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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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