Chapter 20: Problem Set A

Let's break this down problem by problem and address them step by step. I'll provide guidance and key steps for you to follow for each part of the problem. Problem 20-1A: Manufacturing Budgets (Production, Materials, Labor, and Overhead) 1. Production Budget for the Third Quarter Formula to calculate the units to be produced: Units to be Produced=(Budgeted Sales+Desired Ending Inventory)−Beginning Inv entory • Budgeted Sales = 150,000 units • Desired Ending Inventory = 3,500 units • Beginning Inventory = 5,000 units Units to Produce = (150,000+3,500)−5,000=148,500 units 2. Direct Materials Budget Materials required for production: Materials Needed=Units to be Produced×Materials per Unit • • Units to Produce = 148,500 units Materials per Unit = 2 pounds Materials Needed for Production = 148,500×2=297,000 pounds Materials to be purchased: Materials to be Purchased=(Materials Needed for Production+Desired Ending Inve ntory)−Beginning Inventory Beginning Inventory of Materials = 6,000 pounds • Desired Ending Inventory of Materials = 4,000 pounds Materials to be Purchased = (297,000+4,000)−6,000=295,000 pounds Cost of direct materials: Total Cost=Materials to be Purchased×Cost per Pound • Cost per Pound = $15 Total Cost = 295,000×15=$4,425,000 3. Direct Labor Budget Direct labor hours required: Direct Labor Hours=Units to be Produced×Hours per Unit • • Units to Produce = 148,500 units Hours per Unit = 0.5 hours Direct Labor Hours = 148,500×0.5=74,250148, Cost of direct labor: Total Labor Cost=Direct Labor Hours×Cost per Hour Cost per Hour = $20 Total Labor Cost = 74,250×20=$1,485,000 4. Factory Overhead Budget Variable overhead: Variable Overhead=Direct Labor Hours×Variable Overhead Rate per Hour Variable Overhead Rate = $8 per hour Variable Overhead = 74,250×8=$594,000 Total factory overhead: Total Overhead=Variable Overhead+Fixed Overhead Fixed Overhead = $1,782,000 Total Overhead = 594,000+1,782,000=$2,376,000 Problem 20-2A: Cash Budget and Schedule of Cash Payments 1. Schedule of Cash Receipts for July, August, and September Given: • • 20% of sales are cash 80% of sales are on credit (collected in the next month) Sales: • • • • June = $56,250 July = (Calculate based on information provided) August = (Calculate based on information provided) September = (Calculate based on information provided) For each month: Cash Receipts from Sales=Cash Sales+Collections from Credit Sales 2. Cash Budget for July, August, and September Formula for cash budget: Ending Cash Balance=Beginning Cash Balance+Cash Receipts−Cash Payments Make sure to factor in loan requirements, interest, and minimum cash balance requirements. Problem 20-3A: Budgeted Income Statement (Proposed Plan) For each month (January, February, March): 1. 2. 3. 4. 5. 6. Sales = Units Sold×Selling Price per Unit Cost of Goods Sold = Units Sold×Cost per Unit Gross Profit = Sales - Cost of Goods Sold Sales Commissions = 10% of Sales Advertising Expenses = As provided Other Expenses = Same as December Create a budgeted income statement for each month following the above steps. Problem 20-4A: Master Budget Preparation You are required to prepare multiple budgets (Sales, Production, Direct Materials, Direct Labor, etc.) for the months of April, May, and June. Follow the same process outlined in Problem 20-1A for each of these budgets. Key points for Zigby Manufacturing: • • • Use the policy details for ending inventory. Convert units into material requirements, labor hours, and overhead based on production needs. Adjust cash flows based on sales collections and loan requirements. If you have specific questions on any particular part of these problems, I can help you work through the detailed calculations!