Introduction to Management Accounting Solutions Manual

WASATCH MANUFACTURING
Master Budget
Sales Budget
December January February March April May
Unit sales 8,444 8,900 9,900 9,200 9,500 8,600
Unit selling price $ 9 $ 9 $ 9 $ 9 $ 9 $ 9
Total sales Revenue $ 76,000 $ 80,100 $ 89,100 $ 82,800 $ 85,500 $ 77,400

Req. 1

Cash Collections Budget

January February March Quarter
Cash sales $20,025 $22,275 $20,700 $63,000
Credit sales $ 57,000.00 $ 60,075.00 $ 66,825.00 $183,900
Total collections $77,025 $82,350 $87,525 $246,900

Req. 2

Production Budget
January February March Quarter
Unit sales 8,444 8,900 9,900 27,244
Plus: Desired ending inventory 1,335 1,485 1,425 1,425
Total needed 9,779 10,385 11,325 28,669
Less: Beginning inventory 1,267 1,335 1,485 1,267
Units to produce 8,513 9,050 9,840 27,403

Req. 3

Direct Materials Budget

January February March Quarter
Units to be produced 8,513 9,050 9,840 27,403
Multiply by: Quantity of DM needed per unit 2 2 2 2
Quantity of DM needed for production 17,026 18,100 19,680 54,806
Plus: Desired ending inventory of DM 1,810 1,968 5,481 5,481
Total quantity of DM needed 18,836 20,068 25,161 60,286
Less: Beginning inventory of DM 1,703 1,810 1,968 1,703
Quantity of DM to purchase 17,133 18,258 23,193 58,584
Multiply by: Cost per pound $ 1.50 $ 1.50 $ 1.50 $ 1.50
Total cost of DM purchases $25,700 $27,387 $34,789 $87,875

April May
Unit Sales 9,500 8,600
Plus: Desired End Inventory 1,290
Total Needed 10,790
Less: Beginning Inventory 1,425
Units to produce 9,365
DM needed per unit 2
Quantity of DM needed for production 18,730

Req. 4

Cash Payments for Direct Material Purchases Budget

January February March Quarter
December purchases (From AP) $22,000 $22,000
January purchases $7,709.85 $17,990 $25,700
February purchases $8,216 $19,171 $27,387
March purchases $10,437 $10,437
Total disbursements $29,710 $26,206 $29,608 $85,523

Req. 5

Cash Payments for Direct Labor Costs

January February March Quarter
Direct Labor $3,320 $3,530 $3,838 $10,687

Chapter 9: The Master Budget and Responsibility Accounting 1

Introduction to Management Accounting Solutions Manual

Req. 6

Cash Payments for Manufacturing Overhead Budget

January February March Quarter
Rent (fixed) $6,500 $6,500 $6,500 $19,500
Other MOH (fixed) $2,100 $2,100 $2,100 $6,300
Variable manufacturing overhead $ 11,918 $ 12,670 $ 13,776 $38,364
Total disbursements $20,518 $21,270 $22,376 $64,164

Req. 7

Cash Payments for Operating Expenses Budget

January February March Quarter
Variable operating expenses $ 10,680 $ 11,880 $ 11,040 $ 33,600
Fixed operating expenses $ 1,400 $ 1,400 $ 1,400 $ 4,200
Total disbursements $ 12,080 $ 13,280 $ 12,440 $ 37,800

Req. 8

Combined Cash Budget

January February March Quarter
Cash balance, beginning $6,000 $5,397 $6,662 $6,000
Plus: cash collections (req. 1) 77,025 82,350 87,525 246,900
Total cash available 83,025 87,747 94,187 252,900
Less cash payments:
DM purchases (req. 4) 29,710 26,206 29,608 85,523
Direct labor (req. 5) 3,320 3,530 3,838 10,687
MOH costs (req 6) 20,518 21,270 22,376 64,164
Operating expenses (req 7) 12,080 13,280 12,440 37,800
Tax payment 10,800
Equipment purchases 15000 6,000 4000 25,000
Total cash payments 80,628 81,085 72,261 223,174
Ending cash before financing 2,397 6,662 21,926 29,726
Financing:
Borrowings 3,000 3,000
Repayments -3000 -3,000
Interest -135 -135
Total financing 3,000 0 -3,135 -135
Cash balance, ending $5,397 $6,662 $18,791 $29,591

Req. 9

Budgeted Manufacturing Cost per Unit

Direct materials cost per unit $3.00
Direct labor cost per unit $0.39
Variable MOH cost per unit $1.40
Fixed MOH per unit (given in problem) $0.80
Cost of manufacturing each unit $5.59

Req. 10

Damon Manufacturing
Budgeted Income Statement
For the Quarter Ended March 31
Sales $ 252,000
Cost of goods sold 152,296
Gross profit 99,704
Operating expenses 37,800
Depreciation expense 5,200
Operating income 56,704
Less: interest expense -135
Less: provision for income tax 15,839
Net income $40,729

Chapter 9: The Master Budget and Responsibility Accounting 2