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CHAPTER 6
BUDGETING
[Problem 1]
Zamboanga Company
Production Budget
For the Third Quarter, July-September, 200X
Budgeted sales
Add: Finished goods – end.
(40% x next month's sales)
Total goods available for sale
Less: Finished goods – beg.
Budgeted production
July
30,000
August
45,000
September
60,000
Total
135,000
18,000
48,000
10,000
38,000
24,000
69,000
18,000
51,000
20,000
80,000
24,000
56,000
20,000
155,000
10,000
145,000
[Problem 2]
Aparri Company
Budgeted Materials Purchases
For The Year Ended, December 31, 2005
Budgeted production (units)
x Standard materials/unit
Materials used
Q1
80,000
3
240,000
Q2
120,000
3
360,000
Q3
200,000
3
600,000
Q4
180,000
3
240,000
Total
580,000
3
1,740,000
72,000
312,000
42,000
270,000
200 P
120,000
480,000
72,000
408,000
200 P
108,000
708,000
120,000
588,000
200 P
54,000(1)
594,000
108,000
486,000
200 P
54,000
1,794,000
42,000
1,752,000
200
Add: Materials inventory - end
(20% x next quarter's sales)
Total materials
Less: Materials inventory-beg.
Materials purchase (units)
x Standard materials cost per unit P
Budgeted materials purchases
P 54,000,000 P 81,600,000 P117,600,000 P97,200,000 P350,400,000
(pesos)
(1)
90000 x 3 x 20% = 54,000
[Problem 3]
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a. Cagayan Corporation
Budgeted Production
For The Second Quarter, April-June 20__
April
90,000
Budgeted sales (units)
Add: Finished goods inventory - ending (1)
Total goods available for sale
Less: Finished goods inventory - beginning
Budgeted Production
(1)
FG, end = 6000 + 20% (next month’s sales)
FG- 6/30 = 6,000 + 20% (30,000) = 12,000
May
98,000
June
45,000
Total
233,000
25,600 15,000
115,600 113,000
14,000 25,600
101,600 87,400
12,000
57,000
15,000
42,000
12,000
245,000
14,000
231,000
units
b. Cagayan Corporation
Budgeted Raw Materials Purchases
For The Second Quarter, April-June, 20__
Budgeted Production (units)
x Standard saterials / unit
Materials used (lbs.)
Add: Materials inventory – ending
(1/4 x next month’s sales)
Total materials
Less: Materials inventory - beginning
Budgeted materials purchase (in lbs.)
(1)
April
101,600
4 lbs.
406,400
May
87,400
4 lbs.
349,600
June
42,000
4 lbs.
168,000
Total
231,000
4 lbs.
924,000
87,400
493,800
60,000
433,800
42,000
391,600
87,400
304,200
30000(1)
198,000
42,000
156,000
30,000
954,000
60,000
894,000
Materials inventory - 6/30 = 30,000 x 4 lbs. x 1/4 = 30,000 lbs.
[Problem 4].
a. JVC Company
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Budgeted Production and Direct Labor Costs
For The First Quarter, January – March, 20B
Budgeted sales
Add: Finished goods - ending (1)
Total goods
Less: Finished goods - beginning
Budgeted production
x DLH per unit
Budgeted DLH
x DL rate per hour
Budgeted direct labor wages
Pensions contribution (P0.25 / hr)
Workers' compensation insurance
January
February
March
10,000
12,000
8,000
16,000
12,500
13,500
26,000
24,500
21,500
16,000
16,000
12,500
10,000
8,500
9,000
2
2
2
20,000
17,000
18,000
P
8 P
8 P
8
160,000
136,000
144,000
5,000
4,250
4,500
Total
30,000
13,500
43,500
16,000
27,500
2
55,000
P
8
440,000
13,750
2,000
1,700
1,800
5,500
8,000
6,800
7,200
22,000
16,000
13,600
14,400
P 191,000 P 162,350 P 171,900
44,000
P 525,250
(P0.10 per hour)
Employee medical insurance
(P0.40 per hour)
Social security and employment taxes
(10% of wages)
Budgeted direct labor costs
(1)
FG – ending = (100% x next month’s sales) + (50% x 2nd month’s sales)
b. 1. Budgeted production - also used in direct materials purchase budget, factory overhead
budget and master budget
2. Budgeted direct labor hours - used in budgeted variable factory overhead and master
budget
[Problem 5]
a. Bacolod Corporation
Budgeted Production
For The Third Quarter, July – September, 20A
Budgeted sales (units)
Add: Finished goods inventory - ending
(80% x next month's sales)
Total goods available for sale
Less: Finished goods inventory - beginning
Budgeted production (units)
b. Bacolod Corporation
Budgeted Direct Materials Budget
For The Third Quarter, July September, 20A
July
5,000
August
6,000
September
7,000
Total
18,000
4,800
9,800
5,600
4,200
5,600
11,600
4,800
6,800
5,600
12,600
5,600
7,000
5,600
23,600
5,600
18,000
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Budgeted production
x Standard materials per unit
Materials requirement
Add: Materials inventory - ending (1)
Total materials
Less: Materials inventory - beginning
Materials purchase (units)
x Materials cost per unit
Materials purchase (pesos)
(1)
P
P
101
18,000
6
108,000
42,000
150,000
35,000
115,000
0.40
46,000
Materials
211
18,000
4
72,000
28,000
100,000
32,000
68,000
P
3.60 P
P
244,800 P
242
18,000
2
36,000
14,000
50,000
14,000
36,000
1.20
43,200
Mat. Inventory – 7/30
101 = 7,000 x 6 = 42,000 units
211 = 7,000 x 4 = 28,000 units
242 = 7,000 x 2 = 14,000 units
c. Bacolod Corporation
Budgeted Direct Labor Costs
For The Third Quarter, July – September, 20A
Budgeted production (units)
X Standard hours per unit
Budgeted direct labor hours
X Direct labor rate per hour
Budgeted direct labor costs
Forming
18,000
0.80
14,400
P
8.00
P115,200
Assembly
18,000
2.00
36,000
P
8.00
P198,000
d. Bacolod Corporation
Budgeted Factory Overhead
For The Third Quarter, July – September, 20A
Flexible
Budget
Variable overhead
Supplies
Electricity
Indirect labor
Other
Total variable overhead
Fixed overhead
Supervision
Property tax
Depreciation
Other
Total fixed overhead
Rate
per unit
(33,000 units)
P
2.20 P 72,600
1.00
33,000
2.00
66,000
0.80
26,400
P
6.00
198,000
30,000
3,600
33,200
16,200
83,000
Finishing
18,000
0.25
4,500
P
8.00
P 27,000
Total
54,900
P340,000
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Budgeted factory overhead
P 281,000
[Problem 6]
a. Ilocos Corporation
Sales Budget
For The Year Ended, December 31, 20B
Budgeted sales (units)
x Unit sales price
Budgeted sales (pesos)
Thingone
Thingtwo
60,000
40,000
P
70 P
100
P 4,200,000 P 4,000,000
b. Ilocos Corporation
Budgeted Production
For The Year Ended, December 31, 20B
Budgeted sales (units)
Add: Finished goods inventory - 01/01
Total goods available for use
Less: Afinished good inventory - 12/31
Budgeted production (units)
Thingone
60,000
20,000
80,000
25,000
55,000
Thingtwo
40,000
8,000
48,000
9,000
39,000
c. Ilocos Corporation
Budgeted Raw Materials Purchases
For the Year Ended, December 31,20B
Material
B
A
Budgeted materials need
Thingone (55,000 x 4 lbs.)
220,000 lbs.
110,000 lbs.
(55,000 x 2lbs.)
Thingtwo (39,000 x 4 lbs.)
156,000
78,000
(39,000 x 2lbs.)
(39,000 x 1lb.)
Total materials need
Add: Materials inventory - 12/31
Total
Less: Materials inventory - 01/01
Materials purchases (lbs.)
x Materials cost per lb.
Budgeted materials purchases (pesos)
P
P
376,000
36,000
412,000
32,000
380,000
8 P
3,040,000 P
188,000
32,000
220,000
29,000
191,000
5 P
955,000 P
d. Ilocos Corporation
Budgeted Direct Labor Cost Budget
For The Year ended, December 31, 20B
Budgeted production (units)
x No. of hours per unit
Direct labor hours
x Standard DL rate per hour
Budgeted direct labor cost
C
Thingone
55,000
2
110,000
P
8
P 880,000
Thingtwo
39,000
3
117,000
P
9
P 1,053,000
39,000 lbs.
39,000
7,000
46,000
6,000
40,000
3
120,000
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e. Ilocos Corporation
Budgeted Finished Goods Inventory – 12/31
December 31, 20B
Thingone
25,000
Finished goods inventory - 12/31
x Unit costs:
Materials [(4 x P8) + (2 x P5)]
P
Thingtwo
9,000
42
[(5 x P8) + (3 x P5) + 1 x P3)]
P
Direct labor (2 x P8)
58
16
27
(3 x P9)
Applied FOH (2 x P2)
4
( 3 x P2)
Total unit costs
62
Budgeted finished goods inventory - 12/31 P 1,550,000
P
6
91
819,000
[Problem 7]
a. Sorsogon Corporation
Flexible Budgets
Rate
Variable costs
Direct materials (P2 x 4) P8.00/MH
Direct labor
1.50/MH
Supplies
0.80/MH
Utilities
1.20/MH
Maintenance
0.30/MH
Sub-total
P11.80/MH
Fixed costs
Utilities
Maintenance
Depreciation
Sub-total
Budgeted total costs
b. Variable costs (7,000 MH x P11.80)
Fixed costs
Budgeted cost – 7,000 MH
6,000
P
P
c. Variable costs (8,000 MH x P11.80)
Fixed costs
Budgeted costs – 8,000 MH (standard)
Machine Hours
7,000
8,000
9,000
48,000 P
9,000
4,800
7,200
1,800
70,800
56,000 P
11,250
5,600
8,400
2,100
83,350
72,000 P
12,000
6,400
9,600
2,400
102,400
176,000
13,500
7,200
10,800
2,700
210,200
4,000
6,000
12,000
22,000
92,800 P
4,000
6,000
12,000
22,000
105,350 P
P 82,600
22,000
P104,600
4,000
6,000
12,000
22,000
124,400 P
4,000
6,000
12,000
22,000
232,200
P 94,400
22,000
P104,600
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d. Actual manufacturing costs
Less: Standard manufacturing costs
Manufacturing variance
P 61,200
104,600
P(43,400) F
[Problem 8]
Abra Company
Schedule of Accounts Receivable Collections
July – September 20__
Month of Sale
May
June
July
August
September
P
Credit
Sales
550,000
600,000
800,000
P
July
55,000
180,000
188,160
288,000
August
September
P
900,000
60,000
240,000
P
211,680
324,000
1,000,000
Budgeted collections from customer
[Problem 9]
1. May sales (P150,000 x 20%)
April sales (P180,000 x 50%)
March sales (P100,000 x 25%)
May collections
P
711,160
P
P
2. February sales (P160,000 x 5%)
March sales (P100,000 x 30%)
April sales (P180,000 x 80%)
Accounts receivable - 4/30
P
3. February sales (P160,000 x 5%)
March sales (P100,000 x 5%)
April sales (P180,000 x 30%)
May sales (P150,000 x 80%)
Accounts receivable - 5/31
P
P
P
80,000
Total
55,000
240,000
796,160
210,000
745,680
235,200
360,000
885,200
595,200
P
P 835,680
P
P 2,432,040
30,000
90,000
25,000
145,000
8,000
30,000
144,000
182,000
8,000
5,000
54,000
120,000
187,000
4. Steps to reduce the balance in accounts receivable:
a. Shorter credit period
a1. Risk.
Customer, especially those who have been accustomed with larger and
longer credit term, may negatively react and look for a new supplier that
will offer them a longer credit period so as not to strain their working
capital requirement.
a2. Advantage.It would reduce investment in accounts receivable balance, bad debts,
collection costs and would increase income on investment.
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b. Strengthen collection policies:
b1. Risk.
Some customers may have an operating cycle longer than the offered
credit terms and may not have the ability to meet accelerated payments.
b2. Advantage.Increase cash inflows.
[Problem 10]
Lantoting Company
Budgeted Cash Payments to Merchandise Supplies
For the Month of May, 20__
Budgeted sales (in units)
Add: Finished goods inventory - 5/1
(20% x 10,000)
Total goods available for sale
Less: Finished goods inventory - 5/31
(20% x 12,000)
Budgeted production
x Standard materials per unit
Materials used
Add: Materials inventory 5/1
(40% x 28,800)
Total materials
Less: Materials inventory - 5/31
(40% x 12,200 units x 3 units)
Materials purchase (units)
x Materials cost per unit
Budgeted May purchases
P
P
May
10,000
April
9,000
2,000
12,000
1,800
10,800
2,400
9,600
3
28,800
2,000
8,800
3
26,400
11,520
40,320
10,560
36,960
14,640
25,680
20
513,600
11,520
25,440
20
508,800
Payments to:
April purchases (P508,800 x 10/30 x 98%)
May purchases (P513,600 x 20/30 x 98%)
P
P
P
P
(20% x 9,000)
(40% x 26,400)
166,208
335,552
501,760
[Problem 11] Cash paid for purchases in July = ?
Budgeted sales (units)
Add: Finished goods inventory - beginning
Total goods for sale
Less: Finished goods inventory - ending
Budgeted production
x Standard materials per unit
Materials used
June
50,000
5,000
55,000
3,000
52,000
3
150,000
July
30,000
3,000
33,000
3,000
30,000
3
90,000
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Add: Materials inventory beginning
Total materials
Less: Materials inventory - ending
Materials purchase (units)
x Standard materials per unit
Materials purchase (pesos)
P
20,000
170,000
14,000
156,000
5
P
14,000
104,000
11,000
93,000
5
P
780,000
P
465,000
June purchases paid in July (P 780,000 x 1/3 x 98%)
July purchases paid in July (P 465,000 x 2/3 x 98%)
Cash payments to merchandise suppliers – July
P 254,800
303,800
P 558,600
[Problem 12]
a. Budgeted cash disbursements in June and July:
June
July
Materials
Current month (P 243,600 x 54%)
1-month prior (P225,000 x 46%)
Wages and salaries
Marketing, general and administrative expenses
P 131,544 P 132,408 (P 245,000 x 54%)
103,500
112,056 (P 243,600 x 46%)
38,000
38,000
Current month (P49,300 x 54%)
26,622
28,080 (P52,000 x 54%))
1-month prior (P51,550 x 46%)
23,713
22,678 (P49,300 x 46%))
Budgeted cash disbursements
P 323,379 P 333,222
1)
Materials used (units)
Materials inventory - ending
(130% x next month’s production
requirements)
May
11,900
June
11,400
14,820
15,600
July
12,000
15,860
(12,200 x 130%)
Materials inventory - beginning
(130% x 11,900)
(15,470)
(14,820)
(15,600)
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Materials purchases (units)
x Cost of materials per unit
P
Budgeted materials purchases (pesos) P
11,250
20 P
225,000
P
13,180
20 P
243,600
P
12,260
20
245,200
2) M, G and AE = (15% x sales) – P 2000
May = (15% x P 357,000) – P 2,000 = P 51,550
June = (15% x P 342,000) – P 2,000 = P 49,300
July = (15% x P 360,000) – P 2,000 = P 52,000
b. Budgeted cash collections in May and June:
From March sales (P 354,000 x 9%)
From April sales (P 363,000 x 60% x 97%)
(P 363,000 x 25%)
May
P 31,860
211,266
90,750
From May sales (P357,000 x 60% x 97%)
(P357,000 x 25%)
Collections from customers
P333,876
P
June
33,670 (P363,000 x 9%)
207,774
89,250
P329,694
c. Materials purchases in units in July is 13,840 units.
[Problem 13]
V. jovi Band company
Cash Budget
For The Quarter Ending, March 31, January
Collections from sales
January sales
84,672
21,600
February sales
February
March
Total
108,000
136,800
351,072
104,760
27,000
135,000
266,760
111,744
28,800
140,544
March sales
Total collections
106,272
239,760
412,344
758,376
89,200
73,800
36,900
125,000
26,400
17,000
368,300
60,400
90,600
45,300
125,000
33,000
17,000
371,300
(131,540
)
65,600
98,400
49,200
125,000
35,200
17,000
390,400
215,200
262,800
131,400
375,000
94,600
51,000
1,130,000
21,944
(371,624)
Payments:
Materials supplies
Direct labor (Bud, Prod x P 30)
Variable OH (Bud. Prod x P 15)
Fixed OH (5000 x P 25)
Var. expenses (Sales x 11)
Fixed expenses (P 12000 x P5000)
Total
Net operating cash inflows (outflows)
Investing and financing activities:
(262,028)
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C. Salonga investment
Bank loan
Acquisition of assets
Interest payments
Principal payments
Net investing and financing activities
Net cash inflows (outflows)
Add: Cash balance, beginning
Cash balance , ending, before
Financing
Borrowings
Cash balance - end
Schedules:
1.
Budgeted sales (@ 150)
Finished goods inventory - ending
[100 + (10% x next month's sales)]
50,000
150,000
(200,000
)
(3,000)
(3,000)
(265,028)
0
-
-
50,000
150,000
(3,000)
(3,000)
(134,340
)
10,000
(3,000)
(30,000)
(33,000)
(200,000)
(9,000)
(30,000)
(39,000)
(11,056)
10,000
(410,624)
0
(265,028)
(124,540)
275,028
134,540
P 10,000 P 10,000 P
(1,056)
(410,624)
11,056
420,624
10,000 P
10,000
January
2,400
February
3,000
March
3,200
400
420
500
(340)
2,460
(400)
3020
(420)
3,280
Finished goods inventory - beginning
[100 + (10% x 24,000)]
Budgeted production
2.
Budgeted materials purchases (units)
(2460 + 2000)
x Materials cost/unit
P
Budgeted materials purchase (pesos) P
4,460
20 P
89,200 P
[Problem 14]
a. Schedule of cash collections in September:
July credit sales (P 400,000 x 8%)
August credit sales (P 500,000 x 70%)
September credit sales (P 580,000 x 20%)
September cash sales
September collections
b. Schedule of payments to suppliers in September:
August purchases
September purchases (P 250,000 x 25%)
September payments to suppliers
3,020
20 P
60,400 P
P
P
P
P
32,000
350,000
116,000
280,000
778,000
105,000
62,500
167,500
3,280
20
65,600
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c. Isabela Corporation
Cash budget
For The Month of September, 2000
Cash balance, Sept. 01
P
80,000
Add: Cash collections from sales
778,000
Total cash
858,000
Less: Payments:
To merchandise suppliers
P 167,500
Selling and administrative expenses
80,000
Dividends
40,000
287,500
Cash balance, Sept. 30
P
570,500
[Problem 15]
1. Cricket Company
Cash Budget
For The Month Ended, July 30, 20__
Cash balance, July 1
Add: Collections from customers:
June sales (P 30,000 x 48%)
P 14,400
July sales (P 40,000 x 50%)
20,000
Total cash
Less: Payments:
Merchandise suppliers
June purchase (P10,000 x 50%)
P 5,000
July purchase (P 15,000 x 50%)
7,500
12,500
Marketing and administrative expenses
10,000
Dividends
15,000
Cash balance before financing
Add: Borrowings (P 5,000 – 1,900)
Cash balance, July 31
P
5,000
34,400
39,400
P
37,500
1,900
3,100
5,000
2. Financial actions to be taken:
a. Find ways to reduce cost and expenses
b. Find ways to increase sales
[Problem 16]
a.
La Union Corporation
Budgeted Cash Collections
October – December 2000
Month of sales
Previous to October
October sales
November sales
December sales
Amount
October
November
December
P
245,000 P
210,000 P
30,000
P
1,050,000
315,000
630,000 P
73,500
900,000
270,000
540,000
850,000
75,000
Total
240,000
1,018,000
810,000
75,000
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Collections from customers
P
525,000 P
930,000 P
688,500
P2,143,500
b. La Union Corporation
Cash Budget
For The Fourth Quarter, October – December 2000
Collections from customers
Payments:
Merchandise purchases
Payroll
Lease payments
Advertising
Equipment purchases
Total
Operating inflows (outflows)
Proceeds of loan
Interest payment
Net cash inflows (outflows)
Cash balance - beginning
Cash balance - ending
P
October
November
December
525,000 P
930,000 P
688,500 P
Total
2,143,500
P
520,000
120,000
20,000
70,000
30,000
760,000
(235,000)
300,000
(12,000)
53,000
250,000
303,000 P
1,860,000
345,000
60,000
230,000
30,000
2,525,000
(381,500)
300,000
(36,000)
(117,500)
250,000
132,500
[Problem 17]
a. Collections from customers – July 2007
Cash sales
July sales [(P 1,500,000 – P 350,000) x 70%]
June sales
July collections
b. Cash payments to suppliers – July 2007
July purchases (P 800,000 x 40%)
June purchases
July payments to suppliers
720,000
110,000
20,000
80,000
930,000
0
(12,000)
(12,000)
303,000
291,000 P
P
P
P
P
620,000
115,000
20,000
80,000
835,000
(146,500)
(12,000)
(158,500)
291,000
132,500 P
350,000
805,000
420,000
1,575,000
320,000
280,000
600,000
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c. Ilocos Norte Corporation
Cash Budget
For The Month Ended July 31, 2007
Cash balance, July 1
Add: Collections from customers
Other revenues
Bank borrowings
Total cash available for use
Less: Payments
Merchandise suppliers
Operating expenses (1)
Note payable paid
Equipment purchases
Interest
Cash balance, July 31
(1)
Operating expenses incurred
Accrued expenses – beginning
- end
Prepaid expenses – beginning
- end
Operating expenses paid
P
P
80,000
1,575,000
30,000
150,000
1,755,000
1,835,000
600,000
316,000
60,000
2,000
1,178,000
657,000
P
P
P
320,000
45,000
(60,000)
(23,000)
34,000
316,000
d. Ilocos Norte Corporation
Income Statement
For The Month Ended, July 31, 2007
Sales
Less: Cost of goods sold:
Inventory, July 1
P
Add: Purchases
Total goods available for use
Less: Inventory, July 31
Gross profit
P
350,000
800,000
1,150,000
400,000
1,500,000
750,000
750,000
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Less: Operating expenses
Depreciation expense
Operating Income
Add: Other revenues (1)
Interest expense
Net Income
(1)
320,000
15,000
335,000
415,000
26,500
(2,000)
24,500
439,500
P
Cash received form other revenues
Accrued income – July 1
- July 31
Deferred revenues – July 1
- July 31
Other revenues earned
P
30,000
(12,000)
14,500
3,000
(9,000)
26,500
P
[Problem 18]
a and b
Revenues earned/Expenses incurred
Accruals – beginning
- ending
Prepayments – beginning
- ending
Cash received/cash paid
(Revenues)
a
P 120,000
23,000
(40,000)
(22,000)
8,000
P 89,000
(Expenses)
b
P 90,000
12,000
(15,000)
(9,000)
11,000
P 89,000
[Problem 19]
Patz Company
Budgeted Income Statement
For The Second Quarter Ended, June 30, 20xx
Sales (P 500,000 + P 1,000,000)
Less: Cost of goods sold
Gross profit
Less: Operating expenses:
Variable marketing
Fixed marketing
Fixed administrative
Doubtful accounts (2% x 1.5 million)
Depreciation expense (P 800,000/20)
Net income
[Problem 20]
Mexia Inc.
Budgeted Income Statement
For The Year Ended, December 31, 2007
P
P
Sales (P 9,000 x 110% x 105%)
Less: Cost of goods sold (P 6,000 x 106% x 105%)
Gross profit
Less: Commercial expenses
Marketing
P
780
Administrative (P 900 + P 420)
1,320
150,000
50,000
40,000
30,000
40,000
P
P
10,395
6,678
3,717
2,100
1,500,000
900,000
600,000
310,000
290,000
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Operating income
Less: Interest expense [P 140 + 10% (P 300)]
Income before income tax
Less: Income tax
Net income
P
1,617
170
1,447
579
868
[Problem 21]
Easecom Company
Budgeted Income Statement
For The Year Ended, December 31, 2007
(in thousands)
Sales:
Equipment (P 6,000 x 110% x 106%)
P
Maintenance contracts (P 1,800 x 106%)
Less: Cost of goods sold (P 4,600 x 110% x 103%)
Gross profit
Less: Operating expenses:
Marketing (P 600 + P 250)
Administration
Distribution (P 150 x 110%)
Customer maintenance (P 1,000 + P 300)
Operating income
6,996
1,908
P
850
900
165
1,300
P
8,904
5,212
3,692
3,215
477
[Problem 22]
Mabuhay University
Motor Pool Division
Performance Report
For The Month of March 20xx
Variable Costs
Gasoline
Oil, minor repairs, parts and supplies
P
Actual
Costs
5,323.00 P
380.00
Flexible
Budget
5,512.50 P
378.00
Variance
UF (F)
(189.50)F
2.00UF
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Outside repairs
Sub-total
50.00
5,753.00
225.00
6,115.50
(175.00)F
(362.50)F
Fixed Cost
Insurance
Salaries and benefits
Depreciation
Sub-total
Totals
Cost per mile (Costs + 63,000 miles)
(1)
P
525.00
2,500.00
2,310.00
5,335.00
11,088.00 P
500.00
2,500.00
2,200.00
5,200.00
11,315.50 P
P
0.1760
0.1796
P
25.00UF
0.00
110.00UF
135.00UF
(227.50)F
P (0.0036)F
Gasoline = 63,000 x P1.40/16 = P 5,512.50
Oil, etc., = 63,000 x P 0.006 = P 378
[Problem 23]
a.
Triple-F Health Club
Cash Budget
For The Year Ended October 31, 20C
(in thousands)
Receipts:
Annual membership fees (P 355 x 110% x 103%)
Lesson and class fee (P 234 x 234/180)
Miscellaneous (P 2 x 2/1.5)
Payments:
Manager’s salary and benefits (P 36 x 115%)
Regular employees wages and benefits (P 190 x 115%)
Lesson and class employee wages and benefits
(P 195 x 234/180 x 115%)
Travel and supplies (P 16 x 125%)
Utilities (P 22 x 125%)
Mortgage interest (P360 x 9%)
Miscellaneous (P2 x 125%)
Equipment payable
Accounts payable for supplies and utilities
Amortization of mortgage payable
Purchase of new equipment
Net cash inflows
Add: Cash balance - Oct. 31,20B
Cash balance - Oct. 31, 20C
P
402.2
304.2
2.7
P 708.9
41.4
218.5
291.5
20.0
27.5
32.4
2.5
10.0
2.5
30.0
25.0
701.3
7.6
7.3
P 14.9
b. Problem(s) discloses by the prepared budget:
1. Incremental revenues are basically determined by the membership base, which
may be considered relatively non-controllable.
2. The presence of the mortgage payable and its attendant interest expense
fundamentally drain the cash position of the health club.
3. Possible areas for cost saving should be identified to compensate the
accelerating trend in costs and expenses.
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c. Joy Tan, the club general manager, is correct that the board’s goals to purchase the
adjoining property in four or five years time is unrealistic. The adjoining property
costs P300,000 and would be requiring in nominal terms P60,000 annual savings in
the next five years. Considering that the recent net cash inflows from operations is
only P7,600 in 20C, the required P60,000 annual savings would be extremely
difficult for the business to achieve.