Chapter 9 Budgeting 1 Washington Sports offers 2 types of exams basic and extended Charge for basic is 65 extended is 160 They expect to perform 225 basic and 155 extended in July 255 basic and 230 extended in Aug and 120 basic and 65 extended in Sept Washington Company Sales Budget for the months July through Sept July 255 65 14 625 155 160 24 800 39 425 August 120 65 16 575 230 160 36 800 53 375 September 600 65 7 800 65 160 10 400 18 200 Quarter 65 39 000 450 160 72 000 111 000 of exams performed basic 225 Multiply by Price per exam Sales revenue basic of exams performed extended Multiply by Price per exam Sales revenue extended Total sales revenue 2 Total Sales Revenue 1st 181 000 2nd 218 000 3rd 257 000213 500 4th 193 000160 000 of Jars Sold Ringer anticipates selling 225 000 jars with total sales revenue of 266 000 in the 1st quarter of the yr following the yr given in the 154 500 184 500 table Ringer has a policy that the ending inventory of jars must be 25 of the following quarter s sales Prepare production budget Ringer Production Budget For the Quarts in the Upcoming Yr Year Quarter 1 712 500 154 500 56 250 46 125 768 750 200 625 38 625 38 625 162 000 730 125 Unit sales Plus Desired ending invent Total needed Less Beginning Inventory Units to produce 3 Beckett manuf A toy that requires 2 computer chips per toy The comp pays 1 for each chip Policy states that the ending inv Of chips should be at least 30 of the following month s production needs Stuffed animals to be produced Jan 5 200 Feb 4 200 Mar 4 900 Apr 4 400 Prepare Direct Materials Budget Quarter 2 184 500 53 375 237 875 46 125 191 750 Quarter 4 160 000 56 250 216 250 40 000 176 250 Quarter 3 213 500 40 000 253 500 53 375 200 125 Units to be produced Multiply by Quant of DM needed per unit Quantity needed for production Plus Desired end Inv Of DM Total quantity needed Less Beginning inv Of DM Quantity to purchase Multiply by Cost per unit Total cost of DM purchases 4 Units to be produced Jan 540 Feb 670 Mar 840 Each unit requires 2 0 hrs of DL DL workers are paid on avg 19 per hr How much DL will be budgeted in Jan Feb Mar and for the quarter in total Quarter Mar 14 300 4 900 2 2 28 600 9 800 2 640 2 640 31 240 12 440 3 120 2 940 28 120 9 500 1 00 1 00 9 500 28 120 Feb 4 200 2 8 400 2 940 11 340 2 520 8 820 1 00 8 820 Jan 5 200 2 10 400 2 520 12 920 3 120 9 800 1 00 9 800 Jan 540 2 0 1 080 19 20 520 Feb 670 2 0 1 340 19 25 460 Mar 840 2 0 1 680 19 31 920 Units to be produced Multiply by DL hr per unit Total hours required Multiply by DL cost per hr Total DL cost 5 Samson Corp has found 70 of its sales in any given month are credit sales while the remainder are cash Credit sales 20 received in the month of sale 40 received in the month after the sale 25 received two months after the sale 15 of the credit sales are never received Nov sales for last yr were 85 000 Dec were 115 000 Projected sales Jan 145 000 Feb 130 000 Mar 165 000 Prepare Cash Collections Budget The hrs required In Jan are 1080 Feb are 1340 Mar are 1680 Quarter 2 050 2 0 4 100 19 77 900 Jan 43 500 Feb 39 000 Mar 49 500 Quarter 132 000 38 500 36 900 39 000 33 700 43 700 7 200 199 000 61 600 23 100 18 200 20 300 109 200 36 400 40 600 32 200 60 375 25 375 20 125 14 875 363 175 134 375 117 925 110 875 Cash sales Collections on credit sales 20 Month of Sale 40 Month after 25 Two months after Total cash collections 6 A Surity Corp pays for 45 of its DM purchases in the month of purchase and the remainder the following month Last month s DM purchases were 70 000 while the comp anticipates 82 000 of DM purchases next month B Direct labor for the upcoming month is budgeted to be 39 000 and will be paid at the end of the upcoming moth C MOH is estimated to be 130 of DL cost each month and is paid in the month in which it is incurred This monthly estimate includes 17 000 of depreciation on the plant and equipment D Monthly operating expenses for next month are expected to be 48 000 which includes 2 700 of depreciation on office equipment and 1 600 of bad debt expense These monthly operating expenses are paid during the month in which they are incurred E Surity Corp will be making an estimated tax payment of 7 200 next month How much cash will be paid out next month Cash payments for DM 55 of last month s purchases 45 of next month s purchases Cash payments for DL Cash payments for MOH Cash payments for operating expenses Cash payments for taxes Total cash payments 7 Costa has 8 000 cash on hand May 1 The comp requires a min cash bal of 7 100 May cash collections are 548 420 Total cash payments for May are 567 220 Prepare a cash budget for May How much cash if any will Costa need to borrow by the end of May Beginning cash balance Plus Cash collections Total cash available Less Cash payments Ending cash bal before fin Min cash bal desired Ending cash bal before fin 8 At the beg Of the yr ABC has 500 picture frames in inv The comp wants to have 3 100 frames in inv At the end of the yr and plans to sell 5 400 frames during the yr How many frames must they produce 8 000 1 Which term describes the situation in which a manager intentionally over budgets expenses or under budgets revenue Budgetary slack 2 Benefits of budgeting include planning coordination and communication and benchmarking 3 The comprehensive planning document for the entire organization is called the master budget 4 Which of the following budgets must be prepared first as it serves as a basis for most other budgets Sales budget 5 The operating budgets culminate in the budgeted income statement 6 Which of the following are non cash expenses that will always result in differences b w the budgeted operating expenses for a given period and the budgeted cash payments for the same period Depreciation expense and bad debt expense 7 Which budget reflects the company s plans to invest in new property plant and …