Short-Term Financial Planning

The assignment content consists of five cases related to budgeting in accounting. Case 20 deals with calculating August's cash disbursements for materials purchases, while case 21 requires the preparation of a direct materials budget and calculation of direct materials purchases. In case 22, the student is asked to determine how much sand should be purchased in September. Case 23 involves preparing separate direct materials budgets for two products and calculating total cost of direct materials purchases. Finally, cases 24 and 25 require the preparation of budgeted quarterly income statements and cash budgets, respectively.

Assignment (1) – Due Date 6 Nov. 2016
Write down the answer in each one of the following spaces
1. TATA, Inc. estimates its sales at 200,000 units in the first quarter and that sales will
increase by 20,000 units each quarter over the year. They have, and desire, a 25%
ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for
cash. 70% of the credit customers pay within the quarter. The remainder is received
in the quarter following sale. Cash collections for the third quarter are budgeted at
________________
2. Solo Manufacturing budgets on an annual basis for its fiscal year. The following
beginning and ending inventory levels are planned for the fiscal year of July 1, 2012
to June 30, 2013:
June 30, 2013 June 30, 2012
Raw Materials 3,000 kilos 2,000 kilos
Three kilos of raw materials are needed to produce each unit of finished product. If
Solo Manufacturing plans to produce 560,000 units during the 2012-2013 fiscal year,
how many kilos of materials will the company need to purchase for its production
during the year?
________________
3. Mimie Company is planning to sell 400 buckets and produce 380 buckets during
March. Each bucket requires 500 grams of plastic and one-half hour of direct labor.
Plastic costs $10 per 500 grams and employees of the company are paid $15.00 per
hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs.
Mimie has 300 kilos of plastic in beginning inventory and wants to have 200 kilos in
ending inventory. How much is the total amount of budgeted direct labor for March?
________________
4. Batata Co. estimates its sales at 180,000 units in the first quarter and that sales will
increase by 18,000 units each quarter over the year. They have, and desire, a 25%
ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for
cash. 70% of the credit customers pay within the quarter. The remainder is received
in the quarter following sale. Production in units for the third quarter should be
budgeted at
________________
5. The following information is taken from the production budget for the first quarter:
Beginning inventory in units 1,200
Sales budgeted for the quarter 456,000
Production capacity in units 472,000
How many finished goods units should be produced during the quarter if the
company desires 3,200 units available to start the next quarter?
________________
6. Levi Co. is planning to sell 900 boxes of ceramic tile, with production estimated at
870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter
hour of direct labor. Clay mix costs $0.40 per pound and employees of the company
are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of
direct labor costs. Levi has 3,900 pounds of clay mix in beginning inventory and
wants to have 4,500 pounds in ending inventory. What is the total amount to be
budgeted for manufacturing overhead for the month?
________________

7. Polo Manufacturing is preparing its direct labor budget for May. Projections for the
month are that 33,400 units are to be produced and that direct labor time is three
hours per unit. If the labor cost per hour is $12, what is the total budgeted direct labor
cost for May?
________________
8. Ramla Co. is planning to sell 900 boxes of ceramic tile, with production estimated at
870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter
hour of direct labor. Clay mix costs $0.40 per pound and employees of the company
are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of
direct labor costs. Ramla has 3,900 pounds of clay mix in beginning inventory and
wants to have 4,500 pounds in ending inventory. What is the total amount to be
budgeted for direct labor for the month?
________________
9. Tantram Co. estimates its sales at 180,000 units in the first quarter and that sales will
increase by 18,000 units each quarter over the year. They have, and desire, a 25%
ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for
cash. 70% of the credit customers pay within the quarter. The remainder is received
in the quarter following sale. Cash collections for the third quarter are budgeted at
________________
10. Teller Co. is planning to sell 900 boxes of ceramic tile, with production estimated at
870 boxes during May. Each box of tile requires 44 pounds of clay mix and a quarter
hour of direct labor. Clay mix costs $0.40 per pound and employees of the company
are paid $12.00 per hour. Manufacturing overhead is applied at a rate of 110% of
direct labor costs. Teller has 3,900 pounds of clay mix in beginning inventory and
wants to have 4,500 pounds in ending inventory. What is the total amount to be
budgeted in pounds for direct materials to be purchased for the month?
________________
11. Lorie Nursery plans to sell 320 potted plants during April and 240 units in May. Lorie
Nursery keeps 15% of the next month’s sales as ending inventory. How many units
should Lorie Nursery produce during April?
________________
12. Comma Co. makes and sells widgets. The company is in the process of preparing its
selling and administrative expense budget for the month. The following budget data
are available:
Item Variable Cost Per Unit Sold Monthly Fixed Cost
Sales commissions $1 $10,000
Shipping $3
Advertising $4
Executive salaries $120,000
Depreciation on office equipment $4,000
Other $2 $6,000
Expenses are paid in the month incurred. If the company has budgeted to sell 80,000
widgets in October, how much is the total budgeted selling and administrative
expenses for October?
________________
13. Off-Line Co. has 9,000 units in beginning finished goods. The sales budget shows
expected sales to be 36,000 units. If the production budget shows that 42,000 units
are required for production, what was the desired ending finished goods?
________________

14. Lion Industries required production for June is 132,000 units. To make one unit of
finished product, three pounds of direct material Z are required. Actual beginning and
desired ending inventories of direct material Z are 300,000 and 330,000 pounds,
respectively. How many pounds of direct material Z must be purchased?
________________
15. Haft Construction Company determines that 54,000 pounds of direct materials are
needed for production in July. There are 3,200 pounds of direct materials on hand at
July 1 and the desired ending inventory is 2,800 pounds. If the cost per unit of direct
materials is $3, what is the budgeted total cost of direct materials purchases?
________________
16. Bear, Inc. estimates its sales at 200,000 units in the first quarter and that sales will
increase by 20,000 units each quarter over the year. They have, and desire, a 25%
ending inventory of finished goods. Each unit sells for $35. 40% of the sales are for
cash. 70% of the credit customers pay within the quarter. The remainder is received
in the quarter following sale. Production in units for the third quarter should be
budgeted at
________________
17. A company determined that the budgeted cost of producing a product is $30 per unit.
On June 1, there were 80,000 units on hand, the sales department budgeted sales of
300,000 units in June, and the company desires to have 120,000 units on hand on
June 30. The budgeted cost of goods manufactured for June would be
________________
18. A company has budgeted direct materials purchases of $300,000 in July and
$480,000 in August. Past experience indicates that the company pays for 70% of its
purchases in the month of purchase and the remaining 30% in the next month.
During August, the following items were budgeted:
Wages Expense $150,000
Purchase of office equipment 72,000
Selling and Administrative Expenses 48,000
Depreciation Expense 36,000
The budgeted cash disbursements for August are
________________
19. Astor Manufacturing has the following budgeted sales: January $120,000, February
$180,000, and March $150,000. 40% of the sales are for cash and 60% are on credit.
For the credit sales, 50% are collected in the month of sale, and 50% the next month.
The total expected cash receipts during March are:
________________
20. Garnett Co. expects to purchase $180,000 of materials in July and $210,000 of
materials in August. Three-fourths of all purchases are paid for in the month of
purchase, and the other one-fourth are paid for in the month following the month of
purchase. How much will August's cash disbursements for materials purchases be?
________________
21. The following facts are known:
 The total pounds needed for production are 2 times the units to be produced.
 The desired ending direct materials inventory is 20% of the total pounds needed for
production.

 The beginning direct materials inventory is equal in number to 10% of the units to be
produced.
 Cost per pound is $5.
 Total cost of the direct materials purchases is $1,035,000.
Instructions
Prepare a direct materials budget for the period and write down the cost of direct materials
purchases
________________
22. Pitt Corp. makes and sells a single product, widgets. Two pounds of sand are needed to
make one widget. Budgeted production of widgets for the next few months follows:
September 25,000 units
October 31,000 units
The company wants to maintain monthly ending inventories of sand equal to 20% of the
following month's production needs. On August 31, 10,000 pounds of sand were on hand.
Instructions
How much sand should be purchased in September?
________________
23. Butler Manufacturing manufactures two products, (1) Regular and (2) Deluxe. The
budgeted units to be produced are as follows:
Units of Product
2013 Regular Deluxe Total
July 10,000 15,000 25,000
August 6,000 10,000 16,000
September 9,000 14,000 23,000
October 8,000 12,000 20,000
It takes 2 pounds of direct materials to produce the Regular product and 5 pounds of direct
materials to produce the Deluxe product. It is the company's policy to maintain an inventory of
direct materials on hand at the end of each month equal to 30% of the next month's
production needs for the Regular product and 20% of the next month's production needs for
the Deluxe product. Direct materials inventory on hand at June 30 were 6,000 pounds for the
Regular product and 15,000 pounds for the Deluxe product. The cost per pound of materials
is $5 Regular and $8 Deluxe.
Instructions
Prepare separate direct materials budgets for each product for the third quarter of 2013 and
write down the following:
a. Total cost of direct materials purchases from Regular product in July.
________________
b. Total cost of direct materials purchases from Regular product in August.
________________
c. Total cost of direct materials purchases from Regular product in September.
________________

d. Total cost of direct materials purchases from Deluxe product in July.
________________
e. Total cost of direct materials purchases from Deluxe product in August.
________________
f. Total cost of direct materials purchases from Deluxe product in September.
________________
24. The Northeast Regional Division of Union Corp. has been requested to prepare a
quarterly budgeted income statement for 2013. The regional manager expects that sales in
the first quarter of 2013 will increase by 10% over the same quarter of the preceding year
and will then increase by 5% for each succeeding quarter in 2013.
The corporate head office has requested that the regional manager maintain an inventory in
dollars equal to 25% of the next quarter's sales. Quarterly purchases average 55% of
quarterly sales. Budgeted ending inventory on December 31, 2012 is $176,000. Quarterly
salaries are $20,000 plus 5% of sales. All salaries are classified as sales salaries. Other
quarterly expenses are estimated to be as follows:
Rent expense $24,000
Depreciation on office equipment $12,000
Utilities expense $3,600
Miscellaneous expenses 2% of sales
The income statement for the first quarter of 2012 was as follows:
Income Statement
For the Quarter Ended March 31, 2012
Sales....................................................................................................... $720,000
Cost of goods sold.................................................................................. 396,000
Gross profit............................................................................................. 324,000
Operating expenses
Sales salaries.................................................................................. $52,000
Rent expense.................................................................................. 24,000
Depreciation.................................................................................... 12,000
Utilities............................................................................................. 3,600
Miscellaneous................................................................................. 12,800
Total operating expenses........................................................ 104,400
Net income............................................................................................. $219,600
Instructions
Prepare a budgeted quarterly income statement in tabular form for the first quarter of 2013.
UNION CORP.
Northeast Regional Division
Budgeted Income Statement
For the Quarter Ended March 31, 2013
Sales ................................................................................................................
Cost of goods sold ................................................................................................
Gross profit............................................................................................................
Operating expenses
Sales salaries ................................................................................................
Rent expense.................................................................................................
Depreciation...................................................................................................
Utilities...........................................................................................................
Miscellaneous ...............................................................................................
Total operating expenses.......................................................................
Net income............................................................................................................

25. Cruises, Inc. has budgeted sales revenues as follows:
June July August
Credit sales $135,000 $125,000 $ 90,000
Cash sales 90,000 255,000 195,000
Total sales $225,000 $380,000 $285,000
Past experience indicates that 60% of the credit sales will be collected in the month of sale
and the remaining 40% will be collected in the following month. Purchases of inventory are
all on credit and 50% is paid in the month of purchase and 50% in the month following
purchase. Budgeted inventory purchases are:
June $300,000
July 240,000
August 105,000
Other cash disbursements budgeted: (a) selling and administrative expenses of $48,000
each month, (b) dividends of $103,000 will be paid in July, and (c) purchase of equipment in
August for $30,000 cash. The company wishes to maintain a minimum cash balance of
$50,000 at the end of each month. The company borrows money from the bank at 6%
interest if necessary to maintain the minimum cash balance. Borrowed money is repaid in
months when there is an excess cash balance. The beginning cash balance on July 1 was
$50,000. Assume that borrowed money in this case is for one month.
Instructions
Prepare a cash budget for the months of July and August.
Cash Budget
For the Two Months of July and August
July August
Beginning cash balance
Add: Receipts
Collections from customers
Cash sales
Total receipts
Total available cash
Less: Disbursements
Purchases
Selling and administrative expenses
Dividends
Equipment purchase
Total disbursements
Excess (deficiency) of available cash over disbursements
Financing
Borrowings
Repayments
Ending cash balance