CHAPTER 9 SOLUTIONS TO PROBLEMS: SET B PROBLEM 9-1B MERCER FARM SUPPLY COMPANY Sales Budget For the Six Months Ending June 30, 2017 Expected unit sales... Unit selling price... Total sales... Quarter 1 2 40,000 X $63 $2,520,000 50,000 X $63 $3,150,000 Six Months 90,000 X $63 $5,670,000 MERCER FARM SUPPLY COMPANY Production Budget For the Six Months Ending June 30, 2017 Expected unit sales... Add: Desired ending finished goods units... Total required units... Less: Beginning finished goods units... Required production units... Quarter 1 2 40,000 15,000 55,000 10,000 45,000 50,000 Six Months 20,000 70,000 15,000 55,000 100,000 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only) 9-1
PROBLEM 9-1B (Continued) MERCER FARM SUPPLY COMPANY Direct Materials Budget Crup For the Six Months Ending June 30, 2017 Units to be produced... Direct materials per unit... Total pounds needed for production... Add: Desired ending direct materials (pounds)... Total materials required... Less: Beginning direct materials (pounds)... Direct materials purchases... Cost per pound... Total cost of direct materials purchases... Quarter 1 2 45,000 X 5 225,000 12,000 237,000 9,000 228,000 X $3.80 $866,400 55,000 X 5 275,000 15,000 290,000 12,000 278,000 X $3.80 Six Months $1,056,400 $1,922,800 MERCER FARM SUPPLY COMPANY Direct Labor Budget For the Six Months Ending June 30, 2017 Units to be produced... Direct labor time (hours) per unit... Total required direct labor hours... Direct labor cost per hour... Total direct labor cost... Quarter 1 2 45,000 X.25 11,250 X $12 $135,000 Six Months 55,000 X.25 13,750 X $12 $165,000 $300,000 9-2 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-1B (Continued) MERCER FARM SUPPLY COMPANY Selling and Administrative Expense Budget For the Six Months Ending June 30, 2017 Budgeted sales in units... Quarter 1 2 40,000 50,000 Six Months 90,000 Variable (.10 X sales)... Fixed... Total... $252,000 150,000 $402,000 $315,000 150,000 $465,000 $567,000 300,000 $867,000 MERCER FARM SUPPLY COMPANY Budgeted Income Statement For the Six Months Ending June 30, 2017 Sales... $5,670,000 Cost of goods sold (90,000 X $40)... 3,600,000 Gross profit... 2,070,000 Selling and administrative expenses... 867,000 Income from operations... 1,203,000 Interest expense... 70,000 Income before income taxes... 1,133,000 Income tax expense (30%)... 339,900 Net income... $ 793,100 Cost Per Bag Cost Element Quantity Unit Cost Total Direct materials Crup... Dert... Direct labor... Manufacturing overhead (100% of direct labor cost)... Total... 5 pounds 10 pounds.25 hour $ 3.80 1.50 12.00 $19.00 15.00 3.00 3.00 $40.00 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only) 9-3
PROBLEM 9-2B (a) URBINA INC. Sales Budget Expected unit sales... Unit selling price... Total sales... LN 35 LN 40 Total 400,000 X $25 $10,000,000 240,000 X $35 $8,400,000 000,000,0 $18,400,000 (b) URBINA INC. Production Budget Expected unit sales... Add: Desired ending finished goods units... Total required units... Less: Beginning finished goods units... Required production units... LN 35 LN 40 400,000 20,000 420,000 30,000 390,000 240,000 25,000 265,000 15,000 250,000 9-4 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-2B (Continued) (c) URBINA INC. Direct Materials Budget Units to be produced... Direct materials per unit... Total pounds needed for production... Add: Desired ending direct materials (pounds)... Total materials required... Less: Beginning direct materials (pounds)... Direct materials purchases... Cost per pound... Total cost of direct materials purchases... LN 35 LN 40 Total 390,000 X 2 780,000 50,000 830,000 40,000 790,000 X $2 $1,580,000 250,000 X 3 750,000 10,000 760,000 20,000 740,000 X $3 $2,220,000 $3,800,000 (d) URBINA INC. Direct Labor Budget Units to be produced... Direct labor time (hours) per unit... Total required direct labor hours... Direct labor cost per hour... Total direct labor cost... LN 35 LN 40 Total 390,000 X.5 195,000 X $12 $2,340,000 250,000 X.75 187,500 X $12 $2,250,000 550,000 322,500 X $10 $4,590,000 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only) 9-5
PROBLEM 9-2B (Continued) (e) URBINA INC. Budgeted Income Statement Sales... Cost of goods sold... Gross profit... Operating expenses Selling expenses... Administrative expenses... Total operating expenses... LN 35 LN 40 Total $10,000,000 4,800,000 5,200,000 750,000 420,000 1,170,000 (1) $8,400,000 5,280,000 3,120,000 580,000 380,000 960,000 (2) $18,400,000 10,080,000 8,320,000 1,330,000 800,000 2,130,000 Income from operations... Income expense Income before income taxes. Interest tax expense (30%)... Net income... $ 4,030,000 $2,160,000 6,190,000 110,000 6,080,000 1,824,000 $ 4,256,000 (1) 400,000 X $12. (2) 240,000 X $22. 9-6 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-3B (a) OGLEBY INDUSTRIES Sales Budget Expected unit sales... Unit selling price... Total sales... (1) 800,000 X 95% = 760,000. (2) 800,000 + 150,000 = 950,000. (3) $7.00 X 95% = $6.65. Plan A (1) 760,000 X $7.60 $5,776,000 Plan B 950,000 X $6.65 $6,317,500 (2) (3) (b) OGLEBY INDUSTRIES Production Budget Expected unit sales... Add: Desired ending finished goods units... Total required units... Less: Beginning finished goods units... Required production units... Plan A 760,000 90,000 850,000 70,000 780,000 Plan B 950,000 100,000 1,050,000 70,000 980,000 (c) Variable costs = $4.00 per unit ($2.00 + $1.50 + $.50) for both plans. Total variable costs Total fixed costs Total costs (a) Plan A Plan B $3,120,000 (780,000 X $4.00) $3,920,000 (980,000 X $4.00) 980,000 980,000 $4,100,000 $4,900,000 Total units (b) Unit cost (a) (b) 780,000 $5.26 980,000 $5.00 The difference is due to the fact that fixed costs are spread over a larger number of units (200,000) in Plan B. Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only) 9-7
PROBLEM 9-3B (Continued) (d) Gross Profit Sales Cost of goods sold Gross profit Plan A $5,776,000 3,997,600 (760,000 X $5.26) $1,778,400 Plan B $6,317,500 4,750,000 (950,000 X $5.00) $1,567,500 Plan A should be accepted because it produces a higher gross profit than Plan B. 9-8 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-4B (a) 1. Expected Collections from Customers November ($200,000)... December ($290,000)... January ($350,000)... February ($400,000)... Total collections... January $ 30,000 72,500 210,000 $312,500 February $ 0 43,500 87,500 240,000 $371,000 2. Expected Payments for Direct Materials December ($90,000)... January ($110,000)... February ($120,000)... Total payments... January $63,000 33,000 $96,000 February $ 0 77,000 36,000 $113,000 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only) 9-9
PROBLEM 9-4B (Continued) (b) DERBY COMPANY Cash Budget For the Two Months Ending February 28, 2017 Beginning cash balance... Add: Receipts Collections from customers... [See Schedule (1)] Interest receivable... Sale of securities... Total receipts... Total available cash... Less: Disbursements Direct materials... [See Schedule 2] Direct labor... Manufacturing overhead... Selling and administrative expenses... Purchase of land... Total disbursements... Excess (deficiency) of available cash over cash disbursements... Financing Add: Borrowings... Less: Repayments... Ending cash balance... January $ 50,000 312,500 3,000 315,500 365,500 96,000 85,000 60,000 75,000 316,000 49,500 0 0 $ 49,500 February $ 49,500 371,000 5,000 376,000 425,500 113,000 115,000 75,000 80,000 20,000 403,000 22,500 17,500 0 $ 40,000 9-10 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)
PROBLEM 9-5B (a) WIDNER COMPANY Westwood Store Merchandise Purchases Budget For the Months of July and August, 2017 Budgeted cost of goods sold... Add: Desired ending merchandise inventory... Total... Less: Beginning merchandise inventory... Required merchandise purchases... July $260,000 43,875 303,875 39,000 $264,875 (1) (2) (4) August $292,500 48,750 341,250 43,875 $297,375 (3) (1) $400,000 X 65% = $260,000 (2) $292,500 X 15% = $ 43,875. (3) $500,000 X 65% = $325,000; $325,000 X 15% = $48,750. (4) $260,000 X 15% = $ 39,000. Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only) 9-11
PROBLEM 9-5B (Continued) (b) WIDNER COMPANY Westwood Store Budgeted Income Statement For the Months of July and August, 2017 Sales... Cost of goods sold Beginning inventory... Purchases... Cost of goods available for sale... Less: Ending inventory... Cost of goods sold... Gross profit... Operating expenses Sales salaries... Advertising*... Delivery expense**... Sales commissions***... Rent... Depreciation... Utilities... Insurance... Total... Income from operations... Interest expense Income before income taxes. Income tax expense (30%)... Net income... *5% of sales **2% of sales ***4% of sales July $400,000 39,000 264,875 303,875 43,875 260,000 140,000 50,000 20,000 8,000 16,000 3,000 700 500 300 98,500 41,500 3,000 38,500 11,550 $ 26,950 August $450,000 43,875 297,375 341,250 48,750 292,500 157,500 50,000 22,500 9,000 18,000 3,000 700 500 300 104,000 53,500 3,000 50,500 15,150 $ 35,350 9-12 Copyright 2015 John Wiley & Sons, Inc. Weygandt, Managerial Accounting, 7e Problems: Set B Solutions (For Instructor Use Only)