ACC705 - Tutorial 1: Budgeting

1. Karmun Company estimates that unit sales will be 10,000 in quarter 1; 12,000 in quarter 2;
14,000 in quarter 3; and 18,000 in quarter 4. Using a sales price of $80 per unit, prepare the
sales budget by quarters for the year ending December 31, 2020.

2. Sales budget data for Karmun Company are given in question one. Management desires to
have an ending finished goods inventory equal to 20% of the next quarter’s expected unit
sales. Prepare a production budget by quarters for the first 6 months of 2020.

3. Maltz Company has 1,600 pounds of raw materials in its December 31, 2020, ending
inventory. Required production for January and February of 2021 are 4,000 and 5,500 units
respectively. Two pounds of raw materials are needed for each unit, and the estimated cost
per pound is $6. Management desires an ending inventory equal to 20% of next month’s
materials requirements. Prepare the direct materials budget for January.

4. For Rado Company, units to be produced are 5,000 in quarter 1 and 6,000 in quarter 2. It
takes 1.5 hours to make a finished unit, and the expected hourly wages rate is $14 per hour.
Prepare a direct labor budget by quarter for 6 months ending June 30, 2020.

5. For Chow Inc.Co. variable manufacturing overhead costs are expected to be $20,000 in the
first quarter of 2020 with $4,000 increments in each of the remaining three quarters. Fixed
overhead costs are estimated to be $35,000 in each quarter. Prepare the manufacturing
overhead budget by quarters and in total for the year.

6. Tracey & Jojo, CPAs, are preparing their revenue (sales) budget for the coming year (2020).
The practice is divided into three departments; auditing, tax and consulting. Billable hours
for each department, by quarter, are provided below.

Department Quarter 1 Quarter 2 Quarter 3 Quarter 4

Auditing 2,200 1,600 2,000 2,400
Tax 3,000 2,400 2,000 2.500
Consulting 1,500 1,500 1,500 1,500

Average hourly billing rates are: auditing $80, tax $90, and consulting $100.

Required
Prepare the service revenue (sales) budget for 2010 by listing the departments and showing
for each quarter and the year in total, billable hours billable rate and total revenue.

ACC705: Cost & Management Accounting - Toncan T Eli Page 1

 7. Ankiel Company produces and sells automobile batteries, the heavy-duty HD-240. The2020
sales budget is as follows.

Quarter HD-240
1 5,200
2 7,000
3 8,000
4 10,000

The January 1, 2020, inventory of HD-240 is 2,500 units. Management desires and ending
inventory each quarter equal to 50% of the next quarter’s sales. Sales in the first quarter of
2021 are expected to be 30% higher than sales in the same quarter in 2020.

Instructions
Prepare quarterly production budgets for each quarter and in total for 2020.

8. Moreno Industries has adopted the following budget for the first 4 months of 2021.

Month Units Month Units

January 10,000 March 5,000
February 8,000 April 4,000

Each unit requires 3 pounds of raw materials costing $2 per pound. On December 31, 2020,
the ending raw materials inventory was 9,000 pounds. Management wants to have
materials inventory at the end of the month equal to 30% of next month’s production
requirements.

Required
Prepare a direct materials purchases budget by month for the first quarter.

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