Comprehensive budgeting problem; activity-based costing, operating and financial
ID: 2416521 • Letter: C
Question
Comprehensive budgeting problem; activity-based costing, operating and financial budgets. Tyva makes a very popular undyed cloth sandal in one style, but in Regular and Deluxe. The Regular sandals have cloth soles and the Deluxe sandals have cloth-covered wooden soles. Tyva is preparing its budget for June 2015 and has estimated 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 manufacturing labor-hour
Input Quantities per Unit of Output (per pair of sandals)
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 flow assumption.
Sales and Inventory Information, Finished Goods
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 goods inventory.
All the sandals are made in batches of 50 pairs of sandals. Tyva incurs manufacturing overhead costs, marketing and general administration, and shipping costs. Besides materials and labor, manufacturing costs include setup, processing, and inspection costs. Tyva ships 40 pairs of sandals per shipment. Tyva uses activity-based costing and has classified all overhead costs for the 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.Prepare each of the following for June:
a.Revenues budget
b.Production budget in units
c.Direct material usage budget and direct material purchases budget in both units and dollars, round to dollars
d.Direct manufacturing labor cost budget
e.Manufacturing overhead cost budgets for setup, processing, and inspection activities
f.Budgeted unit cost of ending finished goods inventory and ending inventories budget
g.Cost of goods sold budget
h.Marketing and general administration and shipping costs budget
Tyva’s 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 a cash budget for Tyva for June. Round to dollars.
All sales are on account; 60% are collected in the month of the sale, 38% are collected the following month, and 2% are never collected and written off as bad debts.
All purchases of materials are on account. Tyva pays for 80% of purchases in the month of purchase and 20% in the following month.
All other costs are paid in the month incurred, including the declaration and payment of a $15,000 cash dividend in June.
Tyva is making monthly interest payments of 0.5% (6%per year) on a $150,000 long-term loan.
Tyva plans to pay the $10,800 of taxes owed as of May 31 in the month of June. Income tax expense for June is zero.
30% of processing, setup, and inspection costs and 10% of marketing and general administration and shipping costs are depreciation.
Prepare a budgeted income statement for June and a budgeted balance sheet for Tyva as of June 30, 2015.
Listed below are the answers to the first question. I just need help with preparing a cash budget for June, and a budgeted income statement and budgeted balance sheet as of June 30.
Again, I just need help with the cash budget question, and the budgeted income statement and budgeted balance sheet as of June.
Thank you!
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
Explanation / Answer
Cash Budget:
$ Opening Balance 9435 + Receipt from debtors: 60% of the current month sales (240000+585000)0.60 495000 38% of the last month sales i.e. the debotrs of last month 307800 - Payment to creditors for purchases: 80% of the current month purchases 77192 x 0.80 -61753.60 20% of the last month purchases i.e. creditors of last month -15600 - Direct Labour -471000 - Manufacturing Overheads 67077 x (1-0.30) -46953.90 - Non maufacturing Costs 67875 x (1-0.10) -61087.50 - Cash dividends -15000 - Interest on loan -750 - Income taxes due -10800 Closing cash balance 129290Related Questions
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