budgeting

Answer: A
The amount of fixed costs in operating branches 10 warehouses is P400,000 (the fixed cost line intercepts
the vertical axis).
Total operating costs

P2,900,000

Less fixed costs

400,000

Total variable costs (10 warehouses)

P2,500,000

Variable costs per branch: P2,500,000 10

P 250,000

Answer: A
Cost of units sold
(0.65 x P800,000)
Add Desired ending inventory
Total cost of goods available for sale
Deduct Beginning inventory
Budgeted purchases

P520,000
140,000
660,000
130,000
P530,000

Answer: A
Cost of goods sold

P750,000 x 0.6

Add Ending Inventory

P800,000 x 0.6 x 0.5

P450,000
240,000

Total available for sale

P690,000

Deduct Beginning inventory

P450,000 x 0.5

225,000

Budgeted purchases, February

.

P465,000

Answer: D
Cost of sales
Add Desired ending inventory
Total available for sale
Deduct Budgeted purchases
Beginning inventory

P120,000
42,000
162,000
100,000
P 62,000

Answer: A
Total payments for purchases in June

P140,000

Deduct payments applicable to purchase of:

June

(P100,000 x 0.6)

P60,000

May

(P200,000 x 0.30)

120,000

Payments applicable to April purchase

P 20,000

Credit purchase in April: P20,000 0.10

P200,000

Answer: C
Budgeted sales, First Quarter

120,000 units

Add Required Ending Finished goods:

30% x 160,000

Total units required

48,000 units
168,000 units

Less Beginning Finished goods

36,000 units

Budgeted production in units

.

60,000

132,000 units

Answer: C
Sales for three-month period:
July

400,000

August

400,000 x 1.05

420,000

September

420,000 x 1.05

441,000

Total

Inventory, September 30

1,261,000

(441,000 x 1.05 x 0.8)

Total Requirements

1,631,440

Less July Inventory

300,000

Budgeted Production
.

370,440

1,331,440

Answer: C
Beginning Inventory

(8000 x 3.5)

Required Purchases
Direct Materials Used for Production
Desired Ending Inventory

28,000
8,000

(8000 x 3)

(24,000)
12,000

Answer: C

Budgeted production
Required materials per unit of product
Materials required
Unit cost
Peso amounts of materials used by
units produced

LL

MM

NN

622,000

622,000

622,000

0.50

1.00

1.2

311,000

622,000

746,400

P0.60

P1.70

P1.00

P186,600

P1,057,400

P746,400

Budgeted sales in units

Add Finished goods, end

730,000

Deduct Finished goods, beginning

108,000

Budgeted production

622,000

Answer: D
Required pounds by production

180,000

Ending raw materials required

60,000

Budgeted purchases

90,000

Total

Beginning raw materials

640,000

Answer: B
Materials required by June production 1,300 x 2
Add Ending raw materials inventory 1,600 x 2 x 0.5
Total materials required
Deduct Beginning materials inventory 1,300 x 2 x 0.5
Materials to be purchased

( 30,000)
210,000

2,600
1,600
4,200
1,300
2,900

Answer: D
Budgeted sales

18,000

Add Finished goods inventory, end

11,400

Total

29,400

Deduct Finished good inventory, beginning

15,000

Budgeted production

14,400

(14,400 x 6 0.9)

Raw materials required by production

Desired Raw materials inventory end

24,400

Total

120,400

Deduct Raw materials inventory, beginning

21,000

Budgeted purchase of raw materials

99,400

Answer: D
Raw materials required by June production:
Add: Ending materials inventory
Total materials required
Deduct Beginning material inventory
Budgeted materials purchase

1,200 x 2
1,300 x 2 . 1.5
2,400 x 1.5

2,400
3,900
6,300
3,600
2,700

Answer: A
Budgeted sales

300,000

Less decrease in Finished goods inventory

10,000

Budgeted production

290,000

Material Q required by production

290,000 x 3

Less decrease in Material Q inventory

60,000 80,000

Budgeted purchase in pounds, Material Q

.

6,000

870,000
20,000
850,000

Answer: B
Materials required by production

500,000 x 2

Increased in materials inventory

(50,000 40,000)

Purchases

1,000,000
10,000
1,010,000

Answer: B
Materials required by 2nd Quarters production

45,000 x 2.5 kgs.

112,500

Add: Materials inventory, end:

40,000 x 2.5 x0.25

25.000

Total materials required

137,500

Less: Materials inventory, beginning:

112,500 x 0.25

Total budget purchases in kilograms

.

28,125
109,375

Answer: D
Under flexible budget, analysis should be based on actual level achieved.

Indirect labor cost per unit

(P360,000 200,000 units)

Flexible budget allowance:

14,500 units x P1.80

P1.80
P26,100

Answer: C
Cash sales (March)

0.2 x P420,000

P 84,000

Collections of account sales:

March sales:

(P420,000 x 0.8 x 0.7)

235,200

February sales:

(P300,000 x 0.8 x 0.25)

60,000

January sales:

(P240,000 x 0.8 x .05)

9,600

Total cash from sales

.

P388,800

Answer: B
Total cash collections
Deductions collections on September sales

P57,000
(P80,000 x 0.6)

48,000

Collections applicable to July and August sales

P 9,000

Credit sales in July: P9,000 2 0.15

P30,000

Answer: D

Collections from:
January sales

(P860,000 x 0.8 x 0.75)

December sales (January 1 Accounts)

Collections of credit sales
Cash sales

(P860,000 x 0.2)

Answer: A
Collections sales of:
June:
May:
Total collections from sales

172,000
P987,000

P8,000 x 0.7
P7,000 x 0.3

P5,600
2,100
P7,700

Answer: B
October 90,000 x .95

P 85,500

November 100,000 x .85

85,000

December 85,000 x .70

59,500

Fourth quarter sales collected in fourth quarter

.

299,000
815,000

Total cash received

.

P516,000

P230,000

Answer: D
Cash sales

P 70,000

Collections from account sales:

January

(P340,000 x 0.60)

204,000

December

(P50,000 x 30/40)

37,500

November
Total cash receipts in January
.

20,000
P331,500

Answer: B
The balance of Accounts Receivable, based on the collection pattern for Liberal Sales Company, equals 40
percent of credit sales for that month:
P1,500,000 x 0.8 x 0.4 = P480,000

Answer: C
Gross receivable collected months sales
November

2,000,000 x .12

P 240,000

October

1,800,000 x .75

1,350,000

September

1,600,000 x .06

96,000

August

1,900,000 x .04

Total credit
.

76,000
P1,762,000

Answer: A
The balance of Accounts Receivable as of January 31, its first month of operations, will increase by P400,000
because the first collection on account sales will be in February.
However, a question of how much increase in Accounts Receivable in February will equal to the difference
between the February credit sales and 70% of January sales.

Answer: D
Cost of goods sold

P1,680,000

Deduct desired decrease in inventories

Budgeted purchases

P1,610,000

Add decrease in Accounts Payable

150,000

Budgeted payments for purchases

P1,760,000

Answer: A
November costs

(P1,952,000 P288,000) x 0.75

P1,248,000

October costs

(P1,568,000 P288,000) x 0.25)

320,000

Total disbursements
.

70,000

P1,568,000

Answer: C
Beginning Cash

P 20,000

Add:Cash collected on June's sales

(P300,000 x .8 x .98)

Cash collected on May's sales

((P300,000/1.25) x .2) 48,000

Total

235,200
283,200

P303,200

Less:Cash paid on June's purchases

(P240,000 x .6 x .99)

Cash paid on May's purchases

(P200,000 x .4)

142,560
80,000

222,560

Ending cash balance

.

P80,640

Answer: C
January

February

Budgeted sales

11,900

11,400

Add: Ending inventory (130%)

14,820

15,600

Total

26,720

27,000

Less: Beginning inventory

15,470

14,820

Budgeted purchases (units)

11,250

12,180

Unit purchase price

Budgeted peso purchases

200
P2,250,000

200
P2,436,000

Budgeted inventories:

December 31

130% x 11,900

15,470

January 31

130% x 11,400

14,820

February 28

130% x 12,000

15,600

March 31

130% x 12,200

15,860

February purchases

54% x P2,436,000

P1,315,440

January purchases

46% x P2,250,000

1,035,000

Answer: D
Payments for:

Total payments for purchases

P2,350,440

Selling, general and administrative expenses:

February:

[(P3,420,000 x 0.15) P20,000]0.54

266,220

January:

[(P3,570,000 x 0.15) P20,000]0.46

237,130

Total cash disbursements

.

P2,853,790

Answer: A
Billings of December 31:
Collections with 3% discount

P3,630,000 x 0.6 x 0.97

Collections end of January

P3,630,000 x 0.25

907,500

P3,540,000 x 0.09

318,600

Billings of November 30:

Total collections
.

P2,112,660

P3,338,760

Answer: B
Budgeted March sales

12,000

Add: Ending inventory units

15,860

Total units required

27,860

Less: Beginning inventory units

15,600

Budgeted purchases in units, March

12,260

Answer: A
Payments for purchases in the month of:
December

(0.2 x P120,000 x 0.6)

P14,400

January

(0.2 x P160,000 x 0.4)

12,800

Total January disbursements for purchases

.

P27,200

Answer: C
Payments for purchases:
May purchase

(0.2 x P200,000 x 0.6)

P24,000

June purchase

(0.2 x P220,000 x 0.4)

17,600

Total

41,600

Labor costs

60,000

Fixed Overhead

30,000

Interest payments

45,000

Commission (0.03 x P1,020,000)

30,600

Total disbursements
.

P207,200

Answer: C
June cash sales (P390,000 x 0.1)

P 39,000

Collections from account sales:

April sales

(P390,000 x 0.9 x 0.7)

245,700

May sales

(P420,000 x 0.9 x 0.3)

113,400

Total cash receipts, June

.

P398,100

Answer: B
Marketable securities purchased on:
June

P 5,600

July

126,900

Cumulative purchase of MS
.

P132,500

Answer: A
Cash Budget (P000)
June

July

Aug

Sept

P398.1

P404.9

P382.2

P374.9

367.5

278.0

296.5

702.5

Net cash inflow (outflow)

30.6

126.9

85.7

( 327.6)

Beginning cash balance

25.0

50.0

50.0

50.0

Cash receipts
Cash disbursements

Cumulative cash balance

55.6

176.9

135.7

( 277.6)

5.6

- 126.9

- 85.7

218.2

0.0

0.0

109.4

M/S sold (purchased)

Cash loan

0.0

Cash balance, end

P 50.0

P 50.0

P 50.0

P 50.0

June

July

Aug

Sept

Account sales (90%)

P351.0

P315.0

P378.0

P369.0

Cash sales

P 39.0

P 35.0

P 42.0

P 41.0

First month (30%)

245.7

105.3

94.5

Second month (70%)

113.4

264.6

245.7

220.5

P398.1

P404.9

P382.2

P374.9

June

July

Aug

Sept

Purchases

P210.0

P240.0

P320.0

P230.0

First month (45%)

P 99.0

P 94.5

P108.0

P144.0

Second month (55%)

110.0

121.0

115.5

132.0

Total purchases paid

209.0

215.5

223.5

276.0

Labor

58.5

52.5

63.0

61.5

General overhead

10.0

10.0

10.0

10.0

Interest

35.0

Cash dividend

25.0

Taxes

30.0

Cash Receipts (P000)

Collection of accounts

Total

113.4

Cash Payments (P000)

Purchase of equipt.

35.0

30.0
290.0

Total payments
.

P367.5

P278.0

P296.5

P702.5

Answer: A
Budgeted Production

January

February

March

Total

Sales

1,700,000

1,200,000

1,400,000

4,300,000

Inventory, end

2,600,000

3,400,000

4,500,000

4,500,000

Total

4,300,000

4,600,000

5,900,000

8,800,000

Inventory, beg.

(2,900,000

(2,600,000

(3,400,000 (2,900,000

Budgeted production

1,400,000

2,000,000

2,500,000

5,900,000

Answer: B
Payments for Purchases:
January

(December purchases - 1,800,000 x 0.052)

February

(January purchases 1,400,000 x 0.06)

84,000

March

(February purchases 2,000,000 x 0.06)

120,000

Total for the quarter

.

P 93,600

P297,600

Answer: B
Budgeted Collections on Accounts Receivable
January
November sales

87,500

December sales

116,250

January sales

February

116,250
131,750

Answer: C

203,750

Total
87,500

February sales
Total

March

248,000

232,500
131,750

263,500

93,000

93,000

224,750

676,500

A months sales is collected 50 percent each in the first and second month. Therefore, the accounts receivable
outstanding as of March 31 includes Marchs sales as well as 50 percent of February sales.
Februarys accounts (P186,000 x 0.5)
P 93,000
Marchs sales

217,000

Outstanding accounts receivable, March 31

.

P310,000

Answer: A
Current unit cost per 1,000
Material

P 52

Labor

20

Overhead

10

Total

P 82

Effective January 1, 2007, the price of materials will be raised to P60. The unit cost for 2007 production will be
P90. Since the sales of January and February come from December production, only the March sales will have
cost of P90 per thousand.

January and February cost of goods sold

(1,700 + 1,200) x P82

P237,800

1,400 x P90

126,000

March
Cost of goods sold (first quarter)
.

P363,800

Answer: A
January

February

March

203,750

248,000

224,750

Payments for materials

93,600

84,000

120,000

Labor expenses

28,000

40,000

50,000

Overhead

14,000

20,000

25,000

Selling & administrative

52,700

37,200

43,400

Cash collections
Cash disbursements

Interest

8,000

Taxes

64,560

Dividends

48,420

Total disbursements

188,300

181,200

359,380

Net Cash Inflow (Outflow)

15,450

66,800

(134,630)

Cash Balance, Beginning

30,000

25,000

25,000

Cumulative cash balance

45,450

91,800

(109,630)

Marketable securities

20,450

66,800

( 87,250)

Cumulative MS

20,450

87,250

47,380

25,000

112,250

25,000

Borrowings
Cash Balance, End
.

Answer: C
Proforma Income Statement

January

February

March

Total

Sales

263,500

186,000

217,000

666,500

Cost of goods sold

139,400

98,400

126,000

363,800

Gross profit

124,100

87,600

91,000

302,700

Selling expenses, 20%

52,700

37,200

43,400

133,300

Operating income

71,400

50,400

47,600

169,400

Interest expense

2,667

2,667

2,666

8,000

Income before tax

68,733

47,733

44,934

161,400

Income tax, 40%

27,493

19,093

17,974

64,560

Net income

41,240

28,640

26,960

96,840

Answer: A
August sales
Billed 8/20

P350,000 x 18%

P 63,000

Billed 9/10

P350,000 x 80% x 98%

Collections in Sept of Aug sales

.

274,400
P337,400

Answer: B
Russon provides 25 percent of next months quantity sales.
25% x P400,000 x 80% = P80,000

Answer: D
May sales billed June 10 250,000x18%

P 45,000

June Sales:
Billed June 20
Billed July 10

300,000 x 18%

54,000

300,000 x .80 z .98

235,200

P350,000 x .80 x .98

P274,400

July sales
Billed July 20
July Collections

P608,600