Activity-Based Budgeting St. Sophia's Hospital is preparing its budget for the coming year. It uses an activity-based
Question:
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Activity-Based Budgeting
St. Sophia's Hospital is preparing its budget for the coming year. It uses an activity-based approach for all costs except physician care. Its emergency room has three activity areas with cost drivers as follows:
1.Receptionpaperwork of incoming patients. Cost driver is the number of forms completed.
2.Treatmentinitial diagnosis and treatment of patients. Cost driver is the number of diagnoses treated.
3.Cleaninggeneral cleaning plus preparing treatment facilities for next patient. Cost driver is the number of people visiting emergency room (patients plus person(s) accompanying them).
Budgeted Amount of Cost DriverActiviy AreaCost Driver RatesOutpatientsAdmitted PatientsReception$ 618,400 forms6,500 formsTreatment1218,000 diagnoses5,400 diagnosesCleaning227,400 people3,400 people
a. Create the total budgeted cost for each activity.
Activity Cost BudgetReceptionTreatmentCleaningOutpatients$Answer
$Answer
$Answer
Admitted PatientsAnswer
Answer
Answer
Total$Answer
$Answer
$Answer
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Cash Receipts
The sales budget for Andrew Inc. is forecasted as follows:
MonthSales RevenueMay$ 170,000June210,000July230,000August170,000
To create a cash budget, the company must determine the budgeted cash collections from sales. Historically, the following trend has been established regarding cash collection of sales:
- 50 percent in the month of sale.
- 25 percent in the month following sale.
- 20 percent in the second month following sale.
- 5 percent uncollectible.
The company gives a 2 percent cash discount for payments made by customers during the month of sale. The accounts receivable balance on April 30 is $34,000, of which $10,000 represents uncollected March sales and $24,000 represents uncollected April sales.
Create a schedule of budgeted cash collections from sales for May, June, and July. Include a three-month summary of estimated cash collections.
Andrew, Inc.
Schedule of Budgeted Cash Collections
Quarterly by MonthsMayJuneJulyTotalTotal Cash receipts:$Answer
$Answer
$Answer
$Answer
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Purchases and Cash Budgets
On July 1, MTC Wholesalers had a cash balance of $175,000 and accounts payable of $99,000. Actual sales for May and June, and budgeted sales for July, August, September, and October are:
MonthActual SalesMonthBudgeted SalesMay$150,000July$ 90,000June160,000August80,000September100,000October120,000
All sales are on credit with 75 percent collected during the month of sale, 20 percent collected during the next month, and 5 percent collected during the second month following the month of sale. Cost of goods sold averages 70 percent of sales revenue. Ending inventory is one-half of the next month's predicted cost of sales. The other half of the merchandise is acquired during the month of sale. All purchases are paid for in the month after purchase. Operating costs are estimated at $28,000 each month and are paid during the month incurred.
Required
Prepare purchases and cash budgets for July, August, and September.
Do notuse a negative sign with your answers.
MTC WholesalersPurchases BudgetFor the Months of July, August, and SeptemberJulyAugustSeptemberInventory required, current sales$Answer
$Answer
$Answer
Desired ending inventoryAnswer
Answer
Answer
Total inventory needsAnswer
Answer
Answer
Less beginning inventoryAnswer
Answer
Answer
Purchases$Answer
$Answer
$Answer
Do notuse a negative sign with your answers.
MTC WholesalersCash BudgetFor the Months of July, August, and SeptemberJulyAugustSeptemberCash balance, beginning$Answer
$Answer
$Answer
Cash receiptsCurrent month's salesAnswer
Answer
Answer
Previous month's salesAnswer
Answer
Answer
Sales two months priorAnswer
Answer
Answer
Total receiptsAnswer
Answer
Answer
Cash availableAnswer
Answer
Answer
Cash disbursements:PurchasesAnswer
Answer
Answer
Operating costsAnswer
Answer
Answer
Total disbursementsAnswer
Answer
Answer
Cash balance, ending$Answer
$Answer
$Answer
QUESTION4Not completePoints out of 18.00Flag question
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Production and Purchases Budgets
At the beginning of October, Comfy Cushions had 1,600 cushions and 10,500 pounds of raw materials on hand. Budgeted sales for the next three months are:
MonthSalesOctober8,000 cushionsNovember10,000 cushionsDecember13,000 cushions
Comfy Cushions wants to have sufficient raw materials on hand at the end of each month to meet 25 percent of the following month's production requirements and sufficient cushions on hand at the end of each month to meet 20 percent of the following month's budgeted sales. Five pounds of raw materials, at a standard cost of $0.90 per pound, are required to produce each cushion.
Required
a. Create a production budget for October and November.
Do notuse a negative sign with your answers.
Comfy CushionsProduction BudgetFor the Months of October and NovemberOctoberNovemberDecemberUnit SalesAnswer
Answer
Answer
Desired ending inventoryAnswer
Answer
Finished goods requirementsAnswer
Answer
Less beginning inventoryAnswer
Answer
Production requirementsAnswer
Answer
b. Create a purchases budget in units and dollars for October.
Do notuse a negative sign with your answers.
Comfy CushionsPurchases BudgetFor the Month of OctoberOctoberNovemberProduction requirementsAnswer
Answer
Desired ending inventoryAnswer
Raw materials requirementsAnswer
Less beginning inventoryAnswer
Purchase requirements (units)Answer
Purchase requirements (in dollars)$Answer
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Cash Disbursement
Timber Company is in the process of preparing its budget for next year. Cost of goods sold has been estimated at 70 percent of sales. Lumber purchases and payments are to be made during the month preceding the month of sale. Wages are estimated at 15 percent of sales and are paid during the month of sale. Other operating costs amounting to 10 percent of sales are to be paid in the month following the month of sale. Additionally, a monthly lease payment of $14,000 is paid for computer services. Sales revenue is forecast as follows
MonthSales RevenueFebruary$170,000March210,000April220,000May260,000June240,000July280,000
Required
Create a schedule of cash disbursements for April, May, and June.
Do notuse a negative sign with your answers.
Timber CompanySchedule of Cash DisbursementsApril, May, and JuneAprilMayJuneLumbers purchases$Answer
$Answer
$Answer
WagesAnswer
Answer
Answer
Operating expensesAnswer
Answer
Answer
Lease paymentAnswer
Answer
Answer
Total disbursements$Answer
$Answer
$Answer
QUESTION6Not completePoints out of 10.00Flag question
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Purchases Budget in Units and Dollars
Budgeted sales of Wirtz Music Shop for the first six months of 2017 are as follows:
MonthUnit SalesMonthUnit SalesJanuary155,000April240,000February185,000May205,000March225,000June265,000
Beginning inventory for 2017 is 35,000 units. The budgeted inventory at the end of a month is 40 percent of units to be sold the following month. Purchase price per unit is $5.
Create a purchases budget in units and dollars for each month, January through May.
WIRTZ MUSIC SHOP
Purchases Budget
January - May, 2017JanuaryFebruaryMarchAprilMayPurchase units:Answer
Answer
Answer
Answer
Answer
Purchase dollars:$Answer
$Answer
$Answer
$Answer
$Answer
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Cash Budget
Patrick's Retail Company is planning a cash budget for the next three months. Estimated sales revenue is as follows:
MonthSales RevenueMonthSales RevenueJanuary$ 350,000March$ 250,000February300,000April200,000
All sales are on credit; 60 percent is collected during the month of sale, and 40 percent is collected during the next month. Cost of goods sold is 80 percent of sales. Payments for merchandise sold are made in the month following the month of sale. Operating expenses total $52,000 per month and are paid during the month incurred. The cash balance on February 1 is estimated to be $35,000.
Prepare monthly cash budgets for February, March, and April.
Use negative signs only with beginning and ending cash balances, when appropriate. Do not use negative signs with disbursement answers.
Patrick's Retail Company
Cash Budgets
February, March, and AprilFebruaryMarchAprilCash balance, beginning$Answer
$Answer
$Answer
Total Cash receiptsAnswer
Answer
Answer
Cash availableAnswer
Answer
Answer
Total disbursementsAnswer
Answer
Answer
Cash balance, ending$Answer
$Answer
$Answer
QUESTION8Not completePoints out of 18.00Flag question
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Cash Budget
The Williams Supply Company sells for $40 one product that it purchases for $25. Budgeted sales in total dollars for next year are $1,400,000. The sales information needed for preparing the July budget follows:
MonthSales RevenueMay$ 34,000June48,000July56,000August64,000
Account balances at July 1 include these:
Cash$ 24,000Merchandise inventory17,500Accounts receivable (sales)25,760Accounts payable (purchases)16,250
The company pays for one-half of its purchases in the month of purchase and the remainder in the following month. End-of-month inventory must be 50 percent of the budgeted sales in units for the next month. A 2 percent cash discount on sales is allowed if payment is made during the month of sale. Experience indicates that 50 percent of the billings will be collected during the month of sale, 40 percent in the following month, 8 percent in the second following month, and 2 percent will be uncollectible. Total budgeted selling and administrative expenses (excluding bad debts) for the fiscal year are estimated at $210,000 , of which one-half is fixed expense (inclusive of a $21,000 annual depreciation charge). Fixed expenses are incurred evenly during the year. The other selling and administrative expenses vary with sales. Expenses are paid during the month incurred. (Round your answers to the nearest whole number.)
(a) Create a schedule of estimated cash collections for July.
WilliamsSupply Company
Schedule of Cash Collections
For the Month of JulyCurrent month's sales$Answer
Previous month's sales$Answer
Two months' prior sales$Answer
Total cash collections$Answer
(b) Create a schedule of estimated July cash payments for purchases. For this, perform your calculation using units rounding up to the nearest whole unit. Then convert to dollars for your answer.
WilliamsSupply Company
Schedule of Cash Payments for Purchases
For the Month of JulyCurrent month's purchases$Answer
Beginning accounts payableAnswer
Total cash payments$Answer
(c) Prepare schedules of July selling and administrative expenses, separately identifying those requiring cash disbursements.
WilliamsSupply Company
Schedule of Selling and Administrative Expenses and Cash Disbursements
For the Month of JulyTotalCashSelling and administrative expenses:Fixed$Answer
Cash payment$Answer
VariableAnswer
Answer
Total expenses and cash disbursements$Answer
$Answer
(d) Create a cash budget in summary form for July.
Do not use negative signswith any answers below.
WilliamsSupply Company
Cash Budget
For the Month of JulyCash receipts$Answer
Cash disbursements:Merchandise$Answer
Selling and administrativeAnswer
Answer
Excess receipts (disbursements)$Answer
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Developing a Master Budget for a Merchandising Organization
Dils Brother Department Store prepares budgets quarterly. The following information is available for use in planning the second quarter budgets for 2017.
Dils Brother Department Store
Balance Sheet
March 31, 2017AssetsLiabilities and Stockholders' EquityCash$4,000Accounts payable
$31,000Accounts receivable31,000Dividends payable
15,000Inventory36,000Rent payable
3,000Prepaid Insurance3,000Stockholders' equity
50,000Fixtures25,000Total assets$99,000Total liabilities and equity
$99,000
Actual and forecasted sales for selected months in 2017 are as follows:
MonthSales RevenueJanuary$ 70,000February60,000March50,000April60,000May70,000June80,000July100,000August90,000
Monthly operating expenses are as follows:
Wages and salaries$ 27,000Depreciation100Utilities1,500Rent3,000
Cash dividends of $15,000 are declared during the third month of each quarter and are paid during the first month of the following quarter. Operating expenses, except insurance, rent, and depreciation are paid as incurred. Rent is paid during the following month. The prepaid insurance is for five more months. Cost of goods sold is equal to 50 percent of sales. Ending inventories are sufficient for 120 percent of the next month's cost of sales. Purchases during any given month are paid in full during the following month. All sales are on account, with 50 percent collected during the month of sale, 40 percent during the next month, and 10 percent during the month thereafter. Money can be borrowed and repaid in multiples of $1,000 at an interest rate of 12 percent per year. The company desires a minimum cash balance of $4,000 on the first of each month. At the time the principal is repaid, interest is paid on the portion of principal that is repaid. All borrowing is at the beginning of the month, and all repayment is at the end of the month. Money is never repaid at the end of the month it is borrowed.
(a) Create a purchases budget for each month of the second quarter ending June 30, 2017.
Dils Brothers Department Store
Monthly Purchase Budget
Quarter Ending June 30, 2017AprilMayJuneTotalBudgeted purchases$Answer
$Answer
$Answer
$Answer
(b) Create a cash receipts schedule for each month of the second quarter ending June 30, 2017. Do not include borrowings.
Dils BrothersDepartment Store
Schedule of Monthly Cash Receipts
Quarter Ending June 30, 2017AprilMayJuneTotalTotal cash receipts$Answer
$Answer
$Answer
$Answer
(c) Create a cash disbursements schedule for each month of the second quarter ending June 30, 2017. Do not include repayments of borrowings.
Dils BrothersDepartment Store
Schedule of Monthly Cash Disbursements
Quarter Ending June 30, 2017AprilMayJuneTotalTotal cash disbursements$Answer
$Answer
$Answer
$Answer
(d) Create a cash budget for each month of the second quarter ending June 30, 2017. Include budgeted borrowings and repayments.
Only use negative signs, if needed, for:excess receipts over disbursements, balance before borrowings andcash balances (beginning and ending).
Dils BrothersDepartment
Store Monthly Cash Budget
Quarter Ending June 30, 2017AprilMayJuneTotalCash balance, beginning$Answer
$Answer
$Answer
$Answer
ReceiptsAnswer
Answer
Answer
Answer
DisbursementsAnswer
Answer
Answer
Answer
Excess receipts over disb.Answer
Answer
Answer
Answer
Balance before borrowingsAnswer
Answer
Answer
Answer
BorrowingsAnswer
Answer
Answer
Answer
Loan repaymentsAnswer
Answer
Answer
Answer
Cash balance, ending$Answer
$Answer
$Answer
$Answer
(e) Create an income statement for each month of the second quarter ending June 30, 2017.
Only usenegative signsto shownet losses for income.
Dils BrothersDepartment Store
Budgeted Monthly Income Statements
Quarter Ending June 30, 2017AprilMayJuneTotalSales$Answer
$Answer
$Answer
$Answer
Cost of salesAnswer
Answer
Answer
Answer
Gross profitAnswer
Answer
Answer
Answer
Operating expenses:Wages and salariesAnswer
Answer
Answer
Answer
DepreciationAnswer
Answer
Answer
Answer
UtilitiesAnswer
Answer
Answer
Answer
RentAnswer
Answer
Answer
Answer
InsuranceAnswer
Answer
Answer
Answer
InterestAnswer
Answer
Answer
Answer
Total expensesAnswer
Answer
Answer
Answer
Net income$Answer
$Answer
$Answer
$Answer
(f) Create a budgeted balance sheet as of June 30, 2017.
Dils BrothersDepartment Store
Budgeted Balance Sheet
June 30, 2017AssetsLiabilities and EquityCash$Answer
Merchandise payable$Answer
Accounts receivableAnswer
Dividend payableAnswer
InventoryAnswer
Rent payableAnswer
Prepaid insuranceAnswer
Loans payableAnswer
FixturesAnswer
Interest payableAnswer
Total assets$Answer
Stockholders' equityAnswer
Total liab. & equity$Answer
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