Seminar 12 Week 13 - 0902

Seminar 12 Week 13 - 0902 - SOLUTIONS TO SELF STUDY...

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Unformatted text preview: SOLUTIONS TO SELF STUDY QUESTIONS 1 The primary benefits of budgeting are: • • It provides definite objectives for evaluating subsequent performance. • It creates an early warning system for potential problems, which gives management additional time to solve the problem. • It facilitates the coordination of activities within the business by correlating the goals of each segment with overall company objectives. • It results in greater management awareness of the entity’s overall operations and the impact of external factors such as economic trends on the company’s operations. • 2 It requires all levels of management to plan ahead. It contributes to positive behaviour patterns throughout the organisation by motivating personnel to meet planned objectives. The essentials of effective budgeting are: • a sound organisational structure • research and analysis • management acceptance of the budget. Exercise 16.4 (a) Kasper Ltd Production Budget for the six months ended 30 June 2010 Quarter 1 Expected unit sales Add: Desired ending finished goods units(1) Total required units Less: Beginning finished goods units Required production units (1) 25% of next quarter’s sales (2) 25% x 8,000 (3) 25% x 6,000 Page 2 of 6 2 6,000 2,250 8,250 1,500 6,750 9,000 2,000 11,000 3 2,250 8,750 6 Mths 2 15,500 (b) Kasper Pty Ltd Direct Materials Budget for the six months ended 30 June 2010 Quarter 1 Units to be produced Direct materials per unit Total kilograms needed for production Add: Desired ending direct materials (kgs) (1) Total materials required Less: Beginning direct materials (kgs) Direct materials purchases Cost per kilogram Total cost of direct materials purchases (1) 2 6,750 x3 20,250 13,125 33,375 10,125 23,250 x $5 116,250 6 Mths 8,750 x3 26,250 3 12,750 39,000 2 13,125 25875 x $5 129,375 245,625 4 Year 50% of next quarter’s production [50% x (8,750 x 3)] (2) 50% x (6,750 x 3). (3) 50% x (8,500 x 3) Exercise 16.5 Sunny Pty Ltd Direct Labour Budget for the year ended 31 December 2009 Quarter 1 Units to be produced Direct labour time (hours) per unit Total required direct labour hours Direct labour cost per hour Total direct labour cost 30,000 x 1.5 45,000 x $18 810,000 2 35,000 x 1.5 52,500 x $18 945,000 Page 3 of 6 3 25,000 45,000 x 1.5 x 1.5 37,500 67,500 x $20 x $20 750,000 1,350,000 135,000 x 1.5 202,500 3,855,000 Problem Set A 16.2 a) Joe Dunham Ltd Sales Budget for the year 30 June 2009 JB 50 Expected unit sales Unit selling price Total sales 480,000 x $20 9,600,000 JB 60 TOTAL 180,000 X $25 4,500,000 14,100,000 JB 60 TOTAL b) Joe Dunham Ltd Production Budget for the year 30 June 2009 JB 50 Expected unit sales Add: Desired ending finished goods units Total required units Less: Beginning finished goods units Required production units 480,000 25,000 505,000 30,000 475,000 180,000 15,000 195,000 10,000 185,000 660,000 c) Joe Dunham Ltd Direct Materials Budget for the six months ended 30 June 2009 JB 50 Units to be produced Direct materials per unit Total kilograms needed for production Add: Desired ending direct materials (kgs) Total materials required Less: Beginning direct materials (kgs) Direct materials purchases Cost per kilogram Total cost of direct materials purchases 475,000 x2 950,000 30,000 980,000 40,000 940,000 x $3 2,820,000 Page 4 of 6 JB 60 185,000 x3 555,000 15,000 570,000 10,000 560,000 x $4 2,240,000 TOTAL 5,060,000 (d) Joe Dunham Ltd Direct Labour Budget for the six months ended 30 June 2009 JB 50 Units to be produced Direct labour time (hours) per unit Total required direct labour hours Direct labour cost per hour Total direct labour cost 475,000 x .40 190,000 x $11 2,090,000 JB 60 TOTAL 185,000 x .60 111,000 x $11 1,221,000 660,000 301,000 x $11 3,311,000 (e) Joe Dunham Ltd Budgeted Income Statement for the six months ended 30 June 2009 JB 50 9,600,000 5,760,000 3,840,000 TOTAL 14,100,000 9,360,000 4,740,000 660,000 420,000 1,080,000 Sales Cost of goods sold (see below) Gross profit Less: Selling expenses Administrative expenses JB 60 4,500,000 3,600,000 900,000 360,000 340,000 700,000 1,020,000 760,000 1,780,000 2,960,000 888.000 2,072,000 Profit form ordinary activities Income tax expense (30%) Profit (1) (2) JB 50 480,000 x $12 =$5,760,000 JB 60 180,000 x $20 = $3,600,000 Page 5 of 6 Problem Set B 16.3 (a) David Chambers Ltd Sales Budget for the year ending 31 December 2010 Plan A *590,625 x 8.60 5,079,375 Expected unit sales Unit selling price Total sales Plan B 756,250 x 7.60 5,747,500 *656,250 x 90%= 590,635 ** 656,250 +100,000 = 756,250 (b) David Chambers Ltd Production Budget for the year ending 31 December 2011 Plan A 59,625 87,500 678,125 75,000 603,125 Expected unit sales Add: Desired ending finished goods units Total required units Less: Beginning finished goods units Required production units Plan B 756,250 100,000 856,250 75,000 781,250 (c) Variable costs = $4.00 ($2.00 +$1.50 + $0.50) for both plans Total Variable costs Total fixed costs Total costs (a) Total units (b) Plan B 3,125,000 965,000 4,090,000 603125 603,125x $4 Plan A 2,412,500 965,000 3,377,500 781,250 781,250x4 Unit Cost (a) ÷ (b) 5.60 5.23 The difference is due to the fact that fixed costs are spread over a larger number of units (178,125) in Plan B. (d) Gross Profit calculation Plan A 5,079,375 3,307,500 Plan B 5,747,500 3,955,188 756,250 x 5.23 Sales 590,625 x 5.60 Less Cost of Goods sold Gross Profit 1,771,875 1,792,312 Plan B should be accepted as it produces a higher gross profit than Plan A Page 6 of 6 ...
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