12 Jul Budgets
| 1. Walker Company prepares monthly budgets. The current budget plans for a September ending inventory of 38,000 units. Company policy is to end each month with merchandise inventory equal to a specified percent of budgeted sales for the following month. Budgeted sales and merchandise purchases for the next three months follow. |
| Sales (Units) | Purchases (Units) | |
| July | 210,000 | 232,000 |
| August | 320,000 | 318,000 |
| September | 310,000 | 286,000 |
| 2. Use the following information to prepare the July cash budget for Acco Co. It should show expected cash receipts and cash disbursements for the month and the cash balance expected on July 31. |
| a. | Beginning cash balance on July 1: $77,000. |
| b. | Cash receipts from sales: 35% is collected in the month of sale, 50% in the next month, and 15% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,800,000; June (actual), $1,400,000; and July (budgeted), $1,400,000. |
| c. | Payments on merchandise purchases: 90% in the month of purchase and 10% in the month following purchase. Purchases amounts are: June (actual), $440,000; and July (budgeted), $760,000. |
| d. | Budgeted cash disbursements for salaries in July: $200,000. |
| e. | Budgeted depreciation expense for July: $14,000. |
| f. | Other cash expenses budgeted for July: $190,000. |
| g. | Accrued income taxes due in July: $100,000. |
| h. Bank loan interest due in July: $6,000.
· Calculation of cash receipts from sales · Calculation of cash payments for merchandise · Cash budget |
| 3. Following information relates to Acco Co. |
| a. | Beginning cash balance on July 1: $35,000. |
| b. | Cash receipts from sales: 27% is collected in the month of sale, 50% in the next month, and 23% in the second month after sale (uncollectible accounts are negligible and can be ignored). Sales amounts are: May (actual), $1,204,000; June (actual), $840,000; and July (budgeted), $980,000. |
| c. | Payments on merchandise purchases: 54% in the month of purchase and 46% in the month following purchase. Purchases amounts are: June (actual), $301,000; and July (budgeted), $600,000. |
| d. | Budgeted cash disbursements for salaries in July: $147,700. |
| e. | Budgeted depreciation expense for July: $8,400. |
| f. | Other cash expenses budgeted for July: $105,000. |
| g. | Accrued income taxes due in July: $80,000 (related to June). |
| h. | Bank loan interest paid July 31: $4,620. |
| Additional Information: | |
| a. | Cost of goods sold is 40% of sales. |
| b. | Inventory at the end of June is $56,000 and at the end of July is $264,000. |
| c. | Salaries payable on June 30 are $35,000 and are expected to be $28,000 on July 31. |
| d. | The equipment account balance is $1,120,000 on July 31. On June 30, the accumulated depreciation on equipment is $196,000. |
| e. | The $4,620 cash payment of interest represents the 1% monthly expense on a bank loan of $462,000. |
| f. | Income taxes payable on July 31 are $98,784, and the income tax rate applicable to the company is 30%. |
| g. | The only other balance sheet accounts are: Common Stock, with a balance of $439,260 on June 30; and Retained Earnings, with a balance of $750,400 on June 30. |
| Prepare a budgeted income statement for the month of July and a budgeted balance sheet for July 31. |
· Calculation of cash receipts from sales.
· Calculation of ash payment for merchandise
· Budgeted Income State
| 4. Tempo Company’s fixed budget for the first quarter of calendar year 2013 reveals the following. |
| Sales (14,000 units) | $ | 2,968,000 | ||||||
| Cost of goods sold | ||||||||
| Direct materials | $ | 337,540 | ||||||
| Direct labor | 589,680 | |||||||
| Production supplies | 371,140 | |||||||
| Plant manager salary | 137,540 | 1,435,900 | ||||||
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| Gross profit | 1,532,100 | |||||||
| Selling expenses | ||||||||
| Sales commissions | 119,840 | |||||||
| Packaging | 205,380 | |||||||
| Advertising | 100,000 | 425,220 | ||||||
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| Administrative expenses | ||||||||
| Administrative salaries | 187,540 | |||||||
| Depreciation—office equip. | 157,540 | |||||||
| Insurance | 127,540 | |||||||
| Office rent | 137,540 | 610,160 | ||||||
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| Income from operations | $ | 496,720 | ||||||
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| Prepare flexible budgets that show variable costs per unit, fixed costs, and three different flexible budgets for sales volumes of 12,000, 14,000, and 16,000 units. (Round cost per unit to 2 decimal places.) |
| 5. Solitaire Company’s fixed budget performance report for June follows. The $638,000 budgeted expenses include $599,720 variable expenses and $38,280 fixed expenses. Actual expenses include $50,280 fixed expenses. |
| Fixed Budget | Actual Results | Variances | |||||||||||||||||
| Sales (in units) | 8,500 | 10,900 | |||||||||||||||||
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| Sales (in dollars) | $ | 850,000 | $ | 1,090,000 | $ | 240,000 | F | ||||||||||||
| Total expenses | 638,000 | 765,600 | 127,600 | U | |||||||||||||||
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| Income from operations | $ | 212,000 | $ | 324,400 | $ | 112,400 | F | ||||||||||||
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| Prepare a flexible budget performance report showing any variances between budgeted and actual results. List fixed and variable expenses separately. (Do not round intermediate calculations.) | ||||||||||
| 6. Bay City Company’s fixed budget performance report for July follows. The $440,000 budgeted expenses include $300,000 variable expenses and $140,000 fixed expenses. Actual expenses include $130,000 fixed expenses. | ||||||||||
| Fixed Budget | Actual Results | Variances | ||||||||
| Sales (in units) | 6,000 | 4,900 | ||||||||
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| Sales (in dollars) | $ | 480,000 | $ | 436,100 | $ | 43,900 | U | |||
| Total expenses | 440,000 | 406,000 | 34,000 | F | ||||||
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| Income from operations | $ | 40,000 | $ | 30,100 | $ | 9,900 | U | |||
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| Prepare a flexible budget performance report that shows any variances between budgeted results and actual results. List fixed and variable expenses separately. (Do not round intermediate calculations.) | ||||||||||
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