Question Ex. 172 Garver Industries has budgeted the following unit sales:

Ex. 172

Garver Industries has budgeted the following unit sales:

2013 Units

January 10,000

February 8,000

March 9,000

April 11,000

May 15,000

The finished goods units on hand on December 31, 2012, was 2,000 units. Each unit requires 3 pounds of raw materials that are estimated to cost an average of $4 per pound. It is the company’s policy to maintain a finished goods inventory at the end of each month equal to 20% of next month’s anticipated sales. They also have a policy of maintaining a raw materials inventory at the end of each month equal to 30% of the pounds needed for the following month’s production. There were 8,640 pounds of raw materials on hand at December 31, 2012.

Instructions

For the first quarter of 2013, prepare (1) a production budget and (2) a direct materials budget.

Ex. 173

Benet Company has budgeted the following unit sales:

2013 2013

Quarter Units Quarter Units

1 105,000 1 90,000

2 60,000

3 75,000

4 120,000

The finished goods inventory on hand on December 31, 2012 was 21,000 units. It is the company’s policy to maintain a finished goods inventory at the end of each quarter equal to 20% of the next quarter’s anticipated sales.

Instructions

Prepare a production budget for 2013.

Ex. 174

The following facts are known:

· The total pounds needed for production are 2 times the units to be produced.

· The desired ending direct materials inventory is 20% of the total pounds needed for production.

· The beginning direct materials inventory is equal in number to 10% of the units to be produced.

· Cost per pound is $5.

· Total cost of the direct materials purchases is $1,035,000.

Instructions

Prepare a direct materials budget for the period.

Ex. 175

Tall Oak, Inc. produces rulers from plastic resin. Tall Oak has estimated production and sales of rulers in units for the next 2 months as:

May June

Estimated production 42,000 48,000

Estimated sales 50,000 36,000

Each ruler requires 0.25 pounds of resin. The cost of resin is $4.50 per pound. Tall Oak wants to have 20% of the next month’s materials requirements on hand at the end of each month.

Instructions

Prepare a direct materials purchases budget for the month of May.

Ex. 176

Pulham Company is preparing its direct labor budget for 2013 from the following production budget based on a calendar year:

Quarter Units

1 60,000

2 30,000

3 45,000

4 75,000

Each unit requires 2 hours of direct labor. The union contract provides for a 10% increase in wage rate to $11 per hour on October 1.

Instructions

Prepare a direct labor budget for 2013.

Ex. 177

For each item given, identify the budget in which it will appear. If an item will appear on more than one budget, then indicate as many budgets as are relevant.

Budget Code:

DM Direct Materials Budget

DL Direct Labor Budget

P Production Budget

S Sales Budget

C Cash Budget

BBS Budgeted Balance Sheet

BIS Budgeted Income Statement

SA Selling and Administrative Expense Budget

MOH Manufacturing Overhead Budget

____________ 1. Ending cash balance

____________ 2. Total selling and administrative expenses

____________ 3. Total sales (in dollars)

____________ 4. Interest expense

____________ 5. Ending raw materials inventory (in dollars)

____________ 6. Ending finished goods inventory (in dollars)

Ex. 178

Leaf Industries is preparing its master budget for 2013. Relevant data pertaining to its sales budget are as follows:

Sales for the year are expected to total 8,000,000 units. Quarterly sales are 25%, 30%, 15%, and 30%, respectively. The sales price is expected to be $2.00 per unit for the first quarter and then be increased to $2.20 per unit in the second quarter.

Instructions

Prepare a sales budget for 2013 for Leaf Industries.

Ex. 179

Shep Company combines its operating expenses for budget purposes in a selling and administrative expense budget. For the first quarter of 2013, the following data are developed:

1. Sales: 20,000 units; unit selling price: $30

2. Variable costs per dollar of sales:

Sales commissions 6%

Delivery expense 2%

Advertising 4%

3. Fixed costs per quarter:

Sales salaries $24,000

Office salaries 19,000

Depreciation 6,000

Insurance 2,000

Utilities 1,000

Instructions

Prepare a selling and administrative expense budget for the first quarter of 2013.

Ex. 180

Thread Company is preparing its manufacturing overhead budget for 2013. Relevant data consist of the following.

Units to be produced (by quarters): 10,000, 12,000, 14,000, 16,000.

Direct labor: Time is 1 hour per unit.

Variable overhead costs per direct labor hour: Indirect materials $0.80; indirect labor $1.20; and maintenance $0.50.

Fixed overhead costs per quarter: Supervisory salaries $42,000; depreciation $16,000; and maintenance $12,000.

Instructions

Prepare the manufacturing overhead budget for the year, showing quarterly data.

Ex. 181

Walt Bach Company has accumulated the following budget data for the year 2013.

1. Sales: 40,000 units, unit selling price $50.

2. Cost of one unit of finished goods: Direct materials 2 pounds at $5 per pound, direct labor 1.5 hours at $12 per hour, and manufacturing overhead $6 per direct labor hour.

3. Inventories (raw materials only): Beginning, 10,000 pounds; ending, 15,000 pounds.

4. Raw materials cost: $5 per pound.

5. Selling and administrative expenses: $200,000.

6. Income taxes: 30% of income before income taxes.

Ex. 181 (Cont.)

Instructions

(a) Prepare a schedule showing the computation of cost of goods sold for 2013.

(b) Prepare a budgeted income statement for 2013.

Ex. 182

The Northeast Regional Division of Union Corp. has been requested to prepare a quarterly budgeted income statement for 2013. The regional manager expects that sales in the first quarter of 2013 will increase by 10% over the same quarter of the preceding year and will then increase by 5% for each succeeding quarter in 2013.

The corporate head office has requested that the regional manager maintain an inventory in dollars equal to 25% of the next quarter’s sales. Quarterly purchases average 55% of quarterly sales. Budgeted ending inventory on December 31, 2012 is $176,000. Quarterly salaries are $20,000 plus 5% of sales. All salaries are classified as sales salaries. Other quarterly expenses are estimated to be as follows:

Rent expense $24,000

Depreciation on office equipment $12,000

Utilities expense $3,600

Miscellaneous expenses 2% of sales

Ex. 182 (Cont.)

The income statement for the first quarter of 2012 was as follows:

Income Statement

For the Quarter Ended March 31, 2012

Sales………………………………………………………………………………………….. $720,000

Cost of goods sold……………………………………………………………………….. 396,000

Gross profit…………………………………………………………………………………. 324,000

Operating expenses

Sales salaries……………………………………………………………………….. $52,000

Rent expense……………………………………………………………………….. 24,000

Depreciation…………………………………………………………………………. 12,000

Utilities…………………………………………………………………………………. 3,600

Miscellaneous……………………………………………………………………….. 12,800

Total operating expenses…………………………………………………. 104,400

Net income…………………………………………………………………………………. $219,600

Instructions

Prepare a budgeted quarterly income statement in tabular form for the first quarter of 2013. (Show computations.)

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