/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} 5SE Preparing an operating budget鈥�... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 22: 5SE (page 1229)

Preparing an operating budget鈥攄irect materials budget

Bell expects to produce 1,800 units in January and 2,155 units in February. The company budgets 3 pounds per unit of direct materials at a cost of $10 per pound. Indirect materials are insignificant and not considered for budgeting purposes. The balance in the Raw Materials Inventory account (all direct materials) on January 1 is 4,950 pounds. Bell desires the ending balance in Raw Materials Inventory to be 20% of the next month鈥檚 direct materials needed for production. Desired ending balance for February is 4,860 pounds. Prepare Bell鈥檚 direct materials budget for January and February.

Short Answer

Expert verified

The budgeted cost of direct materials purchases for January and February is 17,430 and 100,320 respectively.

Step by step solution

01

Meaning of direct materials budget

The budget that forecasts the amount of materials to purchase to meet the company鈥檚 production needs is known as direct materials budget

02

Preparation of sales budget for January and February

Particulars

January

February

Budgeted units to be produced

1,800

2,155

Direct materials (pounds) per tablet

x 3

x 3

Direct materials needed for production

5,400

6,465

Plus: Desired direct materials in ending inventory (pounds)

1,293

4,860

Total direct materials needed

6,693

11,325

Less: Direct materials in beginning inventory (pounds)

(4,950)

(1,293)

Budgeted purchases of direct materials

1,743

10,032

Direct materials cost per pound

$10

$10

Budgeted cost of direct materials purchases

$17,430

$100,320

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

What is the capital expenditures budget?

Preparing a financial budget鈥攂udgeted income statement and balance sheet

Ballentine Company has the following post-closing trial balance on December 31, 2018:

The company鈥檚 accounting department has gathered the following budgeting information for the first quarter of 2019:

Budgeted total sales, all on account $ 305,500 Budgeted direct materials to be purchased and used 40,000 Budgeted direct labor cost 12,500 Budgeted manufacturing overhead costs: Variable manufacturing overhead 2,600 Depreciation 800 Insurance and property taxes 1,100 Budgeted cost of goods sold 71,300 Budgeted selling and administrative expenses: Salaries expense7,000 Rent expense 3,500 Insurance expense 2,000 Depreciation expense 350 Supplies expense 3,055 Budgeted cash receipts from customers 263,500 Budgeted income tax expense 44,000 Budgeted purchase and payment for capital expenditures

(additional equipment) 34,000

Additional information:

a. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.

b. Direct labor, ma following budgeted income statement manufacturing overhead, selling and administrative costs, and income tax expense are paid in the quarter incurred.

c. Accounts payable at December 31, 2018 are paid in the first quarter of 2019. Requirements

1. Prepare Ballentine Company鈥檚 budgeted income statement for the first quarter of 2019.

2. Prepare Ballentine Company鈥檚 budgeted balance sheet as of March 31, 2019.

What is a master budget?

Question: Preparing a financial budget鈥攕chedule of cash receipts, schedule cash payments, cash budget

Baxter Company鈥檚 budget committee provides the following information: December 31, 2017, account balances:

1. Prepare the schedule of cash receipts from customers for January and February 2018. Assume cash receipts are 80% in the month of the sale and 20% in the month following the sale.

2. Prepare the schedule of cash payments for purchases for January and February 2018. Assume purchases are paid 60% in the month of purchase and 40% in the month following the purchase.

3. Prepare the schedule of cash payments for selling and administrative expenses for January and February 2018. Assume 40% of the accrual for Salaries and Commissions Payable is for commissions and 60% is for salaries. The December 31 balance will be paid in January. Salaries and commissions are paid 30% in the month incurred and 70% in the following month. Rent and income tax expenses are paid as incurred. Insurance expense is an expiration of the prepaid amount.

4. Prepare the cash budget for January and February 2018. Assume no financing took place.

Preparing the financial budget鈥攃ash budget

Use the original schedule of cash receipts completed in Exercise E22-26, Requirement 1, and the schedule of cash payments completed in Exercise E22-27 to complete a cash budget for Marcel Company for January, February, and March.

Additional information: Marcel鈥檚 beginning cash balance is \(5,000, and Marcel desires to maintain a minimum ending cash balance of \)5,000. Marcel borrows cash as needed at the beginning of each month in increments of \(1,000 and repays the amounts borrowed in increments of \)1,000 at the beginning of months when excess cash is available. The interest rate on amounts borrowed is 8% per year. Interest is paid at the beginning of the month on the outstanding balance from the previous month.
See all solutions

Recommended explanations on Business Studies Textbooks

Sales in Business

Read Explanation

International Business

Read Explanation

Organizational Communication

Read Explanation

Business Case Studies

Read Explanation

Strategic Analysis

Read Explanation

Strategy

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.