Concept explainers
The management of Zigby Manufacturing prepared the following estimated balance sheet for March, 2015:
NABAR MANUFACTURING Estimated Balance Sheet December 30,2015 |
|||
Assets | Liabilities and Equity | ||
Cash | $ 40,000 | Accounts payable | $ 200,500 |
342,248 | |||
Raw material Inventory | 98,500 | Short-term notes payable | 12,500 |
Finished goods inventory | 325,540 | Total current liabilities | 212,500 |
Total current assets | 806,288 | Long-term note payable | 500,000 |
Equipment, gross | 600,000 | Total Liabilities | 712,500 |
Accumulated depreciation | (150,000) | Common stock | 335,000 |
Equipment, net | 45,000 | 208,788 | |
Total assets | $1,256,288 | Total stockholders’ equity | 543,788 |
Total Liabilities and equity | $1,045,980 |
To prepare a
- Salve were 20,000 units in June. Fore casted sales in units are as follows: July 21,000; August, 19,000; September, 20,000; October, 24,000. The product’s selling price is $17 per unit and its total product cost is $14.35 per unit.
- Company policy calls for a given month’s ending raw materials inventory to equal 50% of the next month’s materials requirements. The March 31 raw materials inventory is 4,925 units, which com-plies with the policy. The expected June 30 ending raw materials inventory is 4,000 units. Raw mate-rials cost $20 per unit. Each finished unit requires 0.50 units of raw materials.
- Company policy calls for a given month’s ending finished goods inventory to equal 80% of the next month’s expected unit sales. The March 31 finished goods inventory is 16,400 units, which complies with the policy.
- Each finished unit requires 0.50 hours of direct labor at a rate of $15 per hour.
Overhead is allocated based on direct labor hours. The predetermined variable overhead rate is $2.70 per direct labor hour. Depreciation of $20,000 per month is treated as fixed factory overhead.- Sales representatives' commissions are 8% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,000.
- Sales representatives' commissions are 10% of sales and are paid in the month of the sales. The sales manager’s monthly salary is $3,500 per month.
- The company expects 30% of sales to be for cash and the remaining 70% on credit. Receivables are collected in full in the month following the sale (none is collected in the month of the sale).
- All raw materials purchases are on credit, and no payables arise from any other transactions. One month’s raw materials purchases are fully paid in the next month.
- The minimum ending cash balance for all months is $40,000. If necessary, the company borrows enough cash using a short-term note to reach the minimum. Short-term notes require an interest payment of 1% at each month-end (before any repayment). If the ending cash balance exceeds the minimum, the excess will be applied to repaying the short-term notes payable balance.
- Dividends of $10,000 are to be declared and paid in May.
- No cash payments for income taxes are to be made during the second calendar quarter. Income tax will be assessed at 35% in the quarter and paid in the third calendar quarter. m. Equipment purchases of $130,000 are budgeted for the last day of June.
Required
Prepare the following budgets and other financial information as required. All budgets and other financial information should be prepared for the second calendar quarter, except as otherwise noted below. Round calculations up to the nearest whole dollar, except for the amount of cash sales, which should be rounded down to the nearest whole dollar.
- Sales budget.
- Production budget.
- Raw materials budget.
- Direct labor budget.
- Factory overhead budget.
- Selling expense budget.
- General and administrative expense budget.
Cash budget .Budgeted income statement for the entire second quarter (not for each month separately).- Budgeted balance sheet as of the end of the second calendar quarter.
Concept introduction:
Master forecast
Master budget is a detailed plan for upcoming, it start with sales forecast and ends with money (cash) forecast and with statement of finance. It is also known as joint forecast manufactured by company at a very small level. It also includes budget for money(cash), forecasted statement of finance and monetary plan.
Sales forecast:
It relates to the monetary plan that shows the way capital can be assigned in best way for achieving sales target. The aim of this budget is to curb and plan for the expenditure incurred for objective achievement with respect to sales.
Requirement 1:
Sales forecast for the second quarter of the calendar.
Answer to Problem 4PSA
Therefore, it is determined that sales budget for second quarter for 60000 units is $1431000.
Explanation of Solution
Sales forecast::
It relates to the monetary plan that shows the way capital can be assigned in best way for achieving target for sales. The aim of this budget is to curb and plan for the expenditure incurred for objective achievement with respect to sales.
So computation of sales forecast is given below.
Z manufacturing forecast for sales | |||
Particulars | Forecasted units | Unit value | Dollar(total) |
April | 20500 | $23.85 | 488925 |
May | 19500 | 23.85 | 465075 |
June | 20000 | 23.85 | 477000 |
Second quarter total | 60000 | 1431000 |
Therefore it is determined that sales forecast for quarter second for 60000 units is $1431000
Concept introduction:
Manufacturing(production) forecast assesses the number of units to be produced. It is determined by scheduled amount relating to stock of completed goods and sales budget.
Requirement 2:
To explain:
Production budget for the second quarter of the calendar.
Answer to Problem 4PSA
Therefore, it is determined that the production budget for April is 19700 for May it is 19900 and for June it is 20400.
Explanation of Solution
Z manufacturing forecast for production | |||
Particulars | April | May | June |
Forecast sales for succeeding month | 19500 | 20000 | 20500 |
Ratio of stock to upcoming sales | *.80 | *.80 | *.80 |
Forecasted closing stock | 15600 | 16000 | 16400 |
Add- forecasted sales | 20500 | 19500 | 20000 |
Required manufacturing of units | 36100 | 35500 | 36400 |
Less-opening stock | (16400) | (15600) | (16000) |
Units to be manufactured | 19700 | 19900 | 20400 |
Therefore, it is determined that the manufacturing forecast for April is 19700 for May it is 19900 and for June it is 20400.
Concept introduction:
Raw material forecast points out the material required for production of units and services.
Requirement 3:
Raw material budget for the second quarter of the calendar.
Answer to Problem 4PSA
Therefore, it is determined that the raw material forecast for the month of April is-$198000, for May-201500 and for June it is $182000.
Explanation of Solution
Z manufacturing raw material forecast | |||
Particulars | April | May | June |
Manufactured forecasted units | 19700 | 19900 | 20400 |
Per unit material required | *.50 | *.50 | *.50 |
Material required for manufacturing | 9850 | 9950 | 10200 |
Add-forecasted closing stock | 4975 | 5100 | 4000 |
Total material required | 14825 | 15050 | 14200 |
Less-opening stock | (4925) | (4975) | (5100) |
Material required to be purchased | 9900 | 10075 | 9100 |
Price per unit of material | $20 | $20 | $20 |
Cost in total of direct material(DM) purchase | 198000 | 201500 | 182000 |
Therefore, it is determined that the raw material forecast for the month of April is-$198000, for May-201500 and for June it is $182000.
Concept introduction:
Direct labour forecast usually tells the numberof hours required for producing units.
Requirement 4:
Direct labour forecast for the second quarter of the calendar.
Answer to Problem 4PSA
Therefore, it is determined that direct labour budget for April is$147750, for May $149250 and for June is $153000.
Explanation of Solution
Direct labour forecast usually determines the number ofhours required for producing units specified underlying the production forecast.
So, computation of direct labour forecast is given below.
Z manufacturing labour(direct) forecast | |||
Particulars | April | May | June |
Forecasted manufacturing units | 19700 | 19900 | 20400 |
Requirement of labour unit per hours | *.50 | *.50 | *.50 |
Total hours needed | 9850 | 9950 | 10200 |
Labour rate | 15 | 15 | 15 |
Labour $ | 147750 | 149250 | 153000 |
Therefore, it is determined that direct labour forecast for April is$147750, for May $149250 and for June $153000.
Concept introduction:
Factory overhead forecast is that forecast which consists of cost of production apart from cost relating to direct material (DM) and direct labour.
Requirement 5:
Factory overhead budget for the second quarter of the calendar.
Answer to Problem 4PSA
Hence, it is determined that factory overhead budget for April is $46595, for May it is $46865 and for June it is $47540.
Explanation of Solution
Factory overhead forecast is that forecast which consists of cost of production apart from cost relating to direct material (DM) and direct labour.
So computation of factory overhead forecast is given below.
Z manufacturing factory overhead forecast | |||
Particulars | April | May | June |
Hours of labour needed | 9850 | 9950 | 10200 |
Factory overhead (variable) rate | *2.70 | *2.70 | *2.70 |
Forecasted overhead(variable) | 26595 | 26865 | 27540 |
Overhead(fixed) | 20000 | 20000 | 20000 |
Total overhead forecasted | $46595 | $46865 | $47540 |
Hence, it is determined that factory overhead forecast for April is $46595, for May it is $46865 and for June; it is $47540.
Concept introduction:
Forecast for selling expenses is that budget which involves forecast related tosales, marketing, engineering and accounting.
Requirement 6:
Selling expenses budget for the second quarter of the calendar.
Answer to Problem 4PSA
Hence, it is determined that selling expenses budget for April is $42114, for May it is $40206 and for June it is $41160.
Explanation of Solution
Forecast for selling expenses is that forecast which involves forecast relating to sales, marketing, engineering and accounting.
So computation of selling expenses forecast is given below.
Z manufacturing selling expenses forecast | |||
Particulars | April | May | June |
Forecasted sales | 488925 | 465075 | 477000 |
Commission percentage sales | *.08 | *.08 | *.08 |
Expenses related to sales commission | 39114 | 37206 | 38160 |
Salaries of sales | 3000 | 3000 | 3000 |
Selling expenses in total | $42114 | $40206 | $41160 |
Hence, it is determined that selling expenses forecast for April is $42114, for May it is $40206 and for June it is $41160.
Concept introduction:
Administrative and general expenditure forecast relates to the expenditure that is made for administering the company i.e. rent, utilities and insurance. It does not include expenditure in relation to manufacturing of commodities and services.
Requirement 7:
Administrative and general expenses budget for the second quarter of the calendar.
Answer to Problem 4PSA
Hence it is determined that administrative and general expenses budget for April is $42114, for May it is $40206 and for June it is $41160.
Explanation of Solution
Administrative and general expenditure forecast relates to that expenditure which is made for administering the company i.e. rent, utilities and insurance. It does not include expenditure that is in relation to manufacturingof commodities and services. So, computation of administrative and general expenditure forecast is given below.
Z manufacturing administrative and general expenses forecast | |||
Particulars | April | May | June |
Salaries | 12000 | 12000 | 12000 |
Long term interest (500000*.9%) | 4500 | 4500 | 4500 |
Expenses total | $16500 | $16500 | $16500 |
Hence it is determined that administrative and general expenses forecast for April is $16500, for May it is $16500 and for June it is $16500.
Concept introduction:
Cash received forecast shows the outflow and inflow of money(cash) in forecasted period to assess the money(cash) balance.
Cash budget for the second quarter of the calendar.
Answer to Problem 4PSA
Therefore the cash budget for April $83346, for May $124295 and for June is $40000.
Explanation of Solution
Cash received forecast shows the outflow and inflow of money(cash)in forecasted period to assess the money(cash) balance.
So, computation of cash received forecast is given below.
Z manufacturing cash received forecast | |||
Particulars | April | May | June |
Total sales | 488925 | 465075 | 477000 |
Cash sales (30%) | 146677 | 139522 | 143100 |
Amount due from last month(70%of credit sales) | 342248 | 342248 | 325553 |
Total cash received | $488925 | $481770 | $468653 |
Z manufacturing cash budget | |||
Particulars | April | May | June |
Opening balance | 40000 | 83346 | 124295 |
Cash received | 488925 | 481770 | 468653 |
Total available cash | 528925 | 565116 | 592948 |
Cash disposal | |||
Payment for material | 200500 | 198000 | 201500 |
Payment for direct labour | 147750 | 149250 | 153000 |
Payment for overhead(variable) | 26595 | 26865 | 27540 |
Sales commission | 39114 | 37206 | 38160 |
Salaries | 3000 | 3000 | 3000 |
Administrative & general | 12000 | 12000 | 12000 |
Dividends | 10000 | ||
Loan interest | 120 | ||
Interest long term | 4500 | 4500 | 4500 |
Purchase of equipment | 130000 | ||
Total cash disposal | 433579 | 440821 | 569700 |
Preliminary balance money(cash) | 95346 | 124295 | 23248 |
Additional loan | 16752 | ||
Payment of loan | (12000) | ||
Closing cash balance | $83346 | $124295 | $40000 |
Loan balance | $16752 |
Therefore, the closing budget for April $83346, for May $124295 and for June is$40000.
Concept introduction:
Forecasted statement of income assesses the financial standing of the company. It depicts the income, expenses and net income of a firm in a period of time.
Requirement 9:
Budgeted income statement for the second quarter.
Answer to Problem 4PSA
Hence the budgeted income statement for second quarter is $43485.
Explanation of Solution
Forecasted statement of income assesses the financial standing of the company. It depicts the income, expenses, net income of a firm over a period.
So computation of income statement forecast is given below.
Z manufacturing forecasted income statement | |||
sales | $1431000 | ||
Cost of goods sold(COGS)(60000*$19.85) | 191000 | ||
Gross profit | 240000 | ||
Running expenses | |||
Commission on sales | 114480 | ||
Salaries | 9000 | ||
Administrative & general salaries | 36000 | ||
Long term interest | 13500 | ||
Expenses on interest | 120 | 173100 | |
Before tax income | 66900 | ||
Tax (66900*35%) | 23415 | ||
Net revenue | $43485 |
Hence, the budgeted income statement for second quarter is $43485.
Concept introduction:
Financial statement also known as balance sheet helps in summarizing assets, liabilities and equity of the company held by shareholders at a point of time.
Requirement 10:
Financial statement for the entire second quarter.
Answer to Problem 4PSA
Budgeted balance sheet for the second quarter totals $1299440.
Explanation of Solution
Financial statement also known as balance sheet that help in summarizing assets, liabilities and equity of the company held by shareholders at thatpoint of time.
So, computation of financial statement forecast is given below.
Z manufacturing forecasted income statement | |||
Asset | |||
Cash | 40000 | ||
Amount due | 333900 | ||
Raw material stock | 80000 | ||
Finished goods stock | 325540 | ||
Total current asset | 779440 | ||
Equipment | 730000 | ||
Less-depreciation | 210000 | 520000 | |
Total of asset | $1299440 | ||
Liabilities and equities | |||
Account to be paid | 182000 | ||
Bank loan | 16752 | ||
Taxes | 23415 | ||
Total of current liabilities | 222167 | ||
Long term loan | 500000 | ||
Common inventory | 335000 | ||
Retained income | 242273 | ||
Total equity shareholder | 577273 | ||
Total equity and liabilities | $1299440 |
Budgeted balance sheet for the second quarter totals $1299440.
Want to see more full solutions like this?
Chapter 7 Solutions
MANAGERIAL ACCOUNTING FUND. W/CONNECT
- Duke Company’s records show the following account balances at December 31, 2021: Sales revenue $ 16,200,000 Cost of goods sold 9,600,000 General and administrative expense 1,060,000 Selling expense 560,000 Interest expense 760,000 Income tax expense has not yet been determined. The following events also occurred during 2021. All transactions are material in amount. $360,000 in restructuring costs were incurred in connection with plant closings. Inventory costing $460,000 was written off as obsolete. Material losses of this type are considered to be unusual. It was discovered that depreciation expense for 2020 was understated by $56,000 due to a mathematical error. The company experienced a negative foreign currency translation adjustment of $260,000 and had an unrealized gain on debt securities of $240,000. Required:Prepare a single, continuous multiple-step statement of comprehensive income for 2021. The company’s effective tax rate on all items…arrow_forwardDuke Company’s records show the following account balances at December 31, 2021: Sales revenue $ 17,600,000 Cost of goods sold 10,300,000 General and administrative expense 1,130,000 Selling expense 630,000 Interest expense 830,000 Income tax expense has not yet been determined. The following events also occurred during 2021. All transactions are material in amount. $430,000 in restructuring costs were incurred in connection with plant closings. Inventory costing $530,000 was written off as obsolete. Material losses of this type are considered to be unusual. It was discovered that depreciation expense for 2020 was understated by $63,000 due to a mathematical error. The company experienced a negative foreign currency translation adjustment of $330,000 and had an unrealized gain on debt securities of $310,000. Required:Prepare a single, continuous multiple-step statement of comprehensive income for 2021. The company’s effective tax rate on all…arrow_forwardSelected information about income statement accounts for the Reed Company is presented below (the company's fiscal year ends on December 31): 2018 2017 Sales $ 4,550,000 $ 3,650,000 Cost of goods sold 2,890,000 2,030,000 Administrative expenses 830,000 705,000 Selling expenses 390,000 342,000 Interest revenue 153,000 143,000 Interest expense 206,000 206,000 Loss on sale of assets of discontinued component 62,000 — On July 1, 2018, the company adopted a plan to discontinue a division that qualifies as a component of an entity as defined by GAAP. The assets of the component were sold on September 30, 2018, for $62,000 less than their book value. Results of operations for the component (included in the above account balances) were as follows: 1/1/18-9/30/18 2017 Sales $ 430,000 $ 530,000 Cost of goods sold (305,000 ) (338,000 ) Administrative expenses (53,000 ) (43,000 ) Selling…arrow_forward
- Presented below are selected accounts of Novak Company at December 31, 2017. Inventory (finished goods) $ 53,500 Cost of Goods Sold $2,192,400 Unearned Service Revenue 95,200 Notes Receivable 41,000 Equipment 257,100 Accounts Receivable 161,020 Inventory (work in process) 36,000 Inventory (raw materials) 182,280 Cash (not including restricted cash) 43,800 Supplies Expense 65,490 Debt Investments (trading) 39,500 Allowance for Doubtful Accounts 11,290 Customer Advances 53,200 Licenses 16,890 Restricted Cash for Plant Expansion 58,300 Additional Paid-in Capital 88,040 Treasury Stock 22,320 The following additional information is available. 1. Inventories are valued at lower-of-cost-or-market using LIFO. 2. Equipment is recorded at cost. Accumulated depreciation, computed on a straight-line basis, is $47,568. 3. The short-term investments have a fair value of $29,730. 4. The notes receivable are due April 30, 2019, with interest receivable every April 30. The notes bear interest at 6%.…arrow_forwardMissoula Inc. reported the following selected financial statement data: Dec 31, 2020 Dec 31, 2021Cash $ 38,000 $ 44,000 Accounts receivable (net) 56,000 68,000 Inventory 76,000 80,000 Plant assets (net) 218,000 234,000 Total assets 429,000 411,000 Liabilities 153,000 153,000 Shareholders' equity 276,000 258,000 Net sales 348,000 848,000 Cost of goods sold 228,000 312,000 Net income 28,000 41,000 Required:Compute the asset turnover ratio for 2021.arrow_forward19. A listing of the estimated balances in the company's ledger accounts as of December 31, 2023 is given below (as well as in your Excel template): Cash Accounts receivable Inventory-raw materials Inventory-finished goods Capital assets (net) Assets $ 83,365 1,122,900 10,000 9,125 724,000 $1,949,390 Total assets Liabilities and Shareholders' Equity Accounts payable $ 231,563 Capital stock 1,000,000 Retained Earnings Total liabilities and shareholders' equity 717,828 $1,949,390 Required: 1. Prepare a monthly master budget for ToyWorks for the year ended December 31, 2024, including the following schedules (Use the Excel template provided!): Sales Budget & Schedule of Cash Receipts Production Budget & Manufacturing Overhead Budget Direct Materials Budget & Schedule of Cash Disbursements Direct Labour Budget Selling and Administrative Expense Budget Ending Finished Goods Inventory Budget Cash Budget 2. Prepare budgeted financial statements at December 31, 2024, using absorption costing.arrow_forward
- ABC company's records included the following, assume 365 days in a year: Accounts Receivable, 12/31/20 $ 860,000 Accounts Receivable, 12/31/19 780,000 Merchandise Inventory, 12/31/20 900,000 800,000 Merchandise Inventory, 12/31/19 Net Sales during 2020 8,364,000 Cost of Sales during 2020 5,950,000 Compute Solomon's accounts receivable turnover ratio in 2020 O 9.8 times O 10.7 times O 10.2 times 9.73 timesarrow_forwardThe following are selected ledger accounts of Spock Corporation at December 31, 2020. Cash $ 185,000 Salaries and wages expense (sales) $284,000 Inventory 535,000 Salaries and wages expense (office) 346,000 Sales revenue 4,275,000 Purchase returns 15,000 Unearned sales revenue 117,000 Sales returns and allowances 79,000 Purchases 2,786,000 Freight-in 72,000 Sales discounts 34,000 Accounts receivable 142,500 Purchase discounts 27,000 Sales commissions 83,000 Selling expenses 69,000 Telephone and Internet expense (sales) 17,000 Accounting and legal services 33,000 Utilities expense (office) 32,000 Insurance expense (office) 24,000 Miscellaneous office expenses 8,000 Advertising expense 54,000 Rent revenue 240,000 Delivery expense 93,000 Casualty loss (before tax) 70,000 Depreciation expense (office equipment) 48,000 Interest expense 176,000 Depreciation expense (sales equipment)…arrow_forwardSelected information from the comparative financial statements of Barcelona Company for the year ended December 31 appears below: 2017 2016 Accounts receivable (net) $200,000 175,000 Inventory 170,000 130,000 Total assets 1,100,000 800,000 Current liabilities 140,000 110,000 Long-term debt 300,000 410,000 Net credit sales 900,000 700,000 Cost of goods sold 530,000 600,000 Interest expense 40,000 25,000 Income tax expense 60,000 29,000 Net income 120,000 85,000 Net cash provided by operating activities 250,000 135,000 Instructions Answer the following questions relating to the year ended December 31, 2017. Show computations. 1. The inventory turnover for 2017 is 2. The number of times interest earned in 2017 is 3. The accounts receivable turnover for 2017 is 4. The return on assets for 2017 isarrow_forward
- ABC company's records included the following, assume 365 days in a year: Accounts Receivable, 12/31/20 $ 860,000 Accounts Receivable, 12/31/19 780,000 Merchandise Inventory, 12/31/20 900,000 Merchandise Inventory, 12/31/19 800,000 Net Sales during 2020 8,364,000 Cost of Saless during 2020 5,950,000 Compute the average length of time in days to sell inventory O 52.1 days 55.3 days 49.3 days O 48.7 daysarrow_forward$ 15,000,000 (9,000,000) 6,000,000 Sales revenue Cost of goods sold Gross profit Operating expenses: General and administrative expense Selling expense Restructuring costs Loss on inventory write-down Total operating expenses Operating income $ (1,000,000) (500,000) (300,000) (400,000) (2,200,000) 3,800,000 Other income (expense): Interest expense (700,000) 3,100,000 (775,000) 2,325,000 Income before income taxes Income tax expense Net income Other comprehensive income, (net of tax): Foreign currency translation adjustment Gains on debt securities Total other comprehensive income (loss) Comprehensive incomearrow_forwardPresented below is information for Chivu Company for the month of March 2020: Cost of goods sold s50,000 Salaries and wages Expense S8,000 Sales Revenue Freight-out 7.000 as0,000 Sales Returns and Allowances interest Expense 4,000 3,000 Required: Prepare a multiple-step income statement for the month of March by completing the following Salaries and wages Expense Operating Expense Total Operating Expensearrow_forward
- Excel Applications for Accounting PrinciplesAccountingISBN:9781111581565Author:Gaylord N. SmithPublisher:Cengage Learning