CASE 9-56 (120 MINUTES) 1.
Sales budget: 20x0 4th Quarter
S frame unit sales................ sales...................... ...... v S sales price pr ice .......
v
50,000 $10
1st Quarter
v
55,000 $10
2nd Quarter
v
60,000 $10
20x1 3rd Quarter
4th Quarter
65,000 $10
70,000 x $10
250,000 v $10
v
Entire Year
S frame sales revenue ............... ...................
$ 500,000
$ 550,000
$ 600,000
$ 650,000
$ 700,000
$2,500,000
L frame unit sales................ sales...................... ...... v L sales price........ price........
40,000 $15
45,000 $15
50,000 $15
55,000 $15
60,000 $15
210,000 v $15
L frame sales revenue ............... ...................
v
v
v
v
v
$ 600,000
$ 675,000
$ 750,000
$ 825,000
$ 900,000
$3,150,000
Total sales revenue ............... ................... $1,100,000
$1,225,000
$1,350,000
$1,475,000
$1,600,000
$5,650,000
$ 440,000
$ 490,000
$ 540,000
$590,000
$640,000
$2,260,000
660,000
735,000
810,000
885,000
960,000
3,390,000
Cash sales* ............ ............ Sales on account ............... ................. *40% of total sales. 60% of total sales.
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CASE 9-56 (CONTINUED) 2.
Cash receipts budget: 20x1 3rd Quarter $ 590,000
1st 2nd 4th Quarter Entire Quarter Quarter Year Cash sales .................................... $ 490,000 $ 540,000 $ 640,000 $2,260,000 Cash collections from credit sales made during current quarter* ...................................... 588,000 648,000 708,000 768,000 2,712,000 Cash collections from credit sales made during previous quarter ....................................... 132,000 147,000 162,000 177,000 618,000 Total cash receipts ........................ $1,210,000 $1,335,000 $1,460,000 $1,585,000 $5,590,000 *80% of current quarter's credit sales. 20% of previous quarter's credit sales.
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CASE 9-56 (CONTINUED) 3.
Production budget
S frames: Sales (in units) ................... Add: Desired ending inventory.......................... Total units needed ................ Less: Expected beginning inventory............ Units to be produced............. L frames: Sales (in units) ................... Add: Desired ending inventory.......................... Total units needed ................ Less: Expected beginning inventory............ Units to be produced.............
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20x0 4th Quarter
1st Quarter
2nd Quarter
20x1 3rd Quarter
50,000
55,000
60,000
65,000
70,000 250,000
11,000 61,000
12,000 67,000
13,000 73,000
14,000 79,000
15,000 15,000 85,000 265,000
10,000 51,000
11,000 56,000
12,000 61,000
13,000 66,000
14,000 11,000 71,000 254,000
40,000
45,000
50,000
55,000
60,000 210,000
9,000 49,000
10,000 55,000
11,000 61,000
12,000 67,000
13,000 13,000 73,000 223,000
8,000 41,000
9,000 46,000
10,000 51,000
11,000 56,000
12,000 9,000 61,000 214,000
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Entire Year
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CASE 9-56 (CONTINUED) 4.
Raw-material budget:* 20x0 4th Quarter
Metal strips: S frames to be produced ....................... 51,000 v Metal quantity per unit (ft.) .......................... v 2 Needed for S frame production ..................... 102,000 L frames to be produced ....................... 41,000 v Metal quantity per unit (ft.) .......................... v 3 Needed for L frame production ..................... 123,000 Total metal needed for production; to be purchased (ft.).......... 225,000 v Price per foot ................ v $1 Cost of metal strips to be purchased: ............... $225,000
1st Quarter
2nd Quarter
56,000 2
v
20x1 3rd Quarter
4th Quarter
66,000
71,000
61,000 v
2
2
v
v
2
Entire Year
254,000 2
v
112,000
122,000
132,000
142,000
508,000
46,000
51,000
56,000
61,000
214,000
v
3
v
3
v
3
v
3
3
v
138,000
153,000
168,000
183,000
642,000
250,000 v $1
275,000 v $1
300,000 v $1
325,000 v $1
1,150,000 v $1
$250,000
$275,000
$300,000
$325,000
$1,150,000
*Raw-material budget continued on next page.
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CASE 9-56 (CONTINUED) Glass sheets: ................... S frames to be produced ....................... 51,000 v Glass quantity per unit (sheets) .................. v .25 Needed for S frame production ..................... 12,750 L frames to be produced ....................... 41,000 v Glass quantity per .5 unit (sheets) .................. v Needed for L frame production ..................... 20,500 Total glass needed for production (sheets) ......................... 33,250 Add: Desired ending inventory........................ 7,400 Total glass needs............. 40,650 Less: Expected beginning inventory ...... 6,650 Glass to be purchased ..................... 34,000 v Price per glass sheet ............................. v $8 Cost of glass to be purchased ..................... $272,000 Total raw-material purchases (metal and glass) ..................... $497,000
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56,000 v
v
.25
66,000 v
.25
71,000 v
.25
254,000 .25
v
14,000
15,250
16,500
17,750
63,500
46,000
51,000
56,000
61,000
214,000
v
v
.25
61,000
.5
v
.5
v
.5
v
.5
.5
v
23,000
25,500
28,000
30,500
107,000
37,000
40,750
44,500
48,250
170,500
8,150 45,150
8,900 49,650
9,650 54,150
10,400 58,650
10,400 180,900
7,400
8,150
8,900
9,650
7,400
37,750
41,500
45,250
49,000
173,500
$8
v
$8
v
$8
v
$8
$8
v
$302,000
$332,000
$362,000
$392,000
$1,388,000
$552,000
$607,000
$662,000
$717,000
$2,538,000
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CASE 9-56 (CONTINUED) 5. Cash disbursements budget:*
Raw-material purchases: Cash payments for purchases during the current quarter ............. Cash payments for purchases during the preceding quarter** ............ Total cash payments for raw-material purchases ...... Direct labor: Frames produced (S and L) ............................. v Direct-labor hours per frame ................................... Direct-labor hours to be used .................................... v Rate per direct-labor hour ..................................... Total cash payments for direct labor ..........................
1st Quarter
2nd Quarter
20v1 3rd Quarter
$441,600
$ 485,600
99,400
4th Quarter
Entire Year
$ 529,600
$ 573,600
$2,030,400
110,400
121,400
132,400
463,600
$541,000
$ 596,000
$ 651,000
$ 706,000
$2,494,000
102,000
112,000
122,000
132,000
468,000
.1
v
10,200 v
$20
$204,000
.1
v
11,200 v
$20
$ 224,000
.1
v
v
12,200 v
$20
$ 244,000
.1 13,200
v
$20
$ 264,000
.1
v
46,800 $20
v
$ 936,000
*Cash disbursements budget continued on next page. 80% of current quarter¶s purchases **20% of previous quarter¶s purchases
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CASE 9-56 (CONTINUED) Manufacturing overhead: Indirect material ....................... Indirect labor ............................ Other ........................................ Total cash payments for manufacturing overhead .............................
$ 10,200 40,800 31,000
$
$ 82,000
$ 92,000
$ 102,000
$ 112,000
$ 388,000
Cash payments for selling and administrative expenses............................. Total cash disbursements............
$100,000 $927,000
$ 100,000 $1,012,000
$ 100,000 $1,097,000
$ 100,000 $1,182,000
$ 400,000 $4,218,000
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11,200 44,800 36,000
$
12,200 48,800 41,000
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$
13,200 52,800 46,000
$
46,800 187,200 154,000
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CASE 9-56 (CONTINUED) 6.
Summary cash budget:
Cash receipts [from req. (2)] .............. Less: Cash disbursements [from req. (5)] ................................. Change in cash balance due to operations ...................................... Payment of dividends ........................ Proceeds from bank loan (1/2/x1) ..... Purchase of equipment...................... Quarterly installment on loan principal ......................................... Quarterly interest payment* ............... Change in cash balance during the period....................................... Cash balance, beginning of period Cash balance, end of period .............
1st Quarter $1,210,000
2nd Quarter $1,335,000
20x1 3nd Quarter $1,460,000
927,000
1,012,000
1,097,000
1,182,000
4,218,000
$ 283,000 (50,000) 1,000,000 (1,000,000)
$ 323,000 (50,000)
$ 363,000 (50,000)
$ 403,000 (50,000)
$1,372,000 (200,000) 1,000,000 (1,000,000)
(250,000) (25,000)
(250,000) (18,750)
(250,000) (12,500)
(250,000) (6,250)
(1,000,000) (62,500)
$ (42,000) 95,000 $ 53,000
$
4,250 53,000 $ 57,250
$
50,500 57,250 $ 107,750
4th Quarter $1,585,000
Entire Year $5,590,000
$
96,750 107,750 $ 204,500
$ 109,500 95,000 $ 204,500
*$1,000,000 v 10% v ¼ = $25,000 $750,000 v 10% v ¼ = $18,750 $500,000 v 10% v ¼ = $12,500 $250,000 v 10% v ¼ = $6,250
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CASE 9-56 (CONTINUED) 7.
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...................................................... Add: Purchases of raw material [req. (4)] ..................................... Raw material available for use ...................................................... Deduct: Raw-material inventory, 12/31/x1 ([req. (4)] 10,400 v $8) ............................................................. Raw material used Direct labor [req. (5)] ............................................................................ Manufacturing overhead: Indirect material $ 46,800
$
59,200 2,538,000 $2,597,200 83,200 $2,514,000 936,000
CASE 9-56 (CONTINUED) 7.
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...................................................... Add: Purchases of raw material [req. (4)] ..................................... Raw material available for use ...................................................... Deduct: Raw-material inventory, 12/31/x1 ([req. (4)] 10,400 v $8) ............................................................. Raw material used Direct labor [req. (5)] ............................................................................ Manufacturing overhead: Indirect material ............................................................................. $ 46,800 Indirect labor .................................................................................. 187,200 Other overhead .............................................................................. 154,000 Depreciation ................................................................................... 80,000 Total manufacturing overhead ...................................................... Cost of goods manufactured ............................................................... Add: Finished-goods inventory, 1/1/x1................................................ Cost of goods available for sale .......................................................... Deduct: Finished-goods inventory, 12/31/x1 ...................................... Cost of goods sold ...............................................................................
$
59,200 2,538,000 $2,597,200 83,200 $2,514,000 936,000
468,000* $3,918,000 167,000 $4,085,000 235,000 ** $3,850,000
*In the budget, budgeted and applied manufacturing overhead are equal. The applied manufacturing overhead may be verified independently as follows: Total number of frames produced ................................................. v Direct-labor hours per frame ...................................................... Total direct-labor hours ................................................................. v Predetermined overhead rate per hour ..................................... Total manufacturing overhead applied .........................................
468,000 v .1 46,800 v $10 $468,000
See next page. **See next page. See next page.
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CASE 9-56 (CONTINUED) The cost of goods manufactured may be verified independently as follows:
Frames produced ....................................................................... v Manufacturing cost per unit .................................................... Total manufacturing cost ........................................................... Grand total .................................................................................
S Frames L Frames 254,000 214,000 v $7 v $10 $1,778,000 $2,140,000 $3,918,000
**The finished-goods inventory on 12/31/x1 may be verified independently as follows:
Projected inventory on 12/31/x1................................................ Manufacturing cost per unit ....................................................... Cost of ending inventory ............................................................ Total cost of ending inventory (S and L) ...................................
S Frames L Frames 15,000 13,000 v $7 v $10 $ 105,000 $ 130,000 $235,000
The cost of goods sold may be verified independently as follows:
Frames sold ............................................................................... Manufacturing cost per unit ....................................................... Cost of goods sold ..................................................................... Total cost of goods sold (S and L) ............................................ 8.
S Frames L Frames 250,000 210,000 v $7 v $10 $1,750,000 $2,100,000 $3,850,000
FRAME-IT COMPANY BUDGETED INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 20X1
Sales revenue ........................................................................... Less: Cost of goods sold .......................................................... Gross margin............................................................................. Selling and administrative expenses ........................................ Interest expense ....................................................................... Net income ................................................................................
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$5,650,000 3,850,000 $1,800,000 $400,000 62,500
462,500 $1,337,500
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CASE 9-56 (CONTINUED) 9.
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 ............................................................................. 10.
$3,353,800 1,337,500 200,000 $4,491,300
FRAME-IT COMPANY BUDGETED BALANCE SHEET DECEMBER 31, 20X1
Cash ................................................................................................................... $ 204,500 Accounts receivable* ......................................................................................... 192,000 Inventory: Raw material .............................................................................................. 83,200 Finished goods............................................................................................ 235,000 Plant and equipment (net of accumulated depreciation)** ............................... 8,920,000 Total assets ........................................................................................................ $9,634,700 Accounts payable ............................................................................................ Common stock ................................................................................................... Retained earnings.............................................................................................. Total liabilities and stockholders' equity ............................................................
$ 143,400 5,000,000 4,491,300 $9,634,700
*Fourth-quarter sales on account v 20% = $960,000 v 20% 10,400 units v $8 **$8,000,000 + $1,000,000 ± $80,000 Fourth-quarter purchases on account v 20% = $717,000 v 20%
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