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Cost Management 2

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20 views5 pages

Cost Management 2

Uploaded by

melesemelaku1234
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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COST AND MANAGEMENT ACCOUNTING II

Part One – Write True or False


1. True
2. True
3. False
4. True
5. True
6. False
7. False
8. False
9. False
10. True
11. False
12. True
13. True
14. False
15. True

Part Two – Master Budget Preparation


STEPS IN PREPARATION OF MASTER BUDGET

1.

a) Sales budget

December* January February March Jan.-Mar.


Total
Cash sales (40%) $24, 000 $30, 000 $48, 000 $36, 000 $114, 000
Credit sales (60%) 16, 000 20, 000 32, 000 24,000 76, 000
Totals $40, 000 $50, 000 $80, 000 $60, 000 $190, 000

*December sales are included in the schedule (a) because they affect cash collected in
January.

b) Cash collection budget

January February March


Cash sales of the month $30, 000 $48, 000 $36, 000
Credit sales of last month 16, 000 20, 000 32, 000
Total cash collected $46, 000 $68, 000 $68, 000
COST AND MANAGEMENT ACCOUNTING II

c) Purchase budget

January February March Jan.-Mar


Required ending inventory $64, 800 $53, 600 $48, 000
Cost of gods sold 35, 000 56, 000 42, 000 $133, 000
Total needed $99, 800 $109, 600 $90, 000
Beginning inventory 48, 000 64, 800 53, 600
Purchases budget $51, 800 $44, 800 $36, 400

d) Disbursement for purchases

January February March

50% of last month’s purchase $16, 800 $25, 900 $22, 400

50% of current month’s purchase 25, 900 22, 400 18, 200

Total disbursement for purchase $42, 700 $48, 300 $40, 600

e) Operating expense budget

January February March Jan.-Mar.


Wages and commissions $10, 000 $14, 500 $11, 500 $36, 000
Rent expense 2, 000 2, 000 2, 000 6, 000
Insurance expense 200 200 200 600
Depreciation expense 500 500 500 1, 500
Miscellaneous expense 2, 500 4, 000 3, 000 9, 500
Total $15, 200 $21, 200 $17, 200 $53, 600
COST AND MANAGEMENT ACCOUNTING II

f) Disbursement for operating expenses budget

January February March


Wages and commissions $14, 250 $14, 500 $11, 500
Rent expense 2, 000 2, 000 2, 000
Miscellaneous expense 2, 500 4, 000 3, 000
Total $18, 750 $20, 500 $16, 500

2.
a) Budget income statement

R Company
Budget Income Statement
For the Quarter Ended, March 31, 20x4

Sales (schedule 1(a)) $190, 000


Cost of goods sold (schedule 1(c)) 133, 000
Gross profit 57, 000
Operating expenses
Wages and commissions $36, 000
Rent expense 6, 000
Insurance expense 1, 500
Depreciation expense 600
Miscellaneous expense 9, 500 53, 600
Operating income 3, 400
Interest expense* 885
Net income $ 2, 515

*Interest expense computation


Paid interest = 11, 000*0.18*3/12= 495
Accrued amount:
On the first batch borrowing:
8, 000*0.18*3/12= 360
On the second batch borrowing:
1, 000*0.18*2/12= 30
Total interest expense incurred $885
COST AND MANAGEMENT ACCOUNTING II

b) Cash budget including receipts, payments and effects of financing

January February March


Beginning balance $10, 000 $10, 550 $10, 750
Collections (Schedule1 (b)) 46, 000 68, 000 68, 000
Cash available for the use (x) $56, 000 $78, 550 $78, 750
Cash disbursements for:
Purchases (Schedule 1(d)) 42, 700 48, 300 40, 600
Operating expenses (Schedule1 (f)) 18, 750 20, 500 16, 500
Truck purchases 3, 000 - -
Total disbursement (y) $64, 450 $68, 800 $57, 100
Minimum cash balance required 10, 000 10, 000 10, 000
Total cash needed $74, 450 $78, 800 $67, 100
Cash excess (deficiency) $(18, 450) $( 250) $11, 650
Effects of financing
Borrowing 19, 000 1, 000 -
Payment of the principal - - (11, 000)
Payment of interest - - (495)
Net effect of financing (z) $19, 000 $1, 000 $(11, 495)
End cash balance (x+z-y) $10, 550 $10, 750 $10, 155
COST AND MANAGEMENT ACCOUNTING II

c) Budgeted balance sheet

R Company
Budgeted Balance Sheet March 31

ASSETS
Current assets
Cash $ 10, 155
Accounts receivable 24, 000
Merchandise inventory 48, 000
Unexpired insurance 1, 200 $ 83, 355
Plant assets
Equipment, Fixture and others 40, 000
Accumulated depreciation 14, 300 25, 700
Total assets $ 109, 055

LIABILITIES AND OWNER’S EQUITY


Liabilities
Accounts payable $18, 200
Loan payable 9, 000
Interest payable 390
Total liabilities $27, 590
Capital
Beginning owners’ equity $78, 950
Net income 2, 515
Ending capital balance 81, 465
Total equities $109, 055

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