1. Production and cash-outlay computations
Chapter 6 and 7 ProblemsPlease complete the following 8 exercises below in either Excel or
a word document (but must be single document). You must show your work where
appropriate (leaving the calculations within Excel cells is acceptable). Save the document,
and submit it in the appropriate week using the Assignment Submission button.Chapter 6
Exercise 22. Schedule of cash collectionsSugarland Company sells a single product and
anticipates opening a new facility inCharlotteon May 1 of the current year. Expected sales
during the first three months of activity are: May, $60,000; June, $80,000; and July, $85,000.
Thirty percent of all sales are for cash; the remaining 70% are on account. Credit sales have
the following collection pattern:Collected in the month of
sale 60%Collected in the month following
sale 35Uncollectible 5a. Prepare a schedule of
cash collections for May through July.b. Compute the expected balance in Accounts
Receivable as of July 31.Chapter 6 Exercise 44. Production and cash-outlay
computationsRPR, Inc., anticipates that 120,000 units of product K will be sold during May.
Each unit of product K requires four units of raw material A. Actual inventories as of May 1
and budgeted inventories as of May 31 follow:1-May 31-MayProduct K
(Units) 55,000 60,000Rate Materials A
(Units) 40,000 37,000Each unit of raw material A costs $8; RPR pays for all
purchases in the month of acquisition. Invoices that account for 80% of the cost of materials
acquired will be paid within 10 days of receipt, entitling the company to a 2% cash
discount.a. Determine the number of units of product K to be manufactured in
May.b. Compute the May cash outlay for purchases of raw material A.Chapter 6 Exercise
55. Abbreviated cash budget; financing emphasisAn abbreviated cash budget for Big Chuck
Enterprises follows.July August SeptemberBeginning cash
balance $10,000 $ ? $ ?AID: Cash receipts 50,000 63,000 71,000Deduct: Cash
payments -64,000 -58,000 -64,000Cash excess (deficiency) before
financing ($4,000) $ ? $ ?FinancingBorrowing to maintain minimum
balance ? ? ?Principal repayment ? ? ?Interest
payment ? ? ?Ending cash balance $ ? $ ? $ ?Big Chuck wishes to
maintain a $10,000 minimum cash balance at all times. AIDitional financing is available (and
retired) in $1,000 multiples at a 12% interest rate. Assume that borrowings take place at
the beginning of the month; retirements, in contrast, occur at the end of the month. Interest
is paid at the time of repaying principal and computed on the portion of principal repaid.a.
2. Find the unknowns in Big Chuck’ s abbreviated cash budget.b. Determine the outstanding
loan balance as of September 30, after any repayments have been made.Chapter 6 Problem
33. Comprehensive budgetingThe balance sheet of Watson Company as of December 31,
19X1, follows.WATSON COMPANYBalance SheetDecember 31,
19X1AssetsCash $4,595Accounts receivable 10,000Finished goods (575
units x $7.00) 4,025Direct materials (2,760 units x $0.50) 1,380Plant &
equipment $50,000Less: Accumulated depreciation 10,000 40,000Total
assets $60,000Liabilities & Stockholders’ EquityAccounts payable to
suppliers $14,000Common stock $25,000Retained earnings 21,000
46,000Total liabilities &. stockholders’ equity $60,000The following
information has been extracted from the firm’ s accounting records:1. All sales are
made on account at $20 per unit. Sixty percent of the sales are collected in the month of
sale; the remaining 40% are collected in the following month. Forecasted sales for the first
five months of 19X2 are: January, 1,500 units,- February, 1,600 units; March, 1,800 units;
April, 2,000 units; May, 2,100 units.2. Management wants to maintain the finished
goods inventory at 30% of the following month’ s sales.3. Watson uses four units of
direct material in each finished unit. The direct material price has been stable and is
expected to remain so over the next six months. Management wants to maintain the ending
direct materials inventory at 60% of the following month’ s production needs.4. Seventy
percent of all purchases are paid in the month of purchase; the remaining 30% are paid in
the subsequent month.5. Watson’ s product requires 30 minutes of direct labor time. Each
hour of direct labor costs $7.Instructions:a. Rounding computations to the nearest dollar,
prepare the following for January through March:1) Sales budget2) Schedule of cash
collections3) Production budget4) Direct material purchases budget5) Schedule of cash
disbursements for material purchases6) Direct labor budgetb. Determine the balances in
the following accounts as of March 31:1) Accounts Receivable2) Direct Materials3)
Accounts PayableChapter 7 Exercise 33. Variances for direct materials and direct
laborBanner Company manufactures flags of various countries. Each flag has a standard of
eight square feet of fabric and three hours of direct labor time. Information about recent
production activity follows.Actual cost of fabric: $4.50 per square
footFabric consumed: 32,080 square feetStandard price per square
foot of fabric: $4.25Standard direct labor rate: $10.00 per
hourActual direct labor rate: $10.20 per hourActual labor hours
worked: 11,940Actual production completed: 4,000
flagsa. Compute the materials price variance and the materials quantity
variance.b. Compute the labor rate variance and the labor efficiency variance.Chapter 7
Exercise 55. Overhead variancesNova Manufacturing applies factory overhead to products
on the basis of direct labor hours. At the beginning of the current year, the company’ s
accountant made the following estimates for the forthcoming period:• Estimated
variable overhead: $500,000• Estimated fixed overhead: $400,000• Estimated
direct labor hours: 40,000It is now 12 months later. Actual total overhead incurred in the
manufacture of 7,900 units amounted to $895,100. Actual labor hours totaled 39,800.
Assuming a direct labor standard of five hours per finished unit, calculate the
3. following:a. Variable overhead efficiency varianceb. Fixed overhead volume
variancec. Overhead spending varianceChapter 7 Problem 11. P26-A1 Basic flexible
budgeting (L.O. 2)Centron, Inc., has the following budgeted production costs:Direct
materials $0.40 per unitDirect labor 1.80 per unitVariable factory overhead 2.20
per unitFixed factory
overheadSupervision $24,000Maintenance 18,000Other 12,000The company normally
manufactures between 20,000 and 25,000 units each quarter. Should output exceed 25,000
units, maintenance and other fixed costs are expected to increase by $6,000 and $4,500,
respectively.During the recent quarter ended March 31, Centron produced 25,500 units and
incurred the following costs:Direct Materials $10,710Direct
Labor 47,175Variable factory overhead 51,940Fixed factory
overheadSupervision 24,500Maintenance 23,700Other 1
6,800Total production costs $174,825Instructions:a. Prepare a flexible budget
for 20,000, 22,500, and 25,000 units of activity.b. Was Centron’ s experience in the quarter
cited better or worse than anticipated? Prepare an appropriate performance report and
explain your answer.c. Explain the benefit of using flexible budgets (as opposed to static
budgets) in the measurement of performance.Chapter 7 Problem 55. P26-B3
Straightforward variance analysis (L.O. 5)Arrow Enterprises uses a standard costing
system. The standard cost sheet for product no. 549 follows.Direct materials: 4 units @
$6.50 $26.00Direct labor: 8 hours @ $8.50 68Variable factory
overhead: 8 hours @ $7.00 56Fixed factory overhead: 8 hours @ 2.5 20Total
standard cost per unit $170.00The following information pertains to activity for
December:1. Direct materials acquired during the month amounted to 26,350 units at
$6.40 per unit. All materials were consumed in operations.2. Arrow incurred an average
wage rate of $8.75 for 51,400 hours of activity.3. Total overhead incurred amounted to
$508,400. Budgeted fixed overhead totals $1.8 million and is spread evenly throughout the
year.4. Actual production amounted to 6,500 completed
units.Instructions:a. Compute Arrow’ s direct material variances.b. Compute
Arrow’ s direct labor variances.c. Compute Arrow’ s variances for factory overhead.
