Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
McGraw-Hill/Irwin
Inc.
9-2
Sales
Budget
Operati
onal
Budgets
Materials
Ending
Budget:
Inventory
Gasoline
Budget:
Gasoline and Related
Products
Labo
r
Budg
et
Overh
ead
Budge
t
Selling and
Administrat
ive Expense
Budget
Cash
Budget
Budgeted
Income
Statement
Budgete
d
Financia
l
Stateme
nts
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Budgeted
Balance
Sheet
Budgeted
Statement
of Cash
Flows
9.7 Application
of
activity-based
costing
to
the
budgeting process yields activity-based budgeting
(ABB).
Under ABB, the first step is to specify the
products or services to be produced and the customers
to be served. Then the activities necessary to produce
these products and services are determined. Finally
the resources needed to perform the specified
activities are determined. ABB differs from traditional
budgeting in the emphasis that it places on activities
and its use of activity-based costing data in the
budgeting process.
9.8 E-budgeting stands for an electronic and enterprisewide budgeting process.
Under this approach the
information needed to construct a budget is gathered
via the Internet from individuals and subunits located
throughout the enterprise. The Internet also is used to
disseminate the resulting budget schedules and
information to authorized users throughout the
enterprise.
9-9 The city of New York could use budgeting for planning
purposes in many ways. For example, the city's personnel
budget would be important in planning for required
employees in the police and fire departments. The city's
capital budget would be used in planning for the
replacement
of
the
city's
vehicles,
computers,
administrative buildings, and traffic control equipment.
The city's cash budget would be important in planning for
cash receipts and disbursements. It is important for any
organization, including a municipal government, to make
sure that it has enough cash on hand to meet its cash
needs at all times.
9.10 The budget director, or chief budget officer, specifies
the process by which budget data will be gathered,
collects the information, and prepares the master
budget. To communicate budget procedures and
deadlines to employees throughout the organization,
the budget director often develops and disseminates a
budget manual.
McGraw-Hill/Irwin
Inc.
9-4
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
(b)
Preliminary design
(c)
(d)
Production
(e)
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
SOLUTIONS TO EXERCISES
EXERCISE 9-24 (20 MINUTES)
1.
April
May
June
Sales..................................
$80,000
Cash receipts:
From cash sales...............
40,000b
From sales on account.....
Total cash receipts.............
36,000d
$
76,000
30,000c
34,000
$
64,000
$90,0
00
= $45,000 2
$40,0
00
= $80,000 .5
$30,0
00
= $60,000 .5
$36,0
00
$39,0
00
2.
$60,000
$90,000a
$
45,000
39,000e
$
84,000
300,000
DM
Purchases of goods and services on account
1,200,000
during 20x1....................................................
DM
Payments of accounts payable during 20x1.....
(1,100,00
0DM)*
Accounts payable, 12/31/x1............................
400,000
DM
*1,100,000DM = 300,000DM + 1,200,000DM
McGraw-Hill/Irwin
Inc.
9-10
400,000DM
3.
340,
000y
Sales on account during 20x1.........................
900,
000y
Collections of accounts receivable during 20x1 (780,000y)
460,
000y
$
810,000
150,000
$
960,000
5.
$
2,050,000
400,000
-0-_
$
2,450,000
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
480,000
50,000
80,000
450,000
2.
Amount Collected in
October
$ 2,400
$ 60,000
4%
7,000
70,000
10%
12,000
80,000
15%
63,000
90,000
70%
$84,400
McGraw-Hill/Irwin
Inc.
9-12
November....................
December....................
Total............................
Total collections in
fourth quarter from
credit sales in fourth
quarter.....................
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Credit
Sales
$
90,000
Octob
er
$
Novem
ber
Decem
ber
$9,000
63,00
0
100,00
0
85,000
0
$
$13,50
0
70,000
15,000
59,500
63,00
0
$83,50
0
$
83,500
$230,0
00
200,000
210,000
1.05)
220,500
1.05)
231,525
1.05)
Planned Ending
Inventory
(in units)
160,000 (200,000
80%)
(given)
(200,000
(210,000
185,220 (231,525
80%)
(220,500
Sales in units:
2.
July...................................................................
August..............................................................
September........................................................
Total for third quarter.......................................
Add: Desired ending inventory, September 30....
Subtotal............................................................
Deduct: Desired ending inventory, June 30.........
Total required production..................................
200,000
210,000
220,500
630,500
185,220
815,720
160,000
655,720
600,000
4
2,400,0
00
600,000
3,000,0
00
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
700,000
2,300,0
00
$1.15
$2,645,
000
2
.
Sales
$60,000
78,000
66,000
Percent
9%
20%
70%
Expected
Collections
$5,400
15,600
46,200
$67,200
3
.
$
54,000
1,080
$
52,920
14,400
$67,320
BINGHAMTON CORPORATION
EXPECTED CASH BALANCE
AUGUST 31
Balance, August 1...............................................
Add: Expected collections...................................
Less: Expected disbursements............................
Expected balance.............................................
McGraw-Hill/Irwin
Inc.
9-16
$
22,000
67,200
67,320
$
21,880
Today
To:
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
$
7,125*
75,0
00
20,000*
*
$
102,125
$ $7,125
7,125
97,500 120,000
32,000
26,000
$130,6
25
$159,12
5
2
.
Collections in December
$ 76,000
$200,000
38%
132,000
220,000
60%
$208,000
McGraw-Hill/Irwin
Inc.
9-18
Sales revenue.....................................
$220,00
0
165,00
0
$55,000
$
4,400
18,000
22,600
45,000
$10,000
Month
December.......
January...........
Total December
purchases.....
Sales
$220,0
00
200,00
0
Cost of
Goods
Sold
$165,0
00
150,00
0
Amount Purchased in
December
$
$165,000
33,000
20%
150,000
80%
120,000
$153,00
0
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
McGraw-Hill/Irwin
Inc.
9-20
800 hours
1,600 hours
2,400 hours
$ 60
$144,00
0
May
3,200
$40
June
3,200
$40
$128,00 $128,00
0
0
800
800
$70
$70
$
$56,000
56,000
$184,00
0
$184,00
0
10%
$
18,400
90%
$165,60
0
$184,00
0
(2)(annuare
l quiremen
t)(costperorder)
annualholdingcostperunit
Case A : EOQ =
CaseB : EOQ =
CaseC : EOQ =
(2)(13,23)($
0 250)
= 1,102,500
=1,050
$6
(2)(1,681
($
) 40)
= 6,724=82
$20
(2)(560)($
10)
= 1,600=40
$7
Safety stock:
The lead time is one month, so the safety stock is equal to
the difference between average monthly usage and the
maximum usage in a month. Average monthly usage is 65
tons (780/12), and the maximum usage is 80 tons.
Therefore, the safety stock is 15 tons (80 65).
2
.
Reorder point:
The reorder point is 80 tons. This is the maximum amount
of the bonding agent that would be used in a month, which
is the time required to receive an order after it is placed.
McGraw-Hill/Irwin
Inc.
9-22
SOLUTIONS TO PROBLEMS
PROBLEM 9-36 (40 MINUTES)
1.
Sales (units)...........................
Add: Ending inventory*...........
Total needs............................
Deduct: Beginning inventory. .
Units to be produced..............
Direct-labor hours per unit.....
Total hours of direct labor
time needed........................
Direct-labor costs:
Wages ($16.00 per DLH).....
Pension contributions
($.50 per DLH)..................
Workers' compensation
insurance ($.20 per DLH). .
Employee medical insurance
($.80 per DLH)..................
Employer's social security
(at 7%).............................
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Januar
y
10,00
0
16,00
0
26,00
0
16,00
0
10,00
0
Month
Februa March Quart
ry
er
12,000 8,000 30,000
13,50 13,500
0
21,50 43,500
0
12,50 16,000
0
9,000
27,500
.75
8,500
6,750 25,250
$160, $136,0
000
00
$108, $404,0
000
00
5,000
4,250
3,375 12,625
2,000
1,700
1,350
8,000
6,800
5,400 20,200
10,00
0
12,500
24,500
16,000
8,500
5,050
11,20
9,520
0
$186, $158,2
200
70
7,560 28,280
$125, $470,1
685
55
McGraw-Hill/Irwin
Inc.
9-24
Sales budget
Cost-of-goods-sold budget
Selling and administrative expense budget
Components of the master budget, other than the
production budget and the direct-labor budget, that would
also use the production data include the following:
Direct-material budget
Manufacturing-overhead budget
Cost-of-goods-sold budget
Components of the master budget, other than the
production budget and the direct-labor budget, that would
also use the direct-labor-hour data include the following:
Cost-of-goods-sold budget
Cash budget
Budgeted income statement
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
McGraw-Hill/Irwin
Inc.
9-26
$
20,000
30,000
70,0
00
$120,0
00
March
$ 24,000 $16,000
25,500
59,500
27,000
47,250
$109,000 $90,250
Quarter
$
60,000
82,500
176,75
0
$319,25
0
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
revenue.
2.
,000
class.
25
Classes
to
be 3,36
taught.
0
Classes
taught
per
professor.
5
Faculty
672
needed
McGraw-Hill/Irwin
Inc.
9-28
4.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Januar
y
Febru
ary
March
$
11,00
0
90,
000
$
52,50
0
108,
000
$
63,00
0
111,
000
Sale of
equipment
.
Total cash
collections
2.
Payment of accounts
payable...
Payment of January
purchases ($90,000):
70% in January; 30% in
February..
5,
000
$101,
000
$160,
500
Januar
y
McGraw-Hill/Irwin
Inc.
9-30
Febru
ary
March
$
22,00
0
63,
000
Payment of February
purchases ($100,000):
70% in February; 30% in
March..
Payment of March purchases
($140,000):
70% in March; 30% in
April..
Cash operating
costs..
Total cash
disbursements...
$179,
000
$
27,00
0
70,
000
31,
000
$116,
000
24,
000
$121,
000
$
30,00
0
98,
000
45,
000
$173,
000
Beginning cash
balance.
Total
receipts
.
Subtotal
.
Less: Total
disbursements
Cash excess (deficiency)
before financing
Financing:
Borrowing to maintain
$20,000 balance..
Loan principal
repaid
Loan interest
paid..
Ending cash
balance
Januar Februar
y
y
March
$
20,00
0
101,
000
$
20,000
$
44,30
0
179,
000
$121,
000
116,
000
$
5,000
$180,50
0
121,00
0
$
59,500
160,50
0
$223,
300
173,
000
$
50,30
0
15,
000
$
20,00
0
(15,00
0)
(2
00)*
$
44,300
$
50,30
0
* $15,000 x 8% x 2/12
PROBLEM 9-39 (45 MINUTES)
1.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
$510,
000
357,
000
Gross
margin
..
Operating expenses:
Cash operating expenses $100,
($50,000 x 2)
000
Depreciation ($12,000 x 2)
24,
.
000
Net
income
...
McGraw-Hill/Irwin
Inc.
9-32
$153,
000
124,
000
$
29,00
0
Accounts
receivable...
Merchandise
inventory..
Land
Common
stock.
Retained
earnings...
Total
liabilities
&
stockholders equity...
$114,0
00
91,0
00
14,0
00
62,0
00
56,0
00
$337,0
00
$180,0
00
57,0
00
140,0
00
(40,0
00)
$337,0
00
Supporting calculations:
Cash: $22,000a + $84,000b + ($250,000 x 65%)c
+ ($250,000 x 35%)d + ($260,000 x 65%)e $150,000f ($260,000 x 60%)g - $50,000h $50,000h - $5,000i = $114,000
1/31/01 Cash balance
1/31/01 Accounts Receivable balance
c
65% of February sales
a
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
McGraw-Hill/Irwin
Inc.
9-34
February sales
sales
= $56,000
$57,000
3.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
McGraw-Hill/Irwin
Inc.
9-36
2.
3.
4.
5.
6.
7.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Add:
January
receipts
($216,000 + $152,000)..
Subtotal
Less:
January
payments
Cash
balance
before
financing.
McGraw-Hill/Irwin
Inc.
9-38
368,
000
$413,
000
390,
000
$
23,00
0
Sales budget
Sales (in sets).....................
Sales price per set...............
Sales revenue.....................
2.
April
10,000
$50
May
12,000
$50
June
15,000
$50
$500,00
0
$600,00
0
$750,00
0
May
June
10,000
2,400
12,000
3,000
15,000
3,000
12,400
2,000
15,000
2,400
18,000
3,000
10,400
12,600
15,000
Sales..................................
Add: Desired ending
inventory............................
Total requirements..............
Less: Projected beginning
inventory............................
Planned production.............
3.
Raw-material purchases
Planned production (sets).....
Raw material required per
set
(board feet).......................
Raw material required for
production
(board feet).......................
Add: Desired ending
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
April
10,400
May
12,600
June
15,000
10
104,000
10
126,00
0
10
150,000
inventory of raw
material (board feet)..........
Total requirements...............
McGraw-Hill/Irwin
Inc.
9-40
12,600
15,000
16,000
116,600
141,00
0
166,000
10,400
12,600
15,000
106,200
151,000
$.50
128,40
0
$.50
$
53,100
$
64,200
$
75,500
$.50
Direct-labor budget
Planned production (sets).....
Direct-labor hours per set.....
Direct-labor hours required. . .
Cost per hour........................
Planned direct-labor cost......
April
10,400
1.5
15,600
$20
May
12,600
1.5
18,900
$20
$312,00
0
$378,0
00
June
15,000
1.5
22,500
$20
$450,00
0
2.
Yarex
Darol
Norex
5,200
60,000
65,200
2,800
40,000
42,800
2,400
25,000
27,400
4,800
60,400
3,200
39,600
2,000
25,400
4,228
3,960
4,06
4
Total hours.........................
12,25
2
Conversion
cost
budget $245,04
(12,252 $20)...................
0
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
4.
McGraw-Hill/Irwin
Inc.
9-42
40
$(24,50
4)
$
76,316
Units
60,000
Price
$65
Heavy coils.................................
40,000
$95
Projected sales...........................
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Total
$3,900,
000
3,800,0
00
$7,700,
000
Projected sales.........................................
Add: Desired inventories,
December 31, 20x0................................
Total requirements...................................
Deduct: Expected inventories, January 1,
20x0.........................................................
Production required (units).......................
3
.
25,000
85,000
20,000
9,000
49,000
8,000
65,000
41,000
Sheet
Metal
Light coils (65,000 units
projected
to be produced)......................
Heavy coils (41,000 units
projected
to be produced)......................
Production requirements.............
Add: Desired inventories,
December 31, 20x0.....................
Total requirements.....................
Deduct: Expected inventories,
January 1, 20x0.......................
Purchase requirements (units)....
4
.
Light
Heavy
Coils
Coils
60,000
40,000
Raw Material
Copper
Wire
Platfor
ms
260,000 130,000
__
205,000 123,000
41,000
465,000 253,000
36,000 32,000
41,000
7,000
501,000 285,000
48,000
32,000 29,000
469,000 256,000
6,000
42,000
McGraw-Hill/Irwin
Inc.
9-44
Anticipa
ted
Raw Material
Required
(units)
Sheet metal...............................
469,0
00
Copper wire...............................
256,0
00
Platforms...................................
42,00
0
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Purchas
Total
e Price
$8 $3,752,000
5
1,280,000
126,000
Light coils..................
Project
ed
Produc
tion
(units)
65,000
Heavy coils................
41,000
Hours
per
Unit
2
3
Total
Hour
s
Rate
130,0
00
123,0
00
$15
20
Total..........................
6.
Total
Cost
$1,950,0
00
2,460,00
0
$4,410,0
00
725,000
lb.a
106,000
coils b
100,000c
253,000
hr. d
Cost
Driver
Rate
Budgete
d Cost
$.25 $181,25
0
$4.00 424,000
$1.00 100,000
$3.00
759,
000
$1,464,
250
McGraw-Hill/Irwin
Inc.
9-46
The
budgeting
process
communication and coordination.
promotes
internal
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
b. Subsequent Schedule
Production Budget
Selling Expense Budget
Budgeted Income Statement
Production Budget
Direct-Material Budget
Direct-Labor Budget
Manufacturing-Overhead
Budget
Direct-Material Budget
Cost-of-Goods-Manufactured
Budget
Direct-Labor Budget
Cost-of-Goods-Manufactured
Budget
Manufacturing-Overhead
Budget
Cost-of-Goods-Manufactured
Budget
Cost-of-Goods-Manufactured
Budget
Cost-of-Goods-Sold Budget
Cost-of-Goods-Sold Budget
(includes ending inventory in
dollars)
Administrative Expense
Budget
McGraw-Hill/Irwin
Inc.
9-48
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
$478,12
5
468,000
$946,12
5
10,000
$956,12
5
$510,65
0
57,875
93,000
40,000
75,000
$776,52
5
$179,60
0
McGraw-Hill/Irwin
Inc.
9-50
Compu
ter
System
Consult
ing
Third Quarter:
Revenue...........................................
Hourly billing rate............................
Billable hours...................................
Number of consultants.....................
Hours per consultant........................
Fourth-quarter planned increase..........
Billable hours per consultant................
Number of consultants.........................
Billable hours......................................
Billing rate..........................................
Projected revenue...............................
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
$421,8
75
$75
5,625
15
375
50
425
15
6,375
$75
$478,1
25
Manage
ment
Consulti
ng
$315,00
0
$90
3,500
10
350
50
400
13
5,200
$90
$468,00
0
Manage
ment
Consulti
ng
$ $ 50,000
46,000
$ $ 12,500
11,500
1,150 1,250
$ $ 13,750
12,650
10
15
$ $137,50
189,750
0
37,500
-0$ $175,00
189,750
0
70,000
75,900
$ $245,00
265,650
0
6,375
5,200
11,575
$5
$ 57,875
$ 93,000
$ 75,000
hour = rate
s
$45,625 9,12
5
= $5.00
2
.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Sales budget:
Box C
Box P
500,0 500,00
00
0
$.90
$1.30
$450, $650,0
000
00
$1,100,0
00
3.
Total
Box C
500,000
5,000
Box P
500,000
15,000
515,000
20,000
495,000
505,000
10,000
495,000
Raw-material budget:
PAPERBOARD
Production requirement (number
of boxes).....................................
Raw material required per box
(pounds).....................................
Raw material required for
production (pounds)..................
Add: Desired ending
raw-material inventory..............
McGraw-Hill/Irwin
Inc.
9-54
Box C
Box P
495,0 495,00
00
0
. .
3
7
Total
148,5 346,50
00
0
495,0
00
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
5,000
500,0
00
15,00
0
485,0
00
$.20
$
97,00
0
Box C Box P
495,0 495,00
00
0
.
.2
3
148,50 247,50
99,00
0
0
0
10,000
257,50
0
5,000
252,50
0
$.10
$
25,250
Total
$122,
250
Direct-labor budget:
Production requirements (number
of boxes)
Direct labor required per box
(hours)........................................
Direct labor required for
production (hours)
Direct-labor rate..........................
Total direct-labor cost.................
McGraw-Hill/Irwin
Inc.
9-56
Box C Box P
495,0 495,00
00
0
.
.
0025
005
1,23
7.5
2,475
Total
3,712.
5
$12
$44,5
50
5.
Manufacturing-overhead budget:
Indirect material................................................
Indirect labor....................................................
Utilities.............................................................
Property taxes..................................................
Insurance..........................................................
Depreciation.....................................................
Total overhead..................................................
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
$
10,500
50,000
25,000
18,000
16,000
29,000
$
148,500
7.
$
75,000
15,000
90,000
26,000
4,000
$
210,000
$105,
000
$1,100,
000
320,000
$
780,000
210,000
$
570,000
228,000
$
342,000
budgeted
manufactur
ingoverhead
volume
ofdirect
-laborhours
$148,500
= (495,000)(
.0025)+(495,000)(
.005)
McGraw-Hill/Irwin
Inc.
9-58
$148,500
= $40perhour
= 3,712.5
hours
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Box P
$.06
$.14
.02
.03
.03
.06
.10
___
$.21
.20
$.43
McGraw-Hill/Irwin
Inc.
9-60
Objective
Increase sales by 12%
($850,000 1.12 =
$952,000)
Increase before-tax income
by 15%
($105,000 1.15 =
$120,750)
Maintain long-term debt at
or below 16% of assets
($2,050,000 .16 =
$328,000)
Maintain cost of goods sold
at or below 70% of sales
($947,750 .70 =
$663,425)
3.
Attained/
Not
Attained
Not
attained
Calculations
($947,750$850,000)/
$850,000 = 11.5%
Attained
($120,750$105,000)/
$105,000 = 15%
Attained
$308,000/$2,050,000 = 15%
(rounded)
Attained
$574,725/$947,750 = 60.6%
(rounded)
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
out
his
duties
ethically,
by
not
communicating
unfavorable as well as favorable information, and by
engaging in an activity that appears to be a conflict of
interest.
Objectivity.
By
overstating
the
inventory
and
reclassifying certain costs, Winslow has violated the
objectivity standard.
He has failed to communicate
information fairly and objectively and has failed to
disclose all relevant information that would influence the
users understanding of the report.
McGraw-Hill/Irwin
Inc.
9-62
Sales budget:
20x0
Total sales..........
Cash sales*.........
Sales on account
20x1
Decem Januar
ber
y
$400,0 $440,
00
000
100,00 110,0
0
00
300,00 330,0
0
00
First
Februa March Quarte
ry
r
$484,0 $532, $1,456,
00
400
400
121,00 133,1 364,10
0
00
0
363,00 399,3 1,092,3
0
00
00
*25% of total
sales.
75% of total
sales.
2.
Cash receipts
budget:
20x1
Cash sales.......................
Cash collections from
credit
sales made during
current
month*.........................
Cash collections from
credit
sales made during
preceding
month..........................
Total cash receipts..........
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
First
Quarte
r
$
364,10
0
33,00 36,300
0
39,93
0
109,23
0
270,0 297,00
00
0
$413, $454,3
000
00
326,7 893,70
00
0
$499, $1,367,
730
030
McGraw-Hill/Irwin
Inc.
9-64
Purchases
budget:
20x0
Budgeted cost
of
goods sold. .
Add: Desired
ending
inventory........
Total goods
needed........
Less: Expected
beginning
inventory....
Purchases.......
20x1
March
First
Quarter
Decem
ber
January
Febru
ary
$280,0
00
$308,0
00
$338,
800
$372,6 $1,019,4
80
80
154,00
0
169,40
0
186,3
40
186,34
0*
$434,0
00
$477,4
00
$525,
140
$559,0 $1,205,8
20
20
140,00
0
$294,0
00
154,00
0
$323,4
00
169,4
00
$355,
740
186,34 154,000
0
**
$372,6 $1,051,8
80
20
186,340
*Since April's expected sales and cost of goods sold are the
same as the projections for March, the desired ending
inventory for March is the same as that for February.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Cash disbursements
budget:
20x1
Januar Februa March
y
ry
Inventory purchases:
Cash payments for
purchases
during the current
month*............................
Cash payments for
purchases
during the preceding
month.....................
Total cash payments for
inventory purchases.....
Other expenses:
Sales salaries...............
Advertising and
promotion.......................
Administrative salaries.
Interest on bonds**......
Property taxes**..........
Sales commissions.......
Total cash payments for
other ................expenses
Total cash disbursements
McGraw-Hill/Irwin
Inc.
9-66
First
Quarter
$129, $142,2
360
96
$149,
$
072 420,728
176,4 194,04
00
0
213,4 583,884
44
$305, $336,3
760
36
$362,
516
$1,004,
612
$
$
21,00 21,000
0
16,00 16,000
0
21,00 21,000
0
15,00
-00
-05,400
4,400
4,840
$
21,00
0
16,00
0
21,00
0
-0-
$
63,000
-0
5,324
5,400
14,564
$
$
77,40 68,240
0
$383, $404,5
160
76
$
$
63,32 208,964
4
$425,
$
840 1,213,5
48,000
63,000
15,000
76
*40% of current months' purchases [see requirement (3)].
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
0) (50,000
)
Change in cash balance
during
first quarter................
Cash balance, 1/1/x1.......
Cash balance, 3/31/x1.....
McGraw-Hill/Irwin
Inc.
9-68
$
(9,046)
35,000
$
25,954
2002 The McGraw-Hill Companies,
Solutions Manual
$
35,000
25,000
$
10,000
15,000
$
25,000
125,000
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
$(100,0
00)
$1,456,
400
1,019,4
80
$
436,920
$63,000
14,564
48,000
63,000
75,000
7,500
2,500
2,700
276,264
$
160,656
McGraw-Hill/Irwin
Inc.
9-70
$
107,500
160,656
50,000
$
218,156
$
25,954
359,370
186,340
676,000
$1,247,6
64
$
223,608
5,000
900
300,000
500,000
218,156
$
1,247,66
4
$
270,000
1,092,30
0
(1,002,93)
0
$
359,370
$
626,000
125,000
(75,000)
$
676,000
**Accounts payable, 12/31/x0..............................
Purchases [req. (3)]............................................
Cash payments for purchases [req. (4)]...............
Accounts payable, 3/31/x1..................................
McGraw-Hill/Irwin
Inc.
9-72
$
176,400
1,051,82
0
(1,004,61)
2
$
223,608
a n a n n u n a u l a l
r t c ep o qo q he r us urod t a ile rdn r e i t n mi t g y e
+
o o r 2 r cd p d o e e s r r t
q u u a n n i i t t y
1.
Annual cost of
ordering and
storing XL-20
2.
Economic order
quantity
(2)(annuare
l quiremet)(co
n
stperorder)
annualholdingcostperunit
(2)(4,800
($
) 150)
$4
360,000
3.
= 600
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
4,800
600
) + ( $4)
= 600 ( $150
2
2002 The McGraw-Hill Companies,
9-73
XL-20
= $2,400
Note that this cost does not include the actual cost of XL20 purchases (i.e., the quantity puchased multiplied by the
price).
4.
5.
annual
requiremen
t 4,800
=
=8
orderquantity
600
EO =
Q
=
(2)(annualrequiremen
t)(cost perorder)
annualholdingcostperunit
(2)(4,800
($
) 20)
$19.20
10,000 = 100
=
PROBLEM 9-49 (CONTINUED)
b.
annualrequiremen
t 4,800
=
orderquantity
100
= 48
PROBLEM 9-50 (20 MINUTES)
1.
McGraw-Hill/Irwin
Inc.
9-74
Order size
600
800
12
$1,80
0
$1,200
$900
200
300
400
Holding costs
($4 average inventory). .
Total annual costs (ordering
costs + holding costs).......
$800
$1,200
$1,600
$2,60
0
$2,400
$2,500
minim
um
2.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
McGraw-Hill/Irwin
Inc.
9-76
$3,500
$3,000
$2,500
Minimum
cost
$2,000
Total annual
cost
Holding costs
$1,500
$1000
Ordering costs
$500
200
400
600
800
Order quantity
1,000
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Reorder point:
Monthly usage =
=
annual
usage
12
4,800
= 400canisters
12
Usage
during 1- = 400 canisters
month
lead time
Reorder point = 400 canisters
The chemical XL-20 should be ordered in the economic
order quantity of 600 canisters when the inventory level
falls to 400 canisters. In the one month it takes to receive
the order, those 400 canisters will be used in production.
McGraw-Hill/Irwin
Inc.
9-78
Usage of
XL-20
400
200
Time
1 month
lead timeOrder
Denotes
1 month
received
Reorder point,
when
inventory equals
400
canisters. Order
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
$ 75.00
72.00
20.00
5.80
$172.80
changeinordering
cost
= changeinnumberoforders
=
$12,300
$11,900
9515
$400
80
= $5.00
Recognition of 16%
cost increase
= $5.00 1.16
= $5.80
McGraw-Hill/Irwin
Inc.
9-80
3.
5.35
3.00
1.15
10.50
$ 20.00
(2)(10,80)($
0 172.80)
$20.00
10,800
$172.80 432$20.00
+
432
2
= $4,320 + $4,320
= $8,640
5.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
EOQ =
=
b. Number of orders
per year
(2)(10,800
)($32.40)
$60.00
11,664
order
annualrequiremen
t 10,800
=
orderquantity
108
= 100 orders
c.
10,800
$32.40 108$60.00
+
108
2
= $3,240 + $3,240
= $6,480
McGraw-Hill/Irwin
Inc.
9-82
SOLUTIONS TO CASES
CASE 9-54 (60 MINUTES)
1.
2.
a.
b.
3.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
transactions.
McGraw-Hill/Irwin
Inc.
9-84
willingness
to
be
held
Recommendations
The
arbitrary
revision
of The
contingency
budget
approved budgets defeats the should be separate, over and
participatory process.
above
each
departments
original submission.
The division manager holds Managers should be involved
back a percentage of each in the revision of budgets.
budget for discretionary use.
Managers could submit a
budget
with
programs
at
different levels of funding.
Evaluation based on budget
performance
must
be
accompanied
with
intrinsic
rewards.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
McGraw-Hill/Irwin
Inc.
9-86
Sales budget:
S frame
unit
sales.........
S sales
price..........
S frame
sales
revenue.....
L frame
unit
sales.........
L sales
price..........
L frame
sales
revenue.....
20x0
4th
Quarte
r
2nd
Quarte
r
20x1
3rd
Quarte
r
1st
Quarte
r
4th
Quarte
r
Entire
Year
50,000
55,000
60,000
65,000
70,000
$10
$10
$10
$10
x
$10
250,00
0
$10
$
500,00
0
$
550,00
0
$
600,00
0
$
650,00
0
$ $2,500,
700,00
000
0
40,000
45,000
50,000
55,000
60,000
$15
$15
$15
$15
$15
$
600,00
0
$
675,00
0
$
750,00
0
$
825,00
0
210,00
0
$15
$ $3,150,
900,00
000
0
Total sales
revenue..... $1,100, $1,225, $1,350, $1,475, $1,600, $5,650,
000
000
000
000
000
000
Cash sales*.
Sales on
account....
$
440,00
0
$
490,00
0
$
540,00
0
$590,0
00
$640,0 $2,260,
00
000
660,00
0
735,00
0
810,00
0
885,00
0
960,00 3,390,0
0
00
McGraw-Hill/Irwin
Inc.
9-88
Cash sales...............
1st
Quarte
r
$
490,00
0
2nd
Quarte
r
$
540,00
0
20x1
3rd
Quarte
r
$
590,00
0
4th
Entire
Quarte
Year
r
$ $2,260,
640,00
000
0
Cash collections
from credit
sales made during
588,00 648,00 708,00 768,00 2,712,0
current
0
0
0
0
00
quarter*................
Cash collections
from credit
sales made during
previous
132,00 147,00 162,00 177,00 618,00
quarter .................
0
0
0
0
0
Total cash receipts. . $1,210, $1,335, $1,460, $1,585, $5,590,
000
000
000
000
000
*80% of current quarter's credit
sales.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
Production budget
20x0
4th
Quart
er
1st
Quart
er
2nd
Quart
er
20x1
3rd
4th
Quart Quart
er
er
Entir
e
Year
55,00
0
250,
000
12,00
0
61,00
0
67,00
0
15,0
00
265,
000
10,00
0
11,00
0
Units to be
51,00
produced..............
0
56,00
0
11,0
00
254,
000
45,00
0
210,
000
10,00
0
55,00
0
61,00 67,00
0
0
13,0
00
223,
000
S frames:
Sales (in units). . . 50,00
0
Add: Desired
ending
11,00
inventory..........
0
Total units needed
Less: Expected
beginning
inventory.............
L frames:
Sales (in units). . . 40,00
0
Add: Desired
ending
9,000
inventory..........
Total units needed
Less: Expected
beginning
inventory.............
49,00
0
9,000
8,000
Units to be
41,00
produced..............
0
McGraw-Hill/Irwin
Inc.
9-90
46,00
0
73,0
00
9,00
0
214,
000
Raw-material budget:*
Metal strips:
S frames to be
produced.......
Metal
quantity per
unit (ft.).........
Needed for S
frame
production.....
L frames to be
produced.......
Metal
quantity per
unit (ft.).........
Needed for L
frame
production.....
Total metal
needed
for
production; to
be purchased
(ft.)...................
Price per
foot...................
Cost of metal
strips to
be purchased:
20x0
4th
Quart
er
1st
Quart
er
51,00
0
56,00 61,000
0
66,00
0
71,00
0
254,00
0
102,0
00
112,0 122,00
00
0
132,0
00
142,0
00
508,00
0
41,00
0
46,00 51,000
0
56,00
0
61,00
0
214,00
0
123,0
00
138,0 153,00
00
0
168,0
00
183,0
00
642,00
0
225,0
00
250,0 275,00
00
0
300,0
00
325,0 1,150,0
00
00
$1
$1
$1
$1
$1
$225,
000
$250, $275,0
000
00
$300,
000
$325, $1,150,
000
000
2nd
Quarte
r
20x1
3rd
4th
Quart Quart
er
er
Entire
Year
$1
51,00
0
56,00 61,000
0
66,00
0
71,00
0
254,00
0
.2
5
.2
5
.2
5
.2
5
.2
5
.
25
12,75
0
14,00 15,250
0
16,50
0
17,75
0
63,500
41,00
0
46,00 51,000
0
56,00
0
61,00
0
214,00
0
.
5
. .5
5
.
5
. .
5
5
20,50
0
23,00 25,500
0
28,00
0
30,50
0
107,00
0
33,25
0
37,00 40,750
0
44,50
0
48,25
0
170,50
0
7,400
8,150
8,900
9,650
10,400
40,65
0
45,15 49,650
0
54,15
0
10,40
0
58,65
0
6,650
7,400
8,150
8,900
9,650
7,400
34,00
0
37,75 41,500
0
45,25
0
49,00
0
173,50
0
180,90
0
sheet.............
Cost of glass to
be
purchased......
Total rawmaterial
purchases
(metal
and glass)......
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
$8
$8
$8
$8
$8
$8
$272,
000
$302, $332,0
000
00
$362,
000
$392, $1,388,
000
000
$497,
000
$552, $607,0
000
00
$662,
000
$717, $2,538,
000
000
1st
Quart
er
Raw-material purchases:
Cash payments for
purchases during
the current
$441,
quarter ...................
600
Cash payments for
purchases during
the
preceding
quarter**.................
Total cash
payments for
raw-material
purchases................
Direct labor:
Frames produced
(S and L)............
4th
Quarte
r
Entire
Year
$
$
485,60 529,600
0
$ $2,030,
573,60
400
0
99,40
0
110,40 121,400
0
132,40
0
$541,
000
$
$
596,00 651,000
0
$ $2,494,
706,00
000
0
102,0
00
112,00 122,000
0
132,00
0
468,00
0
.1
.
1
.1
.1
11,200
12,200
13,200
46,800
$20
$20
$20
$20
$
$
224,00 244,000
0
$
264,00
0
$
936,00
0
Direct-labor
hours per
.
frame.................
1
Direct-labor hours
to be
10,20
used...................
0
Rate per directlabor
hour...................
$20
Total cash
payments for
$204,
direct labor.........
000
McGraw-Hill/Irwin
Inc.
9-94
2nd
Quarte
r
20 1
3rd
Quarter
463,60
0
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
McGraw-Hill/Irwin
Inc.
9-96
$
10,20
0
40,80
0
31,00
0
$
11,200
$
$
12,200 13,200
$
46,800
44,800
48,800
52,800
36,000
41,000
46,000
187,20
0
154,00
0
$
82,00
0
$
$
92,000 102,000
$
112,00
0
$
388,00
0
$100,
000
$
$
$
$
100,00 100,000 100,00 400,00
0
0
0
$927, $1,012, $1,097, $1,182, $4,218,
000
000
000
000
000
20x1
1st
2nd
3nd
4th
Entire
Quarter
Quarter
Quarter
Quarter
Year
$1,210,0 $1,335,0 $1,460,0 $1,585,0 $5,590,0
00
00
00
00
00
1,012,00 1,097,00 1,182,00 4,218,00
927,000
0
0
0
0
$
283,000
(50,000)
$
323,000
$
363,000
(50,000)
(50,000)
$ $1,372,0
403,000
00
(50,000) (200,000
)
1,000,00
0
(1,000,0
00)
(1,000,0
00)
(62,500)
$
109,500
Cash balance,
beginning of period
95,000
53,000
57,250
$
53,000
$
57,250
$
107,750
$
204,500
*$1,000,000 10%
$750,000 10%
$500,000 10%
$250,000 10%
McGraw-Hill/Irwin
9-98
107,750 95,000
= $25,000
= $18,750
= $12,500
= $6,250
$
204,500
FRAME-IT COMPANY
BUDGETED SCHEDULE OF COST OF GOODS MANUFACTURED AND SOLD
FOR THE YEAR ENDED DECEMBER 31, 20X1
Direct material:
Raw-material inventory, 1/1/x1...............
$
59,200
2,538,000
$2,597,20
0
83,200
$2,514,00
0
936,000
$
46,80
0
187,2
00
154,0
00
80,00
0
468,000*
$3,918,00
0
167,000
$4,085,00
0
235,000**
$3,850,00
0
468,000
.1
46,800
$10
$468,00
0
McGraw-Hill/Irwin
Inc.
9-100
Frames produced.................................
Manufacturing cost per unit..............
Total manufacturing cost.....................
Grand total..........................................
S
L
Frames Frames
254,000 214,000
$7
$10
$1,778, $2,140,
000
000
$3,918,000
S
L
Frames Frames
15,000
13,000
$7
$10
$
$
105,000 130,000
$235,000
Frames sold.........................................
Manufacturing cost per unit.................
Cost of goods sold...............................
Total cost of goods sold (S and L).........
8.
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
S
L
Frames Frames
250,000 210,000
$7
$10
$1,750, $2,100,
000
000
$3,850,000
FRAME-IT COMPANY
BUDGETED INCOME STATEMENT
2002 The McGraw-Hill Companies,
9-101
$5,650,
000
3,850,0
00
$1,800,
000
McGraw-Hill/Irwin
Inc.
9-102
$400,00
0
62,500
462,500
$1,337,
500
FRAME-IT COMPANY
BUDGETED STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 20X1
Retained earnings, 12/31/x0..............................
Add: Net income................................................
Deduct: Dividends.............................................
Retained earnings, 12/31/x1..............................
1
0.
$3,353,
800
1,337,5
00
200,000
$4,491,
300
FRAME-IT COMPANY
BUDGETED BALANCE SHEET
DECEMBER 31, 20X1
Cash.................................................................
Accounts receivable*.........................................
Inventory:
Raw material................................................
Finished goods..............................................
Plant and equipment (net of accumulated
depreciation)**..................................................
Total assets......................................................
Accounts payable.............................................
Common stock...................................................
Retained earnings.............................................
Total liabilities and stockholders' equity............
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
$
204,500
192,000
83,200
235,000
8,920,0
00
$9,634,
700
$
143,400
5,000,0
00
4,491,3
00
$9,634,
700
10,400 units $8
**$8,000,000 + $1,000,000 $80,000
McGraw-Hill/Irwin
Inc.
9-104
ISSUE 9-58
"BUDGET
PLANNING:
THE
NEXT
INFORMATIONWEEK.COM, SEPTEMBER
WHITING.
GENERATION,"
25, 2000, RICK
3.
Amway Corporation incorporated Adaytum Software
to project reducing travel expenses by 5% for its
executives. Next year Amway will use the software to
eventually link several hundred managers into the
budgeting process.
McGraw-Hill/Irwin
Inc.
9-106
ISSUE 9-59
"INEFFICIENT
BUDGETING
COSTS
COMPANIES
DEARLY,"
MANAGEMENT ACCOUNTING, FEBRUARY 2000, JOHN
FANNING.
The traditional budget and associated processes, such as
strategic planning, forecasting, monthly reviews and reward
processes, consume an enormous amount of management
time. If these processes are linked, rather than operating in
isolation, the overall level of control over the business can
be improved while eliminating, or substantially streamlining,
redundant or superfluous activities.
ISSUE 9-60
"THE REVOLUTION IN PLANNING," CFO, AUGUST 1999, RUSS
BANHAM.
There are fewer best practices that are directly transferable
from company to company than exist with re-engineering.
This article discusses re-engineering the planning process.
Planning pervades every corner of an organization and is
steeped in a tradition of negotiation. Planning is the most
political of all processes. Success in this area requires
patience, communication with employees, investment in new
data-gathering tools and time. It also requires finance to
evolve from being a reporter to being a facilitator of the
process. Companies that succeed in revamping this process
believe they can accurately assess strategic decisions based
on metrics intrinsic to the business.
Since this is a
continuous process that starts when senior management
defines business objectives and communicates them to the
operating lines, benefits begin immediately.
ISSUE 9-61
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e
McGraw-Hill/Irwin
Inc.
Managerial Accounting, 5/e