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Act121: Strategic Cost Management Assignment Topic: Master Budgeting DEADLINE: OCTOBER 4, 2020 (SUNDAY), 11:59PM

This document provides the requirements and details for 5 problems related to master budgeting for an accounting class. Students are asked to prepare budgets involving sales, production, materials purchases, direct labor, and manufacturing overhead for various companies over multiple quarters. Solutions to the budgeting problems must be shown. The deadline for the assignment is October 4, 2020 at 11:59pm.

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Bella Ronah
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189 views

Act121: Strategic Cost Management Assignment Topic: Master Budgeting DEADLINE: OCTOBER 4, 2020 (SUNDAY), 11:59PM

This document provides the requirements and details for 5 problems related to master budgeting for an accounting class. Students are asked to prepare budgets involving sales, production, materials purchases, direct labor, and manufacturing overhead for various companies over multiple quarters. Solutions to the budgeting problems must be shown. The deadline for the assignment is October 4, 2020 at 11:59pm.

Uploaded by

Bella Ronah
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ACT121: STRATEGIC COST MANAGEMENT

ASSIGNMENT
TOPIC: MASTER BUDGETING
DEADLINE: OCTOBER 4, 2020 (SUNDAY), 11:59PM

PROVIDE THE FOLLOWING REQUIREMENTS. SHOW YOUR SOLUTIONS.

PROBLEM 1
Peak sales for X Company occur in August. The company’s sales budget
for the third quarter showing these peak sales is given below:
July August September Total
Budgeted Sales P600,000 P900,000 P2 million P2 million

From past experience, the company has learned that 20% of a month’s
sales are collected in the month of sale, that another 70% is
collected in the month following sale, and that the remaining 10% is
collected in the second month following sale. Bad debts are negligible
and can be ignored. May sales totaled P430,000 and June sales totaled
P540,000.

Required:
1. Prepare a schedule of expected cash collections from sales, by
month and in total, for the third quarter.
2. Assume that the company will prepare a budgeted income statement
of financial position as of September 30. Compute the accounts
receivable as of that date.

PROBLEM 2
Y Company has budgeted the sales of its innovative mobile phone over
the next four months as follows:
Units
July 30,000
August 45,000
September 60,000
October 50,000

The company is now in the process of preparing a production budget for


the third quarter. Past experience has shown that end-of-month
inventories of finished goods must equal 10% of the next month’s
sales. The inventory at the end of June was 3,000 units.

Required:
Prepare a production budget for the third quarter showing the number
of units to be produced each month and for the quarter in total.

PROBLEM 3
ABC Company has developed a very powerful electronic calculator. Each
calculator requires three small “chips” that cost P200 each and are
purchased from an overseas supplier. Mini Products has prepared a
production budget for the calculator by Quarters for Year 2 and for
the first quarter of Year 3, as shown below:
YEAR 2 YEAR 3
1st Q 2nd Q 3rd Q 4th Q 1st Q
Budgeted
production 60,000 90,000 150,000 100,000 80,000

The chip used in production of calculator is sometimes hard to get, so


it is necessary to carry large inventories as a precaution against
stockouts. For this reason, the inventory of chips at the end of the
quarter must be equal to 20% of the following quarter’s production
needs. Some 36,000 chips will be on hand to start the first quarter of
Year 2.

Required:
Prepare a material purchases budget for chips, by quarter and in
total, for Year 2. At the bottom, show the peso amount of purchases
for each quarter of Year 2.

PROBLEM 4
The production department of XYZ Corporation has submitted the
following forecast of units to be produced at the plant for each
quarter of the upcoming fiscal year. The plant produces high-end
outdoor barbeque grills.
1st Q 2nd Q 3rd Q 4th Q
Units to be Produced 5,000 4,400 4,500 4,900

Each unit requires 0.40 direct labor-hours and direct labor-hour


workers paid P10 per hour.

Required:
1. Construct the company’s direct labor budget for the upcoming fiscal
year, assuming that the direct labor work force is adjusted each
quarter to match the number of hours required to produce the
forecasted number of units produced.
2. Construct the company’s direct labor budget for the upcoming fiscal
year, assuming that the direct labor workforce is not adjusted each
quarter. Instead, assume that the company’s direct labor work force
consists of permanent employees who are guaranteed to be paid for at
least 1,800 hours of work each quarter. If the number of required
direct labor-hours is less than this number, the workers are paid for
1,800 hours anyway. Any hours worked in excess of 1,800 hours in a
quarter are paid at the rate of 1.5 times the normal hourly rate for
direct labor.

PROBLEM 5
The direct labor budget of XYZ Company for the upcoming fiscal year
contains the following details concerning budgeted direct labor-hours.

1st Q 2nd Q 3rd Q 4th Q


Budgeted DL hours 5,000 4,800 5,200 5,400

The company’s variable manufacturing overhead rate is P1.75 per direct


labor-hour and the company’s fixed manufacturing overhead is P35,000
per quarter. The only non-cash item included in the fixed
manufacturing overhead is depreciation, which is P15,000 per quarter.

Required:
1. Construct the company’s manufacturing overhead budget for the
upcoming fiscal year.
2. Compute the company’s manufacturing overhead rate (including both
variable and fixed manufacturing overhead) for the upcoming fiscal
year. Round off to the nearest whole centavos.

**NOTHING FOLLOWS**

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