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Exercises in Operational Budgeting - Solve in Excel Spread Sheet

Both documents provide the necessary financial information and instructions to prepare operational

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Claire Barba
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124 views2 pages

Exercises in Operational Budgeting - Solve in Excel Spread Sheet

Both documents provide the necessary financial information and instructions to prepare operational

Uploaded by

Claire Barba
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Exercises in Operational Budgeting – Cash budget and Schedules

Orton Company prepares monthly cash budgets. Relevant to the operating budgets for 2014
are:
January February
Sales $320,000 $400,000
Direct materials purchases 80,000 110,000
Direct labor 85,000 115,000
Manufacturing overhead 60,000 75,000
Selling and Administrative Exps 75,000 80,000

All sales are on account. Collections are expected to be 60% in the month of sale. 30% in the
first month following the sale, and 10% in the second month following the sale. Thirty percent
(30%) of direct materials purchases are paid in cash in the month of purchase, and the balance
due is paid the month following the purchase. All other items above are paid in the month
incurred. Depreciation has been excluded from manufacturing overhead and selling and
administrative expenses.
Other data:
1. Credit sales: November 2013 $200,000, December 2013 $280,000
2. Purchases of direct materials: December 2013, $90,000
3. Other receipts: January - Collection of December 31, 2013 interest receivable $3,000;
February –proceeds from sale of securities $5,000.
4. Other disbursements: February –payment of $20,000 for land
The company’s cash balance of January 1, 2014, is expected to be $60,000. The company wants
to maintain a minimum cash balance $50,000.
Instructions
(a) Prepare schedules for (1) expected collections from customers and (2) expected
payments for direct materials purchases
(b) Prepare a cash budget for January and February in columnar form.

Additional Exercise in Operational Budgeting


Stephanie Inc. is preparing its annual budgets for the year ending December 31, 2020.
Accounting assistants furnish the data shown below:
Product JB50 Product JB 60
Sales budget
Anticipated volume in units 400,000 200,000
Unit selling price $20 $25
Production budget
Desired ending FGU’s 25,000 15,000
Beginning FGU’s 30,000 10,000’
Direct materials budget
Direct materials per unit (pounds) 2 3
Desired ending direct materials (lbs) 30,000 15,000
Beginning direct materials pounds 40,000 10,000
Cost per pound $3 $4
Direct labor budget
Direct labor time per unit 0.4 0.6
Direct labor rate per hour $12 $12
Budgeted income statement
Total unit cost $12 $21

An accounting assistant has prepared the detailed manufacturing overhead budget and the
selling and administrative expense budget. The latter shows selling expenses of $660,000 for
product JB 50 and $360,000 for product JB 60, and administrative expenses of $540,000 for
product JB 50 and $340,000 for product JB 60. Income taxes are expected to be 30%.
Instructions
Prepare the following budgets for the year. Show data for each product. Quarterly budgets
should not be prepared.
(a) sales (d) direct labor
(b) production ( e) Income statement (Note: income
(c) direct materials taxes are not allocated to the products

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