SHIMENET Manufacturing Company sold 23,430 units of Product AM in 2021 which was higher by

10% compared to the units sold in 2020. The products were sold at ₱300 per unit.

Because of heavy advertising and other promotional activities and shift in buyer's preferences, the
company expects to increase the sales by 15% in 2022 against the 2021 performance. The company
plans to sell the product at ₱350 per unit.

Required: Prepare the sales budget in 2019

𝟐𝟑,𝟒𝟑𝟎 ×𝟏𝟓% ≈𝟑,𝟓𝟏𝟓

Step 1 Identify the increase in project sales in terms of units

𝟐𝟑,𝟒𝟑𝟎+𝟑,𝟓𝟏𝟓 ≈𝟐𝟔,𝟗𝟒𝟓 𝒖𝒏𝒊𝒕𝒔

Step 2 Identify the estimated increase in projected sales in terms of pesos

SHIMENET Manufacturing Corporation
Sales Budget
for year 2022

Selling Units Estimated Price Sales

Projected Sales (23,430 × 1.15) 26,945 ₱ 350 ₱ 9,431,000
 QUIBBLES Processing Company in the production of one unit of Product AB requires the following
raw materials: 2 units of Material X and 3 units of Material Y. The company expects to sell 26,495
units of Product AB in 2021.

The inventory data for Product AB are as follows:

Beginning inventory, January 1, 2021 (actual) 3,500 units

Ending inventory, December 31, 2021 (plan) 5,600 units

Variable cost based on unit produced:

Indirect materials and factory supplies ₱ 6.50 per unit
Light and water ₱ 12.20 per unit
Other variable costs ₱ 18.80 per unit

Fixed cost:
Salary of supervisor ₱ 250,000
Depreciation 420,000
Taxes 100,000
Other fixed costs 230,000

Required:
1. Prepare the budget for 2021
2. Estimated cost of sales
Answer 1:
Step 1 Identify all the production schedules.
Schedule 1 - No. of units to produce
Number of units to sell: 26,495
Add: Plan inventory level 5,600
Total 32,095
Less: Beg. Inventory 3,500
Estimated number of units to produce 28,595
Schedule 2 - Raw materials required for the production
Material X Material Y
No. of units to produce 28,595 28,595
Multiplied by: No. per unit 2 3
Materials required for production 57,190 85,785
Multiplied by cost per unit 6 18
Cost to produce the product ₱ 344,000 1,545,000
Direct material cost ₱ 1,889,000
Schedule 3 - Direct labor budget
Estimated number of units to produce 28,595
Multiplied by: Direct labor rate 90
Estimated direct labor costs ₱ 2,574,000
Schedule 4 - Factory overhead budget
Variable manufacturing costs
Indirect materials (28,595 × ₱6.50) 185,868 ₱ 186,000
Light and water (28,595 × ₱12.20) 348,859 349,000
Other variable costs (28,595 × ₱18.80) 537,586 538,000
Total manufacturing costs 1,072,313 ₱ 1,073,000

Fixed manufacturing costs

Salary of supervisor ₱ 250,000
Depreciation 420,000
Insurance 100,000
Other fixed cost 230,000
Total fixed cost ₱ 1,000,000

Total estimated overhead costs ₱ 2,073,000

Step 2 Prepare the production budget

QUIBBLES Processing Company
Production Budget
for year 2021

Direct materials ₱ 1,889,000

Direct labor cost 2,574,000
Factory overhead 2,073,000
Total estimated production costs ₱ 6,536,000
Answer 2:
Step 1: Determine the production schedule for the raw materials to purchase
Schedule 5 - Raw materials to purchase
Material X Material Y
Materials required for production 57,190 85,785
Add: Ending inventory (plan) 18,000 36,000
Total 75,190 121,785
Less: Beginning inventory (actual) 12,200 28,800
Required materials to purchase 62,990 92,985
Multipled by: Unit price ₱ 6 ₱ 18
Cost of purchases ₱ 378,000 ₱ 1,674,000
Total cost of raw materials purchases ₱ 2,052,000

Step 2: Determine the projected cost of sales

Manufacturing costs
Direct materials
Raw materials inventory
Material X (12,000 × ₱6) ₱ 73,200 ₱ 74,000
Material Y (28,800 × ₱18) ₱ 518,400 519,000 ₱ 593,000
Add: Purchases 2,052,000
Total materials for use ₱ 2,645,000
Less: Raw materials, ending
Material X (18,000 × ₱6) ₱ 108,000 ₱ 108,000
Material Y (36,000 × ₱18) ₱ 648,000 648,000 756,000
Direct materials cost ₱ 1,889,000
Direct labor cost 2,574,000
Factory overhead 2,073,000
Total manufacturing (production) costs ₱ 6,536,000
Add: Work in progess, beginning -
Total goods put in progress ₱ 6,536,000
Less: Work in progess, ending -
Total cost of goods manufactured ₱ 6,536,000
Add: Finished goods, beginning (3,500 × ₱200) 700,000
Total goods available for sale ₱ 7,236,000
Less: Finished goods, ending 1,280,000
Estimated cost of sales ₱ 5,956,000
 ISANG KAIBIGAN Publishing presents the following financial statements for 2020.

ISANG KAIBIGAN Publishing ISANG KAIBIGAN Publishing

Statement of Financial Position Statement of Comprehensive Income
for the year ended, December 31, 2020 for the year ended, December 31, 2020

Assets Sales ₱ 855,000

Current Assets Less: Cost of sales
Cash ₱ 123,000 Merchandise inventory, beginning ₱ 213,000
Accounts receivable, net 57,000 Add: Purchases 580,000
Merchandise inventory 280,000 Total goods available for sale ₱ 793,000
Prepaid expenses 20,000 ₱ 480,000 Less: Merchandise inventory, end 280,000 513,000
Gross Profit ₱ 342,000
Current Assets Less: Operating expenses
Furnitures and fixtures, net ₱ 100,000 Salaries expense ₱ 125,000
Store equipment, net 60,000 160,000 Travelling expenses 8,000
₱ 640,000 Rent expenses 48,000
Depreciation expense 12,000
Liabilities and Owner's Equity Light and water 35,000
Current Liabilities Taxes and licenses 10,000
Accounts payable ₱ 27,000 Communication expenses 6,000
Accrued operating expenses 20,000 Store supplies 8,000 252,000
Income tax payable 27,000 ₱ 74,000 Net income before tax ₱ 90,000
Income tax 27,000
Owner's Equity Net income ₱ 63,000
Goh, Capital 566,000
₱ 640,000

Additional information: Required:

1. Sixty percent of total sales are sales on account. The business is expected to collect the receivable as follows: Prepare the cash budget for the first quarter of 2021.
(a) month of sale 60%
(b) month following month of sale 38%
(c) balance is uncollectible
2. Projected sales for the first three months of 2021 are as follows:
(a) January ₱ 120,000
(b) February ₱ 150,000
(c) March ₱ 190,000
3. The cost of purchases is 60% of the sales. Seventy percent of the costs are paid on the month of purchases and 30% are paid on the following month.
The accounts payable represent the unpaid purchases for the month of December 2020.
4. All operating expenses, except depreciation, are assumed to be evenly incurred during the year. In 2021, operating expenses are expected to increase
by 10%. The expenses for the first three months of 2021 are all paid in cash.
5. All payables on December 2020 are settled in January 2021.
6. The business will buy new store equipment costing ₱60,000 with 25% down payment in March 2021.
Step 1: Determine the following schedules
Schedule 1 - Cash Sales
January (₱120,000 × 40%) ₱ 48,000
February (₱150,000 × 40%) 60,000
March (₱190,000 × 40%) 76,000
Total Cash Sales ₱ 184,000
Schedule 2 - Collection of Sales on Account
Accounts receivable, beginning ₱ 57,000
January ((₱120,000 × 60%) × 98%) 70,560 71,000
February ((₱150,000 × 60%) × 98%) 88,200 89,000
March ((₱190,000 × 60%) × 60%) 68,400 69,000
Total collection from sales on account ₱ 286,000
Schedule 3 - Payment of Purchases
January (₱120,000 × 60%) 72,000 ₱ 72,000
February (₱150,000 × 60%) 90,000 90,000
March ((₱190,000 × 60%) × 70%) 79,800 80,000
Total purchases paid ₱ 242,000
Schedule 4 - Payment for operating expenses
Operating expenses, 2020 ₱ 252,000
Less: Depreciation 12,000
Cash operating expenses ₱ 240,000
Multiplied by: expected expenses 1.10
Estimated operating expenses for 2020 ₱ 264,000
Divide by number of quarters 4
Estimated operating expenses for Q1 ₱ 66,000

Step 2: Determine the estimated cash balance for March 31, 2021
ISANG KAIBIGAN Publishing
Cash Budget
for the month ended March 31, 2021
Cash balance, January 1, 2021 ₱ 123,000
Add: Estimated cash receipts
Cash sales ₱ 184,000
Collection of accounts receivable 286,000 470,000
Estimated cash available ₱ 593,000
Less: Estimated cash disbursement
Payment of 2020 payables ₱ 74,000
Payment of purchases 242,000
Payment of operating expenses 66,000
Downpayment on store equipment 15,000 397,000
(₱60,000 × 25%)
Cash balance, March 31, 2021 ₱ 196,000