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Budgeted Income Statement. 16. (L.O. 4) The budgeted income statement is the important end-product in preparing operating budgets. This budget indicates the ...
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Budgeting Basics
Benefits of Budgeting
Essentials of Effective Budgeting
The Master Budget
b. Financial budgets focus primarily on the cash resources needed to fund expected operations and planned capital expenditures.
Budgeted Income Statement
Cash Budget
Budgeting in Nonmanufacturing Companies
Direct Materials Budget For the Month Ending January 31, 2014
Units to be produced ....................................................... 4, Direct materials per unit .................................................. X 2 Total pounds required for production ............................ 8, Add: Desired ending inventory (25% X 5,000 X 2) ....... 2, Total materials required .................................................. 10, Less: Beginning materials inventory (4,000 X 2 X 25%) .................................................. 2, Direct materials purchases ............................................. 8, Cost per pound ................................................................ X $ Total cost of direct materials purchases........................ $51,
Direct Labor Budget For the Six Months Ending June 30, 2014
Quarter (^) Six 1 2 Months Units to be produced Direct labor time (hours) per unit Total required direct labor hours Direct labor cost per hour Total direct labor cost
Manufacturing Overhead Budget For the Year Ending December 31, 2014
Quarter 1 2 3 4 Year Variable costs Fixed costs Total manufacturing overhead
$20, 40, $60,
$25, 40, $65,
$30, 40, $70,
$35, 40, $75,
$110, 160, $270,
Selling and Administrative Expense Budget For the Year Ending December 31, 2014
Quarter 1 2 3 4 Year Variable expenses Fixed expenses Total selling and administrative expenses
$22, 40,
$62,
$26, 40,
$66,
$30, 40,
$70,
$34, 40,
$74,
$112, 160,
$272,
Budgeted Income Statement For the Year Ending December 31, 2014
Sales .................................................................................. $2,250, Cost of goods sold (50,000 X $25) ................................... 1,250, Gross profit ....................................................................... 1,000, Selling and administrative expenses............................... 300, Income before income taxes ............................................ 700, Income tax expense .......................................................... 210, Net income ........................................................................ $ 490,
For the Six Months Ending June 30, 2014
Quarter (^) Six 1 2 Months
Expected unit sales ........................................... Add: Desired ending finished goods units ........................................................ Total required units ........................................... Less: Beginning finished goods units ............ Required production units ................................
PROBLEM 9-1A (Continued)
GLENDO FARM SUPPLY COMPANY Direct Materials Budget — Gumm For the Six Months Ending June 30, 2014
Quarter (^) Six 1 2 Months
Units to be produced .................................... Direct materials per unit ............................... Total pounds needed for production .......... Add: Desired ending direct materials (pounds) ............................................. Total materials required ............................... Less: Beginning direct materials (pounds) ............................................ Direct materials purchases .......................... Cost per pound .............................................. Total cost of direct materials purchases ..................................................
37, X 4 148,
10, 158,
9, 149, X $3.
$566,
45, X 4 180,
13, 193,
10, 183, X $3.
$695,400 $1,261,
Direct Labor Budget For the Six Months Ending June 30, 2014
Quarter Six 1 2 Months
Units to be produced ............................ Direct labor time (hours) per unit ........ Total required direct labor hours ......... Direct labor cost per hour .................... Total direct labor cost ..........................
(a) DELEON INC. Sales Budget For the Year Ending December 31, 2014
JB 50 JB 60 Total Expected unit sales ............. Unit selling price .................. Total sales ............................
(b) DELEON INC. Production Budget For the Year Ending December 31, 2014
JB 50 JB 60 Expected unit sales .............................. Add: Desired ending finished goods units................................ Total required units .............................. Less: Beginning finished goods units ........................................... Required production units ...................
PROBLEM 9-2A (Continued)
(c) DELEON INC. Direct Materials Budget For the Year Ending December 31, 2014
JB 50 JB 60 Total Units to be produced ...................... Direct materials per unit ................. Total pounds needed for production.................................... Add: Desired ending direct materials (pounds) ............... Total materials required ................. Less: Beginning direct materials (pounds) ............... Direct materials purchases ............ Cost per pound ................................ Total cost of direct materials purchases ...................................
405, X 2
810,
30, 840,
40, 800, X $
$2,400,
205, X 3
615,
10, 625,
15, 610, X $
$2,440,000 $4,840,
(d) DELEON INC. Direct Labor Budget For the Year Ending December 31, 2014
JB 50 JB 60 Total Units to be produced ...................... Direct labor time (hours) per unit ................................................ Total required direct labor hours ............................................ Direct labor cost per hour .............. Total direct labor cost .....................
405,
X.
162, X $ $1,944,
205,
X.
123, X $ $1,476,
650,
—
301, X $ $3,420,
(a) MARSH INDUSTRIES Sales Budget For the Year Ending December 31, 2014
Plan A Plan B Expected unit sales .................................... Unit selling price ........................................ Total sales ...................................................
(2) (3)
(b) MARSH INDUSTRIES Production Budget For the Year Ending December 31, 2014
Plan A Plan B Expected unit sales .............................................. Add: Desired ending finished goods units ....... Total required units .............................................. Less: Beginning finished goods units ............... Required production units ...................................
(1)
(c) Variable costs = $4.30 per unit ($1.80 + $1.30 + $1.20) for both plans.
Plan A Plan B Total variable costs Total fixed costs Total costs (a)
Total units (b)
Unit cost (a) ÷ (b)
$3,087, 1,895, $4,982,
718,
$6.
(718,000 X $4.30) $3,964, 1,895, $5,859,
922,
$6.
(922,000 X $4.30)
The difference is due to the fact that fixed costs are spread over a larger number of units (204,000) in Plan B.
PROBLEM 9-3A (Continued)
(d) Gross Profit
Plan A Plan B Sales Cost of goods sold Gross profit
$6,048, 4,996, $1,051,
(720,000 X $6.94)
$6,750, 5,724, $1,026,
(900,000 X $6.36)
Plan A should be accepted because it produces a higher gross profit than Plan B.
PROBLEM 9-4A (Continued)
(b) COLTER COMPANY Cash Budget For the Two Months Ending February 28, 2014
January February Beginning cash balance................................... Add: Receipts Collections from customers ............. [See Schedule (1)] Notes receivable ................................ Sale of securities ............................... Total receipts ............................. Total available cash ..........................................
Less: Disbursements Direct materials ................................ [See Schedule 2] Direct labor ....................................... Manufacturing overhead ................. Selling and administrative expenses* ..................................... Cash dividend .................................. Total disbursements ................ Excess (deficiency) of available cash over cash disbursements ............................ Financing Add: Borrowings ............................................ Less: Repayments ........................................... Ending cash balance ........................................
*Selling and administrative expenses less $1,000 depreciation.
(a) LITWIN COMPANY San Miguel Store Merchandise Purchases Budget For the Months of May and June, 2014
May June Budgeted cost of goods sold .......................... Add: Desired ending merchandise inventory .... Total .................................................................. Less: Beginning merchandise inventory ........ Required merchandise purchases ..................
(2)
(4)
(1) (3)
Budgeted Income Statement For the Year Ending December 31, 2014
Sales (8,000 X $32) ................................................... $256, Cost of goods sold Finished goods inventory, January 1 ............. $ 15, Cost of goods manufactured ($62,500 + $50,900 + $48,600) ...................... 162, Cost of goods available for sale...................... 177, Finished goods inventory, December 31 (3,000 X $18) ................................................. 54, Cost of goods sold ................................... 123, Gross profit .............................................................. 133, Selling and administrative expenses...................... 75, Income from operations .......................................... 58, Interest expense....................................................... 3, Income before income taxes ................................... 54, Income tax expense (40%) ...................................... 21, Net income ............................................................... $ 32,
PROBLEM 9-6A (Continued)
KRAUSE INDUSTRIES Budgeted Balance Sheet December 31, 2014
Assets Current assets Cash ...................................................................... $ 6, Accounts receivable ($76,800 X 40%) ................. 30, Finished goods inventory (3,000 units X $18) ............................................ 54, Total current assets ...................................... $91,
Property, plant, and equipment Equipment ($40,000 + $9,000) .............................. $49, Less: Accumulated depreciation ($10,000 + $4,000) ...................................... 14,000 35, Total assets ................................................... $126,
Liabilities and Stockholders’ Equity Liabilities Notes payable ($25,000 – $8,000) ........................ $17, Accounts payable ($8,500* + $6,500) .................. 15, Income taxes payable .......................................... 5, Total liabilities ............................................... $ 37,
Stockholders’ equity Common stock ..................................................... $40, Retained earnings ($25,000 + $32,700 – $8,000) ............................ 49, Total stockholders’ equity ........................... 89, Total liabilities and stockholders ’ equity ......................................................... $126,
*$17,000 X 50%