PE22-1A
At the beginning of the period the assembly Department budgeted direct labor of $110,500 and property taxes of $50,000 for 8,500 hours of production. The department actually completed 10,000 hours of production. Determine the budget for the department, assuming that it uses flexible budgeting?
PE22-2A
OnTime Publishers Inc. projected sales of 220,000 schedule planners for 2008. The estimated January 1, 2008, inventory is 15,000 units, and the desired December 31, 2008, Inventory is 11,000 units. What is the budgeted production (in units) for 2008?
PE22-3A
OnTime Publishers Inc. budgeted production of 216,000 schedule planners in 2008. Paper is required to produce a planner. Assume 90 square feet of paper are required for each planner. The estimated January 1, 2008, paper inventory is 100,000 square feet. The desired December 31,2008, paper inventory is 160,000 square feet. If paper costs $0.08 per square foot, determine the direct materials purchase budget for 2008.
PE22-4A
OnTime Publishers Inc. budgeted production of 216,000 schedule planners in 2008. Each planner requires assembly. Assume that 15 minutes are required to assemble each planner. If assembly labor costs $12.50 per hour, determine the direct labor cost budget for 2008.
PE22-5A
Prepare a cost of goods sold budget for OnTime Publishers Inc. using the information in Practice Exercises 22-3B AND 22-4B. Assume the estimated inventories on January 1, 2008, for finished goods and work in process were $43,000 and $22,000, respectively. Also assume the desired inventories on December 31, 2008, for finished goods and work in process were $40,000 and $25,000, respectively. Factory overhead was budgeted at $245,000.
PE22-3B
New England Candle, Co. budgeted production of 95,600 candles in 2008. Wax is required to produce a candle. Assume 8 ounces (one half a pound) of wax is required for each candle. The estimated January 1, 2008, inventory is 1,400 pounds. The desired December 31, 2008, wax inventory is 1,100 pounds. If candle wax costs $3.60 per pound, determine the direct materials purchases budget for 2008.
PE22-4B
New England Candle Co. budgeted production of 95,600 candles in 2008. Each candle requires molding. Assume that 12 minutes are required to mold each candle. If molding labor costs $14.per hour, determine the direct labor cost budget for 2008.
PE22-6A
OnTime Publishers Inc. collects 30% of its sales on account in the month of the sale and 70% in the month following the sale. If sales on account are budgeted to be $400,000 for June and $360,000 for July, what are the budgeted cash receipts from sales on account for July?
EX22-4
Steelcase Inc. is one of the largest manufactures of office furniture in the United States. In Grand Rapids, Michigan, it produces filling cabinets in two departments: Fabrication and trim Assembly. Assume the following information for the Fabrication Department:
Steel peer filing cabinet 50 pounds
Direct labor per filling cabinet 18 minuets
Supervisor salaries $130,000 per month
Depreciation $20,000 per month
Direct labor rate $16 per hour
Steel cost $1.25 per pound
Prepare a flexible budget for 12,000, 15,000 and 18,000 filing cabinets for the month of October 2008, assuming that inventories are not significant.
EX22-8
Roma Frozen Pizza Inc. has determined from its production budget the following estimated production volume for 12’’ and 16’’ frozen pizzas for November 2008:
UNITS
12’’Pizza 16’’Pizza
Budget production volume 16,400 25,600
There are three direct materials used in producing the two types of pizza. The quantities at direct materials expected to be used for each pizza are as follows:
12’’ Pizza 16’’ Pizza
Direct Materials:
Dough 1.00lb. per unit 1.50lbs. per unit
Tomato 0.60 0.90
Cheese 0.80 1.30
In addition, Roma has determined the following information about each material:
Dough Tomato Cheese
Estimated inventory, Nov. 1, 2008 675 lbs. 190 lbs. 525 lbs.
Desired inventory, Nov. 30, 2008 480 lbs. 250 lbs. 375 lbs.
Price per pound $1.20 $2.40 $2.85
Prepare November’s direct materials purchases budget for Roma Frozen Pizza Inc.
PR22-4A
The Controller of Santa Fe Housewares Inc. instructs you to prepare a monthly cash budget for the next three months. You are presented with the following budget information:
August September October
Sales $630,000 $715,000 $845,000
Manufacturing cost 350,000 360,000 410,000
Selling and administrative expenses 170,000 205,000 235,000
Capital expenditures 150,000
The company expects to sell about 10% of its merchandise for cash. Of sales on account, 70% are expected to be collected in full in the month following the sale and the remainder the following month. Depreciation, insurance, and property tax expense represent $25,000 of the estimated monthly manufacturing costs. The annual insurance premium is paid in July, and the annual property taxes are paid in November. Of the remainder of the manufacturing costs, 80% are expected to be paid in the month in which they are incurred and the balance in the following month.
Current assets as of August 1 include cash of $50,000, marketable securities of $85,000, and accounts receivable of $635,000 ($500,000 from July sales and $135,000 from June sales).Sales on account for June and July were $450,000 and $500,000, respectively. Current liabilities as of August 1 include s $100,000, 15%, 90-day note payable due October 20 and $65,000 of accounts payable incurred in July for manufacturing costs. All selling and administrative expenses are paid in cash in the period they are incurred. It is expected that $1,800 in dividends will be received in August. An estimated income tax payment of $39,000 will be made in September. Santa Fe’s regular quarterly dividend of $12,000 is expected to be declared in September and paid in October. Management desires to maintain a minimum cash balance of $40,000.
Prepare a monthly cash budget and supporting schedules for August, September, and October.
On the basis of the cash budget prepared in part (1), what recommendation should be made to the controller?
PE 22–1A
Variable cost:
Direct labor (10,000 hours × $13* per hour)...... $130,000
Fixed cost:
Property tax...... 50,000
Total department costs...... $180,000
*$110,500/8,500 hours
PE 22–2A
Expected units to be sold...... 220,000
Plus desired ending inventory, December 31, 2008...... 11,000
Total...... 231,000
Less estimated beginning inventory, January 1, 2008...... 15,000
Total units to be produced...... 216,000
PE 22–3A
Square feet required for production:
Schedule planner (216,000 × 90 sq. ft.)...... 19,440,000
Plus desired ending inventory, December 31, 2008...... 160,000
Total...... 19,600,000
Less estimated beginning inventory, January 1, 2008...... 100,000
Total square feet to be purchased...... 19,500,000
Unit price (per square foot)...... ×$0.08
Total direct materials to be purchased...... $1,560,000
PE 22–4A
Hours required for assembly:
Schedule planner (216,000 × 15 min.)...... 3,240,000 min.
Convert minutes to hours...... / 60min.
Assembly hours...... 54,000 hrs.
Hourly rate...... × $12.50
Total direct labor cost...... $ 675,000
PE 22–5A
Finished goods inventory, January 1, 2008...... $ 43,000
Work in process inventory, January 1, 2008...... $ 22,000
Direct materials:
Direct materials inventory, January 1, 2008
(100,000 × $0.08)...... $ 8,000
Direct materials purchases (from PE 22–3A)..... 1,560,000
Cost of direct materials available for use...... $1,568,000
Less direct materials inventory,
December 31, 2008 (160,000 × $0.08)...... 12,800
Cost of direct materials placed in production..... $1,555,200
Direct labor (from PE 22–4A)...... 675,000
Factory overhead...... 245,000
Total manufacturing costs...... 2,475,200
Total work in process during period...... $2,497,200
Less work in process inventory, December 31, 2008.. 25,000
Cost of goods manufactured...... 2,472,200
Cost of finished goods available for sale...... $2,515,200
Less finished goods inventory, December 31, 2008.... 40,000
Cost of goods sold...... $2,475,200
PE 22–3B
Pounds of wax required for production:
Candle [(95,600 × 8 oz.)/16 oz.]...... 47,800
Plus desired ending inventory, December 31, 2008...... 1,100
Total...... 48,900
Less estimated beginning inventory, January 1, 2008...... 1,400
Total pounds to be purchased...... 47,500
Unit price (per pound)...... ×$3.60
Total direct materials to be purchased$171,000
PE 22–4B
Hours required for assembly:
Candle (95,600 × 12 min.)...... 1,147,200 min.
Convert minutes to hours...... / 60min.
Molding hours...... 19,120 hrs.
Hourly rate...... ×$14.00
Total direct labor cost...... $ 267,680
PE 22–6A
July
Collections from June sales (70% × $400,000)...... $280,000
Collections from July sales (30% × $360,000)...... 108,000
Total receipts from sales on account...... $388,000
Ex. 22–4
A / B / C / DSTEELCASE INC.—FABRICATION DEPARTMENT
Flexible Production Budget
October 2008
(assumed data)
1 / Units of production / 12,000 / 15,000 / 18,000 / 1
2 / 2
3 / Variable cost: / 3
4 / Direct labor / $ 57,6001 / $ 72,0002 / $ 86,4003 / 4
5 / Direct materials / 750,0004 / 937,5005 / 1,125,0006 / 5
6 / Total variable cost / $ 807,600 / $ 1,009,500 / $ 1,211,400 / 6
7 / 7
8 / Fixed cost: / 8
9 / Supervisor salaries / $ 130,000 / $ 130,000 / $ 130,000 / 9
10 / Depreciation / 20,000 / 20,000 / 20,000 / 10
11 / Total fixed cost / $ 150,000 / $ 150,000 / $150,000 / 11
12 / Total department cost / $ 957,600 / $ 1,159,500 / $ 1,361,400 / 12
13 / 13
14 / 112,000 × 18/60 × $16 / 14
15 / 215,000 × 18/60 × $16 / 15
16 / 318,000 × 18/60 × $16 / 16
17 / 412,000 × 50 × $1.25 / 17
18 / 515,000 × 50 × $1.25 / 18
19 / 618,000 × 50 × $1.25 / 19
Ex. 22–8
A / B / C / D / EROMA FROZEN PIZZA INC.
Direct Materials Purchases Budget
For the Month Ending November 30, 2008
Dough / Tomato / Cheese / Total
1 / Units required for production: / 1
2 / 12” pizza / 16,4001 / 9,8402 / 13,1203 / 2
3 / 16” pizza / 38,4004 / 23,0405 / 33,2806 / 3
4 / Plus desired inventory,
November 30, 2008 / 480 / 250 / 375 / 4
5 / Total / 55,280 / 33,130 / 46,775 / 5
6 / Less estimated inventory,
November 1, 2008 / 675 / 190 / 525 / 6
7 / Total units to be purchased / 54,605 / 32,940 / 46,250 / 7
8 / Unit price / ×$1.20 / ×$2.40 / ×$2.85 / 8
9 / Total direct materials to be
purchased / $ 65,526 / $ 79,056 / $131,813* / $276,395 / 9
10 / 10
11 / 116,400 × 1 lb. / 11
12 / 216,400 × 0.60 lb. / 12
13 / 316,400 × 0.80 lb. / 13
14 / 425,600 × 1.50 lbs. / 14
15 / 525,600 × 0.90 lb. / 15
16 / 625,600 × 1.30 lbs. / 16
17 / *Rounded to the nearest dollar / 17
Prob. 22–4A
1.
A / B / C / DSANTA FE HOUSEWARES INC.
Cash Budget
For the Three Months Ending October 31, 2008
August / September / October
1 / Estimated cash receipts from: / 1
2 / Cash sales / $ 63,000 / $ 71,500 / $ 84,500 / 2
3 / Collection of accounts receivablea / 485,000 / 546,900 / 620,550 / 3
4 / Dividends / 1,800 / 4
5 / Total cash receipts / $ 549,800 / $ 618,400 / 705,050 / 5
6 / Estimated cash payments for: / 6
7 / Manufacturing costsb / $ 325,000 / $ 333,000 / $ 375,000 / 7
8 / Selling and administrative expenses / 170,000 / 205,000 / 235,000 / 8
9 / Capital expenditures / 150,000 / 9
10 / Other purposes: / 10
11 / Note payable (including interest) / 103,750 / 11
12 / Income tax / 39,000 / 12
13 / Dividends / 12,000 / 13
14 / Total cash payments / $ 495,000 / $ 577,000 / $ 875,750 / 14
15 / Cash increase or (decrease) / $ 54,800 / $ 41,400 / $ (170,700) / 15
16 / Cash balance at beginning of month / 50,000 / 104,800 / 146,200 / 16
17 / Cash balance at end of month / $ 104,800 / $ 146,200 / $ (24,500) / 17
18 / Minimum cash balance / 40,000 / 40,000 / 40,000 / 18
19 / Excess or (deficiency) / $ 64,800 / $ 106,200 / $ (64,500) / 19
20 / Computations: / 20
21 / a Collections of accounts receivable: / August / September / October / 21
22 / June sales / $ 135,0001 / 22
23 / July sales / 350,0002 / $ 150,0003 / 23
24 / August sales / 396,9004 / $ 170,1005 / 24
25 / September sales / 450,4506 / 25
26 / Total / $ 485,000 / $ 546,900 / $ 620,550 / 26
27 / 1$450,000 × 30% = $135,000 / 27
28 / 2$500,000 × 70% = $350,000 / 28
29 / 3$500,000 × 30% = $150,000 / 29
30 / 4$630,000 × 90% × 70% = $396,900 / 30
31 / 5$630,000 × 90% × 30% = $170,100 / 31
32 / 6$715,000 × 90% × 70% = $450,450 / 32
33 / bPayments for manufacturing costs: / August / September / October / 33
34 / Payment of accounts payable, beginning
of month balance* / $ 65,000 / $ 65,000 / $ 67,000 / 34
35 / Payment of current month’s cost** / 260,000 / 268,000 / 308,000 / 35
36 / Total / $ 325,000 / $ 333,000 / $ 375,000 / 36
37 / *Accounts payable, August 1 balance = $65,000 / 37
38 / ($350,000 – $25,000) × 20% = 65,000 / 38
39 / ($360,000 – $25,000) × 20% = $67,000 / 39
40 / **($350,000 – $25,000) × 80% = $260,000 / 40
41 / ($360,000 – $25,000) × 80% = $268,000 / 41
42 / ($410,000 – $25,000) × 80% = $308,000 / 42
2.The budget indicates that the minimum cash balance will not be maintained in October. This is due to the capital expenditures and note repayment requiring significant cash outflows during this month. This situation can be corrected by borrowing and/or by the sale of the marketable securities, if they are held for such purposes. At the end of August and September, the cash balance will exceed the minimum desired balance, and the excess could be considered for temporary investment.