WS-7 Budgeting - Workshop solutions PDF

Preview

Summary

Workshop solutions...

Description

1. Which of the following statements best describes the relationship between the sales-forecasting process and the master-budgeting process?

A. The sales forecast is typically completed after completion of the master budget. B. The sales forecast is typically completed approximately halfway through the master-budget process. C. The sales forecast is typically completed before the master budget and has no impact on the master budget. D. The sales forecast is typically completed before the master budget and has little impact on the master budget. E. The sales forecast is typically completed before the master budget and has significant impact on the master budget. 2. Swamp Fox has the following sales forecasts for its hip waders next year:

What is Swamp Fox's estimated sales in units for next year?

A. 41,485 pairs. B. 38,300 pairs. C. 40,000 pairs. D. 40,685 pairs. E. None of the other answers are correct.

10,000 + (10,000x 105%=10,500) + (10,500x97%=10,185)+ 10,800=41,485 3. Quattro began operations in April of this year. It makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for April, May, and June were $60,000, $80,000, and $70,000, respectively, what were the firm's budgeted collections for May?

A. $21,00 0. B. $60,00 0. C. $69,00 0.

1

4.

D. $75,00 0. E. None of the other answers are correct. May 80,000 x .3 =24,000 April 60,000 x .6 =36,000 = 60,000 Dragon makes all sales on account, subject to the following collection pattern: 30% are collected in the month of sale; 60% are collected in the first month after sale; and 10% are collected in the second month after sale. If sales for June, July, and August were $120,000, $160,000, and $220,000, respectively, what were the firm's budgeted collections for August and the company's budgeted receivables balance on August 31?

A. Choice A B. Choice B C. Choice C D. Choice D E. Choice E

August $220,000 x .3 = 66,000 July 160,000 x .6= 96,000 June 120,000 x .1 = 12,000 Total 174,000

154,000 16,000 170,000

2

5. Scotch Company plans to sell 400,000 units of finished product in July 20x1. Management (1) anticipates a growth rate in sales of 5% per month thereafter and (2) desires a monthly ending finished-goods inventory (in units) of 80% of the following month's estimated sales. There are 300,000 completed units in the June 30, 20x1 inventory. Each unit of finished product requires four pounds of direct material at a cost of $1.50 per pound. There are 1,600,000 pounds of direct material in inventory on June 30, 20x1. Required: A. Prepare a production budget for the quarter ended September 30, 20x1. Note: For both part "A" and part "B" of this problem, prepare your budget on a quarterly (not monthly) basis. B. Independent of your answer to part "A," assume that Scotch plans to produce 1,200,000 units of finished product for the quarter ended September 30. If the firm desires to stock direct materials at the end of this period equal to 25% of current production usage, compute the cost of direct material purchases for the quarter.

3

6. Tiara Company has the following historical collection pattern for its credit sales: 70% collected in month of sale 15% collected in the first month after sale 10% collected in the second month after sale 4% collected in the third month after sale 1% uncollectible Budgeted credit sales for the last six months of the year follow.

Required: A. Calculate the estimated total cash collections during October. B. Calculate the estimated total cash collections during the year's fourth quarter.

Book : 9-5, 9-16, 9-23

9 5

Ge ne r a le c on o mi ct r e n dsa r ei mpo r t a n ti nf o r e c a s t i n gs a l e si nt hea i r l i n e i nd u s t r y .Th eo v e r a l lh e a l t ho ft h ee c o n omyi sa ni mp or t a ntf a c t o ra ffe c t i n g 4

t hee x t e n to fbu s i n e s st r a v e l . I na d di t i on , t heh e a l t ho ft h ee c o n omy , i nfl a t i on , a ndi nc omel e v e l sa ffe c tt h ee x t e ntt owhi c ht hege ne r a lp ub l i ct r a v e l sb ya i r . Fo re x a mp l e ,wi t hi nfl a t i ona n dr i s i n gpr i c el e v e l s ,c on s u me rc on fi de nc ef a l l s a nds pe nd i n gd e c r e a s e s .Ai r l i ne sma yt h e r e f or ebu d ge tl o we rs a l e si nf u t u r e qu a r t e r sof t hey e a r .

9 1 6 T h ei de aofp a r t i c i pa t i v ebu dge t i ngi st oi n v ol v ee mpl oy e e st h r o ug ho u ta n or ga ni z a t i o ni nt h eb ud ge t a r yp r oc e s s . Suc hp a r t i c i p a t i o nc a ngi v ee mp l oy e e s t hef e e l i n gt ha t" t hi si sou rbu dge t , "r a t he rt h a nt h ef e e l i n gt ha t" t hi si st he bu dg e ty o ui mp os e donu s . "Whe ne mp l oy e e sf e e lt h a tt he ywe r ep a r toft h e bu dg e t i ngp r o c e s s , t h e ya r emor el i k e l yt os t r i v et oa c h i e v et h eb ud g e t .

EXERCI SE9 2 4( 2 5MI NUT ES) 1 . Ca s hc o l l e c t i on si nOc t ob e r :

Mo nt ho f Sa l e Amo u nt Co l l e c t e di nOc t ob e r J u l y . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6 0 , 0 0 0 4 %     $2 , 4 0 0 Aug us t . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 0 , 0 0 0 1 0 % 7 , 0 0 0 Se pt e mb e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 0 , 0 0 0 1 5 % 1 2 , 0 0 0 Oc t o b e r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 0 , 0 0 0 7 0 % 6 3 , 0 0 0

5

T o t a l . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8 4 , 4 0 0

Not i c et ha t t h ea mou nt o f s a l e so na c c o un t i nJ u n e , $ 4 9 , 0 0 0wa s n ot ne e de dt os ol v et h ee x e r c i s e .

EXERCI SE9 2 3 1 . Pr od uc t i o n( i nu ni t s ) r e q ui r e df ort hey e a r : Sa l e sf o rt h ey e a r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 8 0 , 0 0 0 Ad d: De s i r e de nd i n gfin i s h e d g oo d si n v e n t o r yo nDe c e mb e r3 1 . . . . . . . . . . . . . . 5 0 , 0 0 0 De d uc t : Be g i n ni n gfin i s h e d g o od si n v e nt or yo nJ a n ua r y1 . . . . . . . . . . . . . . . . . . . . . . 8 0 , 0 0 0 Re q ui r e dp r od uc t i o nd u r i n gt hey e a r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5 0 , 0 0 0 2 . Pu r c h a s e so f r a wma t e r i a l ( i nu ni t s ) , a s s u mi n gpr o d uc t i ono f 5 0 0 , 0 0 0fi ni s he d un i t s : Ra wma t e r i a l r e q ui r e df orpr od u c t i o n( 5 0 0 , 0 0 0 2 ) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . , . 0 . 0 0 , 0 0 0 Ad d: De s i r e de nd i n gi n v e n t o r yo nDe c e mb e r3 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5 , 0 0 0 De d uc t : Be g i n ni n gi nv e nt or yonJ a nu a r y1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 5 , 0 0 0 Re q ui r e dr a wma t e r i a l pu r c h a s e sdu r i ngt h ey e a r . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 . , . 0 . 1 0 , 0 0 0

6

7...