Direct Labor Cost Budget

Ace Racket Company manufactures two types of tennis rackets, the Junior and Pro Striker models. The production budget for July for the two rackets is as follows:

	Junior	Pro Striker
Production budget	9,900 units	20,000 units

Both rackets are produced in two departments, Forming and Assembly. The direct labor hours required for each racket are estimated as follows:

	Forming Department	Assembly Department
Junior	0.20 hour per unit	0.40 hour per unit
Pro Striker	0.35 hour per unit	0.75 hour per unit

The direct labor rate for each department is as follows:

Forming Department	$20.00 per hour
Assembly Department	$10.00 per hour

Direct labor cost budget for July.

	Forming Department	Assembly Department
Hours required for production:
Junior	fill in the blank 1	fill in the blank 2
Pro Striker	fill in the blank 3	fill in the blank 4
Total	fill in the blank 5	fill in the blank 6
Hourly rate	x$fill in the blank 7	x$fill in the blank 8
Total direct labor cost	$fill in the blank 9	$fill in the blank 10

Flexible budget for selling and administrative expenses for a service company

Digital Solutions Inc. uses flexible budgets that are based on the following data:

Sales commissions	8% of sales
Advertising expense	16% of sales
Miscellaneous administrative expense	$10,500 per month plus 6% of sales
Office salaries expense	$51,000 per month
Customer support expenses	$23,000 per month plus 30% of sales
Research and development expense	$80,000 per month

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below.

Open spreadsheet

Flexible selling and administrative expenses budget for October for sales volumes of $600,000, $700,000, and $1,200,000. (Use Exhibit 5 as a model.) Enter all amounts as positive numbers.

Digital Solutions Inc.
Flexible Selling and Administrative Expenses Budget
For the Month Ending October 31
Total sales	$600,000	$700,000	$1,200,000
Variable cost:
CashOffice salaries expenseSales commissionsSupplies expenseWages expense		$fill in the blank 3		$fill in the blank 4		$fill in the blank 5
Advertising expenseCashOffice salaries expenseSupplies expenseWages expense		fill in the blank 7		fill in the blank 8		fill in the blank 9
Miscellaneous administrative expenseOffice salaries expensePrepaid insuranceRent expenseWages expense		fill in the blank 11		fill in the blank 12		fill in the blank 13
Customer support expensesRent expenseResearch and development expenseSupplies expenseWages expense		fill in the blank 15		fill in the blank 16		fill in the blank 17
Total variable cost		$fill in the blank 18		$fill in the blank 19		$fill in the blank 20
Fixed cost:
Insurance expenseMiscellaneous administrative expenseRent expenseSupplies expenseWages expense		$fill in the blank 22		$fill in the blank 23		$fill in the blank 24
Insurance expenseOffice salaries expensePrepaid insuranceRent expenseWages expense		fill in the blank 26		fill in the blank 27		fill in the blank 28
Customer support expensesInsurance expenseRent expenseSupplies expenseWages expense		fill in the blank 30		fill in the blank 31		fill in the blank 32
Insurance expenseRent expenseResearch and development expenseSupplies expenseWages expense		fill in the blank 34		fill in the blank 35		fill in the blank 36
Total fixed cost		$fill in the blank 37		$fill in the blank 38		$fill in the blank 39
Total selling and administrative expenses		$fill in the blank 40		$fill in the blank 41		$fill in the blank 42

Direct materials purchases budget

Tobin's Frozen Pizza Inc. has determined from its production budget the following estimated production volumes for 12'' and 16'' frozen pizzas for November:

	Units
	12" Pizza	16" Pizza
Budgeted production volume	54,000		34,000

There are three direct materials used in producing the two types of pizza. The quantities of direct materials expected to be used for each pizza are as follows:

	12" Pizza	16" Pizza
Direct materials:
	Dough	0.55	lb. per unit	0.80	lbs. per unit
	Tomato	0.25		0.40
	Cheese	0.70		1.20

In addition, Tobin's has determined the following information about each material:

	Dough	Tomato	Cheese
Estimated inventory, November 1	2,800	lbs.	1,100	lbs.	2,700	lbs.
Desired inventory, November 30	2,000	lbs.	1,100	lbs.	2,800	lbs.
Price per pound	$0.40		$0.50		$0.75

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the question below.

Open spreadsheet

November's direct materials purchases budget for Tobin's Frozen Pizza Inc. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Round your final answers to the nearest dollar.

Tobin's Frozen Pizza Inc.
Direct Materials Purchases Budget
For the Month Ending November 30
	Dough	Tomato	Cheese	Total
Units required for production:
12" pizza		fill in the blank 2		fill in the blank 3		fill in the blank 4
16" pizza		fill in the blank 5		fill in the blank 6		fill in the blank 7
Desired inventory, November 1Desired inventory, November 30Estimated inventory, November 1Estimated inventory, November 30Supervisor salaries		fill in the blank 9		fill in the blank 10		fill in the blank 11
Total units available		fill in the blank 12		fill in the blank 13		fill in the blank 14
Desired inventory, November 1Desired inventory, November 30Estimated inventory, November 1Estimated inventory, November 30Supervisor salaries		fill in the blank 16		fill in the blank 17		fill in the blank 18
Total units to be purchased		fill in the blank 19		fill in the blank 20		fill in the blank 21
Unit price	x	$fill in the blank 22	x	$fill in the blank 23	x	$fill in the blank 24
Total direct materials to be purchased		$fill in the blank 25		$fill in the blank 26		$fill in the blank 27		$fill in the blank 28

Production Budget

Healthy Measures Inc. produces a Bath and Gym version of its popular electronic scale. The anticipated unit sales for the scales by sales region are as follows:

	Bath Scale	Gym Scale
Northern Region unit sales	22,900		36,200
Southern Region unit sales	24,700		25,900
Total	47,600		62,100

The finished goods inventory estimated for March 1, for the Bath and Gym scale models is 1,400 and 2,600 units, respectively. The desired finished goods inventory for March 31 for the Bath and Gym scale models is 1,000 and 2,800 units, respectively.

Production budget for the Bath and Gym scales for the month ended March 31. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Units Bath Scale	Units Gym Scale
DepreciationDirect laborEstimated inventory, March 1Expected units to be soldSupervisor salaries	- Select -	- Select -
DepreciationDesired inventory, March 31Direct laborEstimated inventory, March 1Supervisor salaries	- Select -	- Select -
Total units available	fill in the blank 7	fill in the blank 8
DepreciationDesired inventory, March 31Estimated inventory, March 1Expected units to be soldSupervisor salaries	- Select -	- Select -
Total units to be produced	fill in the blank 12	fill in the blank 13

Static Budget versus Flexible Budget

The production supervisor of the Machining Department for Hagerstown Company agreed to the following monthly static budget for the upcoming year:

Hagerstown Company Machining Department Monthly Production Budget
Wages	$991,000
Utilities	50,000
Depreciation	83,000
Total	$1,124,000

The actual amount spent and the actual units produced in the first three months in the Machining Department were as follows:

	Amount Spent	Units Produced
May	$1,058,000		101,000
June	1,010,000		92,000
July	963,000		83,000

The Machining Department supervisor has been very pleased with this performance because actual expenditures for May-July have been significantly less than the monthly static budget of 1,124,000. However, the plant manager believes that the budget should not remain fixed for every month but should "flex" or adjust to the volume of work that is produced in the Machining Department. Additional budget information for the Machining Department is as follows:

Wages per hour	$18.00
Utility cost per direct labor hour	$0.90
Direct labor hours per unit	0.50
Planned monthly unit production	110,000

Question Content Area

a. Flexible budget for the actual units produced for May, June, and July in the Machining Department. Assume depreciation is a fixed cost. If required, use per unit amounts carried out to two decimal places.

	May	June	July
Units of production	101,000	92,000	83,000
AdvertisingRentResearch and developmentSuppliesWages	$- Select -	$- Select -	$- Select -
AdvertisingRentResearch and developmentSuppliesUtilities	- Select -	- Select -	- Select -
AdvertisingDepreciationRentResearch and developmentSupplies	- Select -	- Select -	- Select -
Total	$fill in the blank c87a7ffe801ef8f_13	$fill in the blank c87a7ffe801ef8f_14	$fill in the blank c87a7ffe801ef8f_15
Supporting calculations:
Units of production	101,000	92,000	83,000
Hours per unit	xfill in the blank c87a7ffe801ef8f_16	xfill in the blank c87a7ffe801ef8f_17	xfill in the blank c87a7ffe801ef8f_18
Total hours of production	fill in the blank c87a7ffe801ef8f_19	fill in the blank c87a7ffe801ef8f_20	fill in the blank c87a7ffe801ef8f_21
Wages per hour	x $fill in the blank c87a7ffe801ef8f_22	x $fill in the blank c87a7ffe801ef8f_23	x $fill in the blank c87a7ffe801ef8f_24
Total wages	$fill in the blank c87a7ffe801ef8f_25	$fill in the blank c87a7ffe801ef8f_26	$fill in the blank c87a7ffe801ef8f_27
Total hours of production	fill in the blank c87a7ffe801ef8f_28	fill in the blank c87a7ffe801ef8f_29	fill in the blank c87a7ffe801ef8f_30
Utility costs per hour	x $fill in the blank c87a7ffe801ef8f_31	x $fill in the blank c87a7ffe801ef8f_32	x $fill in the blank c87a7ffe801ef8f_33
Total utilities	$fill in the blank c87a7ffe801ef8f_34	$fill in the blank c87a7ffe801ef8f_35	$fill in the blank c87a7ffe801ef8f_36

Question Content Area

b. Compare the flexible budget with the actual expenditures for the first three months.

	May	June	July
Total flexible budget	$fill in the blank f63b8a09b03107e_1	$fill in the blank f63b8a09b03107e_2	$fill in the blank f63b8a09b03107e_3
Actual cost	fill in the blank f63b8a09b03107e_4	fill in the blank f63b8a09b03107e_5	fill in the blank f63b8a09b03107e_6
Excess of actual cost over budget	$fill in the blank f63b8a09b03107e_7	$fill in the blank f63b8a09b03107e_8	$fill in the blank f63b8a09b03107e_9

What does this comparison suggest?

The Machining Department has performed better than originally thought.	YesNo
The department is spending more than would be expected.	YesNo

Personal budget

At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget:

Cash balance, September 1 (from a summer job)	$8,200
Purchase season football tickets in September	180
Additional entertainment for each month	280
Pay fall semester tuition in September	4,300
Pay rent at the beginning of each month	680
Pay for food each month	620
Pay apartment deposit on September 2 (to be returned December 15)	680
Part-time job earnings each month (net of taxes)	1,350

This information has been collected in the Microsoft Excel Online file. Open the spreadsheet, perform the required analysis, and input your answers in the questions below.

Open spreadsheet

a. Cash budget for September, October, November, and December. Enter all amounts as positive values except cash decrease which should be indicated with a minus sign.

Craig Kovar

Cash Budget

For the Four Months Ending December 31

September

October

November

December

Estimated cash receipts from:

Additional entertainmentFoodPart-time jobRentTuition

$fill in the blank 3

$fill in the blank 4

$fill in the blank 5

$fill in the blank 6

Additional entertainmentDepositFoodRentTuition

fill in the blank 8

Total cash receipts

$fill in the blank 9

$fill in the blank 10

$fill in the blank 11

$fill in the blank 12

Less estimated cash payments for:

CashInsuranceMovie ticketsPart-time jobSeason football tickets

$fill in the blank 14

Additional entertainmentCashInsuranceMovie ticketsPart-time job

fill in the blank 16

$fill in the blank 17

$fill in the blank 18

$fill in the blank 19

CashInsuranceMovie ticketsPart-time jobTuition

fill in the blank 21

CashInsuranceMovie ticketsPart-time jobRent

fill in the blank 23

fill in the blank 24

fill in the blank 25

fill in the blank 26

CashFoodInsuranceMovie ticketsPart-time job

fill in the blank 28

fill in the blank 29

fill in the blank 30

fill in the blank 31

DepositInsuranceMovie ticketsPart-time jobPrepaid rent

fill in the blank 33

Total cash payments

$fill in the blank 34

$fill in the blank 35

$fill in the blank 36

$fill in the blank 37

Cash increase (decrease)

$fill in the blank 38

$fill in the blank 39

$fill in the blank 40

$fill in the blank 41

Less cash balance at beginning of monthPlus cash balance at beginning of month

fill in the blank 43

fill in the blank 44

fill in the blank 45

fill in the blank 46

Cash balance at end of month

$fill in the blank 47

$fill in the blank 48

$fill in the blank 49

$fill in the blank 50

b. Are the four monthly budgets that are presented prepared as static budgets or flexible budgets?

StaticFlexible

c. What are the budget implications for Craig Kovar?

Craig can see that his present plan

will providewill not provide

sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $fill in the blank 53

overshort

at the end of December, with no time left to adjust.

Schedule of cash payments for a service company

Horizon Financial Inc. was organized on February 28. Projected selling and administrative expenses for each of the first three months of operations are as follows:

March	$104,000
April	97,800
May	89,000

Depreciation, insurance, and property taxes represent $22,000 of the estimated monthly expenses. The annual insurance premium was paid on February 28, and property taxes for the year will be paid in June. 61% of the remainder of the expenses are expected to be paid in the month in which they are incurred, with the balance to be paid in the following month.

Schedule of cash payments for selling and administrative expenses for March, April, and May.

	March	April	May
March expenses:
Paid in March	$fill in the blank 1
Paid in April		$fill in the blank 2
April expenses:
Paid in April		fill in the blank 3
Paid in May			$fill in the blank 4
May expenses:
Paid in May			fill in the blank 5
Total cash payments	$fill in the blank 6	$fill in the blank 7	$fill in the blank 8

Sales and Production Budgets

Sonic Inc. manufactures two models of speakers, Rumble and Thunder. Based on the following production and sales data for June, prepare (a) a sales budget and (b) a production budget:

	Rumble		Thunder
Estimated inventory (units), June 1	254		63
Desired inventory (units), June 30	292		55
Expected sales volume (units):
Midwest Region	3,400		3,000
South Region	4,950		4,300
Unit sales price	$135		$185

Question Content Area

a. Sales budget.

Product and Area	Unit Sales Volume	Unit Selling Price	Total Sales
Model: Rumble
Midwest Region	fill in the blank e00847f9b046fc6_1	$fill in the blank e00847f9b046fc6_2	$fill in the blank e00847f9b046fc6_3
South Region	fill in the blank e00847f9b046fc6_4	fill in the blank e00847f9b046fc6_5	fill in the blank e00847f9b046fc6_6
Total	fill in the blank e00847f9b046fc6_7		$fill in the blank e00847f9b046fc6_8
Model: Thunder
Midwest Region	fill in the blank e00847f9b046fc6_9	$fill in the blank e00847f9b046fc6_10	$fill in the blank e00847f9b046fc6_11
South Region	fill in the blank e00847f9b046fc6_12	fill in the blank e00847f9b046fc6_13	fill in the blank e00847f9b046fc6_14
Total	fill in the blank e00847f9b046fc6_15		$fill in the blank e00847f9b046fc6_16
Total revenue from sales			$fill in the blank e00847f9b046fc6_17

Question Content Area

b. Production budget. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

	Units Rumble	Units Thunder
DepreciationDirect laborEstimated inventory, June 1Expected units to be soldSupervisor salaries	- Select -	- Select -
DepreciationDesired inventory, June 30Direct laborEstimated inventory, June 1Supervisor salaries	- Select -	- Select -
Total units available	fill in the blank fd95c7fc8058043_7	fill in the blank fd95c7fc8058043_8
DepreciationDirect laborEstimated inventory, June 1Expected units to be soldSupervisor salaries	- Select -	- Select -
Total units to be produced	fill in the blank fd95c7fc8058043_12	fill in the blank fd95c7fc8058043_13