Solution manual management advisory services by agamata chapter 6

Cagayan Corporation Budgeted Raw Materials Purchases For The Second Quarter, April-June, 20__ x Standard saterials / unit 4 lbs.. Budgeted production - also used in direct materials pu

CHAPTER 6 BUDGETING

[Problem 1]

Zamboanga Company

Production Budget

For the Third Quarter, July-September, 200X

Add: Finished goods – end

[Problem 2]

Aparri Company

Budgeted Materials Purchases

For The Year Ended, December 31, 2005

Add: Materials inventory - end

(20% x next quarter's sales) 72,000 120,000 108,000 54,000(1) 54,000

x Standard materials cost per unit P 200 P 200 P 200 P 200 P 200

Budgeted materials purchases

(pesos) P 54,000,000 P 81,600,000 P117,600,000 P97,200,000 P350,400,000

(1) 90000 x 3 x 20% = 54,000

[Problem 3]

a Cagayan Corporation

Budgeted Production

For The Second Quarter, April-June 20

(1) FG, end = 6000 + 20% (next month’s sales)

FG- 6/30 = 6,000 + 20% (30,000) = 12,000 units

b Cagayan Corporation

Budgeted Raw Materials Purchases

For The Second Quarter, April-June, 20

x Standard saterials / unit 4 lbs 4 lbs 4 lbs 4 lbs

Add: Materials inventory – ending

Budgeted materials purchase (in lbs.) 433,800 304,200 156,000 894,000

(1) Materials inventory - 6/30 = 30,000 x 4 lbs x 1/4 = 30,000 lbs

[Problem 4]

a JVC Company

Budgeted Production and Direct Labor Costs

For The First Quarter, January – March, 20B

Workers' compensation insurance

Employee medical insurance

Social security and employment taxes

(1) FG – ending = (100% x next month’s sales) + (50% x 2 nd month’s sales)

b 1 Budgeted production - also used in direct materials purchase budget, factory overhead

budget and master budget

2 Budgeted direct labor hours - used in budgeted variable factory overhead and master

budget

[Problem 5]

a Bacolod Corporation

Budgeted Production

For The Third Quarter, July – September, 20A

Add: Finished goods inventory - ending

b Bacolod Corporation

Budgeted Direct Materials Budget

For The Third Quarter, July September, 20A

(1) Mat Inventory – 7/30

101 = 7,000 x 6 = 42,000 units

211 = 7,000 x 4 = 28,000 units

242 = 7,000 x 2 = 14,000 units

c Bacolod Corporation

Budgeted Direct Labor Costs

For The Third Quarter, July – September, 20A

X Standard hours per unit 0.80 2.00 0.25

X Direct labor rate per hour P 8.00 P 8.00 P 8.00

d Bacolod Corporation

Budgeted Factory Overhead

For The Third Quarter, July – September, 20A

Flexible

Fixed overhead

Budgeted factory overhead P 281,000

[Problem 6]

a Ilocos Corporation

Sales Budget

For The Year Ended, December 31, 20B

b Ilocos Corporation

Budgeted Production

For The Year Ended, December 31, 20B

c Ilocos Corporation

Budgeted Raw Materials Purchases

For the Year Ended, December 31,20B

Material

Budgeted materials need

d Ilocos Corporation

Budgeted Direct Labor Cost Budget

For The Year ended, December 31, 20B

e Ilocos Corporation

Budgeted Finished Goods Inventory – 12/31

December 31, 20B

x Unit costs:

Budgeted finished goods inventory - 12/31 P 1,550,000 P 819,000

[Problem 7]

a Sorsogon Corporation

Flexible Budgets

Machine Hours

Variable costs

Fixed costs

d Actual manufacturing costs P 61,200

[Problem 8]

Abra Company

Schedule of Accounts Receivable Collections

July – September 20

Credit

288,000

324,000

360,000

[Problem 9]

4 Steps to reduce the balance in accounts receivable:

a Shorter credit period

a1 Risk Customer, especially those who have been accustomed with larger and

longer credit term, may negatively react and look for a new supplier that will offer them a longer credit period so as not to strain their working capital requirement

a2 Advantage.It would reduce investment in accounts receivable balance, bad debts,

collection costs and would increase income on investment

b Strengthen collection policies:

b1 Risk Some customers may have an operating cycle longer than the offered

credit terms and may not have the ability to meet accelerated payments b2 Advantage.Increase cash inflows

[Problem 10]

Lantoting Company

Budgeted Cash Payments to Merchandise Supplies

For the Month of May, 20

Add: Finished goods inventory - 5/1

Less: Finished goods inventory - 5/31

Add: Materials inventory 5/1

Less: Materials inventory - 5/31

(40% x 12,200 units x 3 units) 14,640 11,520

Payments to:

April purchases (P508,800 x 10/30 x 98%) P 166,208

[Problem 11] Cash paid for purchases in July = ?

Add: Materials inventory -

x Standard materials per unit P 5 P 5

June purchases paid in July (P 780,000 x 1/3 x 98%) P 254,800

July purchases paid in July (P 465,000 x 2/3 x 98%) 303,800

[Problem 12]

a Budgeted cash disbursements in June and July:

Materials

Current month (P 243,600 x 54%)

P 131,544 P 132,408(P 245,000 x 54%)

Marketing, general and administrative expenses

Budgeted cash disbursements

P 323,379

P 333,222

1)

Materials inventory - ending

(130% x next month’s production

Materials inventory - beginning

Materials purchases (units) 11,250 13,180 12,260

Budgeted materials purchases (pesos) P 225,000 P 243,600 P 245,200

2) M, G and AE = (15% x sales) – P 2000

May = (15% x P 357,000) – P 2,000 = P 51,550

June = (15% x P 342,000) – P 2,000 = P 49,300

July = (15% x P 360,000) – P 2,000 = P 52,000

b Budgeted cash collections in May and June:

From March sales (P 354,000 x 9%) P 31,860 P

-From April sales (P 363,000 x 60% x 97%) 211,266 33,670 (P363,000 x 9%)

(P 363,000 x 25%) 90,750

(P357,000 x 25%) 89,250

c Materials purchases in units in July is 13,840 units

[Problem 13]

V jovi Band company

Cash Budget

For The Quarter Ending, March 31,

Collections from sales

21,600

27,000

28,800

Payments:

Net operating cash inflows (outflows) (262,028)

(131,540

Investing and financing activities:

C Salonga investment 50,000 - - 50,000

Acquisition of assets

(200,000

Net investing and financing activities (3,000) (3,000) (33,000) (39,000)

(134,340

Cash balance , ending, before

Schedules:

Finished goods inventory - ending

Finished goods inventory - beginning

2

Budgeted materials purchases (units)

Budgeted materials purchase (pesos) P 89,200 P 60,400 P 65,600

[Problem 14]

a Schedule of cash collections in September:

August credit sales (P 500,000 x 70%) 350,000 September credit sales (P 580,000 x 20%) 116,000

b Schedule of payments to suppliers in September:

September purchases (P 250,000 x 25%) 62,500

c Isabela Corporation

Cash budget

For The Month of September, 2000

Less: Payments:

To merchandise suppliers P 167,500 Selling and administrative expenses 80,000

[Problem 15]

1 Cricket Company

Cash Budget

For The Month Ended, July 30, 20

Add: Collections from customers:

July sales (P 40,000 x 50%) 20,000 34,400

Less: Payments:

Merchandise suppliers June purchase (P10,000 x 50%) P 5,000 July purchase (P 15,000 x 50%) 7,500 12,500 Marketing and administrative expenses 10,000

2 Financial actions to be taken:

a Find ways to reduce cost and expenses

b Find ways to increase sales

[Problem 16]

a La Union Corporation

Budgeted Cash Collections

October – December 2000

Collections from customers P 525,000 P 930,000 P 688,500 P2,143,500

b La Union Corporation

Cash Budget

For The Fourth Quarter, October – December 2000

Collections from customers P 525,000 P 930,000 P 688,500 P 2,143,500 Payments:

[Problem 17]

a Collections from customers – July 2007

b Cash payments to suppliers – July 2007

c Ilocos Norte Corporation

Cash Budget

For The Month Ended July 31, 2007

(1) Operating expenses incurred P 320,000

- end (60,000)

Prepaid expenses – beginning (23,000)

Operating expenses paid P 316,000

d Ilocos Norte Corporation

Income Statement

For The Month Ended, July 31, 2007

Less: Cost of goods sold:

Total goods available for use 1,150,000 Less: Inventory, July 31 400,000 750,000

Add: Collections from customers P 1,575,000

Less: Payments

Note payable paid

Less: Operating expenses 320,000

Depreciation expense 15,000 335,000

Interest expense (2,000) 24,500

(1) Cash received form other revenues P 30,000

Accrued income – July 1 (12,000)

Deferred revenues – July 1 3,000

- July 31 (9,000) Other revenues earned P 26,500

[Problem 18]

a and b

[Problem 19]

Patz Company

Budgeted Income Statement

For The Second Quarter Ended, June 30, 20xx

Less: Operating expenses:

Doubtful accounts (2% x 1.5 million) 30,000 Depreciation expense (P 800,000/20) 40,000 310,000

[Problem 20]

Mexia Inc

Budgeted Income Statement

For The Year Ended, December 31, 2007

Less: Cost of goods sold (P 6,000 x 106% x 105%) 6,678

Less: Commercial expenses

Administrative (P 900 + P 420) 1,320 2,100

Operating income 1,617

Less: Interest expense [P 140 + 10% (P 300)] 170

[Problem 21]

Easecom Company

Budgeted Income Statement

For The Year Ended, December 31, 2007

(in thousands)

Sales:

Equipment (P 6,000 x 110% x 106%) P 6,996

Maintenance contracts (P 1,800 x 106%) 1,908 P 8,904 Less: Cost of goods sold (P 4,600 x 110% x 103%) 5,212

Less: Operating expenses:

Customer maintenance (P 1,000 + P 300) 1,300 3,215

[Problem 22]

Mabuhay University

Motor Pool Division

Performance Report

For The Month of March 20xx

Outside repairs 50.00 225.00 (175.00)F

Fixed Cost

Cost per mile (Costs + 63,000 miles) P 0.1760 P 0.1796 P

(0.0036)F

(1) Gasoline = 63,000 x P1.40/16 = P 5,512.50

Oil, etc., = 63,000 x P 0.006 = P 378

[Problem 23]

a Triple-F Health Club

Cash Budget

For The Year Ended October 31, 20C

(in thousands)

Receipts:

Annual membership fees (P 355 x 110% x 103%) P 402.2

Lesson and class fee (P 234 x 234/180) 304.2

Miscellaneous (P 2 x 2/1.5) 2.7 P 708.9

Payments:

Manager’s salary and benefits (P 36 x 115%) 41.4

Regular employees wages and benefits (P 190 x 115%) 218.5

Lesson and class employee wages and benefits

(P 195 x 234/180 x 115%) 291.5

Travel and supplies (P 16 x 125%) 20.0

Utilities (P 22 x 125%) 27.5

Mortgage interest (P360 x 9%) 32.4

Miscellaneous (P2 x 125%) 2.5

Accounts payable for supplies and utilities 2.5

Amortization of mortgage payable 30.0

Purchase of new equipment 25.0 701.3

b Problem(s) discloses by the prepared budget:

1 Incremental revenues are basically determined by the membership base, which may be considered relatively non-controllable

2 The presence of the mortgage payable and its attendant interest expense fundamentally drain the cash position of the health club

3 Possible areas for cost saving should be identified to compensate the accelerating trend in costs and expenses

c Joy Tan, the club general manager, is correct that the board’s goals to purchase the adjoining property in four or five years time is unrealistic The adjoining property costs P300,000 and would be requiring in nominal terms P60,000 annual savings in the next five years Considering that the recent net cash inflows from operations is only P7,600 in 20C, the required P60,000 annual savings would be extremely difficult for the business to achieve