Chapter 6 Solutions

Chapter 6 Solutions - CHAPTER 6 MASTER BUDGET AND...

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CHAPTER 6 MASTER BUDGET AND RESPONSIBILITY ACCOUNTING 6-16 (15 min.) Sales budget, service setting. 1. 2006 Volum e At 2006 Selling Prices Expected 2007 Change in Volume Expected 2007 Volume Radon Tests 11,000 $250 +5% 11,550 Lead Tests 15,200 $200 -10% 13,680 For the Year Ended December 31, 2007 Selling Price Units Sold Total Revenues Radon Tests $250 11,550 $2,887,500 Lead Tests $200 13,680 2,736,000 $5,623,500 2. 2006 Volum e Planned 2007 Selling Prices Expected 2007 Change in Volume Expected 2007 Volume Radon Tests 11,000 $250 +5% 11,550 Lead Tests 15,200 $190 -5% 14,440 For the Year Ended December 31, 2007 Selling Price Units Sold Total Revenues Radon Tests $250 11,550 $2,887,500 Lead Tests $190 14,440 2,743,600 $5,631,100 Expected revenues at the new 2007 prices are $5,631,100, which are greater than the expected 2007 revenues of $5,623,500 if the prices are unchanged. So, if the goal is to maximize sales revenue and if Jim McGrath’s forecasts are reliable, the company should lower its price for a lead test in 2007. 6-1
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6-17 (5 min.) Sales and production budget. Budgeted sales in units 100,000 Add target ending finished goods inventory 11,000 Total requirements 111,000 Deduct beginning finished goods inventory 7,000 Units to be produced 104,000 6-18 (5 min.) Direct materials purchases budget. Direct materials to be used in production (bottles) 1,500,000 Add target ending direct materials inventory (bottles) 50,000 Total requirements (bottles) 1,550,000 Deduct beginning direct materials inventory (bottles) 20,000 Direct materials to be purchased (bottles) 1,530,000 6.19 (10 min.) Budgeting material purchases. Production Budget: Finished Goods (units) Budgeted sales 42,000 Add target ending finished goods inventory 24,000 Total requirements 66,000 Deduct beginning finished goods inventory 22,000 Units to be produced 44,000 Direct Materials Purchases Budget: Direct Materials
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Chapter 6 Solutions - CHAPTER 6 MASTER BUDGET AND...

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