P9-54A

(60 min.)
Requirements

1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in
2. Prepare a production budget.
3. Prepare a direct materials budget.
4. Prepare a cash payments budget for the direct material purchases from
Requirement 3.
5. Prepare a cash payments budget for direct labor.
6. Prepare a cash payments budget for manufacturing overhead costs.
7. Prepare a cash payments budget for operating expenses.
8. Prepare a combined cash budget.
9. Calculate the budgeted manufacturing cost per unit (assume that fixed manufacturing overhead
10. Prepare a budgeted income statement for the quarter ending March 31.
Solution:
Sales Budget
December
Unit sales
Price per Unit
Sales Revenue

January

7000
15
105,000.00 $

8000
120,000.00

Req. 1

Cash
January
Cash sales (30%)
Credit sales (70%)
Total cash collections

0.30 $
0.70 $
$

36,000
73,500
109,500

Computations:
a
b
c

December credit sales:

January credit sales: $
February credit sales: $

Req. 2

Pr
January
Unit sales*
Plus: Desired ending inventory

0.20

8,000
1,800

Total needed
Less: Beginning inventory
Units to produce

9,800
1,600
8,200

Req. 3

Direc
January
Units to be produced
Multiply by: Quantity of DM needed per unit
Quantity of DM needed for production
Plus: Desired ending inventory of
Total quantity of DM needed
Less: Beginning inventory of DM
Quantity of DM to purchase
Multiply by: Cost per pound
Total cost of DM purchases

8,200
4
32,800
5,352
38,152
4,920
33,232
1.00
33,232

15%
15%
$
$

Req. 4

Cash Payments for

January
December purchases (From AP)
January purchases
February purchases
March purchases
Total payments

$
$

37,000
8,308

45,308

Req. 5

Cash Payme
Units Produced
Hours per unit
Direct labor hours
Direct labor rate
Direct Labor

January
8,200.00
0.10
820.00
15.00
12,300.00

Req. 6

Cash Payments for

January
Rent (fixed)
Other MOH (fixed)

$
$

10,000
6,000

Variable manufacturing overhead costs

Total disbursements

$
$

10,250
26,250

Req. 7

Cash Payments f
January
Variable operating expenses
Fixed operating expenses
Total payments for operating expenses

$
$
$

10,400
2,200
12,600

Req. 8

Com
January
Cash balance, beginning
Plus: cash collections (req. 1)
Total cash available
Less cash payments:
DM purchases (req 4)
Direct labor (req 5)
MOH costs (req 6)
Operating expenses (req. 7)
Tax payment
Equipment purchases
Total cash payments
Ending cash before financing
Financing:
Borrowings
Repayments
Interest payments
Total financing
Cash balance, ending

Req. 9

17,000
109,500
126,500
45,308
12,300
26,250
12,600
20,000
116,458
10,042
5,000

5,000
15,042
15000
(4,958)

Budgeted M
Direct materials cost per unit
Direct labor cost per unit
Variable manufacturing costs per unit
Fixed manufacturing overhead per unit
Cost of manufacturing each unit

Req. 10

Damon Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Less: Cost of goods sold
Gross profit
Less: Operating expenses
Less: Depreciation expense
Operating income
Less: interest expense
Less: income tax expense @ %
Net income

25600

, and for the quarter in total.

manufacturing overhead is budgeted to be $0.70 per unit for the year.)

.

Sales Budget
February
9000
$

$
$
$

135,000.00 $

March

April
8600

9400

129,000.00 $

141,000.00

Cash Collections Budget

February
March
40,500 $
38,700
84,000 $
94,500
124,500 $
133,200

$
$
$

Production Budget
February
9,000
1,720

73,500
84,000
94,500

March
8,600
1,880

9,400
1,360

10,720
1,800
8,920

Direct Materials Budget

February
March
8,920

$
$

4
35,680
5,256
40,936
5,352
35,584
1.00 $
35,584 $

10,480
1,720
8,760

8,760
4
35,040
5,328
40,368
5,256
35,112
1.00
35,112

Cash Payments for Direct Material Purchases Budget

February
March
$
$
$

24,924
8,896 $
$
33,820 $

26,688
8,778
35,466

Cash Payments for Direct Labor Budget

February
March
8,920.00
8,760.00
0.10
0.10
892.00
876.00
15.00
15.00
13,380.00
13,140.00

10,760
1,880
8,880

Cash Payments for Manufacturing Overhead Budget

February
March
$
10,000 $
10,000
$
6,000 $
6,000
$
$

11,150 $
27,150 $

10,950
26,950

Cash Payments for Operating Expenses Budget

February
March
$
11,700 $
11,180
$
2,200 $
2,200
$
13,900 $
13,380

Combined Cash Budget

February
March
15,042 $
15,292
124,500
133,200
139,542
148,492
33,820
13,380
27,150
13,900
28,000
8,000
124,250
15,292

35,466
13,140
26,950
13,380
25,000
113,936
34,556

15,292 $
15000
292

5,000
188
(5,188)
29,369
15000
19,556

1.25

Budgeted Manufacturing Cost per Unit

n Manufacturing
Income Statement
arter Ended March 31
$

7.50

384,000
192,000
192,000
39,880
10,000
142,120
188
32,644
109,289

141,933

May

Quarter
6800

25600

102,000.00 $

384,000.00

$
$
$

Quarter
115,200
252,000
367,200

Quarter
6,800

25,600
1,880

27,480
1,600
25,880

Quarter
25,880

103,520
5,328
108,848.00
4,920
103,928
103,928

Quarter
$
$
$
$
$

37,000
33,232
35,584
8,778
114,594

Quarter
25,880.00

38,820.00

Quarter
$
$

30,000
18,000

$
$

32,350
80,350

Quarter
$
$
$

33,280
6,600
39,880

Quarter
$

17,000
367,200

114,594
38,820
80,350
39,880
28,000
53,000
354,644
59,890

5,000
5,000
188
(188)
29,369

$
$

0.23

4.00
1.50
1.25
0.75
7.50

P9-60B
(60 min.)
Requirements

1. Prepare a schedule of cash collections for January, February, and March, and for the quarter in tota
2. Prepare a production budget.
3. Prepare a direct materials budget.
4. Prepare a cash payments budget for the direct material purchases from
Requirement 3.
5. Prepare a cash payments budget for direct labor.
6. Prepare a cash payments budget for manufacturing overhead costs.
7. Prepare a cash payments budget for operating expenses.
8. Prepare a combined cash budget.
9. Calculate the budgeted manufacturing cost per unit (assume that fixed manufacturing overhead is
10. Prepare a budgeted income statement for the quarter ending March 31.
Solution:

Sales Budget

Sales B
December

January

Unit sales
Price per Unit
Sales Revenue

Req. 1

Cash Collect
January
Cash sales ()
Credit sales (%)
Total cash collections

Computations:
a
December credit sales:
b
January credit sales: $
c
February credit sales: $
Req. 2

0.35 $
0.65 $
$

Productio
January
Unit sales*
Plus: Desired ending inventory
Total needed
Less: Beginning inventory
Units to produce

Req. 3

Direct Mater
January
Units to be produced
Multiply by: Quantity of DM needed per unit
Quantity of DM needed for production
Plus: Desired ending inventory of DM
Total quantity of DM needed
Less: Beginning inventory of DM
Quantity of DM to purchase
Multiply by: Cost per pound
Total cost of DM purchases

Req. 4

Cash Payments for Direct M

January
December purchases (From AP)
January purchases
February purchases
March purchases
Total payments

Req. 5

Cash Payments for D

January

Units Produced
Hours per unit
Direct labor hours
Direct labor rate
Direct Labor

Req. 6

Cash Payments for Manufa

January
Rent (fixed)
Other MOH (fixed)
Variable manufacturing overhead costs
Total disbursements

Req. 7

Cash Payments for Oper

January
Variable operating expenses
Fixed operating expenses
Total payments for operating expenses

Req. 8

Combined C
January
Cash balance, beginning
Plus: cash collections (req. 1)
Total cash available
Less cash payments:
DM purchases (req 4)
Direct labor (req 5)
MOH costs (req 6)
Operating expenses (req. 7)
Tax payment
Equipment purchases
Total cash payments
Ending cash before financing
Financing:
Borrowings
Repayments
Interest payments

Total financing
Cash balance, ending

Req. 9

Budgeted Manufact
Direct materials cost per unit
Direct labor cost per unit
Variable manufacturing costs per unit
Fixed manufacturing overhead per unit
Cost of manufacturing each unit

Req. 10
Damon Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Less: Cost of goods sold
Gross profit
Less: Operating expenses
Less: Depreciation expense
Operating income
Less: interest expense
Less: income tax expense @ %
Net income

nd March, and for the quarter in total.

ses from

osts.

at fixed manufacturing overhead is budgeted to be $0.70 per unit for the year.)
March 31.

Sales Budget
February
March

$
$
$

Cash Collections Budget

February
March
- $
- $
- $

April

Production Budget
February
March
-

Direct Materials Budget

February
March

Cash Payments for Direct Material Purchases Budget

February
March

Cash Payments for Direct Labor Budget

February
March

0.10

Cash Payments for Manufacturing Overhead Budget

February
March

Cash Payments for Operating Expenses Budget

February
March

Combined Cash Budget

February
March

Budgeted Manufacturing Cost per Unit

facturing
me Statement
nded March 31

ar.)

May

Quarter

Quarter
$
$
$

Quarter
-

Quarter

Quarter

Quarter

Quarter

Quarter

Quarter