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Chapter 22: Q1RQ (page 1228)
Question: List the four budgeting objectives.
Answer
Four budgeting objectives are:
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Question: Preparing a financial budget鈥攕chedule of cash receipts, schedule of cash payments, cash budget
Puckett Company has provided the following budget information for the first quarter of 2018:
Total sales \( 216,000
Budgeted purchases of direct materials 40,600
Budgeted direct labor cost 36,800 Budgeted manufacturing overhead costs:
Variable manufacturing overhead 1,025
Depreciation 1,000
Insurance and property taxes 6,650
Budgeted selling and administrative expenses:
Salaries expense 14,000
Rent expense 2,500
Insurance expense 2,000
Depreciation expense 350
Supplies expense 4,320
Additional data related to the first quarter of 2018 for Puckett Company:
a. Capital expenditures include \)41,000 for new manufacturing equipment to be purchased and paid in the first quarter.
b. Cash receipts are 75% of sales in the quarter of the sale and 25% in the quarter following the sale.
c. Direct materials purchases are paid 50% in the quarter purchased and 50% in the next quarter.
d. Direct labor, manufacturing overhead, and selling and administrative costs are paid in the quarter incurred.
e. Income tax expense for the first quarter is projected at \(49,000 and is paid in the quarter incurred.
f. Puckett Company expects to have adequate cash funds and does not anticipate borrowing in the first quarter.
g. The December 31, 2017, balance in Cash is \)25,000, in Accounts Receivable is \(21,600, and in Accounts Payable is \)16,500.
Requirements
1. Prepare Puckett Company鈥檚 schedule of cash receipts from customers and schedule of cash payments for the first quarter of 2018.
2. Prepare Puckett Company鈥檚 cash budget for the first quarter of 2018.
Preparing a financial budget鈥攕chedule of cash receipts, sensitivity analysis
Marcel Company projects the following sales for the first three months of the year: \(11,200 in January; \)12,300 in February; and $11,100 in March. The company expects 60% of the sales to be cash and the remainder on account. Sales on account are collected 50% in the month of the sale and 50% in the following month. The Accounts Receivable account has a zero balance on January 1. Round to the nearest dollar.
Requirements
1. Prepare a schedule of cash receipts for Marcel for January, February, and March. What is the balance in Accounts Receivable on March 31?
2. Prepare a revised schedule of cash receipts if receipts from sales on account are 60% in the month of the sale, 30% in the month following the sale, and 10% in the second month following the sale. What is the balance in Accounts Receivable on March 31?
Preparing a financial budget鈥攃ash budget
You recently began a job as an accounting intern at Reilly Golf Park. Your first task was to help prepare the cash budget for April and May. Unfortunately, the computer with the budget file crashed, and you did not have a backup or even a paper copy. You ran a program to salvage bits of data from the budget file. After entering the following data in the budget, you may have just enough information to reconstruct the budget.
Reilly Golf Park eliminates any cash deficiency by borrowing the exact amount needed from First Street Bank, where the current interest rate is 6% per year. Reilly Golf Park first pays interest on its outstanding debt at the end of each month. The company then repays all borrowed amounts at the end of the month with any excess cash above the minimum required but after paying monthly interest expenses. Reilly does not have any outstanding debt on April 1.
Complete the cash budget. Round interest expense to the nearest whole dollar.
Question: Preparing an operating budget鈥攕ales, production, direct materials, direct labor, overhead, COGS, and S&A expense budgets
The Langley Batting Company manufactures wood baseball bats. Langley鈥檚 two primary products are a youth bat, designed for children and young teens, and an adult bat, designed for high school and college-aged players. Langley sells the bats to sporting goods stores, and all sales are on account. The youth bat sells for \(40; the adult bat sells for \)65. Langley鈥檚 highest sales volume is in the first three months of the year as retailers prepare for the spring baseball season. Langley鈥檚 balance sheet for December 31, 2018, follows:
Other data for Langley Batting Company for the first quarter of 2019:
a. Budgeted sales are 1,200 youth bats and 2,600 adult bats.
b. Finished Goods Inventory on December 31, 2018, consists of 300 youth bats at \(14 each and 950 adult bats at \)18 each.
c. Desired ending Finished Goods Inventory is 350 youth bats and 300 adult bats; FIFO inventory costing method is used.
d. Direct materials requirements are 48 ounces of wood per youth bat and 56 ounces of wood per adult bat. The cost of wood is \(0.25 per ounce.
e. Raw Materials Inventory of December 31, 2018, consists of 24,000 ounces of wood at \)0.25 per ounce.
f. Desired ending Raw Materials Inventory is 24,000 ounces (indirect materials are insignificant and not considered for budgeting purposes).
g. Each bat requires 0.7 hours of direct labor; direct labor costs average \(18 per hour. h. Variable manufacturing overhead is \)0.30 per bat.
i. Fixed manufacturing overhead includes \(1,300 per quarter in depreciation and \)20,140 per quarter for other costs, such as insurance and property taxes.
j. Fixed selling and administrative expenses include \(9,000 per quarter for salaries; \)2,500 per quarter for rent; \(1,000 per quarter for insurance; and \)200 per quarter for depreciation.
k. Variable selling and administrative expenses include supplies at 2% of sales.
Requirements
1. Prepare Langley鈥檚 sales budget for the first quarter of 2019.
2. Prepare Langley鈥檚 production budget for the first quarter of 2019.
3. Prepare Langley鈥檚 direct materials budget, direct labor budget, and manufacturing overhead budget for the first quarter of 2019. Round the predetermined overhead allocation rate to two decimal places. The overhead allocation base is direct labor hours.
4. Prepare Langley鈥檚 cost of goods sold budget for the first quarter of 2019.
5. Prepare Langley鈥檚 selling and administrative expense budget for the first quarter of 2019.
Question: Meeks Company has the following sales for the first quarter of 2019:
January February March Cash sales \( 5,000 \) 5,500 \( 5,250 Sales on account 15,000 14,000 14,500 Total sales \) 20,000 \( 19,500 \) 19,750 Sales on account are collected the month after the sale. The Accounts Receivable balance on January 1 is $12,500, the amount of December鈥檚 sales on account. Calculate the cash receipts from customers for the first three months of 2019.
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