Introduction

to Management Accounting

Solutions Manual

Problems: Set A
(60 min.) P 9-59A
P9-59A Comprehensive budgeting problem (Learning Objectives 2 & 3)
Requirements
1. Prepare a schedule of cash collections for January, February, and March, and for the quarter
in total.
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 conversion costs.
6. Prepare a cash payments budget for operating expenses.
7. Prepare a combined cash budget.
8. Calculate the budgeted manufacturing cost per unit.
9. Prepare a budgeted income statement for the quarter ending March 31.

Solution:
Given
Sales Budget
December

January

February

March

April

May

Unit sales

7,000 8,000 9,200 9,900 9,700 8,500

Unit selling price

$ 10 $ 10 $ 10 $ 10 $ 10 $ 10

Total sales Revenue

$ 70,000 $ 80,000 $ 92,000 $ 99,000 $ 97,000 $ 85,000

Req. 1

Cash Sales

Cash Collections
January
$24,000

Chapter 9: The Master Budget and Responsibility Accounting

February
$27,600

March
$29,700

Quarter
$81,300

Introduction to Management Accounting

Solutions Manual

Credit Sales
Total Cash Collections

$ 49,000.0 $ 56,000.0 $ 64,400.0

$73,000
$83,600
$94,100

$169,400
$250,700

Req. 2
Production Budget
January
8,000
2,300
10,300
-800
9,500

Unit Sales
Plus: Desired Ending Inventory
Total Needed
Less: Beginning Inventory
Units to Produce

February
9,200
2,475
11,675
-2,300
9,375

March
9,900
6,775
16,675
-2,475
14,200

Quarter
27,100
11,550
38,650
-5,575
33,075

February
9,375
2
18,750
2,840
21,590
-1,875
19,715
2
$39,430

March
14,200
2
28,400
6,615
35,015
-2,840
32,175
2
$64,350

Quarter
33,075
6
66,150
11,330
77,480
-6,615
70,865
6
141,730

Req. 3
Direct Materials Budget
Units to be Produced
x Pounds of DM Needed per Unit
Quantity (pounds) Needed for Production
Plus: Desired Ending Inventory of DM
Total Quantity (pounds) Needed
Less: Beginning Inventory of DM
Quantity (pounds) to Purchase
x Cost per Pound
Total Cost of DM Purchases

January
9,500
2
19,000
1,875
20,875
-1,900
18,975
2
$37,950

Chapter 9: The Master Budget and Responsibility Accounting

Introduction to Management Accounting

Solutions Manual

Req. 4
Schedule of Expected Cash DisbursementsMaterial Purchases
January
February
March
December Purchases (from Accounts
Payable)
$33,920
January Purchases
$7,590
$30,360
February Purchases
$7,886
$31,544
March Purchases
$12,870
Total Cash Payments for Direct Material
Purchased
$41,510
$38,246
$44,414

Chapter 9: The Master Budget and Responsibility Accounting

Quarter
$33,920
$37,950
$39,430
$12,870
$124,170

Introduction to Management Accounting

Solutions Manual

Req. 5
Schedule of Expected Cash DisbursementsConversion Costs
January
February
March
Variable Conversion Costs
$9,600
$11,040
$11,880
Rent (fixed)
$5,000
$5,000
$5,000
Other Fixed MOH
3000
3000
3000
Total Payments for Conversion Costs
$17,600
$19,040
$19,880

Quarter
$32,520
$15,000
$9,000
$56,520

Req. 6
Schedule of Expected Cash Disbursements -- Operating Expenses
January
February
March
Variable Operating Expenses
8,000 9,200 9,900
Fixed Operating Expenses
$1,000
$1,000
$1,000
Total Payments for Operating Expenses
$9,000
$10,200
$10,900

Quarter
$27,100
$3,000
$30,100

Req. 7

Cash Balance, Beginning

Add Cash Collections
Total Cash Available
Less Cash Payments:
Direct Material Purchases
Conversion Costs
Operating Expenses
Equipment Purchases
Tax Payment
Total Cash Payments

Combined Cash Budget

January
February
$4,500
$4,390
73,000
83,600
77,500
87,990

Chapter 9: The Master Budget and Responsibility Accounting

41,510
17,600
9,000
5,000
73,110

38,246
19,040
10,200
12,000
10,000
89,486

March
$4,504
94,100
98,604
44,414
19,880
10,900
16,000
91,194

Quarter
$13,394
$250,700
$264,094
$0
$124,170
$56,520
$30,100
$33,000
$10,000
$253,790
4

Introduction to Management Accounting

Solutions Manual

Ending Cash Balance Before Financing

Financing:
Borrowings
Repayments
Interest Payments
Ending Cash Balance

Total interest

4,390

-1,496

7,410

6,000

4,390

4,504

-3,000
-60
4,350

$10,304
$0
$6,000
($3,000)
($60)
$13,244

$280

Req. 8
Budgeted Manufacturing Cost per Unit
Direct Materials Cost per Unit
Conversion Costs per Unit
Fixed Manufacturing Overhead per Unit
Budgeted Cost of Manufacturing Each Unit

$5.23
$2.09
$0.80
$8.12

Req. 9
Silverman Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales
Cost of Goods Sold
Gross Profit
Operating Expenses
Depreciation
Operating Income
Less Interest Expense
Less Provision for Income Taxes
Net Income

$271,000
219,930
51,070
30,100
4,800
16,170
-60
-10,000
$6,110

Chapter 9: The Master Budget and Responsibility Accounting