Week 4 Assignment from Textbook

Topics: Cost accounting, Budget, Direct material price variance Pages: 7 (1277 words) Published: August 3, 2015
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Week 4 Assignment from Textbook: Chapter 23 & 24
Esther Tate
ACC/400
July 26, 2015
Theresa Pekron

Brief Exercise 23.6 – Elements of the Budget
Identify the budgets in Column B from which dollar amounts are transferred directly in constructing the budgets listed in Column A:

1. Budgeted income statement
a. Direct materials budget
2. Budgeted balance sheet
b. Cost of goods sold budget
3. Cash flow budget
c. Production budget
4. Cost of goods sold budget
d. Payables budget
5. Production budget
e. Sales budget
6.
f. Budgeted income statement

1. Budgeted income statement – e. Sales budget
2. Budgeted balance sheet – d. Payables budget
3. Cash flow budget – a. Direct materials budget
4. Cost of goods sold budget – b. Cost of goods sold budget 5. Production budget – c. Production budget
Exercise 23.1 – Budgeting Purchases and Cash Payment
The following information is from the manufacturing budget and the budgeted financial statements of Fabor Fabrication:

Direct materials inventory Jan.1…….……………………………………. \$73,000 Direct materials inventory Dec.31……………………………………… 85,000 Direct materials budgeted for use during the year……………………… 264,000 Accounts payable to suppliers of materials Jan.1……………………… 46,000 Accounts payable to suppliers of materials Dec.31……………………… 77,000

Compute the budgeted amounts for:

a. Purchases of direct materials during the year
= Direct Materials Budgeted Consumption (Closing Inventory – Opening inventory) = \$264,000 – (85,000 – 73,000)
= \$264,000 – 12,000
= \$252,000

b. Cash payments during the year to suppliers of materials
= \$264,000 – (77,000-46,000)
= \$264,000 – 31,000
= \$233,000

Exercise 23.8 – Budgeting Cash Receipts
Sales on account for the first two months of the current year are budgeted as follows: Jan……………………………………… \$800,000
Feb……………………………………… 880,000
All sales are made on terms of 2/10, n/30 (2% discount if paid in 10 days, full amount by 30 days); collection on accounts receivable are typically made as follows: Collections with the month of sale:

Within discount period………………………………….. 70%
After discount period……………………………………. 10 Collections within the month following sale:
Within the discount period…………………………… 12
After the discount period…………………………….. 6 Returns, allowances, and uncollectibles…………………… 2
Total……………………………………………………… 100

Compute the estimated cash collections on accounts receivable for the month of February. Particulars

February
Sales

\$880,000
Receivables for Feb
70%
\$616,000
After Discount period
10%
\$88,000

Collection in the month of Feb

Collections with discount
= \$880,000 * 70%
\$616,000
Collections w/o discount
= \$880,000 * 10%
\$88,000
Less 2% discount
= (\$880,000 * 2%)
(\$17,6000)
Total (Feb)

\$686,000

Collections in the month of Jan

Collection w/discount
=\$800,000 * 12%
\$96,000
Collection w/o discount
=\$800,000 * 6%
\$48,000
Less 2 discount
= (\$800,000 * 2%)
(\$16,000)
Total (Jan)

\$128,000
Total Collections

\$814,000

Exercise 23.9 – Budgeting an Ending Cash Balance
On March 1 of the current year, Spicer Corporation compiled information to prepare a cash budget for March, April, and May. All of the company’s sales are made on account. The following information has been provided by Spicer’s management:

Month Credit Sales
Jan……………………………………… \$300,000 (actual) Feb……………………………………… 800,000 (actual) Mar……………………………………… 600,000 (estimated) Apr……………………………………… 700,000 (estimated) May……………………………………… 800,000 (estimated) The company’s collection activity on credit sales historically has been as follows: Collections in the month of the sale……………………………………… 50% Collections one month after the sale……………………………………… 30 Collections two months after the sale……………………………………. 15 Uncollectible accounts…………………………………………………….. 5

Spicer’s total cash expenditures for March, April...