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Question:
BE23.6 BRIEF EXERCISE 23.6
Elements of the Budget
 
Identify the budgets in Column B from which dollar amounts are transferred directly in constructing the budgets listed in Column A
 
Column A

  1. Budgeted income statement
  2. Budgeted balance sheet
  3. Cash flow budget
  4. Cost of goods sold budget
  5. Production budget

 
Column B

  1. Direct materials budget
  2. Cost of goods sold budget
  3. Production budget
  4. Payables budget
  5. Sales budget
  6. Budgeted income statement

 
E23.1 EXERCISE 23.1
Budgeting Purchases
and Cash Payments
 
The following information is from the manufacturing budget and the budgeted financial statements
of Fabor Fabrication:
 
Direct materials inventory, Jan. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 73,000
Direct materials inventory, Dec. 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,000
Direct materials budgeted for use during the year . . . . . . . . . . . . . . . . . . . . . . . . . 264,000
Accounts payable to suppliers of materials, Jan. 1 . . . . . . . . . . . . . . . . . . . . . . . . 46,000
Accounts payable to suppliers of materials, Dec. 31 . . . . . . . . . . . . . . . . . . . . . . . 77,000
 
Compute the budgeted amounts for:

  1. Purchases of direct materials during the year.
  2. Cash payments during the year to suppliers of materials.

 
E23.8 EXERCISE 23.8
Budgeting Cash Receipts
 
Sales on account for the first two months of the current year are budgeted as follows:
 
Jan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $800,000
Feb. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 880,000
 
All sales are made on terms of 2/10, n/30 (2% discount if paid in 10 days, full amount by 30 days);
collections on accounts receivable are typically made as follows:
 
Collections within the month of sale:
Within discount period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70%
After discount period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Collections within the month following sale:
Within discount period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
After discount period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Returns, allowances, and uncollectibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
 
E24.2 EXERCISE 24.2
Relationships among
Standard Costs, Actual
Costs, and Cost Variances
 
The standard costs and variances for direct materials, direct labor, and factory overhead for the
month of May are as follows:
Variances
                                                                       Standard Cost                                            Unfavorable                                                Favorable
Direct materials . . . . . . . . . . . . . . . . . . . . . . . . $ 85,000
Price variance . . . . . . . . . . . . . . . . . . . . . . ………………………………………………………. $5,000
Quantity variance . . . . . . . . . . . . . . . . . . . . …………………………………………………………………………………………………………. $3,000
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000
Rate variance . . . . . . . . . . . . . . . . . . . . . . . ……………………………………………………………………………………………………………2,700
Efficiency variance . . . . . . . . . . . . . . . . . . . ………………………………………………………. 6,200
Manufacturing overhead . . . . . . . . . . . . . . . . . 300,000
Spending variance . . . . . . . . . . . . . . . . . . . . …………………………………………………………………………………………………………..4,000
Volume variance . . . . . . . . . . . . . . . . . . . . . ……………………………………………………………………………………………………………5,000
 
Determine the actual costs incurred during the month of May for direct materials, direct labor,
and manufacturing overhead.

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