ACCT 212 Connect Homework 7 Master Budgets Assignment solutions complete answers

ACCT 212 Connect Homework 7 Master Budgets Assignment solutions complete answers 

 

To prepare a master budget for April, May, and June, management gathers the following information.
 

a.   Sales for March total 23,000 units. Budgeted sales in units follow: April, 23,000; May, 15,300; June, 20,400; and July, 23,000. The product’s selling price is $24.00 per unit and its total product cost is $20.00 per unit.

b.   Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month’s ending materials inventory to equal 50% of the next month’s direct materials requirements. The March 31 raw materials inventory is 4,210 pounds. The budgeted June 30 ending raw materials inventory is 4,100 pounds. Each finished unit requires 0.50 pound of direct materials.

c.   Company policy calls for a given month’s ending finished goods inventory to equal 80% of the next month’s budgeted unit sales. The March 31 finished goods inventory is 18,400 units.

d.   Each finished unit requires 0.50 hour of direct labor at a rate of $15 per hour.

e.   The predetermined variable overhead rate is $2.80 per direct labor hour. Depreciation of $21,523 per month is the only fixed factory overhead item.

f.     Sales commissions of 10% of sales are paid in the month of the sales. The sales manager’s monthly salary is $3,100.

g.   Monthly general and administrative expenses include $13,000 for administrative salaries and 0.5% monthly interest on the long-term note payable.

h.   The company budgets 30% of sales to be for cash and the remaining 70% on credit. Credit sales are collected in full in the month following the sale (no credit sales are collected in the month of sale).

i.     All raw materials purchases are on credit, and accounts payable are solely tied to raw materials purchases. Raw materials purchases are fully paid in the next month (none are paid in the month of purchase).

j.     The minimum ending cash balance for all months is $50,000. If necessary, the company borrows enough cash using a loan to reach the minimum. Loans require an interest payment of 1% at each month-end (before any repayment). If the month-end preliminary cash balance exceeds the minimum, the excess will be used to repay any loans.

k.   Dividends of $11,000 are budgeted to be declared and paid in May.

l.     No cash payments for income taxes are budgeted in the second calendar quarter. Income tax will be assessed at 35% in the quarter and budgeted to be paid in the third calendar quarter.

m. Equipment purchases of $100,000 are budgeted for the last day of June.

 

Karim Corporation requires a minimum $8,500 cash balance. Loans taken to meet this requirement cost 2% interest per month (paid at the end of each month). Any preliminary cash balance above $8,500 is used to repay loans at month-end. The cash balance on July 1 is $8,900, and the company has no outstanding loans. Budgeted cash receipts (other than for loans received) and budgeted cash payments (other than for loan or interest payments) follow.

 

Jasper Company has 62% of its sales on credit and 38% for cash. All credit sales are collected in full in the first month following the sale. The company budgets sales of $533,000 for April, $543,000 for May, and $568,000 for June. Total sales for March are $302,300.

 

Kayak requires a minimum cash balance of $30,000 at each month-end. Loans taken to meet this requirement charge 1%, interest per month, paid at each month-end. The interest is computed based on the beginning balance of the loan for the month. Any preliminary cash balance above $30,000 is used to repay loans at month-end. The company has a cash balance of  $30,000 and a loan balance of $60,000 at January 1.

 

MCO Leather manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $5 per pound and 0.7 direct labor hour at a rate of $14 per hour. Variable overhead is budgeted at a rate of $3 per direct labor hour. Budgeted fixed overhead is $16,000 per month. The company’s policy is to end each month with direct materials inventory equal to 20% of the next month’s direct materials requirement. At the end of August the company had 1,920 pounds of direct materials in inventory. The company’s production budget reports the following.

 

Addison Company budgets production of 2,440 units during the second quarter. Information on its direct labor and its variable and fixed overhead is as follows:

 

Rida Incorporated is preparing its direct materials budget for the second quarter. It budgets production of 247,000 units in the second quarter and 59,500 units in the third quarter. Each unit requires 0.50 pound of direct material, priced at $182 per pound. Starting with the second quarter, the company plans to end each quarter with an ending inventory of materials equal to 40% of next quarter’s budgeted direct materials required. Raw material inventory is 49,400 pounds at the beginning of the second quarter.

 

Ruiz Company provides the following budgeted sales for the next four months. The company wants to end each month with ending finished goods inventory equal to 30% of next month’s budgeted unit sales. Finished goods inventory on April 1 is 162 units. Prepare a production budget for the months of April, May, and June.

 

Ruiz Company provides the following budgeted sales for the next four months. The company wants to end each month with ending finished goods inventory equal to 20% of next month’s budgeted unit sales. Finished goods inventory on April 1 is 108 units. Prepare a production budget for the months of April, May, and June.

 

Rida Incorporated is preparing its direct materials budget for the second quarter. It budgets production of 244,000 units in the second quarter and 56,500 units in the third quarter. Each unit requires 0.60 pound of direct material, priced at $179 per pound. Starting with the second quarter, the company plans to end each quarter with an ending inventory of materials equal to 40% of next quarter’s budgeted direct materials required. Raw material inventory is 58,560 pounds at the beginning of the second quarter.

Prepare a direct materials budget for the second quarter. (Enter "per unit" answers in two decimal places.)

 

Addison Company budgets production of 2,400 units during the second quarter. Information on its direct labor and its variable and fixed overhead is as follows:
 

Direct labor
Each finished unit requires 4 direct labor hours, at a cost of $9 per hour.
Variable overhead
Budgeted at the rate of $11 per direct labor hour.
Fixed overhead
Budgeted at $450,000 per quarter.
 
1. Prepare a direct labor budget.
2. Prepare a factory overhead budget.

 

MCO Leather manufactures leather purses. Each purse requires 2 pounds of direct materials at a cost of $3 per pound and 0.7 direct labor hour at a rate of $16 per hour. Variable overhead is budgeted at a rate of $2 per direct labor hour. Budgeted fixed overhead is $18,000 per month. The company’s policy is to end each month with direct materials inventory equal to 20% of the next month’s direct materials requirement. At the end of August the company had 1,880 pounds of direct materials in inventory. The company’s production budget reports the following.
 

Production Budget
September
October
November
Units to produce
4,700
6,800
6,500
 
(1) Prepare direct materials budgets for September and October.
(2) Prepare direct labor budgets for September and October.
(3) Prepare factory overhead budgets for September and October.

 

Kayak Company budgeted the following cash receipts (excluding cash receipts from loans received) and cash payments (excluding cash payments for loan principal and interest payments) for the first three months of next year.
 

 
Cash Receipts
Cash payments
January
$ 524,000
$ 473,000
February
412,500
361,500
March
457,000
528,000
 
Kayak requires a minimum cash balance of $50,000 at each month-end. Loans taken to meet this requirement charge 1%, interest per month, paid at each month-end. The interest is computed based on the beginning balance of the loan for the month. Any preliminary cash balance above $50,000 is used to repay loans at month-end. The company has a cash balance of  $50,000 and a loan balance of $100,000 at January 1.
 
Prepare monthly cash budgets for January, February, and March. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign.)

 

Jasper Company has 59% of its sales on credit and 41% for cash. All credit sales are collected in full in the first month following the sale. The company budgets sales of $532,000 for April, $542,000 for May, and $567,000 for June. Total sales for March are $304,100.

Prepare a schedule of cash receipts from sales for April, May, and June.

 

Karim Corporation requires a minimum $8,700 cash balance. Loans taken to meet this requirement cost 2% interest per month (paid at the end of each month). Any preliminary cash balance above $8,700 is used to repay loans at month-end. The cash balance on July 1 is $9,100, and the company has no outstanding loans. Budgeted cash receipts (other than for loans received) and budgeted cash payments (other than for loan or interest payments) follow.
 

 
July
August
September
Cash receipts
$ 24,700
$ 32,700
$ 40,700
Cash payments
29,050
30,700
32,700

Prepare a cash budget for July, August, and September. (Negative balances and Loan repayment amounts (if any) should be indicated with minus sign. Round your final answers to the nearest whole dollar.)

 

Use the following information to prepare the September cash budget for PTO Company. Ignore the “Loan activity” section of the budget.

a.   Beginning cash balance, September 1, $45,000.

b.   Budgeted cash receipts from September sales, $263,000.

c.   Direct materials are purchased on credit. Purchase amounts are August (actual), $72,000; and September (budgeted), $105,000. Payments for direct materials follow: 65% in the month of purchase and 35% in the first month after purchase.

d.   Budgeted cash payments for direct labor in September, $30,000.

e.   Budgeted depreciation expense for September, $3,500.

f.     Budgeted cash payment for dividends in September, $59,000.

g.   Budgeted cash payment for income taxes in September, $10,500.

h.   Budgeted cash payment for loan interest in September, $1,200.

 

Render CPA is preparing direct labor budgets for the current year. The partners budget billable hours for the year as follows.

 

Data entry
1,100
hours
Auditing
2,480
hours
Tax
2,080
hours
Consulting
345
hours
 
The company budgets $11 per hour to data-entry clerks, $42 per hour to audit personnel, $58 per hour to tax personnel, and $58 per hour to consulting personnel.
 
Prepare a direct labor budget for this service company for the year.

 

The management of Zigby Manufacturing prepared the following balance sheet for March 31.
 

ZIGBY MANUFACTURING
Balance Sheet
March 31
Assets
 
 
Liabilities and Equity
 
 
 
 
 
Cash
 
$ 42,000
Liabilities
 
 
 
 
 
Accounts receivable
 
378,560
Accounts payable
$ 211,300
 
 
 
 
Raw materials inventory
 
107,200
Loan payable
14,000
 
 
 
 
Finished goods inventory
 
349,440
Long-term note payable
500,000
$ 725,300
 
 
 
Equipment
$ 604,000
 
Equity
 
 
 
 
 
Less: Accumulated depreciation
152,000
452,000
Common stock
337,000
 
 
 
 
 
 
 
Retained earnings
266,900
603,900
 
 
 
Total assets
 
$ 1,329,200
Total liabilities and equity
 
$ 1,329,200
 
 
 
 
To prepare a master budget for April, May, and June, management gathers the following information.
 

a.   Sales for March total 20,800 units. Budgeted sales in units follow: April, 20,800; May, 21,600; June, 20,900; and July, 20,800. The product’s selling price is $26.00 per unit and its total product cost is $21.00 per unit.

b.   Raw materials inventory consists solely of direct materials that cost $20 per pound. Company policy calls for a given month’s ending materials inventory to equal 50% of the next month’s direct materials requirements. The March 31 raw materials inventory is 5,360 pounds. The budgeted June 30 ending raw materials inventory is 4,200 pounds. Each finished unit requires 0.50 pound of direct materials.

c.   Company policy calls for a given month’s ending finished goods inventory to equal 80% of the next month’s budgeted unit sales. The March 31 finished goods inventory is 16,640 units.

d.   Each finished unit requires 0.50 hour of direct labor at a rate of $17 per hour.

e.   The predetermined variable overhead rate is $3.00 per direct labor hour. Depreciation of $21,100 per month is the only fixed factory overhead item.

f.     Sales commissions of 8% of sales are paid in the month of the sales. The sales manager’s monthly salary is $3,200.

g.   Monthly general and administrative expenses include $14,000 for administrative salaries and 0.7% monthly interest on the long-term note payable.

h.   The company budgets 30% of sales to be for cash and the remaining 70% on credit. Credit sales are collected in full in the month following the sale (no credit sales are collected in the month of sale).

i.     All raw materials purchases are on credit, and accounts payable are solely tied to raw materials purchases. Raw materials purchases are fully paid in the next month (none are paid in the month of purchase).

j.     The minimum ending cash balance for all months is $42,000. If necessary, the company borrows enough cash using a loan to reach the minimum. Loans require an interest payment of 1% at each month-end (before any repayment). If the month-end preliminary cash balance exceeds the minimum, the excess will be used to repay any loans.

k.   Dividends of $12,000 are budgeted to be declared and paid in May.

l.     No cash payments for income taxes are budgeted in the second calendar quarter. Income tax will be assessed at 35% in the quarter and budgeted to be paid in the third calendar quarter.

m. Equipment purchases of $100,000 are budgeted for the last day of June.

 
Required:
Prepare the following budgets for the months of April, May, and June:

1. Sales budget.
2. Production budget.
3. Direct materials budget.
4. Direct labor budget.
5. Factory overhead budget.
6. Selling expense budget.
7. General and administrative expense budget.
8. Schedule of cash receipts.
9. Schedule of cash payments for direct materials.
10. Cash budget.
11. Budgeted income statement for entire second quarter (not monthly).
12. Budgeted balance sheet at June 30.