08 Budgeting Sol

Budgeting
Suggested Answers and Solutions

BUDGETING
THEORIES:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
D
B
D
C
A
D
D
C
A
D
A
B
B
C
A
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
C
C
C
B
D
C
A
C
D
A
D
C
B
A
D
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
C
B
D
B
A
D
B
B
C
C
B
C
B
C
B
46.
47.
48.
49.
50.
D
C
A
A
D
PROBLEMS:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
A
A
B
C
C
D
D
B
A
A
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
A
D
C
A
B
D
C
C
B
D
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
A
C
A
C
B
D
D
C
A
A
103
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
B
A
B
D
D
C
D
A
B
A
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
C
C
B
A
A
B
D
D
D
B
Budgeting
SOLUTIONS:
1.
Answer: A
The amount of fixed costs in operating branches 10 warehouses is
P400,000 (the fixed cost line intercepts the vertical axis).
2.
Total operating costs

Less fixed costs
Total variable costs (10 warehouses)
P2,900,000
400,000
P2,500,000
Variable costs per branch: P2,500,000 10
P 250,000
Answer: A
Sales of M (2,900 x P9.50)
Cost of goods sold (2,900 x P9.50)
Gross profit
Direct expenses selling (0.1 x 27,550)
Separable income
3.
P27,550
19,430
8,120
2,755
5,365
Answer: B
Fixed cost: 1,000,000 x 0.4
Variable cost: 600,000/80,000
400,000
P7.50 per unit
Budgeted overhead: 400,000 + (100,000 x 7.50)

4.
Answer: C
February sales
Finished goods inventory end
23,000 x 0.05
Finished goods inventory beg
Budgeted production
104
20,000
1,150
( 1,000)
20,150
P1,150,000
Budgeting
5.
Answer: C
Budgeted sales, First Quarter
Add Required Ending Finished goods:
30% x 160,000
Total units required
Less Beginning Finished goods
Budgeted production in units
6.
120,000 units
48,000
168,000
36,000
132,000
Answer: D
Raw materials required by June production:
1,200 x 2
Add: Ending materials inventory 1,300 x 2 . 1.5
Total materials required
Deduct Beginning material inventory 2,400 x 1.5
Budgeted materials purchase
7.
2,400
3,900
6,300
3,600
2,700
Answer: D
Sales
End Finished goods inventory
Beg Finished goods inventory
Budgeted production
Required use of raw materials
End raw materials
Beg raw materials
Purchase of raw materials
Peso purchase @ P15
8.
units
units
units
units
August
6,000
2,000
(1,200)
6,000
21,400
3,120
(2,040)
21,480
330,300
September
10,000
2,400
(2,000)
10,400
31,200
Answer: B
Materials required by June production 1,300 x 2
Add Ending raw materials inventory 1,600 x 2 x 0.5
105
2,600
1,600
4,200
Budgeting
Deduct Beginning materials inventory 1,300 x 2 x 0.5
Materials to be purchased
106
1,300
2,900
Budgeting
9.
Answer: A
Budgeted sales
Less decrease in Finished goods inventory
Budgeted production
Material Q required by production
290,000 x 3
Less decrease in Material Q inventory
60,000 80,000
Budgeted purchase in pounds, Material Q
10.
20,000
850,000
P520,000
140,000
660,000
130,000
P530,000
Answer: A
Cost of goods sold
P750,000 x 0.6
Add Ending Inventory
P800,000 x 0.6 x 0.5
Total available for sale
Deduct Beginning inventory P450,000 x 0.5
Budgeted purchases, February
12.
870,000
Answer: A
Cost of units sold (0.65 x P800,000)
Add Desired ending inventory
Total cost of goods available for sale
Deduct Beginning inventory
Budgeted purchases
11.
300,000
10,000
290,000
P450,000
240,000
P690,000
225,000
P465,000
Answer: D
Cost of sales
Add Desired ending inventory
Total available for sale
Deduct Budgeted purchases
Beginning inventory
P120,000
42,000
162,000
100,000
P 62,000
107
Budgeting
108
Budgeting
13.
Answer: C
LL
Budgeted production
Required
materials
per
unit of product
Materials required
Unit cost
Peso amounts of materials
used by units produced
MM
622,000
622,000
622,000
0.50
311,000
P0.60
1.00
622,000
P1.70
1.2
746,400
P1.00
P186,600
P1,057,40
0
P746,400
Budgeted sales in units

Add Finished goods, end
Total
Deduct Finished goods, beginning
Budgeted production
14.
15.
NN
640,000
90,000
730,000
108,000
622,000
Answer: A
Total payments for purchases in June
Deduct payments applicable to purchase of:
June (P100,000 x 0.6)
P60,000
May (P200,000 x 0.30)
60,000
Payments applicable to April purchase
P140,000
Credit purchase in April: P20,000 0.10
P200,000
120,000
P 20,000
Answer: B
Materials required by production 500,000 x 2 1,000,000
Increased in materials inventory (50,000 40,000)
10,000
Purchases
1,010,000
16.
Answer: D
109
Budgeting
Required pounds by production
Ending raw materials required
Beginning raw materials
Budgeted purchases
110
180,000
60,000
( 30,000)
210,000
Budgeting
17.
Answer: C
Beginning Inventory (8000 x 3.5)
Required Purchases
Direct Materials Used for Production (8000 x 3)
Desired Ending Inventory
18.
19.
20.
28,000
8,000
(24,000)
12,000
Answer: C
Sales for three-month period:
July
August 400,000 x 1.05
September 420,000 x 1.05
Total
400,000
420,000
441,000
1,261,000
Inventory, September 30
(441,000 x 1.05 x 0.8)
Total Requirements
Less July Inventory
Budgeted Production
370,440
1,631,440
300,000
1,331,440
Answer: B
Total cash collections
Deductions collections on September
sales (P80,000 x 0.6)
Collections applicable to July and August sales
P57,000
Credit sales in July: P9,000 2 0.15
P30,000
48,000
P 9,000
Answer: D
Collections from:
January sales (P860,000 x 0.8 x 0.75)
December sales (January 1 Accounts)
Collections of credit sales
111
P516,000
299,000
815,000
Budgeting
Cash sales
Total cash received
(P860,000 x 0.2)
112
172,000
P987,000
Budgeting
21.
Answer: A
Cash from sale of:
March 700 x 8,000 x 0.6
February 1,000 x 8,000 x 0.3
January 600 x 8,000 x 0.09
Total
22.
3,360,000
2,400,000
432,000
6,192,000
Answer: C
Cash sales (March) 0.2 x P420,000
Collections of account sales:
March sales: (P420,000 x 0.8 x 0.7)
February sales: (P300,000 x 0.8 x 0.25)
January sales: (P240,000 x 0.8 x .05)
Total cash from sales
23.
235,200
60,000
9,600
P388,800
Answer: A
Collections sales of:
June: P8,000 x 0.7
May: P7,000 x 0.3
Total collections from sales
24.
P 84,000
P5,600
2,100
P7,700
Answer: C
Beginning Cash
Add:Cash collected on June's sales
(P300,000 x .8 x .98)
235,200
Cash collected on May's sales
((P300,000/1.25) x .2)
48,000
Total
Less:Cash paid on June's purchases
(P240,000 x .6 x .99)
142,560
Cash paid on May's purchases
(P200,000 x .4)
80,000
113
P 20,000
283,200
P303,200
222,560
Budgeting
Ending cash balance
P80,640
114
Budgeting
25.
Answer: B
October 90,000 x .95
November 100,000 x .85
December 85,000 x .70
Fourth quarter sales collected
in fourth quarter
26.
P 85,500
85,000
59,500
P230,000
Answer: D
Cost of goods sold
Deduct desired decrease in inventories
Budgeted purchases
Add decrease in Accounts Payable
Budgeted payments for purchases
27.
P1,680,000
70,000
P1,610,000
150,000
P1,760,000
Answer: D
Cash sales
Collections from account sales:
January (P340,000 x 0.60)
December (P50,000 x 30/40)
November
Total cash receipts in January
28.
P 70,000
204,000
37,500
20,000
P331,500
Answer: C
Gross receivable collected months sales
November
2,000,000 x .12
October
1,800,000 x .75
September
1,600,000 x .06
August
1,900,000 x .04
Total credit
115
240,000
1,350,000
96,000
76,000
P1,762,000
Budgeting
29.
Answer: A
The balance of Accounts Receivable as of January 31, its first month of
operations, will increase by P400,000 because the first collection on
account sales will be in February.
However, a question of how much increase in Accounts Receivable in
February will equal to the difference between the February credit sales
and 70% of January sales.
30.
Answer: A
Cash balance, March 1
Collections: (50,000 x 0.65) + (60,000 x 0.35)
Payment for purchases (20,000 x 0.5) + (18,000 x 0.5)
Selling and administrative expenses
Loan and interest payments
Cash balance, March 31
31.
3,000
53,500
(19,000)
(4,000)
(25,000)
8,500
Answer: B
The balance of Accounts Receivable, based on the collection pattern
for Liberal Sales Company, equals 40 percent of credit sales for that
month:
P1,500,000 x 0.8 x 0.4
P480,000
32.
Answer: A
November costs (P1,952,000 P288,000) x 0.75
October costs (P1,568,000 P288,000) x 0.25)
Total disbursements
33.
P1,248,000
320,000
P1,568,000
Answer: B
Materials required by 2nd Quarters production
45,000 x 2.5 kgs.
116
112,500
Budgeting
Add: Materials inventory, end:
40,000 x 2.5 x0.25
Less: Materials inventory, beginning:
112,500 x 0.25
Total budget purchases in kilograms
34.
25.000
137,500
28,125
109,375
Answer: D
Budgeted sales
Add Finished goods inventory, end
Total
Deduct Finished good inventory, beginning
Budgeted production
18,000
11,400
29,400
15,000
14,400
Raw materials required by production

(14,400 x 6 0.9)
Desired Raw materials inventory end
Total
Deduct Raw materials inventory, beginning
Budgeted purchase of raw materials
35.
6,000
24,400
120,400
21,000
99,400
Answer: D
Under flexible budget, analysis should be based on actual level
achieved.
Indirect labor cost per unit (P360,000 200,000 units) P1.80
Flexible budget allowance: 14,500 units x P1.80
36.
P26,100
Answer: C
Budgeted sales
Add: Ending inventory (130%)
Total
Less: Beginning inventory
117
January
February
11,900
14,820
26,720
15,470
11,400
15,600
27,000
14,820
Budgeting
Budgeted purchases (units)
Unit purchase price
Budgeted peso purchases
Budgeted inventories:
December 31
January 31
February 28
March 31
11,250
200
P2,250,000
130%
130%
130%
130%
x
x
x
x
11,900
11,400
12,000
12,200
118
15,470
14,820
15,600
15,860
12,180
200
P2,436,000
Budgeting
37.
Answer: D
Payments for:
February purchases
54% x P2,436,000
January purchases
46% x P2,250,000
Total payments for purchases
Selling, general and administrative expenses:
February: [(P3,420,000 x 0.15) P20,000]0.54
January: [(P3,570,000 x 0.15) P20,000]0.46
Total cash disbursements
38.
P2,112,660
907,500
318,600
P3,338,760
Answer: B
Budgeted March sales
Add: Ending inventory units
Total units required
Less: Beginning inventory units
Budgeted purchases in units, March
40.
266,220
237,130
P2,853,790
Answer: A
Billings of December 31:
Collections with 3% discount:
P3,630,000 x 0.6 x 0.97
Collections end of January P3,630,000 x 0.25
Billings of November 30: P3,540,000 x 0.09
Total collections
39.
P1,315,440
1,035,000
P2,350,440
12,000
15,860
27,860
15,600
12,260
Answer: A
Payments for purchases in the month of:
December (0.2 x P120,000 x 0.6)
January
(0.2 x P160,000 x 0.4)
Total January disbursements for purchases
119
P14,400
12,800
P27,200
Budgeting
41.
Answer: C
Payments for purchases:
May purchase (0.2 x P200,000 x 0.6)
June purchase (0.2 x P220,000 x 0.4)
Total
Labor costs
Fixed Overhead
Interest payments
Commission (0.03 x P1,020,000)
Total disbursements
42.
Answer: C
43.
June cash sales (P390,000 x 0.1)

Collections from account sales:
April sales (P390,000 x 0.9 x 0.7)
May sales (P420,000 x 0.9 x 0.3)
Total cash receipts, June
Answer: B
P24,000
17,600
41,600
60,000
30,000
45,000
30,600
P207,200
P 39,000
245,700
113,400
P398,100
Marketable securities purchased on:

June
July
Cumulative purchase of MS
44.
5,600
126,900
P132,500
Answer: A
Cash Budget (P000)

Cash receipts
Cash disbursements
Net cash inflow (outflow)
Beginning cash balance
Cumulative cash balance
M/S sold (purchased)
June
P398.1
367.5
30.6
25.0
55.6
5.6
120
July
P404.9
278.0
126.9
50.0
176.9
- 126.9
Aug
P382.2
296.5
85.7
50.0
135.7
- 85.7
Sept
P374.9
702.5
( 327.6)
50.0
( 277.6)
218.2
Budgeting
Cash loan
Cash balance, end
0.0
P 50.0
121
0.0
P 50.0
0.0
P 50.0
109.4
P 50.0
Budgeting
Cash Receipts (P000)
Account sales (90%)
Cash sales
Collection of accounts
First month (30%)
Second month (70%)
Total
June
P351.0
P 39.0
July
P315.0
P 35.0
Aug
P378.0
P 42.0
Sept
P369.0
P 41.0
245.7
113.4
P398.1
105.3
264.6
P404.9
94.5
245.7
P382.2
113.4
220.5
P374.9
Aug
P320.0
P108.0
115.5
223.5
63.0
10.0
Sept
P230.0
P144.0
132.0
276.0
61.5
10.0
35.0
Cash Payments (P000)

Purchases
First month (45%)
Second month (55%)
Total purchases paid
Labor
General overhead
Interest
Cash dividend
Taxes
Purchase of equipt.
Total payments
45.
June
P210.0
P 99.0
110.0
209.0
58.5
10.0
35.0
25.0
30.0
July
P240.0
P 94.5
121.0
215.5
52.5
10.0
P367.5
P278.0
Answer: A
August sales
Billed 8/20 P350,000 x 18%
Billed 9/10 P350,000 x 80% x 98%
Collections in Sept from Aug sales
46.
P296.5
63,000
274,400
P337,400
Answer: B
Russon provides 25 percent of next months quantity sales.
25% x P400,000 x 80% = P80,000
47.
Answer: D
May sales billed June 10
250,000x18%
122
45,000
30.0
290.0
P702.5
Budgeting
48.
June Sales:
Billed June 20 300,000 x 18%
Billed July 10 300,000 x .80 z .98
July sales
Billed July 20 P350,000 x .80 x .98
July Collections
Answer: D
54,000
235,200
P274,400
P608,600
Cash Balance, January 1
P 88,000
Cash from accounts receivables

November and December Sales
January Sales 120,000 x .5
95,000
Payment for purchases
72,000 x .97
Expenses (24,000 5,000)
Cash balance, January 31
49.
35,000
(P 69,840)
(P 19,000)
P 94,160
Answer: D
Sale of December
January (120,000 x .3)
February (110,000 x .5)
Total
50.
60,000
P 23,000
P 36,000
P 55,000
P114,000
Answer: B
Payment for Purchases of January
78,000 x .97
Expenses (24,200 - 5,000)
Total
123
P75,660
P19,200
P94,860

08 Budgeting Sol

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Budgeting

Suggested Answers and Solutions

Total operating costs

Variable costs per branch: P2,500,000 10

Budgeted overhead: 400,000 + (100,000 x 7.50)

Budgeted sales in units

Credit purchase in April: P20,000 0.10

Credit sales in July: P9,000 2 0.15

Raw materials required by production

June cash sales (P390,000 x 0.1)

Marketable securities purchased on:

Cash Budget (P000)

Cash Payments (P000)

Cash Balance, January 1

Cash from accounts receivables

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