Comprehensive budgeting problem; activity-based costing,operating and financial budgets. Tyva makes a very popular undyedcloth sandal in one style, but in Regular and Deluxe. The Regularsandals have cloth soles and the Deluxe sandals have cloth-coveredwooden soles. Tyva is preparing its budget for June 2015 and hasestimated sales based on past experience.
Other information for the month of June follows:
Input Prices
Direct materials
Cloth $5.25 per yard
Wood $7.50 per board foot
Direct manufacturing labor $15 per direct manufacturinglabor-hour
Input Quantities per Unit of Output (per pair ofsandals)
Regular
Deluxe
Direct materials
Cloth
1.3 yards
1.5 yards
Wood
0
2 b.f.
Direct manufacturing labor-hours
5 hours
7 hours
Setup hours per batch
2 hours
3 hours
Inventory Information, Direct Materials
Cloth
Wood
Beginning inventory
610 yards
800 b.f.
Target ending inventory
386 yards
295 b.f.
Cost of beginning inventory
$3,219
$6,060
Tyva accounts for direct materials using a FIFO cost flowassumption.
Sales and Inventory Information, FinishedGoods
Regular
Deluxe
Expected sales in units (pairs of sandals)
2,000
3.000
Selling price
$120
$195
Target ending inventory in units
400
600
Beginning inventory in units
250
650
Beginning inventory in dollars
$23,250
$92,625
Tyva uses a FIFO cost flow assumption for finished goodsinventory.
All the sandals are made in batches of 50 pairs of sandals. Tyvaincurs manufacturing overhead costs, marketing and generaladministration, and shipping costs. Besides materials and labor,manufacturing costs include setup, processing, and inspectioncosts. Tyva ships 40 pairs of sandals per shipment. Tyva usesactivity-based costing and has classified all overhead costs forthe month of June as shown in the following chart:
Cost Type
Denominator Activity
Rate
Manufacturing
Setup
Setup hours
$18 per setup hour
Processing
Direct man. Labor-hours
$1.80 per DMLH
Inspection
Number of pairs of sandals
$1.35 per pair
Nonmanufacturing
Marketing & general admin
Sales revenue
8%
Shipping
Number of shipments
$15 per shipment
Questions
1.Prepareeach of the following for June:
a.Revenuesbudget
b.Productionbudget in units
c.Directmaterial usage budget and direct material purchases budget in bothunits and dollars, round to dollars
d.Directmanufacturing labor cost budget
e.Manufacturing overhead cost budgets forsetup, processing, and inspection activities
f.Budgetedunit cost of ending finished goods inventory and ending inventoriesbudget
g.Cost ofgoods sold budget
h.Marketingand general administration and shipping costs budget
Tyvaâs balance sheet for May 31 follows.
TYVA BALANCE SHEET AS OF MAY 31
Assets
Cash
9,435
Accounts Receivable
324,000
Less: allowance for bad debts
16,200
307,800
Inventories
Direct materials
9,279
Finished goods
115,875
Fixed assets
870,000
Less: accumulated depreciation
136,335
733,665
Total assets
1,176,054
Liabilities and Equity
Liabilities and Equity
Accounts payable
15,600
Taxes payable
10,800
Interest payable
750
Long-term debt
150,000
Common stock
300,000
Retained earnings
698,904
Total liabilities & equity
1,176,054
Use the balance sheet and the following information to prepare acash budget for Tyva for June. Round to dollars.
All sales are on account; 60% are collected in the month of thesale, 38% are collected the following month, and 2% are nevercollected and written off as bad debts.
All purchases of materials are on account. Tyva pays for 80% ofpurchases in the month of purchase and 20% in the followingmonth.
All other costs are paid in the month incurred, including thedeclaration and payment of a $15,000 cash dividend in June.
Tyva is making monthly interest payments of 0.5% (6%per year) ona $150,000 long-term loan.
Tyva plans to pay the $10,800 of taxes owed as of May 31 in themonth of June. Income tax expense for June is zero.
30% of processing, setup, and inspection costs and 10% ofmarketing and general administration and shipping costs aredepreciation.
Prepare a budgeted income statement for June and a budgetedbalance sheet for Tyva as of June 30, 2015.
Listed below are the answers to the first question. Ijust need help with preparing a cash budget for June, and abudgeted income statement and budgeted balance sheet as of June30.
1 a. Revenue Budget For the Month of June 2015 Regular Deluxe Expected sales in units 2,000 3,000 Selling price 120 195 Total sales $240,000 $585,000 b. Production Budget in Units For the Month of June 2015 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 Units andDollars For the Month of June 2015 Direct materials required for Cloth Wood Cloth Wood Units Yards B.F. Total Total Regular 2,150 1.3 0 2,795 0 Deluxe 2,950 1.5 2 4,425 5,900 7,220 5,900 Cost Budget - to be purchased Beg. Need to Cost to Inv. purchase purchase Cloth 7,220 610 6,610 5.25 34,703 Wood 5,900 800 5,100 7.5 38,250 72,953 Cost of direct materials to be used thisperiod available from beginning inventory Total Cloth 34,703 3,219 37,922 Wood 38,250 6,060 44,310 82,232 Direct Materials Purchases Budget For the Month of June 2015 Cloth Wood Total Physical units budget To be used in production 7,220 5,900 Add: target ending direct material inventory 386 295 Total requirements 7,606 6,195 Deduct: beginning direct material inventory 610 800 Purchases to be made 6,996 5,395 Cost of product 5.25 7.5 Totals 36,729 40,463 77,192 d. Direct Manufacturing Labor Cost Budget For the Month of June 2015 Output Labor hrs Total Wage Total units per unit hours rate Regular 2,150 5 10,750 15 161,250 Deluxe 2,950 7 20,650 15 309,750 31,400 471,000 e. Manufacturing Overhead Cost Budget for Setup,Processing, and Inspection Activities For the Month of June 2015 Total production 2,150 2,950 5,100 Total sales 2,000 3,000 5,000 No. of setup hours 86 118 204 No. of shipments 50 75 125 Labor hours 10,750 20,650 31,400 Setup Processing Inspection Total Allocation Setup hrs Labor hrs No. pairs Rate 18 1.8 1.35 No. of Activity 204 31,400 5,100 Total 3,672 56,520 6,885 67,077 f. Budgeted Unit Cost of Ending Finished GoodsInventory For the Month of June 2015 Cost per Regular Total Deluxe Total Unit of Input per Input per Input Unit Unit Output Output Cloth 5.25 1.3 6.825 1.5 7.875 Wood 7.5 0 0 2 15 Direct Manufacturing hours 15 5 75 7 105 Machine setup 18 0.04 0.72 0.06 1.08 Processing 1.8 5 9 7 12.6 Inspection 1.35 1 1.35 1 1.35 Total 92.895 142.905 Ending Inventories Budget For the Month of June 2015 Quantity Cost per Total Unit Direct materials Cloth 386 5.25 2026.5 Wood 295 7.5 2212.5 4239 Finished goods Regular 400 92.895 37158 Deluxe 600 142.905 85743 122901 Total ending inv. 127140 g. Cost of Goods Sold Budget For the Month of June 2015 Regular Deluxe Beginning finished goods inventory, Jun 1 23250 92625 115875 Direct materials used (c) 82232 Direct manufacturing labor (d) 471000 Manufacturing overhead (e) 67077 Cost of goods manufactured 620309 Cost of goods available for sale 736184 Deduct ending finished goods inventory, June 30(f) 122901 Cost of goods sold 613283 h. Nonmanufacturing Costs Budget For the Month of June 2015 Marketing and general administration 825000 0.08 66000 Shipping (5,000 pairs / 40 pairs per shipment) 125 15 1875 Total 67875
Again, I just need help with the cash budget question, and thebudgeted income statement and budgeted balance sheet as ofJune.
Thank you!
Comprehensive budgeting problem; activity-based costing,operating and financial budgets. Tyva makes a very popular undyedcloth sandal in one style, but in Regular and Deluxe. The Regularsandals have cloth soles and the Deluxe sandals have cloth-coveredwooden soles. Tyva is preparing its budget for June 2015 and hasestimated sales based on past experience.
Other information for the month of June follows:
Input Prices
Direct materials
Cloth $5.25 per yard
Wood $7.50 per board foot
Direct manufacturing labor $15 per direct manufacturinglabor-hour
Input Quantities per Unit of Output (per pair ofsandals)
Regular | Deluxe | |
Direct materials | ||
Cloth | 1.3 yards | 1.5 yards |
Wood | 0 | 2 b.f. |
Direct manufacturing labor-hours | 5 hours | 7 hours |
Setup hours per batch | 2 hours | 3 hours |
Inventory Information, Direct Materials
| Cloth | Wood |
Beginning inventory | 610 yards | 800 b.f. |
Target ending inventory | 386 yards | 295 b.f. |
Cost of beginning inventory | $3,219 | $6,060 |
Tyva accounts for direct materials using a FIFO cost flowassumption.
Sales and Inventory Information, FinishedGoods
Regular | Deluxe | |
Expected sales in units (pairs of sandals) | 2,000 | 3.000 |
Selling price | $120 | $195 |
Target ending inventory in units | 400 | 600 |
Beginning inventory in units | 250 | 650 |
Beginning inventory in dollars | $23,250 | $92,625 |
Tyva uses a FIFO cost flow assumption for finished goodsinventory.
All the sandals are made in batches of 50 pairs of sandals. Tyvaincurs manufacturing overhead costs, marketing and generaladministration, and shipping costs. Besides materials and labor,manufacturing costs include setup, processing, and inspectioncosts. Tyva ships 40 pairs of sandals per shipment. Tyva usesactivity-based costing and has classified all overhead costs forthe month of June as shown in the following chart:
Cost Type | Denominator Activity | Rate |
Manufacturing | ||
Setup | Setup hours | $18 per setup hour |
Processing | Direct man. Labor-hours | $1.80 per DMLH |
Inspection | Number of pairs of sandals | $1.35 per pair |
Nonmanufacturing | ||
Marketing & general admin | Sales revenue | 8% |
Shipping | Number of shipments | $15 per shipment |
Questions
1.Prepareeach of the following for June:
a.Revenuesbudget
b.Productionbudget in units
c.Directmaterial usage budget and direct material purchases budget in bothunits and dollars, round to dollars
d.Directmanufacturing labor cost budget
e.Manufacturing overhead cost budgets forsetup, processing, and inspection activities
f.Budgetedunit cost of ending finished goods inventory and ending inventoriesbudget
g.Cost ofgoods sold budget
h.Marketingand general administration and shipping costs budget
Tyvaâs balance sheet for May 31 follows.
TYVA BALANCE SHEET AS OF MAY 31
Assets | ||
Cash | 9,435 | |
Accounts Receivable | 324,000 | |
Less: allowance for bad debts | 16,200 | 307,800 |
Inventories | ||
Direct materials | 9,279 | |
Finished goods | 115,875 | |
Fixed assets | 870,000 | |
Less: accumulated depreciation | 136,335 | 733,665 |
Total assets | 1,176,054 |
Liabilities and Equity
Liabilities and Equity | |
Accounts payable | 15,600 |
Taxes payable | 10,800 |
Interest payable | 750 |
Long-term debt | 150,000 |
Common stock | 300,000 |
Retained earnings | 698,904 |
Total liabilities & equity | 1,176,054 |
Use the balance sheet and the following information to prepare acash budget for Tyva for June. Round to dollars.
All sales are on account; 60% are collected in the month of thesale, 38% are collected the following month, and 2% are nevercollected and written off as bad debts.
All purchases of materials are on account. Tyva pays for 80% ofpurchases in the month of purchase and 20% in the followingmonth.
All other costs are paid in the month incurred, including thedeclaration and payment of a $15,000 cash dividend in June.
Tyva is making monthly interest payments of 0.5% (6%per year) ona $150,000 long-term loan.
Tyva plans to pay the $10,800 of taxes owed as of May 31 in themonth of June. Income tax expense for June is zero.
30% of processing, setup, and inspection costs and 10% ofmarketing and general administration and shipping costs aredepreciation.
Prepare a budgeted income statement for June and a budgetedbalance sheet for Tyva as of June 30, 2015.
Listed below are the answers to the first question. Ijust need help with preparing a cash budget for June, and abudgeted income statement and budgeted balance sheet as of June30.
1 | |||||||||
a. | Revenue Budget | ||||||||
For the Month of June 2015 | |||||||||
Regular | Deluxe | ||||||||
Expected sales in units | 2,000 | 3,000 | |||||||
Selling price | 120 | 195 | |||||||
Total sales | $240,000 | $585,000 | |||||||
b. | Production Budget in Units | ||||||||
For the Month of June 2015 | |||||||||
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 Units andDollars | ||||||||
For the Month of June 2015 | |||||||||
Direct materials required for | |||||||||
Cloth | Wood | Cloth | Wood | ||||||
Units | Yards | B.F. | Total | Total | |||||
Regular | 2,150 | 1.3 | 0 | 2,795 | 0 | ||||
Deluxe | 2,950 | 1.5 | 2 | 4,425 | 5,900 | ||||
7,220 | 5,900 | ||||||||
Cost Budget - to be purchased | |||||||||
Beg. | Need to | Cost to | |||||||
Inv. | purchase | purchase | |||||||
Cloth | 7,220 | 610 | 6,610 | 5.25 | 34,703 | ||||
Wood | 5,900 | 800 | 5,100 | 7.5 | 38,250 | ||||
72,953 | |||||||||
Cost of direct materials to be used thisperiod | |||||||||
available from beginning inventory | Total | ||||||||
Cloth | 34,703 | 3,219 | 37,922 | ||||||
Wood | 38,250 | 6,060 | 44,310 | ||||||
82,232 | |||||||||
Direct Materials Purchases Budget | |||||||||
For the Month of June 2015 | |||||||||
Cloth | Wood | Total | |||||||
Physical units budget | |||||||||
To be used in production | 7,220 | 5,900 | |||||||
Add: target ending direct material inventory | 386 | 295 | |||||||
Total requirements | 7,606 | 6,195 | |||||||
Deduct: beginning direct material inventory | 610 | 800 | |||||||
Purchases to be made | 6,996 | 5,395 | |||||||
Cost of product | 5.25 | 7.5 | |||||||
Totals | 36,729 | 40,463 | 77,192 | ||||||
d. | Direct Manufacturing Labor Cost Budget | ||||||||
For the Month of June 2015 | |||||||||
Output | Labor hrs | Total | Wage | Total | |||||
units | per unit | hours | rate | ||||||
Regular | 2,150 | 5 | 10,750 | 15 | 161,250 | ||||
Deluxe | 2,950 | 7 | 20,650 | 15 | 309,750 | ||||
31,400 | 471,000 | ||||||||
e. | Manufacturing Overhead Cost Budget for Setup,Processing, and Inspection Activities | ||||||||
For the Month of June 2015 | |||||||||
Total production | 2,150 | 2,950 | 5,100 | ||||||
Total sales | 2,000 | 3,000 | 5,000 | ||||||
No. of setup hours | 86 | 118 | 204 | ||||||
No. of shipments | 50 | 75 | 125 | ||||||
Labor hours | 10,750 | 20,650 | 31,400 | ||||||
Setup | Processing | Inspection | Total | ||||||
Allocation | Setup hrs | Labor hrs | No. pairs | ||||||
Rate | 18 | 1.8 | 1.35 | ||||||
No. of Activity | 204 | 31,400 | 5,100 | ||||||
Total | 3,672 | 56,520 | 6,885 | 67,077 | |||||
f. | Budgeted Unit Cost of Ending Finished GoodsInventory | ||||||||
For the Month of June 2015 | |||||||||
Cost per | Regular | Total | Deluxe | Total | |||||
Unit of | Input per | Input per | |||||||
Input | Unit | Unit | |||||||
Output | Output | ||||||||
Cloth | 5.25 | 1.3 | 6.825 | 1.5 | 7.875 | ||||
Wood | 7.5 | 0 | 0 | 2 | 15 | ||||
Direct Manufacturing hours | 15 | 5 | 75 | 7 | 105 | ||||
Machine setup | 18 | 0.04 | 0.72 | 0.06 | 1.08 | ||||
Processing | 1.8 | 5 | 9 | 7 | 12.6 | ||||
Inspection | 1.35 | 1 | 1.35 | 1 | 1.35 | ||||
Total | 92.895 | 142.905 | |||||||
Ending Inventories Budget | |||||||||
For the Month of June 2015 | |||||||||
Quantity | Cost per | Total | |||||||
Unit | |||||||||
Direct materials | |||||||||
Cloth | 386 | 5.25 | 2026.5 | ||||||
Wood | 295 | 7.5 | 2212.5 | 4239 | |||||
Finished goods | |||||||||
Regular | 400 | 92.895 | 37158 | ||||||
Deluxe | 600 | 142.905 | 85743 | 122901 | |||||
Total ending inv. | 127140 | ||||||||
g. | Cost of Goods Sold Budget | ||||||||
For the Month of June 2015 | |||||||||
Regular | Deluxe | ||||||||
Beginning finished goods inventory, Jun 1 | 23250 | 92625 | 115875 | ||||||
Direct materials used (c) | 82232 | ||||||||
Direct manufacturing labor (d) | 471000 | ||||||||
Manufacturing overhead (e) | 67077 | ||||||||
Cost of goods manufactured | 620309 | ||||||||
Cost of goods available for sale | 736184 | ||||||||
Deduct ending finished goods inventory, June 30(f) | 122901 | ||||||||
Cost of goods sold | 613283 | ||||||||
h. | Nonmanufacturing Costs Budget | ||||||||
For the Month of June 2015 | |||||||||
Marketing and general administration | 825000 | 0.08 | 66000 | ||||||
Shipping | |||||||||
(5,000 pairs / 40 pairs per shipment) | 125 | 15 | 1875 | ||||||
Total | 67875 |
Again, I just need help with the cash budget question, and thebudgeted income statement and budgeted balance sheet as ofJune.
Thank you!