Direct material usage budget and direct material

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Direct material usage budget and direct material purchases budget in both units and dollars; round to dollars d. Direct manufacturing labor cost budget e. Manufacturing overhead cost budgets for setup, processing, and inspection activities f. Budgeted unit cost of ending finished-goods inventory and ending inventories budget g. Cost of goods sold budget h. Marketing and general administration and shipping costs budget 2. Tyva’s balance sheet for May 31 follows. Use the balance sheet and the following information to prepare a cash budget for Tyva for June. Round to dollars. All sales are on account; 60% are collected in the month of the sale, 38% are collected the following month, and 2% are never collected and written off as bad debts. All purchases of materials are on account. Tyva pays for 80% of purchases in the month of purchase and 20% in the following month. All other costs are paid in the month incurred, including the declaration and payment of a $15,000 cash dividend in June. Tyva is making monthly interest payments of 0.5% (6% per year) on a $150,000 long-term loan. Tyva plans to pay the $10,800 of taxes owed as of May 31 in the month of June. Income tax expense for June is zero. 30% of processing, setup, and inspection costs and 10% of marketing and general administration and shipping costs are depreciation. 6-63
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3. Prepare a budgeted income statement for June and a budgeted balance sheet for Tyva as of June 30, 2018. SOLUTION (60 min.) Comprehensive budgeting problem; activity-based costing, operating and financial budgets. 1a. Revenues Budget For the Month of June, 2018 Units Selling Price Total Revenues Regular 2,000 $120 $240,000 Deluxe 3,000 195 585,000 Total $825,000 b. Production Budget For the Month of June, 2018 Product Regular Deluxe Budgeted unit sales 2,000 3,000 Add: target ending finished goods inventory 400 600 Total required units 2,400 3,600 Deduct: beginning finished goods inventory 250 650 Units of finished goods to be produced 2,150 2,950 c. Direct Material Usage Budget in Quantity and Dollars For the Month of June, 2018 Material Cloth Wood Total Physical Units Budget Direct materials required for Regular (2,150 units × 1.3 yd.; 0 b.f.) 2,795 yds. 0 b.f. Deluxe (2,950 units × 1.5 yds.; 2 b.f.) 4,425 yds. 5,900 b.f. Total quantity of direct materials to be used 7,220 yds. 5,900 b.f. Cost Budget Available from beginning direct materials inventory (under a FIFO cost-flow assumption) $ 3,219 $ 6,060 To be purchased this period Cloth: (7,220 yd. – 610 yd.) × $5.25 per yd. 34,703 Wood: (5,900 – 800) × $7.50 per b. f. 38,250 Direct materials to be used this period $37,922 $44,310 $82,232 6-64
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Direct Materials Purchases Budget For the Month of June, 2018 Material Cloth Wood Total Physical Units Budget To be used in production 7,220 yds. 5,900 ft Add: Target ending direct material inventory 386 yds. 295 ft Total requirements 7,606 yds. 6,195 ft Deduct: beginning direct material inventory 610 yds. 800 ft Purchases to be made 6,996 yds. 5,395 ft Cost Budget Cloth: (6,996 yds. × $5.25 per yd.) $36,729 Wood: (5,395 ft × $7.50 per b.f.) ______ $40,463 Total $36,729 $40,463 $77,192 d.
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