COST MANAGEMENT LOOSELEAF CUSTOM
8th Edition
ISBN: 9781307659177
Author: BLOCHER
Publisher: MCG/CREATE
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Question
Chapter 10, Problem 52P
1.
To determine
Prepare sales budget of “S” manufacturing Company for the year 2019.
1.
Expert Solution
Explanation of Solution
Compute the sales budget of “S” manufacturing Company for the year 2019:
| "S" Manufacturing Company Sales Budget 2019 | |||
| Particulars | Amount | Amount | Total |
| Sales (in units) | 12000 | 9000 | 21000 |
| Selling Price per unit | $150 | $220 | |
| Total Sales Revenue | $1,800,000 | $1,980,000 | $3,780,000 |
Working notes:
| "S" Manufacturing Company Sales Budget 2019 | |||
| Particulars | Amount | Amount | Total |
| Sales (in units) | 12000 | 9000 | =SUM(C6:D6) |
| Selling Price per unit | 150 | 220 | |
| Total Sales Revenue | =C6*C7 | =D6*D7 | =SUM(C8:D8) |
Compute of production budget of “S” manufacturing Company for the year 2019:
| "S" Manufacturing Company Production Budget 2019 | ||
| Particulars | Amount | Amount |
| Budgeted Sales (in units) | 12,000 | 9,000 |
| Add: Desired finished goods | 300 | 200 |
| Total units needed | 12,300 | 9,200 |
| Less: Beginning finished goods | 400 | 150 |
| Budgeted Production (in units) | 11900 | 9050 |
Compute the direct material purchase budget of “S” manufacturing Company for the year 2019:
| "S" Manufacturing Company Direct Material Purchase Budget (units and dollars) 2019 | |||
| Particulars | Amount | Amount | Total |
| Raw Material (RM) 1: | |||
| Budgeted Production | 11,900 | 9,050 | |
| Pounds per Unit | 9 | 7 | |
| RM 1 needed for production | 107,100 | 63,350 | 170,450 |
| Add: Desired Ending Inventory | 4000 | ||
| Total RM 1 needed | 174,450 | ||
| Less: Beginning inventory | 3000 | ||
| Required purchases of RM 1 | 171,450 | ||
| Cost per pound | $2 | ||
| Budgeted purchases, RM 1 | $342,900 | ||
| Raw Material (RM) 2 | |||
| Budgeted Production | 11,900 | 9,050 | |
| Pounds per Unit | 0 | 3.6 | |
| RM 2 needed for production | 0 | 32,580 | 32,580 |
| Add: Desired Ending Inventory | 1,000 | ||
| Total RM 2 needed | 33,580 | ||
| Less: Beginning inventory | 1,500 | ||
| Required purchases of RM 2 | 32,080 | ||
| Cost per pound | $2.50 | ||
| Budgeted purchases, RM 2 | $80,200 | ||
| Raw Material (RM) 3 | |||
| Budgeted Production | 11,900 | 9,050 | |
| Pounds per Unit | 1.8 | 0.8 | |
| RM 3 needed for production | 21,420 | 7,240 | 28,660 |
| Add: Desired Ending Inventory | 1,500 | ||
| Total RM 3 needed | 30,160 | ||
| Less: Beginning inventory | 1,000 | ||
| Required purchases of RM 3 | 29,160 | ||
| Cost per pound | $0.50 | ||
| Budgeted purchases, RM 3 | $14,580 | ||
Working notes:
| "S" Manufacturing Company Direct Material Purchase Budget (units and dollars) 2019 | |||
| Particulars | Amount | Amount | Total |
| Raw Material (RM) 1: | |||
| Budgeted Production | 11900 | 9050 | |
| Pounds per Unit | 9 | 7 | |
| RM 1 needed for production | =C23*C24 | =D23*D24 | =SUM(C25:D25) |
| Add: Desired Ending Inventory | 4000 | ||
| Total RM 1 needed | =E25+E26 | ||
| Less: Beginning inventory | 3000 | ||
| Required purchases of RM 1 | =E27-E28 | ||
| Cost per pound | 2 | ||
| Budgeted purchases, RM 1 | =E29*E30 | ||
| Raw Material (RM) 2 | |||
| Budgeted Production | 11900 | 9050 | |
| Pounds per Unit | 0 | 3.6 | |
| RM 2 needed for production | =C34*C35 | =D34*D35 | =SUM(C36:D36) |
| Add: Desired Ending Inventory | 1000 | ||
| Total RM 2 needed | =E36+E37 | ||
| Less: Beginning inventory | 1500 | ||
| Required purchases of RM 2 | =E38-E39 | ||
| Cost per pound | 2.5 | ||
| Budgeted purchases, RM 2 | =E40*E41 | ||
| Raw Material (RM) 3 | |||
| Budgeted Production | 11900 | 9050 | |
| Pounds per Unit | 1.8 | 0.8 | |
| RM 3 needed for production | =C45*C46 | =D45*D46 | =SUM(C47:D47) |
| Add: Desired Ending Inventory | 1500 | ||
| Total RM 3 needed | =E47+E48 | ||
| Less: Beginning inventory | 1000 | ||
| Required purchases of RM 3 | =E49-E50 | ||
| Cost per pound | 0.5 | ||
| Budgeted purchases, RM 3 | =E51*E52 | ||
Compute of direct labor purchase budget of “S” manufacturing Company for the year 2019:
| "S" Manufacturing Company Direct Labor Budget 2019 | |||
| Particulars | Amount | Amount | Total |
| Budgeted production | 11,900 | 9,050 | |
| Direct labor hours per unit | 1.5 | 2 | |
| Total direct labor hours needed | 17,850 | 18,100 | 35,950 |
| Hourly wage rate | $30.00 | ||
| Budgeted direct labor costs | $1,078,500 | ||
Working notes:
| "S" Manufacturing Company Direct Labor Budget 2019 | |||
| Particulars | Amount | Amount | Total |
| Budgeted production | 11900 | 9050 | |
| Direct labor hours per unit | 1.5 | 2 | |
| Total direct labor hours needed | =C57*C58 | =D57*D58 | =SUM(C59:D59) |
| Hourly wage rate | 30 | ||
| Budgeted direct labor costs | =E59*E60 | ||
Compute of factory
| "S" Manufacturing Company Factory overhead Budget 2019 | ||
| Particulars | Amount | Amount |
| Variable Factory Overhead: | ||
| Indirect materials | $10,000 | |
| Miscellaneous supplies and tools | $5,000 | |
| Indirect labor | $40,000 | |
| Payroll taxes and | $250,000 | |
| Maintenance costs | $10,080 | |
| Heat, light, and power | $11,000 | $326,080 |
| Fixed Factory Overhead: | ||
| Supervision | $120,000 | |
| Maintenance costs | $20,000 | |
| Heat, light, and power | $43,420 | |
| Total Cash Fixed Factory Overhead | $183,420 | |
| $71,330 | $254,750 | |
| Total Budgeted Factory Overhead | $580,830 | |
| Budgeted Variable OH: | ||
| Variable cost | $293,472 | |
| Budgeted Fixed OH: | ||
| Cash Charges | $174,249 | |
| Depreciation | $71,330 | |
| Total Budgeted Fixed OH | $245,579 | |
Working notes:
| "S" Manufacturing Company Factory overhead Budget 2019 | ||
| Particulars | Amount | Amount |
| Variable Factory Overhead: | ||
| Indirect materials | 10000 | |
| Miscellaneous supplies and tools | 5000 | |
| Indirect labor | 40000 | |
| Payroll taxes and fringe benefits | 250000 | |
| Maintenance costs | 10080 | |
| Heat, light, and power | 11000 | 326080 |
| Fixed Factory Overhead: | ||
| Supervision | 120000 | |
| Maintenance costs | 20000 | |
| Heat, light, and power | 43420 | |
| Total Cash Fixed Factory Overhead | 183420 | |
| Depreciation | 71330 | 254750 |
| Total Budgeted Factory Overhead | 580830 | |
| Budgeted Variable OH: | ||
| Variable cost | =326080*(1-0.1) | |
| Budgeted Fixed OH: | ||
| Cash Charges | =183420*(1-0.05) | |
| Depreciation | 71330 | |
| Total Budgeted Fixed OH | =SUM(C84:C85) | |
Prepare cost of goods sold and ending finished goods inventory budget for the year:
| "S" Manufacturing Company Ending Finished Goods Inventory and Budgeted CGS 2019 | |||
| Particulars | Amount | Amount | Total |
| Sales volume | 12,000 | 9,000 | 21,000 |
| Cost per unit (Schedule 1 and 2) | $86.39 | $113.39 | |
| Cost of Goods Sold | $1,036,700 | $1,020,500 | $2,057,201 |
| Ending Finished Goods Inventory | 300 | 200 | |
| Cost per unit (Schedule 1 and 2) | $86.39 | $113.39 | |
| Budgeted ending inventories | $25,918 | $22,678 | $48,595 |
Working notes
| "S" Manufacturing Company Ending Finished Goods Inventory and Budgeted CGS 2019 | |||
| Particulars | Amount | Amount | Total |
| Sales volume | 12000 | 9000 | =SUM(C116:D116) |
| Cost per unit (Schedule 1 and 2) | 86.3917 | 113.38893 | |
| Cost of Goods Sold | =C116*C117 | =D116*D117 | =SUM(C118:D118) |
| Ending Finished Goods Inventory | 300 | 200 | |
| Cost per unit (Schedule 1 and 2) | 86.3917 | 113.38893 | |
| Budgeted ending inventories | =C120*C121 | =D121*D120 | =SUM(C122:D122) |
Schedule-1
| Schedule 1: Cost per Unit--Product | |||
| Cost Element | Unit Input Cost | Quantity | Per Unit |
| RM-1 | $2.00 | 9 | $18.00 |
| RM-3 | $0.50 | 1.8 | $0.90 |
| Direct labor | $30.00 | 1.5 | $45.00 |
| Variable factory OH ($293,472 ÷ 35,950) | $8.16 | 1.5 | $12.24 |
| Fixed factory OH ($254,579 ÷ 35,950) | $6.83 | 1.5 | $10.25 |
| $86.39 | |||
Schedule-2
| Schedule 2: Cost per Unit--Product | |||
| Cost Element | Inputs Unit Input Cost | Quantity | Cost Per Unit |
| RM-1 | $2.00 | 7 | $14.00 |
| RM-2 | $2.50 | 3.6 | $9.00 |
| RM-3 | $0.50 | 0.8 | $0.40 |
| Direct labor | $30.00 | 2 | $60.00 |
| Variable factory OH ($293,472 ÷ 35,950) | $8.16 | 2 | $16.33 |
| Fixed factory OH ($254,579 ÷ 35,950) | $6.83 | 2 | $13.66 |
| Manufacturing cost per unit | $113.39 | ||
Prepare the selling and administrative budget of “S” manufacturing Company for the year 2019:
| "S" Manufacturing Company Selling and administrative expense Budget 2019 | ||
| Particulars | Amount | Amount |
| Selling Expenses: | ||
| Advertising | $60,000 | |
| Sales salaries | $200,000 | |
| Travel and entertainment | $60,000 | |
| Depreciation | $5,000 | $325,000 |
| Administrative expenses: | ||
| Offices salaries | $60,000 | |
| Executive salaries | $250,000 | |
| Supplies | $4,000 | |
| Depreciation | $6,000 | $320,000 |
| Total selling and administrative expenses | $645,000 | |
Prepare
| "S" Manufacturing Company Budgeted Income Statement 2019 | |||
| Particulars | Amount | Amount | Total |
| Sales | $1,800,000 | $1,980,000 | $3,780,000 |
| Less: Cost of Goods Sold | $1,036,699 | $1,020,499 | $2,057,198 |
| Gross Profit | $763,301 | $959,501 | $1,722,802 |
| Selling and Administrative Expenses | $645,000 | ||
| Pre-tax Operating Income | $1,077,802 | ||
| Income Taxes (@40%) | $431,121 | ||
| After-tax Operating Income | $646,681 | ||
Working notes:
| "S" Manufacturing Company Budgeted Income Statement 2019 | |||
| Particulars | Amount | Amount | Total |
| Sales | 1800000 | 1980000 | 3780000 |
| Less: Cost of Goods Sold | 1036699 | 1020499 | =SUM(C106:D106) |
| Gross Profit | =C105-C106 | =D105-D106 | =E105-E106 |
| Selling and Administrative Expenses | 645000 | ||
| Pre-tax Operating Income | =E107-E108 | ||
| Income Taxes (@40%) | =E109*40% | ||
| After-tax Operating Income | =E109-E110 | ||
2.
To determine
Explain the benefits of adopting the improvement program by “S” manufacturing.
2.
Expert Solution
Explanation of Solution
The revised budget after-tax operating income is $646,681. Therefore, an increase in the amount of income is 37%. The company is benefited in the long-run from the deduction in direct materials, direct labor hours, and factory overhead that is needed in production. The reduction in the consumption of manufacturing elements will decrease the wear and tear of equipment and other facilities.
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Chapter 10 Solutions
COST MANAGEMENT LOOSELEAF CUSTOM
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