ACCT303Chapter6 - 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. 2009 Volum e At 2009 Selling Prices Expected 2010 Change in Volume Expected 2010 Volume Radon Tests 11,000 $250 +5% 11,550 Lead Tests 15,200 $200 -10% 13,680 For the Year Ended December 31, 2010 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. 2009 Volum e Planned 2010 Selling Prices Expected 2010 Change in Volume Expected 2010 Volume Radon Tests 11,000 $250 +5% 11,550 Lead Tests 15,200 $190 -5% 14,440 For the Year Ended December 31, 2010 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 2010 prices are $5,631,100, which are greater than the expected 2010 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 2010. 6-1
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6-17 (5 min.) Sales and production budget. Budgeted sales in units 200,000 Add target ending finished goods inventory 25,000 Total requirements 225,000 Deduct beginning finished goods inventory 15,000 Units to be produced 210,000 6-18 (5 min.) Direct materials purchases budget. Direct materials to be used in production (bottles) 2,500,000 Add target ending direct materials inventory (bottles) 80,000 Total requirements (bottles) 2,580,000 Deduct beginning direct materials inventory (bottles) 50,000 Direct materials to be purchased (bottles) 2,530,000 6-19 (10 min.) Budgeting material purchases. Production Budget: Finished Goods (units) Budgeted sales 45,000 Add target ending finished goods inventory 18,000 Total requirements 63,000 Deduct beginning finished goods inventory 16,000 Units to be produced 47,000 Direct Materials Purchases Budget: Direct Materials (in gallons) Direct materials needed for production (47,000 × 3) 141,000 Add target ending direct materials inventory 50,000 Total requirements 191,000 Deduct beginning direct materials inventory 60,000 Direct materials to be purchased 131,000 6-2
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6-20 (30 min.) Revenues and production budget . 1. Selling Price Units Sold Total Revenues 12-ounce bottles $0.25 4,800,000 a $1,200,000 4-gallon units 1.50 1,200,000 b 1,800,000 $3,000,000 a 400,000 × 12 months = 4,800,000 b 100,000 × 12 months = 1,200,000 2. Budgeted unit sales (12-ounce bottles) 4,800,000 Add target ending finished goods inventory 600,000 Total requirements 5,400,000 Deduct beginning finished goods inventory 900,000 Units to be produced 4,500,000 3. Beginning Budgeted Target Budgeted = + inventory sales ending inventory production - = 1,200,000 + 200,000 - 1,300,000 = 100,000 4-gallon units 6-21 (30 min.) Budgeting: direct material usage, manufacturing cost and gross margin . 1. Direct Material Usage Budget in Quantity and Dollars Material Wool Dye Total Physical Units Budget Direct materials required for Blue Rugs (100,000 rugs × 30 skeins and 0.5 gal.) 3,000,0000 skeins 50,000 gal. Cost Budget Available from beginning direct materials inventory (under a FIFO cost-flow assumption) Wool: 349,000 skeins $ 715,450 Dye: 5,000 gallons $ 24,850 To be purchased this period Wool: (3,000,000 - 349,000) skeins × $2 per skein 5,302,000 Dye: (50,000 – 5,000) gal. × $5 per gal. _________ 225,000 Direct materials to be used this period: (a) + (b) $6,017,450 $ 249,850 $6,267,300 6-3
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ACCT303Chapter6 - CHAPTER 6 MASTER BUDGET AND...

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