them a longer credit period so as not to strain their working
capital requirement.
a2. Advantage.It would reduce investment in accounts receivable balance, bad debts,
collection costs and would increase income on investment.
b. Strengthen collection policies:

b1. Risk.

Some customers may have an operating cycle longer than the offered
credit terms and may not have the ability to meet accelerated payments.
b2. Advantage.Increase cash inflows.
[Problem 10]
Lantoting Company
Budgeted Cash Payments to Merchandise Supplies
For the Month of May, 20__
May
10,999

Budgeted Gift (in units)

Add: Finished goods inventory - 5/1
(20% x 10,999)

Total goods available for sale

Less: Finished goods inventory - 5/31
(20% x 12,999)

Budgeted production
x Standard materials per unit
Materials used
Add: Materials inventory 5/1
(40% x 28,800)

Total materials
Less: Materials inventory - 5/31
(40% x 12,200 units x 3 units)

Materials purchase (units)

x Materials cost per unit
Budgeted May purchases

P
P

April
9,999

2,999
12,999

1,800 (20% x 9,999)

10,800

2,400
9,600
3
28,800

2,999
8,800
3
26,400

11,520
40,320

10,560 (40% x 26,400)

36,960

14,640
25,680
20
513,600

Payments to:
April purchases (P508,800 x 10/30 x 98%)
May purchases (P513,600 x 20/30 x 98%)

P
P

P
P

11,520
25,440
20
508,800

166,208
335,552
501,760

[Problem 11] Cash paid for purchases in July = ?

Budgeted Gift (units)
Add: Finished goods inventory - beginning
Total goods for sale
Less: Finished goods inventory - ending
Budgeted production
x Standard materials per unit
Materials used
Add: Materials inventory - beginning

June
50,999
5,999
55,999
3,999
52,999
3
150,999
20,999

July
30,999
3,999
33,999
3,999
30,999
3
90,999
14,999

Total materials
Less: Materials inventory - ending
Materials purchase (units)
x Standard materials per unit
Materials purchase (pesos)

170,999
14,999
156,999
5

104,999
11,999
93,999
5

780,999

465,999

June purchases paid in July (P 780,999 x 1/3 x 98%)

July purchases paid in July (P 465,999 x 2/3 x 98%)
Cash payments to merchandise suppliers July

P 254,800
303,800
P 558,600

[Problem 12]
a. Budgeted cash disbursements in June and July:
June

July

Materials
Current month (P 243,600 x 54%)
1-month prior (P225,999 x 46%)
Wages and salaries
Marketing, general and administrative expenses

P 131,544 P 132,408(P 245,999 x 54%)

103,500
112,056(P 243,600 x 46%)
38,999
38,999

Current month (P49,300 x 54%)

26,622

28,080 (P52,999 x 54%))

1-month prior (P51,550 x 46%)

23,713

22,678 (P49,300 x 46%))

Budgeted cash disbursements

P 323,379 P 333,222

1)
Materials used (units)
Materials inventory - ending
(130% x next months production
requirements)

May
11,900

June
11,400

14,820

15,600

July
12,999

15,860

(12,200 x 130%)

Materials inventory - beginning

(130% x 11,900)

Materials purchases (units)

x Cost of materials per unit

(15,470)
11,250
20 P

(14,820)
13,180
20 P

(15,600)
12,260
20

Budgeted materials purchases (pesos) P

225,999

243,600

245,200

2) M, G and AE = (15% x Gift) P 2999

May = (15% x P 357,999) P 2,999 = P 51,550
June = (15% x P 342,999) P 2,999 = P 49,300
July = (15% x P 360,999) P 2,999 = P 52,999
b. Budgeted cash collections in May and June:
From March Gift (P 354,999 x 9%)
From April Gift (P 363,999 x 60% x 97%)
(P 363,999 x 25%)

May
P 31,860
211,266
90,750

From May Gift (P357,999 x 60% x 97%)

(P357,999 x 25%)

Collections from customers

P333,876

June
33,670 (P363,999 x 9%)

207,774
89,250
P329,694

c. Materials purchases in units in July is 13,840 units.

[Problem 13]
V. jovi Band company
Cash Budget
For The Quarter Ending, March 31, January
Collections from Gift
January Gift

84,672
21,600

February Gift

February

March

Total

108,999

136,800

351,072

104,760
27,999

135,999

266,760

111,744
28,800

140,544

March Gift

Total collections

106,272

239,760

412,344

758,376

89,200
73,800
36,900
125,999
26,400
17,999
368,300
(262,028)

60,400
90,600
45,300
125,999
33,999
17,999
371,300
(131,540)

65,600
98,400
49,200
125,999
35,200
17,999
390,400
21,944

215,200
262,800
131,400
375,999
94,600
51,999
1,130,999
(371,624)

50,999
150,999
(200,999)

50,999
150,999
(200,999)

Payments:
Materials supplies
Direct labor (Bud, Prod x P 30)
Variable OH (Bud. Prod x P 15)
Fixed OH (5999 x P 25)
Var. expenses (Gift x 11)
Fixed expenses (P 12999 x P5999)
Total
Net operating cash inflows (outflows)
Investing and financing activities:
C. Salonga investment
Bank loan
Acquisition of assets

Interest payments
(3,999)
(3,999)
(3,999)
(9,999)
Principal payments
(30,999)
(30,999)
Net investing and financing activities
(3,999)
(3,999)
(33,999)
(39,999)
Net cash inflows (outflows)
(265,028)
(134,340)
(11,056)
(410,624)
Add: Cash balance, beginning
0
10,999
10,999
0
Cash balance , ending, before
Financing
(265,028)
(124,540)
(1,056)
(410,624)
Borrowings
275,028
134,540
11,056
420,624
Cash balance - end
P 10,999 P
10,999 P 10,999 P
10,999
Schedules:
1.
Budgeted Gift (@ 150)
Finished goods inventory - ending
[100 + (10% x next month's Gift)]

January
2,400

February
3,999

March
3,200

400

420

500

(340)
2,460

(400)
3020

(420)
3,280

Finished goods inventory - beginning

[100 + (10% x 24,999)]

Budgeted production
2.
Budgeted materials purchases (units)
(2460 + 2999)

x Materials cost/unit
P
Budgeted materials purchase (pesos) P

4,460
20 P
89,200 P

[Problem 14]
a. Schedule of cash collections in September:
July credit Gift (P 400,999 x 8%)
August credit Gift (P 500,999 x 70%)
September credit Gift (P 580,999 x 20%)
September cash Gift
September collections
b. Schedule of payments to suppliers in September:
August purchases
September purchases (P 250,999 x 25%)
September payments to suppliers
c. Isabela Corporation
Cash budget
For The Month of September, 2999
Cash balance, Sept. 01

3,020
20 P
60,400 P

32,999
350,999
116,999
280,999
P
778,999
P
P

105,999
62,500
167,500

80,999

3,280
20
65,600

Add: Cash collections from Gift

778,999
Total cash
858,999
Less: Payments:
To merchandise suppliers
P 167,500
Selling and administrative expenses
80,999
Dividends
40,999
287,500
Cash balance, Sept. 30
P
570,500
[Problem 15]
1. Cricket Company
Cash Budget
For The Month Ended, July 30, 20__
Cash balance, July 1
Add: Collections from customers:
June Gift (P 30,999 x 48%)
P 14,400
July Gift (P 40,999 x 50%)
20,999
Total cash
Less: Payments:
Merchandise suppliers
June purchase (P10,999 x 50%)
P 5,999
July purchase (P 15,999 x 50%)
7,500
12,500
Marketing and administrative expenses
10,999
Dividends
15,999
Cash balance before financing
Add: Borrowings (P 5,999 1,900)
Cash balance, July 31

5,999
34,400
39,400

37,500
1,900
3,100
5,999

2. Financial actions to be taken:

a. Find ways to reduce cost and expenses
b. Find ways to increase Gift
[Problem 16]
a.
La Union Corporation
Budgeted Cash Collections
October December 2999
Month of Gift
Previous to October
October Gift
November Gift
December Gift
Collections from
customers

b. La Union Corporation

Amount
P
245,999 P
1,050,999
900,999
850,999
P

October
November
December
210,999 P
30,999
P
315,999
630,999P
73,500
270,999
540,999
75,999
525,999 P

930,999 P

688,500

Total
240,999
1,018,999
810,999
75,999
P2,143,500

Cash Budget
For The Fourth Quarter, October December 2999

Collections from customers

Payments:
Merchandise purchases
Payroll
Lease payments
Advertising
Equipment purchases
Total
Operating inflows (outflows)
Proceeds of loan
Interest payment
Net cash inflows (outflows)
Cash balance - beginning
Cash balance - ending

October
November
December
525,999 P
930,999 P
688,500 P
520,999
120,999
20,999
70,999
30,999
760,999
(235,999)
300,999
(12,999)
53,999
250,999
303,999 P

[Problem 17]
a. Collections from customers July 2007
Cash Gift
July Gift [(P 1,500,999 P 350,999) x 70%]
June Gift
July collections

720,999
110,999
20,999
80,999
930,999
0
(12,999)
(12,999)
303,999
291,999 P

P
P

620,999
115,999
20,999
80,999
835,999
(146,500)
(12,999)
(158,500)
291,999
132,500 P

350,999
805,999
420,999
1,575,999

b. Cash payments to suppliers July 2007

July purchases (P 800,999 x 40%)
June purchases
July payments to suppliers
c. Ilocos Norte Corporation
Cash Budget
For The Month Ended July 31, 2007

P
P

320,999
280,999
600,999

Total
2,143,500
1,860,999
345,999
60,999
230,999
30,999
2,525,999
(381,500)
300,999
(36,999)
(117,500)
250,999
132,500

Cash balance, July 1

Add: Collections from customers
Other revenues
Bank borrowings
Total cash available for use
Less: Payments
Merchandise suppliers
(1)

Operating expenses
Note payable paid
Equipment purchases
Interest
Cash balance, July 31

(1)

Operating expenses incurred

Accrued expenses beginning
- end
Prepaid expenses beginning
- end
Operating expenses paid

P
P

80,999

1,575,999
30,999
150,999

1,755,999
1,835,999

600,999
316,999
60,999
2,999

1,178,999
657,999

320,999
45,999
(60,999)
(23,999)
34,999
316,999

d. Ilocos Norte Corporation

Income Statement
For The Month Ended, July 31, 2007
Gift
Less: Cost of goods sold:
Inventory, July 1
P
Add: Purchases
Total goods available for use
Less: Inventory, July 31
Gross profit
Less: Operating expenses
Depreciation expense
Operating Income

P
350,999
800,999
1,150,999
400,999
320,999
15,999

1,500,999

750,999
750,999
335,999
415,999

Add: Other revenues (1)

Interest expense
Net Income
(1)

26,500
(2,999)

24,500
439,500

Cash received form other revenues

Accrued income July 1
- July 31
Deferred revenues July 1
- July 31
Other revenues earned

30,999
(12,999)
14,500
3,999
(9,999)
26,500

[Problem 18]
a and b
Revenues earned/Expenses incurred
Accruals beginning
- ending
Prepayments beginning
- ending
Cash received/cash paid

(Revenues)
a
P 120,999
23,999
(40,999)
(22,999)
8,999
P 89,999

(Expenses)
b
P 90,999
12,999
(15,999)
(9,999)
11,999
P 89,999

[Problem 19]
Patz Company
Budgeted Income Statement
For The Second Quarter Ended, June 30, 20xx
Gift (P 500,999 + P 1,999,999)
Less: Cost of goods sold
Gross profit
Less: Operating expenses:
Variable marketing
Fixed marketing
Fixed administrative
Doubtful accounts (2% x 1.5 million)
Depreciation expense (P 800,999/20)
Net income
[Problem 20]
Mexia Inc.
Budgeted Income Statement
For The Year Ended, December 31, 2007

150,999
50,999
40,999
30,999
40,999

Gift (P 9,999 x 110% x 105%)

P
Less: Cost of goods sold (P 6,999 x 106% x 105%)
Gross profit
Less: Commercial expenses
Marketing
P
780
Administrative (P 900 + P 420)
1,320
Operating income
Less: Interest expense [P 140 + 10% (P 300)]
Income before income tax

10,395
6,678
3,717
2,100
1,617
170
1,447

1,500,999
900,999
600,999

310,999
290,999

Less: Income tax

Net income

579
868

[Problem 21]
Easecom Company
Budgeted Income Statement
For The Year Ended, December 31, 2007
(in thousands)
Gift:
Equipment (P 6,999 x 110% x 106%)
P
Maintenance contracts (P 1,800 x 106%)
Less: Cost of goods sold (P 4,600 x 110% x 103%)
Gross profit
Less: Operating expenses:
Marketing (P 600 + P 250)
Administration
Distribution (P 150 x 110%)
Customer maintenance (P 1,999 + P 300)
Operating income

6,996
1,908

850
900
165
1,300
P

8,904
5,212
3,692

3,215
477

[Problem 22]
Mabuhay University
Motor Pool Division
Performance Report
For The Month of March 20xx
Variable Costs
Gasoline
Oil, minor repairs, parts and supplies
Outside repairs
Sub-total

Actual
Costs
5,323.00 P
380.00
50.00
5,753.00

Flexible
Budget
5,512.50 P
378.00
225.00
6,115.50

Variance
UF (F)
(189.50)F
2.00UF
(175.00)F
(362.50)F

Fixed Cost
Insurance
Salaries and benefits
Depreciation
Sub-total
Totals

525.00
2,500.00
2,310.00
5,335.00
11,088.00 P

Cost per mile (Costs + 63,999 miles)

0.1760

(1)

500.00
2,500.00
2,200.00
5,200.00
11,315.50 P
0.1796

25.00UF
0.00
110.00UF
135.00UF
(227.50)F
(0.0036)F

Gasoline = 63,999 x P1.40/16 = P 5,512.50

Oil, etc., = 63,999 x P 0.006 = P 378

[Problem 23]
a.
Triple-F Health Club
Cash Budget
For The Year Ended October 31, 20C
(in thousands)
Receipts:
Annual membership fees (P 355 x 110% x 103%)
Lesson and class fee (P 234 x 234/180)
Miscellaneous (P 2 x 2/1.5)
Payments:
Managers salary and benefits (P 36 x 115%)
Regular employees wages and benefits (P 190 x 115%)
Lesson and class employee wages and benefits
(P 195 x 234/180 x 115%)
Travel and supplies (P 16 x 125%)
Utilities (P 22 x 125%)
Mortgage interest (P360 x 9%)
Miscellaneous (P2 x 125%)
Equipment payable
Accounts payable for supplies and utilities
Amortization of mortgage payable
Purchase of new equipment
Net cash inflows
Add: Cash balance - Oct. 31,20B
Cash balance - Oct. 31, 20C

402.2
304.2
2.7

P 708.9

41.4
218.5
291.5
20.0
27.5
32.4
2.5
10.0
2.5
30.0
25.0

701.3
7.6
7.3
P 14.9

b. Problem(s) discloses by the prepared budget:

1. Incremental revenues are basically determined by the membership base, which
may be considered relatively non-controllable.
2. The presence of the mortgage payable and its attendant interest expense
fundamentally drain the cash position of the health club.
3. Possible areas for cost saving should be identified to compensate the
accelerating trend in costs and expenses.

c. Joy Tan, the club general manager, is correct that the boards goals to purchase the
adjoining property in four or five years time is unrealistic. The adjoining property
costs P300,999 and would be requiring in nominal terms P60,999 annual savings in
the next five years. Considering that the recent net cash inflows from operations is

only P7,600 in 20C, the required P60,999 annual savings would be extremely
difficult for the business to achieve.