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(1)
Concept introduction:
Master
Sales forecast:
It relates to the monetary plan that shows the manner in which 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.
Sales forecast for the third quarter of the calendar.
Answer to Problem 4PSB
Therefore, it is determined that sales forecast for quarter first is $1020000.
Explanation of Solution
Sales forecast:
It relates to the monetary plan that shows the manner in which 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.
| N manufacturing forecast for sales | |||
| Particulars | Forecasted units | Unit value | Dollar (total) |
| July | 21000 | 17 | 357000 |
| August | 19000 | 17 | 323000 |
| September | 20000 | 17 | 340000 |
| third quarter total | 60000 | 1020000 | |
(2)
Concept introduction:
It depicts the units required to be produced. It is determined by a assembly of scheduled amount relating to stock of completed units and sales budget.
To explain:
Commodity production forecast (budget ) for the third quarter of the calendar.
Answer to Problem 4PSB
Therefore, it is determined that the production forecast (budget) for July, August and September is $17500, 19700 and $ 22800, respectively.
Explanation of Solution
It depicts the units required to be produced. It is determined by a assembly of scheduled amount relating to stock of completed units and sales budget.
Hence, computation of production budget as below,
| N manufacturing production forecast (budget) | |||
| Particulars | July | August | September |
| Forecast sales for succeeding month | 19000 | 20000 | 24000 |
| Ratio of stock to upcoming sales | 0.70 | 0.70 | 0.70 |
| Forecasted closing stock | 13300 | 14000 | 16800 |
| Add- forecasted sales | 19000 | 20000 | 24000 |
| Units required to be manufactured | 34300 | 33000 | 36800 |
| Less-opening stock | (16800) | (13300) | (14000) |
| Units to be produced | 17500 | 19700 | 22800 |
(3)
Concept introduction:
Raw material forecast point out the forecast for the material that is required for producing of the units and services.
Raw material forecast for the third quarter of the calendar.
Answer to Problem 4PSB
Therefore, it is determined that the raw material forecast for the month of July, August and September is $50760, $81280 and $88800, respectively
Explanation of Solution
| N manufacturing raw material forecast | |||
| Particulars | July | August | September |
| Manufactured forecasted units | 17500 | 19700 | 22800 |
| Per unit material required | 0.50 | 0.50 | 0.50 |
| Material required for manufacturing | 8750 | 9850 | 11400 |
| Add-forecasted closing stock | 1970 | 2280 | 1980 |
| Total material required | 10720 | 12130 | 13380 |
| Less-opening stock | (4375) | (1970) | (2280) |
| Material required to be purchased | 6345 | 10160 | 11100 |
| Price per unit of material | $8 | $8 | $8 |
| Cost in total of direct material (DM) purchase | 50760 | 81280 | 88800 |
(4)
Concept introduction:
Direct labour forecast usually determine the number hours required for producing units specified underlying the production forecast.
Direct labour forecast for the third quarter of the calendar.
Answer to Problem 4PSB
Therefore, it is determined that direct labour forecast for July, August and September is $140000, $157600 and $182400, respectively.
Explanation of Solution
Direct labour forecast usually determine the number hours required for producing units specified underlying the production forecast.
So, computation of direct labour forecast is given below.
| N manufacturing labour(direct) forecast | |||
| Particulars | July | August | September |
| Forecasted manufacturing units | 17500 | 19700 | 22800 |
| Requirement of labour unit per hours | 0.50 | 0.50 | 0.50 |
| Total hours needed | 8750 | 9850 | 11400 |
| Labour rate | 16 | 16 | 16 |
| Labour $ | 140000 | 157600 | 182400 |
(5)
Concept introduction:
Factory
Factory overhead forecast for the third quarter of the calendar.
Answer to Problem 4PSB
Hence, it is determined that factory overhead forecast for July, August and September is $43625, $46595 and $50780, respectively.
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.
| N manufacturing factory overhead forecast | |||
| Particulars | July | August | September |
| Hours of labour needed | 17500 | 19700 | 22800 |
| Factory overhead (variable) rate | 1.35 | 1.35 | 1.35 |
| Forecasted overhead(variable) | 23625 | 26595 | 30780 |
| Overhead(fixed) | 20000 | 20000 | 20000 |
| Total overhead forecasted | $43625 | $46595 | $50780 |
(6)
Concept introduction:
Forecast for selling expenses is that forecast which involves forecast relating to non producing department i.e. sales, marketing, engineering and accounting.
Selling expenses forecast for the third quarter of the calendar.
Answer to Problem 4PSB
Hence, it is determined that selling expenses forecast for July, August and September is $39200, $35800 and $37500, respectively.
Explanation of Solution
Forecast for selling expenses is that forecast that involves forecast relating to non producing department i.e. sales, marketing, engineering as well as accounting.
So computation of selling expenses forecast is given below.
| N manufacturing selling expenses forecast | |||
| Particulars | July | August | September |
| Forecasted sales | 357000 | 323000 | 340000 |
| Commission percentage sales | 10% | 10% | 10% |
| Expenses related to sales commission | 35700 | 32300 | 34000 |
| Salaries of sales | 3500 | 3500 | 3500 |
| Selling expenses in total | $39200 | $35800 | $37500 |
(7)
Concept introduction:
Administrative and general expenditure forecast relates to those expenditure that are made for running of the company i.e. rent, utilities and insurance. It does not include expenditure that are in relation to manufacturing of the commodity and services.
Administrative and general expenses forecast for the third quarter of the calendar.
Answer to Problem 4PSB
Hence, it is determined that administrative and general expenses forecast for July, August and September is $11700, $11700 and $11700, respectively.
Explanation of Solution
Administrative and general expenditure forecast relates to those expenditure that are made for running of the company i.e. rent, utilities and insurance. It does not include expenditure that are in relation to manufacturing of the commodity and services.
So, computation of Administrative and general expenditure forecast is given below.
| N manufacturing administrative and general expenses forecast | |||
| Particulars | July | August | September |
| Salaries | 9000 | 9000 | 9000 |
| Long term interest |
2700 | 2700 | 2700 |
| Expenses total | $11700 | $11700 | $11700 |
(8)
Concept introduction:
Cash received forecast shows the outflow and inflow of money(cash) on forecasted period to assess the money(cash) balance to meet the obligation of cash in forecasted period.
Cash forecast for the third quarter of the calendar.
Answer to Problem 4PSB
Therefore, the closing balance for July, August and September is $96835, $$141180 and $40000, respectively.
Explanation of Solution
Cash received forecast shows the outflow and inflow of money(cash) on forecasted period to assess the money(cash) balance to meet the obligation of cash in forecasted period.
So computation of cash received forecast is given below.
| N manufacturing cash received forecast | |||
| Particulars | July | August | September |
| Total sales | 357000 | 323000 | 340000 |
| Cash sales (30%) | 107100 | 96900 | 102000 |
| Amount due from last month(70% of credit sales) | 249900 | 249900 | 226100 |
| Total cash received | $357000 | $346800 | $328100 |
| N manufacturing cash forecast | |||
| Particulars | July | August | September |
| Opening balance | 40000 | 96835 | 141180 |
| Cash received | 357000 | 346800 | 328100 |
| Total available cash | 397000 | 443635 | 469280 |
| Cash disposal | |||
| Payment for material | 51400 | 50760 | 81280 |
| Payment for direct labour | 140000 | 157600 | 182400 |
| Payment for overhead(variable) | 23625 | 26595 | 30780 |
| Sales commission | 35700 | 32300 | 34000 |
| Salaries | 3500 | 3500 | 3500 |
| Administrative & general | 9000 | 9000 | 9000 |
| Income tax | 10000 | ||
| Dividends | 20000 | ||
| Loan interest | 240 | ||
| Interest long term | 2700 | 2700 | 2700 |
| Purchase of equipment | 100000 | ||
| Total cash disposal | 276165 | 302455 | 443660 |
| Preliminary balance money(cash) | 120835 | 141180 | 25620 |
| Additional loan | 14380 | ||
| Payment of loan | (24000) | ||
| Closing cash balance | $96835 | $141180 | $40000 |
| Loan balance | $14380 | ||
(9)
Concept introduction:
Forecasted statement of income assess the financial standing of the company. It depicts the income, expenses, net income of a firm over a period.
Answer to Problem 4PSB
Hence it is determined that net revenue for third quarter is $7254.
Explanation of Solution
Forecasted statement of income assess 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.
| N manufacturing forecasted income statement | |||
| sales | $1020000 | ||
| Cost of goods sold(COGS) |
861000 | ||
| Gross profit | 159000 | ||
| Running expenses | |||
| Commission on sales | 102000 | ||
| Salaries | 10500 | ||
| Administrative & general salaries | 27000 | ||
| Long term interest | 8100 | ||
| Expenses on interest | 240 | 147840 | |
| Before tax income | 11160 | ||
| Tax |
3906 | ||
| Net revenue | $7254 | ||
Hence it is determined that net revenue for third quarter is $7254.
(10)
Concept introduction:
Financial statement also known as
Financial statement for the entire third quarter.
Answer to Problem 4PSB
Hence financial statement total for third quarter is $1054920.
Explanation of Solution
Financial statement also known as balance sheet that help in summarizing asset, liabilities and equity of the company held by shareholders at point of time.
So computation of financial statement forecast is given below.
| N manufacturing forecasted income statement | |||
| Asset | |||
| Cash | 40000 | ||
| Amount due | 238000 | ||
| Raw material stock | 15840 | ||
| Finished goods stock | 241080 | ||
| Total current asset | 534920 | ||
| Equipment | 820000 | ||
| Less-depreciation | 300000 | 520000 | |
| Total of asset | $1054920 | ||
| Liabilities and equities | |||
| Account to be paid | 88800 | ||
| Bank loan | 14380 | ||
| Taxes | 3906 | ||
| Total of current liabilities | 107086 | ||
| Long term loan | 300000 | ||
| Common inventory | 600000 | ||
| Retained income | 47834 | ||
| Total equity shareholder | 647834 | ||
| Total equity and liabilities | $1054920 | ||
Hence it is determined that total asset and liabilities is $1054920.
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Chapter 7 Solutions
Managerial Accounting
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