ACC 560 HW WK 6

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Exercise 9-8

Fuqua Company’s sales budget projects unit sales of part 198Z of 11,000 units in January, 12,400 units in February, and 13,700 units in March. Each unit of part 198Z requires 3 pounds of materials, which cost $3 per pound. Fuqua Company desires its ending raw materials inventory to equal 40% of the next month’s production requirements, and its ending finished goods inventory to equal 20% of the next month’s expected unit sales. These goals were met at December 31, 2019.

Prepare a production budget for January and February 2020.

FUQUA COMPANY Production Budget
	January	February

:

:

Link to Text

Prepare a direct materials budget for January 2020.

FUQUA COMPANY Direct Materials Budget
		January



:

:

		$
		$

Problem 9-5A (Video)

The budget committee of Suppar Company collects the following data for its San Miguel Store in preparing budgeted income statements for May and June 2020.

1.		Sales for May are expected to be $960,000. Sales in June and July are expected to be 5% higher than the preceding month.
2.		Cost of goods sold is expected to be 75% of sales.
3.		Company policy is to maintain ending merchandise inventory at 10% of the following month’s cost of goods sold.
4.		Operating expenses are estimated to be as follows:

Sales salaries	$31,500		per month
Advertising	6	%	of monthly sales
Delivery expense	2	%	of monthly sales
Sales commissions	5	%	of monthly sales
Rent expense	$5,630		per month
Depreciation	$910		per month
Utilities	$620		per month
Insurance	$520		per month

Interest expense is $2,000 per month. Income taxes are estimated to be 30% of income before income taxes.

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Prepare the merchandise purchases budget for each month in columnar form.

SUPPAR COMPANY San Miguel Store Merchandise Purchases Budget EAT_1415708729413_1_1684277485370373
	May	June
09649515_0_43312020009984234_dropdown_681_resp_3	$ 720000	$ 756000
09649515_0_43312020009984234_dropdown_761_resp_1 : 09649515_0_43312020009984234_dropdown_771_resp_5	75600	79380
09649515_0_43312020009984234_dropdown_851_resp_9	795600	835380
09649515_0_43312020009984234_dropdown_931_resp_2 : 09649515_0_43312020009984234_dropdown_941_resp_2	72000	75600
9649515_0_43312020009984234_dropdown_1041_resp_8	$ 684000	$ 759780

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Prepare budgeted multiple-step income statements for each month in columnar form. Show in the statements the details of cost of goods sold.

SUPPAR COMPANY San Miguel Store Budgeted Income Statement EAT_1415708729413_1_1684277485370373
	May	June
res_EAT_1315545498255_0_9383362420294576_087_resp_16	$ 960000	$
res_EAT_1315545498255_0_9383362420294576_112_resp_4
res_EAT_1315545498255_0_9383362420294576_133_resp_2	72000
res_EAT_1315545498255_0_9383362420294576_158_resp_14	684000
res_EAT_1315545498255_0_9383362420294576_183_resp_7	756000
EAT_1505801441653_1_7036762888616157 :
















	$	$

Exercise 10-3 (Video)

Myers Company uses a flexible budget for manufacturing overhead based on direct labor hours. Variable manufacturing overhead costs per direct labor hour are as follows:

Indirect labor		$1.00
Indirect materials		0.50
Utilities		0.30

Fixed overhead costs per month are Supervision $4,200, Depreciation $1,800, and Property Taxes $600. The company believes it will normally operate in a range of 5,900–11,900 direct labor hours per month. Prepare a monthly manufacturing overhead flexible budget for 2020 for the expected range of activity, using increments of 2,000 direct labor hours. (List variable costs before fixed costs.)

MYERS COMPANY Monthly Manufacturing Overhead Flexible Budget For the Year 2020



	$	$	$	$








	$	$	$	$

Exercise 10-5 (Video)

Fallon Company uses flexible budgets to control its selling expenses. Monthly sales are expected to range from $167,000 to $201,800. Variable costs and their percentage relationship to sales are sales commissions 7%, advertising 4%, travel 4%, and delivery 2%. Fixed selling expenses will consist of sales salaries $34,800, depreciation on delivery equipment $7,000, and insurance on delivery equipment $1,800. Prepare a monthly selling expense flexible budget for each $11,600 increment of sales within the relevant range for the year ending December 31, 2020. (List variable costs before fixed costs.)

FALLON COMPANY Monthly Selling Expense Flexible Budget For the Year 2020

	$	$	$	$

	$	$	$	$









	$	$	$	$

Exercise 10-17 (Video)

The South Division of Wiig Company reported the following data for the current year.

Sales		$3,000,000
Variable costs		2,010,000
Controllable fixed costs		605,000
Average operating assets		5,000,000

Top management is unhappy with the investment center’s return on investment (ROI). It asks the manager of the South Division to submit plans to improve ROI in the next year. The manager believes it is feasible to consider the following independent courses of action.

1.		Increase sales by $300,000 with no change in the contribution margin percentage.
2.		Reduce variable costs by $155,000.
3.		Reduce average operating assets by 3%.

(a) Compute the return on investment (ROI) for the current year. (Round ROI to 2 decimal places, e.g. 1.57%.)

Return on Investment

(b) Using the ROI formula, compute the ROI under each of the proposed courses of action. (Round ROI to 2 decimal places, e.g. 1.57%.)

	Return on investment
Action 1		%
Action 2		%
Action 3		%

Problem 10-5A a, c (Video)

Optimus Company manufactures a variety of tools and industrial equipment. The company operates through three divisions. Each division is an investment center. Operating data for the Home Division for the year ended December 31, 2020, and relevant budget data are as follows.

	Actual	Comparison with Budget
Sales	$1,401,000	$101,000	favorable
Variable cost of goods sold	680,000	55,000	unfavorable
Variable selling and administrative expenses	124,000	25,000	unfavorable
Controllable fixed cost of goods sold	170,000	On target
Controllable fixed selling and administrative expenses	87,000	On target

Average operating assets for the year for the Home Division were $2,000,000 which was also the budgeted amount.

Prepare a responsibility report for the Home Division. (List variable costs before fixed costs. Round ROI to 2 decimal places, e.g. 1.57%.)

OPTIMUS COMPANY Home Division Responsibility Report For the Year Ended December 31, 2020
						Difference
	Budget		Actual		Favorable Unfavorable Neither Favorable nor Unfavorable
	$			$		$









	$			$		$
ROI		%			%		%

72000

Purchases

684000

Ending Inventory

756000

Less

For the Months of May and June, 2020

Budgeted Cost of Goods Sold

720000

756000

Add

Desired Ending Merchandise Inventory

75600

79380

Total

795600

835380

Less

Beginning Merchandise Inventory

72000

75600

Required Merchandise Purchases

684000

759780

For the Months of May and June, 2020

Sales

960000

Cost of Goods Sold

Beginning Inventory