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Chapter-8-Master-Budget

The document outlines exercises in budgeting for a company, including production budgets for various months, direct materials and labor budgets, and a manufacturing overhead budget. It provides specific sales projections and inventory policies, requiring calculations for production needs, raw material costs, and labor expenses. Additionally, it includes a cash receipts schedule and accounts receivable balance for the first quarter of 2025.

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Aguit, Queene Joy
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46 views2 pages

Chapter-8-Master-Budget

The document outlines exercises in budgeting for a company, including production budgets for various months, direct materials and labor budgets, and a manufacturing overhead budget. It provides specific sales projections and inventory policies, requiring calculations for production needs, raw material costs, and labor expenses. Additionally, it includes a cash receipts schedule and accounts receivable balance for the first quarter of 2025.

Uploaded by

Aguit, Queene Joy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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NAME: DATE:

SECTION: SCORE:

EXERCISES IN BUDGETING

1. A company produces a product. The sales budget for the first four months of the year is presented
below.
Unit Sales
January 16,000
February 19,200
March 17,600
April 18,000

Company policy requires that ending inventories for each month be 20 percent of next
month’s sales. At the beginning of January, the inventory of the product is 3,200 units.

REQUIRED:
Prepare a production budget for the first quarter of the year. Show the number of units that should be
produced each month as well as for the quarter in total.

2. (Production, direct materials, and direct labor budgets) A company has projected sales of its
product for the next seven months as follows:

January 200 units


February 600 units
March 900 units
April 800 units
May 300 units
June 200 units
July 400 units

The finished product requires 2 kilos of raw material and 5 hours of direct labor. The company
tries to maintain a Finished Goods ending inventory equal to the next month’s sales and a Raw Material
ending inventory equal to 60% of the current month’s production needs.

Required:
a. Prepare a production budget for March, April and May.
b. Prepare a forecast of the units and cost of raw material that will be required for March, April and
May. The cost per kilo of raw material is expected to be ₱20 in March, ₱23 in April, and ₱24 in
May.
c. Prepare a direct labor budget (assuming a ₱50 per hour rate) for March, April and May.

3. A company produces a variety of labels, including iron-on name labels, which are sold to parents of
camp-bound children. (The camps require campers to have their name on every
article of clothing.) Each roll consists of 10 yards of paper strip with 500 copies of the child’s name. Each yard
of paper strip costs ₱2. The company has budgeted production of the label rolls for the next four months as
follows:
March April May June
Rolls in units 6,000 9,000 15,000 10,000

Inventory policy requires that sufficient paper strip be in ending monthly inventory to satisfy 25 percent of the
following month’s production needs. The inventory of paper strip at the beginning of March equals exactly the
amount needed to satisfy the inventory policy.

REQUIRED:
a) Prepare a direct materials purchases budget for March, April, and May showing purchases in units and
in pesos for each month and in total.
b) Each roll of labels produced requires (on average) 0.05 direct labor hour. The average cost of direct
labor is ₱60 per hour. Prepare a direct labor budget for March, April, and May showing the hours
needed and the direct labor cost for each month and in total

4. The production budget of a corporation for the upcoming fiscal year is as follows:

First quarter 1,600


Second quarter 1,640
Third quarter 1,700
Fourth quarter 1,560

Each unit requires three (3) hours of direct labor. The company’s variable manufacturing
overhead rate is ₱10 per direct labor hour and the company’s fixed manufacturing overhead is
₱80,000 per quarter. The only non-cash item included in fixed manufacturing overhead is depreciation,
which is ₱25,000 per quarter.

REQUIRED: 1. Construct the company’s manufacturing overhead budget for the upcoming
fiscal year.

2. Compute the company’s manufacturing overhead rate (including both variable and fixed
manufacturing overhead) for the upcoming fiscal year. Round off to the nearest whole cent.

5. A company has the following sales projections for the first half of 2025:

January ₱200,000
February 220,000
March 242,000
April 266,000
May 292,000
June 322,000

Credit sales are 60% of the total sales. The company collects 50% of its credit sales in the month of sale,
40% in the month following the sale, and 8% in the second month following the sale. Records show that sales
were ₱180,000 in November and ₱190,000 in December, 2024.

Required:
a. Prepare a schedule of cash receipts for the first three months of 2025.
b. What would be the accounts receivable balance on March 31, 2025?

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