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Budgeting Sample Prob Solution

The document outlines a comprehensive budget plan including sales, production, raw materials, direct labor, overhead costs, and marketing and administrative expenses, leading to a budgeted income statement and cash budget. It details estimated sales, production needs, material purchases, and costs associated with manufacturing, resulting in a projected net income after tax of 275,460. Additionally, it provides a budgeted statement of financial position showing total assets of 2,517,280 and total liabilities of 726,820.

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Zheniceby Cabuetela
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14 views3 pages

Budgeting Sample Prob Solution

The document outlines a comprehensive budget plan including sales, production, raw materials, direct labor, overhead costs, and marketing and administrative expenses, leading to a budgeted income statement and cash budget. It details estimated sales, production needs, material purchases, and costs associated with manufacturing, resulting in a projected net income after tax of 275,460. Additionally, it provides a budgeted statement of financial position showing total assets of 2,517,280 and total liabilities of 726,820.

Uploaded by

Zheniceby Cabuetela
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Solution:

1. Sales Budget
Estimated sales per unit 6,400
Price per unit 800
Total Sales Revenue 5,120,000

2. Production Budget
Estimated Sales 6400
Add: Desired Ending inventory 1000
Total units needed 7400
Less: Beginning Inventory 900
Total units to be produced 6500

3. Raw Materials Budget R S


Total units to be produced 6,500 6,500
Materials required per unit of FG 3 5
Total materials needed in production 19,500 32,500
Add: Desired ending Inventory 1,300 4,600
Total needed materials 20,800 37,100
Less: Beginning Inventory 2,200 4,000
Materials to be purchased 18,600 33,100

Materials to be purchased 18,600 33,100


Cost per unit 10 30
Material purchases 186,000 993,000

4. Direct Labor Budget


Materials to be purchased 6,500
Cost per unit 146
Material purchases 949,000

5. Overhead Cost Budget


Variable costs
Indirect materials and supplies 5.85
Materials handing 9.07
Other indirect labor 5.08
Variable cost per unit 20.00
Units to be produced 6,500
Total variable costs 130,000
Fixed costs
Supervisor labor 175,000
Maintenance and repairs 85,000
Plant administration 173,000
Utilities 87,000
Depreciation 280,000
Insurance 43,000
Property taxes 117,000
Others 41,000
Total Fixed Costs 1,001,000
Total Overhead costs 1,131,000

6. Budgeted Statement of Cost of Goods Sold


Direct Materials
Beginning Inventory
R(2,200*10) 22,000
S(4,000*30) 120,000
Total beginning inventory 142,000
Add: Purchases (see schedule 3) 1,179,000
Less: Ending inventory
R(1,300*10) 13,000
S(4,600*30) 138,000 151,000
Total Direct materials used 1,170,000
Direct Labor (6400*146) 949,000
Manufacturing Overhead
Variable costs (see schedule 5) 130,000
Fixed costs (see schedule 5) 1,001,000
Total manufacturing costs 3,250,000
Add: Beginning Inventory-Finished Goods 450,000
Total Goods available for sale 3,700,000
Less: Finished Goods-Ending Inventory 500,000 *
Total Costs of Goods Sold 3,200,000
*ending inventory is at P500 per unit (total manufacturing cost divided by
number of units produced

7. Budgeted Marketing and Administrative Costs


Variable Costs
Sales Commissions (6,400x40.625) 260,000
Other Marketing Costs (6,400x16.250) 104,000
Total Variable Marketing expense 364,000
Fixed Marketing Costs:
Sales salaries 100,000
Advertising 193,000
Other 78,000
Administrative Costs
Admin salaries 254,000
Data processing services 103,000
Legal and other professional fees 180,000
Depreciation 94,000
Taxes(other than income tax) 108,000
Other 26,000
Total Marketing and Admin Expenses 1,500,000

8. Budgeted Income Statement

Sales (Schedule 1) 5,120,000


Cost of Sales (Schedule 6) 3,200,000
Gross Profit 1,920,000
Marketing and Admin Expenses 1,500,000
Interest Expense 52,720 *
Net Income before Tax 367,280
Provision for income tax 91,820
Net income after tax 275,460
* Add current and noncurrent portion of Longterm debt multiply by 8% annual interest rate

9. Cash Budget
Cash Balance, January 1 150,000
Collections 5,185,000
Sale of old equipment 25,000
Total cash available 5,360,000
Purchases - 1,164,000 *
Direct labor - 949,000
Manufacturing overhead - 851,000 **
Marketing and administrative expenses - 1,406,000 **
Purchase of new equipment - 320,000
Payment of long-term debt - 83,000
Payment of interest - 52,720
Payment of dividends - 140,000
Payment for income tax - 252,000
Cash balance, December 31 142,280
* Budgeted Material Purchases less 15,000 increase in Accounts payable
**Remove noncash expenses, in this case Depreciation
10. Budgeted Statement Financial Position
Assets
Current Assets
Cash 142,280
Accounts receivable 155,000
Inventories 651,000
Other Current Assets 23,000
Total Current Assets 971,280

Long-term Assets
Property, plant and equipment 2,495,000
Less: Accum Depn 949,000
Net Assets 1,546,000
Total Assets 2,517,280

Liabilities and Equity


Current Liabilities
Accounts payable 155,000
Taxes payable - 4,180
Longterm debt-current portion 83,000
Total Current liabilities 233,820
Long -term liabilities 493,000
Total Liabilities 726,820

Equity
Share Capital 350,000
Retained Earnings 1,440,460
Total 1,790,460
Total Liabilities and Equity 2,517,280
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