MAS SOLUTIONS TO PROBLEMS SOLUTIONS 2018.docx

# Budgeted raw materials to be used or production

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Budgeted raw materials to be used (or production) – 140,000+ 5,000 145,000 units Add raw materials ending inventory 18 ,500 Total 163,500 Less raw materials beginning inventory 16 ,000 Budgeted purchases 147,500 Less actual purchases, 1 st quarter 27 ,500 Required purchases in the remaining 3 quarters 120 ,000 units Cost computation: First quarter purchases (27,500 units) P1,760,000 Second quarter (120,000/3 or 40,000 x [P1,760,000÷27,500] or P64/unit) 2,560,000 Third and fourth quarters ([40,000/qtr. x 2] x[P64 x 105%]) 5 ,376,000 Total cost of budgeted purchases P9,696,000 A 65. Materials inventory, December 31, 2018 18,500 x Purchase price (P64 x 1.05) P67.20 Cost of materials inventory, December 31, 2018 P1,243,200 B

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MANAGEMENT ADVISORY SERVICES Page 10 The company uses the FIFO method of costing inventory. Thus, the ending inventory should be valued at the new purchase price of P67.20. 66. Original labor cost per unit (P784,000 ÷ 140,000 units) P 5.60 Labor cost per unit effective on the beginning of the 4 th quarter (P5.60 x 108%) P6.048 Budgeted labor cost: First to third quarters (25,000 + 40,000 + 40,000) x P5.60)P588,000 Fourth quarter (40,000 x P6.048) 241,920 Total budgeted labor cost P 829,920 D 67. Materials: Inventory, January 1 P 960,000 Add purchases 9,696,000 Available for use P10,656,000 Less inventory, December 31 1,243,200 P 9,412,800 Labor 829,920 Factory overhead: Variable: Indirect materials (P9,412,800 x 10%) P941,280 Other variable overhead ( P2,009,600 – P889,600 x 145,000 ) 1,160,000 140,000 Total variable overhead P2,101,280 Fixed 1,120,000 3,221,280 Budgeted cost of goods manufactured P13,464,000 B 68. Cost of goods manufactured (from Item #67) P13,464,000 Add finished goods inventory, January 1 744,000 Total cost of goods available for sale P14,208,000 Less finished goods inventory, December 31 (3,300 units x [P13,464,000 ÷ 145,000]) 306,422 Budgeted cost of goods sold P13,901,578 A 69. Cost of goods sold P300,000 Add inventory, 12/31/18 42,000 Less inventory, 1/1/18 ( 30,000 ) Purchases P312,000 Add accounts payable, 1/1/18 20,000 Less accounts payable, 12/31/18 (P312,000/12)( 26,000 ) Budgeted cash payments P306,000 C 70. The amount is equal to July’s collections in September plus August’s collections in September. This amount is P169,800 [(36% × P120,000) + (60% × P211,000)]. A 71. Sales, July 24,000 Add ending inventory (30,000 x 30%) + 3,000 12,000 Less beg, inventory (24,000 x 30%) + 3,000 (10,200)
MANAGEMENT ADVISORY SERVICES Page 11 Production, July 25,800 D 72. Internal growth rate is the percentage increase in assets kept in business. Increase in assets (P30,000 – P10,000) P 20,000 ÷ Total assets, beginning of 2018 ÷ 500,000 Internal growth rate 4% B 73. ROS x ATO = ROA ROS x 5 = 20% ROS = 20% ÷ 5 = 4% C 74. Total assets P375,000 Less equity 206,250 Debt P168,750 Debt-to-Equity Ratio (P168,750 ÷ P206,250) 81.82% *Total financing required for the capital budget P62,500 ÷181.82 % Amount to be financed by equity P34,375 Amount to be financed by debt without changing the debt-to-equity ratio (P62,500 – P34,375) P28,125 A 75. Sales volume variance P80,000 F Cost volume variance 64,000 U Gross profit volume variance P16,000 F – OR – 2018 units @ 2017 gross profit per unit (P160,000 x 110%) P176,000 Less 2017 gross profit 160,000 Gross profit volume variance P 16,000 F C 76. 77. Capital budget P80,000 Fund from net income (P60,000 x 30%) 18,000 External funding needed P62,000 B 78. The annual benefit is P6,000 which is equal to the interest income P12,000 (P100,000 × 2 days × 6%) – P6,000 (P500 × 12) cost.

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