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Problem 21-3A (Part Level Submission) Marsh Industries had sales in 2013 of $6,848,000 and gross profit of $1,177,000. Management is considering two alternative budget plans to increase its gross profit in 2014. Plan A would increase the selling price per unit from $8.56 to $8.99. Sales volume would decrease by 10% from its 2013 level. Plan B would decrease the selling price per unit by $0.54. The marketing department expects that the sales volume would increase by 160,500 units. At the end of 2013, Marsh has 42,800 units of inventory on hand. If Plan A is accepted, the 2014 ending inventory should be equal to 5% of the 2014 sales. If Plan B is accepted, the ending inventory should be equal to 53,500 units. Each unit produced will cost $1.93 in direct labor, $1.34 in direct materials, and $1.28 in variable overhead. The fixed overhead for 2014 should be $2,027,650.

(a)

Prepare a sales budget for 2014 under each plan.

MARSH INDUSTRIES Sales Budget For the Year Ending December 31, 2014
Plan A	Plan B
Expected unit sales
Unit selling price	$	$
Total sales	$	$

Problem 21-4A (Part Level Submission)

Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are:

January	February
Sales	$380,800	$435,200
Direct materials purchases	119,680	141,440
Direct labor	97,920	108,800
Manufacturing overhead	76,160	81,600
Selling and administrative expenses	85,952	93,568

All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,088 of depreciation per month. Other data:

1.	Credit sales: November 2013, $282,880; December 2013, $348,160.
2.	Purchases of direct materials: December 2013, $108,800.
3.	Other receipts: JanuaryCollection of December 31, 2013, notes receivable $16,320;
FebruaryProceeds from sale of securities $6,528.
4.	Other disbursements: FebruaryPayment of $5,440 cash dividend.

The companys cash balance on January 1, 2014, is expected to be $65,280. The company wants to maintain a minimum cash balance of $54,400.

(a)

Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February.

Expected Collections from Customers
January	February
November	$	$
December
January
February
Total collections	$	$

Expected Payments for Direct Materials
January	February
December	$	$
January
February
Total payments	$	$

Exercise 21-20 (Part Level Submission)

In May 2014, the budget committee of Grand Stores assembles the following data in preparation of budgeted merchandise purchases for the month of June.

1.	Expected sales: June $506,600, July $605,200.
2.	Cost of goods sold is expected to be 75% of sales.
3.	Desired ending merchandise inventory is 30% of the following (next) months cost of goods sold.
4.	The beginning inventory at June 1 will be the desired amount.

(a)

Compute the budgeted merchandise purchases for June. (Round answers to the nearest whole dollar, e.g. 5,275.)

GRAND STORES Merchandise Purchases Budget For the Month Ending June 30, 2014
	$
:
:
	$

Problem 21-6A (Part Level Submission)

Krause Industries balance sheet at December 31, 2013, is presented below.

KRAUSE INDUSTRIES Balance Sheet December 31, 2013
Assets
Current Assets
Cash	$7,500
Accounts receivable	82,500
Finished goods inventory (2,000 units)	34,660
Total current assets	$124,660
Property, Plant, and Equipment
Equipment	$42,330
Less: Accumulated depreciation	12,330	30,000
Total assets	$154,660
Liabilities and Stockholders' Equity
Liabilities
Notes payable	$27,330
Accounts payable	47,330
Total liabilities	74,660
Stockholders' Equity
Common stock	$47,670
Retained earnings	32,330
Total stockholders' equity	80,000
Total liabilities and stockholders' equity	$154,660

Additional information accumulated for the budgeting process is as follows. Budgeted data for the year 2014 include the following.

4th Qtr. of 2014	Year 2014 Total
Sales budget (8,000 units at $35)	$84,000	$280,000
Direct materials used	12,340	69,400
Direct labor	12,500	56,600
Manufacturing overhead applied	10,000	51,670
Selling and administrative expenses	15,670	76,000

To meet sales requirements and to have 3,000 units of finished goods on hand at December 31, 2014, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $20. Krause Industries uses the first-in, first-out (FIFO) inventory costing method. Selling and administrative expenses include $12,778 for depreciation on equipment. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers are paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2014, the company expects to purchase additional equipment costing $21,330. It expects to pay $10,330 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2014, include amounts due suppliers (see above) plus other accounts payable of $8,030. In 2014, the company expects to declare and pay an $7,330 cash dividend. Unpaid income taxes at December 31 will be $7,330. The companys cash budget shows an expected cash balance of $7,950 at December 31, 2014.

(a)

Prepare a budgeted income statement for 2014.

KRAUSE INDUSTRIES Budgeted Income Statement For the Year Ending December 31, 2014
	$
	$
	$

Exercise 22-9 (part level submission)

Lowell Companys manufacturing overhead budget for the first quarter of 2014 contained the following data.

Variable Costs	Fixed Costs
Indirect materials	$11,260	Supervisory salaries	$35,095
Indirect labor	10,625	Depreciation	6,883
Utilities	7,881	Property taxes and insurance	7,930
Maintenance	5,984	Maintenance	4,521

Actual variable costs were indirect materials $14,828, indirect labor $9,276, utilities $9,886, and maintenance $5,013. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,897. The actual activity level equaled the budgeted level. All costs are considered controllable by the production department manager except for depreciation, and property taxes and insurance.

(a)

Prepare a manufacturing overhead flexible budget report for the first quarter. (List variable costs before fixed costs.)

LOWELL COMPANY Manufacturing Overhead Flexible Budget Report For the Quarter Ended March 31, 2014
Difference
Budget	Actual	Favorable (F) Unfavorable (U) Neither Favorable nor Unfavorable (N)
	$	$	$
	$	$	$

Exercise 22-15 (part level submission) Deitz Inc. has three divisions which are operated as profit centers. Actual operating data for the divisions are listed below.

(a)

Compute the missing amounts.

Operating Data	Womens Shoes	Mens Shoes	Childrens Shoes
Contribution margin	$343,750	$	(3)	$247,500
Controllable fixed costs	137,500		(4)		(5)
Controllable margin		(1)	123,750	130,625
Sales	825,000	618,750		(6)
Variable costs		(2)	440,000	343,750

Problem 22-5A (part level submission)

Suppan Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2014, and relevant budget data are as follows.

Actual	Comparison with Budget
Sales	$1,400,690	$100,380	favorable
Variable cost of goods sold	674,300	55,740	unfavorable
Variable selling and administrative expenses	124,090	25,390	unfavorable
Controllable fixed cost of goods sold	170,520	On target
Controllable fixed selling and administrative expenses	80,480	On target

Average operating assets for the year for the Home Division were $2,000,590 which was also the budgeted amount.

(a)

Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 1 decimal place, e.g. 1.5%.)

SUPPAN MANUFACTURING COMPANY Home Division Responsibility Report For the Year Ended December 31, 2014
Difference
Budget	Actual	Favorable (F) Unfavorable (U) Neither Favorable nor Unfavorable (N)
	$		$		$

Problem 21-3A (Part Level Submission) Marsh Industries had sales in 2013 of $6,848,000 and gross profit of $1,177,000. Management is considering two alternative budget plans to increase its gross profit in 2014. Plan A would increase the selling price per unit from $8.56 to $8.99. Sales volume would decrease by 10% from its 2013 level. Plan B would decrease the selling price per unit by $0.54. The marketing department expects that the sales volume would increase by 160,500 units. At the end of 2013, Marsh has 42,800 units of inventory on hand. If Plan A is accepted, the 2014 ending inventory should be equal to 5% of the 2014 sales. If Plan B is accepted, the ending inventory should be equal to 53,500 units. Each unit produced will cost $1.93 in direct labor, $1.34 in direct materials, and $1.28 in variable overhead. The fixed overhead for 2014 should be $2,027,650. (a) Prepare a sales budget for 2014 under each plan. MARSH INDUSTRIES Sales Budget For the Year Ending December 31, 2014 Plan A Plan B Expected unit sales Unit selling price Total sales $ $ $ $ Problem 21-4A (Part Level Submission) Colter Company prepares monthly cash budgets. Relevant data from operating budgets for 2014 are: January Sales February $380,800 $435,200 119,680 141,440 Direct labor 97,920 108,800 Manufacturing overhead 76,160 Selling and administrative expenses 85,952 Direct materials purchases All sales are on account. Collections are expected to be 50% in the month of sale, 30% in the first month following the sale, and 20% in the second month following the sale. Sixty percent (60%) of direct materials purchases are paid in cash in the month of purchase, and the balance due is paid in the month following the purchase. All other items above are paid in the month incurred except for selling and administrative expenses that include $1,088 of depreciation per month. Other data: 1. Credit sales: November 2013, $282,880; December 2013, $348,160. 2. Purchases of direct materials: December 2013, $108,800. 3. Other receipts: JanuaryCollection of December 31, 2013, notes receivable $16,320; 4. Other disbursements: FebruaryPayment of $5,440 cash dividend. FebruaryProceeds from sale of securities $6,528. The company's cash balance on January 1, 2014, is expected to be $65,280. The company wants to maintain a minimum cash balance of $54,400. (a) Prepare schedules for (1) expected collections from customers and (2) expected payments for direct materials purchases for January and February. Expected Collections from Customers Februar January y November $ $ $ $ December January February Total collections Expected Payments for Direct Materials January February December $ $ $ $ January February Total payments Exercise 21-20 (Part Level Submission) In May 2014, the budget committee of Grand Stores assembles the following data in preparation of budgeted merchandise purchases for the month of June. 1. Expected sales: June $506,600, July $605,200. 2. Cost of goods sold is expected to be 75% of sales. 3. Desired ending merchandise inventory is 30% of the following (next) month's cost of goods sold. 4. The beginning inventory at June 1 will be the desired amount. (a) Compute the budgeted merchandise purchases for June. (Round answers to the nearest whole dollar, e.g. 5,275.) GRAND STORES Merchandise Purchases Budget For the Month Ending June 30, 2014 $ : : $ Problem 21-6A (Part Level Submission) Krause Industries' balance sheet at December 31, 2013, is presented below. KRAUSE INDUSTRIES Balance Sheet December 31, 2013 Assets Current Assets Cash $7,500 Accounts receivable 82,500 Finished goods inventory (2,000 units) 34,660 Total current assets $124,660 Property, Plant, and Equipment Equipment $42,330 Less: Accumulated depreciation 12,330 Total assets 30,000 $154,660 Liabilities and Stockholders' Equity Liabilities Notes payable $27,330 Accounts payable 47,330 Total liabilities 74,660 Stockholders' Equity Common stock $47,670 Retained earnings 32,330 Total stockholders' equity 80,000 Total liabilities and stockholders' equity $154,660 Additional information accumulated for the budgeting process is as follows. Budgeted data for the year 2014 include the following. Sales budget (8,000 units at $35) Direct materials used Direct labor Manufacturing overhead applied Selling and administrative expenses 4th Qtr. of 2014 $84,000 12,340 12,500 10,000 Year 2014 Total $280,000 69,400 56,600 51,670 15,670 76,000 To meet sales requirements and to have 3,000 units of finished goods on hand at December 31, 2014, the production budget shows 9,000 required units of output. The total unit cost of production is expected to be $20. Krause Industries uses the first-in, first-out (FIFO) inventory costing method. Selling and administrative expenses include $12,778 for depreciation on equipment. Interest expense is expected to be $3,500 for the year. Income taxes are expected to be 40% of income before income taxes. All sales and purchases are on account. It is expected that 60% of quarterly sales are collected in cash within the quarter and the remainder is collected in the following quarter. Direct materials purchased from suppliers are paid 50% in the quarter incurred and the remainder in the following quarter. Purchases in the fourth quarter were the same as the materials used. In 2014, the company expects to purchase additional equipment costing $21,330. It expects to pay $10,330 on notes payable plus all interest due and payable to December 31 (included in interest expense $3,500, above). Accounts payable at December 31, 2014, include amounts due suppliers (see above) plus other accounts payable of $8,030. In 2014, the company expects to declare and pay an $7,330 cash dividend. Unpaid income taxes at December 31 will be $7,330. The company's cash budget shows an expected cash balance of $7,950 at December 31, 2014. (a) Prepare a budgeted income statement for 2014. KRAUSE INDUSTRIES Budgeted Income Statement For the Year Ending December 31, 2014 $ $ $ Exercise 22-9 (part level submission) Lowell Company's manufacturing overhead budget for the first quarter of 2014 contained the following data. Variable Costs Indirect materials Indirect labor Fixed Costs $11,260 10,625 Supervisory salaries Depreciation Utilities 7,881 Property taxes and insurance Maintenance 5,984 Maintenance Actual variable costs were indirect materials $14,828, indirect labor $9,276, utilities $9,886, and maintenance $5,013. Actual fixed costs equaled budgeted costs except for property taxes and insurance, which were $8,897. The actual activity level equaled the budgeted level. All costs are considered controllable by the production department manager except for depreciation, and property taxes and insurance. $35,095 (a) Prepare a manufacturing overhead flexible budget report for the first quarter. (List variable costs before fixed costs.) LOWELL COMPANY Manufacturing Overhead Flexible Budget Report For the Quarter Ended March 31, 2014 Difference Budget $ Actual $ Favorable (F) Unfavorable (U) Neither Favorable nor Unfavorable (N) $ $ $ $ Exercise 22-15 (part level submission) Deitz Inc. has three divisions which are operated as profit centers. Actual operating data for the divisions are listed below. (a) Compute the missing amounts. Operating Data Contribution margin Controllable fixed costs Women's Shoes $343,750 137,500 Men's Shoes $ (3) (4) Children's Shoes $247,500 (5) Controllable margin Sales (1) 825,000 Variable costs 123,750 130,625 618,750 (2) (6) 343,750 440,000 Problem 22-5A (part level submission) Suppan Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2014, and relevant budget data are as follows. Actual Sales $1,400,690 Variable cost of goods sold Variable selling and administrative expenses Controllable fixed cost of goods sold Controllable fixed selling and administrative expenses Average operating assets for the year for the Home Division were $2,000,590 which was also the budgeted amount. (a) Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 1 decimal place, e.g. 1.5%.) SUPPAN MANUFACTURING COMPANY Home Division Responsibility Report For the Year Ended December 31, 2014 Difference Budge t $ Favorable (F) Unfavorable (U) Neither Favorable nor Unfavorable (N) Actu al $ $ $ ROI $ % $ % %