ACCOUNTG 331 Lecture 7: Chapter 7

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apricotgoldfish514

2 Apr 2017

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Direct materials purchase budget (prepared by production department) Budgeted direct labor hours (from direct labor budget) Budgeted indirect cost rate = predetermined overhead rate. Unit variable marketing expense (budgeted sales commission per unit) Flexible budget: a flexible budget shifts budgeted revenues and costs up and down based on actual operating results, represents a blending of actual activities and budgeted dollar amounts, 1. A flexible budget provides budgeted costs for a variety of activity levels: 2. A flexible budget provides budgeted costs for actual level of activity (actual production: flexible budget allows management to evaluate performance by comparing it to actual results, since it is based on actual production. Performance report: actual results budgeted production variance, effectiveness indicates whether of not the right work is performed. Levels 1, 2 and 3 examine the variance into progressively more detailed levels of analysis. Produced more than budgeted: u unfavorable (ex.

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White Corporation's budget calls for the following sales for next year:

Quarter 1 96,500 units Quarter 2 82,000 units Quarter 3 67,700 units Quarter 4 98,800

Each unit of the product requires 3 pounds of direct materials. The company's policy is to begin each quarter with an inventory of product equal to 5% of that quater's estimated sales requirements and an inventory of direct materials equal to 20% of that quarter's estimated direct materials requirements for production.

1. Determine the production budget for the second quarter:

Budgeted sales_____________

Desired ending inventory________________

Total units needed ___________________

Beginning inventory ____________________

Total units to produce__________________

2. Determine the materials purchases budget for the second quater:

Budgeted production _________________

Direct materials (lbs.) per unit produced ____________________

Direct materials needed in production

Desired ending inventory of direct materials (lbs.)_____________

Total direct materials needed ________________________

Beginning inventory of direct materials ___________________

Budgeted purchases of direct materials (lbs.) _______________

coralyellowjacket733

Show your work

Preparing a Comprehensive Budget

Ginnie Springs Company has been bottling and selling water since1940. The companyâs current owner would like to know how a newproduct would affect the companyâs rent income in the comingyear.

Required

Calculate Ginnie Springs net income for the new product in thecoming year by completing the operating budgets and budgeted incomestatement that follow. Assume that the selling price will remainconstant.

Sales budget

Ginnie Springs Company

Sales Budget

Forthe year Ended December 31

Quarter

	1	2	3	4	Year
Sales in Units	40,000	30,000	50,000	55,000	175,000
Selling price per unit	X $1	X ?	X ?	X ?	X ?
Totals Sales	40,000	$ ?	X ?	X ?	X ?

2. Production Budget:

Ginnie SpringsCompany

ProductionBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Sales in Units	40,000	?	?	?	?
Plus desired units of ending finished goods inventory*	30,000	?	?	6000	6000
Desired total Units	43000	?	?	?	?
Less desired units of ending finished goods inventory*	4000	?	?	?	4000
Total Production units	39,000	?	?	?	?

*Desired units of ending finished goods inventory = 10% of nextquarterâs budgeted production needs in ounces. Desired ounces ofbeginning direct materials inventory = 20% of current quartersbudgeted production needs in ounces.

3.DirectMaterials Purchases budget

Ginnie SpringsCompany

Direct Materials PurchaseBudget

For the year Ended December31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	32,000	50,500	55,500	?
Ounces per unit	X 20	X 20	X 20	X 20	X 20
Total production needs in ounces	780,000	?	?	?	?
Plus desired ounces of ending direct materials inventory*	128,000 908,000	? ?	? ?	240,000 ?	240,000 ?
Less desired ounces of ending direct materials inventory*	156,000	?	?	?	156,000
Total ounces of direct material to be purchased	752,000	?	?	?	?
Cost per ounce	X $0.01	X ?	X ?	X ?	X ?
Total cost of direct materials purchases	$7520	?	?	?	?

Desired ounces of ending direct material inventory =20% of nextquarters budgeted production needs in ounces.

Desired ounces of beginning direct materials inventory = 20% ofcurrent quarters budgeted production needs in ounces.

4.Directlabor budget:

Ginnie SpringsCompany

Direct LaborBudget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Total production units	39,000	?	?	?	?
Direct labor hours per units	X 0.001	X ?	X ?	X ?	X ?
Total direct labor hours	39.0	?	?	?	?
Direct labor cost per hour	X $8	X ?	X ?	X ?	X ?
Total direct labor cost	$312	$ ?	$ ?	$ ?	$ ?

5.Overheadbudget

Ginnie SpringsCompany

Overhead Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable overhead costs:
Factory supplies ($0.01)	$ 390	$ ?	$ ?	$ ?	$ ?
Employee benefits ($0.05)	1,950	?	?	?	?
Inspection ($0.01)	390	?	?	?	?
Maintenance and repairs($0.02)	780	?	?	?	?
Utilities ($0.01)	390	?	?	?	?
Total Variable overheadcosts	$3900	$ ?	$ ?	$ ?	$ ?
Total fixed overhead costs	1416	?	?	?	?
Total overhead costs	$5,316	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses are variable costs perunit.

6.Sellingand administrative expenses budget:

Ginnie SpringsCompany

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Quarter

	1	2	3	4	Year
Variable Selling and Administrative expenses
Delivery expenses ($0.01)	$ 400	$ ?	$ ?	$ ?	$ ?
Sales Commission ($0.02)	800	?	?	?	?
Accounting ($0.01)	400	?	?	?	?
Other administrative expenses($0.01)	400	?	?	?	?
Total Variable selling and administrative exp.	$2,000	$ ?	$ ?	$?	$?
Total fixed selling and administrative exp.	5000	?	?	$?	?
Total selling and administrative expenses	$ 7,000	$ ?	$ ?	$ ?	$ ?

Note: The figures in parentheses arevariable costs per unit

7. Cost of goods manufactured budget:

Ginnie SpringsCompany

Cost of Goods Manufactured Budget

For the year EndedDecember 31_____________

Direct Material Used:

Direct Material Inventory,Beginning

Purchases

Cost of Direct materials available foruse

Less: Direct materials Inventory,ending

Cost of Direct Materialsused

Direct laborcosts:

Overhead costs:

Total manufacturing costs

Work in Process Inventory,beginning*

Less: work in process inventory,ending*

Cost of Goods Manufactured

Units produced

Manufactured cost perunit

It is the companyâs policy to have no units in process at theend of theyear.

8. Budgeted income statement

Ginnie Springs Company

Selling and Administrative Expenses Budget

For the year EndedDecember 31_____________

Sales

Cost of goods sold

Finished goods inventory beginning

Cost of goods manufactured

Cost of Goods available for sale

Less finished goods inventory, ending

Cost of good sold

Gross margin

Selling and administrative expenses

Income from operations

Income taxes expenses (30% tax rate)

Net Income

lemonhamster976

The Matrix Company budgeted its sales for the coming year at240,000 units. Expected production costs are (per unit): materials,$50; direct labor, $30; and variable overhead, $17. Fixed overheadis budgeted at $1,680,000 and is to be applied to production usinga fixed overhead rate based on expected activity. There is no workin process inventory (actual or budgeted). Finished goods inventoryat the beginning of the year consists of 96,000 units on hand andbudgeted end-of-year inventory is 24,000 units.

(A) Prepare a production budget in units.

(B) Compute the total budgeted cost of production for the comingyear.

limeworm408

ACCOUNTG 331 Lecture 7: Chapter 7

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