MANAGERIAL ACCOUNTING

WASATCH MANUFACTURING
Master Budget

Sales Budget
December January February March April May
unit sale 7000 8000 9000 8600 9400 6800
price per unit $15 $15 $15 $15 $15 $15
sales revenue $105,000 $120,000 $135,000 $129,000 $141,000 $102,000

Cash Collections Budget

January February March Quarter
CASH SALE (30%) $36,000.0 $40,500.0 $38,700.0 $115,200.0
CREDIT SALES(70%) $84,000.0 $94,500.0 $90,300.0 $268,800.0

TOTAL SALES $120,000.0 $135,000.0 $129,000.0 $384,000.0

Production Budget
January February March Quarter
UNIT SALES 8,000 9,000 8,600 25,600
PLUS: DESIRED ENDING INVENTORY 1,800 1,720 1,880 1,880
TOTAL: NEEDED 9,800 10,720 10,480 27,480
LESS: BEGINNING INVENTORY 1,600 1,800 1,720 1,600

UNITS TO PRODUCE 8,200 8,920 8,760 25,880

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Direct Materials Budget

January February March Quarter
units to be produced 8,200 8,920 8,760 25,880
multiply by: Quantity of DM need per
units(lbs.) 4 4 4 4
Quantity of DM need for production (lbs.) 32800 35680 35040 103520
Plus: Desired ending inventory of DM (lbs.) 5352 5256 5,328 5328
Total quantity of DM needed (lbs.) 38152 40936 40,368 108,848
Less: Beginning inventory of DM (lbs.) 4920 5352 5256 4920
Quantity of DM to purchase (lbs.) 33232 35584 35,112 103,928
Multiply by: Cost per pound 1 1 1 1

Total cost of DM purchases 33232 35584 35,112 103,928

Cash Payments for Direct Material Purchases Budget

January February March Quarter
December Purchases (from A/P) 37000 37000
January Purchases 8308 24924 33232
February Purchases 8896 26688 35584
March Purchases 8778 8778

Total Cash Payments 45308 33820 35466 114594

Cash Payments for Direct Labor Budget

January February March Quarter
units produced 8,200 8,920 8,760 25,880
Multiply by: Hours per Unit 0.1 0.1 0.1 0.1
Direct Labor Hours 820 892 876 2588
Multiiply by: Direct Labor Rater per Hour $15 $15 $15 $15
Direct Labor Hours $12,300 $13,380 $13,140 $38,820

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Cash Payments for Manufacturing Overhead Budget

January February March Quarter
Rent (fixed) $10,000 $10,000 $10,000 $30,000
Other Manufacturing Overhead (fixed) $6,000 $6,000 $6,000 $18,000
variable Manufacturing overhead costs $10,250 $11,150 $10,950 $32,350

Cash Payments for Manufacturing

Overhead $26,250 $27,150 $26,950 $80,350

Cash Payments for Operating Expenses Budget

January February March Quarter
variable operating expense 10,400 11,700 11180 33,280
Fixed operating expense 2200 2200 2200 2200

Cash payments for Operating expense $12,600 $13,900 $13,380 $35,480

Combined Cash Budget

January February March Quarter
Cash Balance, beginning $17,000 $15,042 $15,292.0 $17,000.0
Plus: Cash Collections $109,500 $124,500.0 $133,200.0 $367,200.0
Total Cash Available $126,500 $139,542.0 $148,492.0 $384,200.0
less cash payments:
DM purchases 45308 33820 35466 114594
Direct Labor $12,300 $13,380 $13,140 $38,820
Manufacturing Overhead Costs $26,250 $27,150 $26,950 $80,350
Operating Expense $12,600 $13,900 $13,380 $39,880
Tax Payment 28000 28000
Equipment Purchases 20000 8000 25000 53000
Total Cash Payments $116,458 $124,250 $113,936 $354,644
Ending Cash before Financing $10,042 $15,292.0 $34,556.0 $59,890.0
Financing:
Borrowings 5000 5000
Repayments -5000 -5000
Interest Payments -187.5 -187.5
total finance -5187.5 -5187.5

Cash Balance ending $15,042 $15,292.0 $29,368.5 $54,702.5

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Budgeted Manufacturing Cost per Unit

direct materials cost per unit (4 lbs x $1.00) 4
direct labor cost per unit $1.50
variable manufacturing cost per unit $1.25
fixed manufacturing cost per unit 0.75

cost of manufacturing per unit $7.50

Budgeted Income Statement

Sales Revenue $384,000
Less: Cost of goods Solds $192,000.00
Gross Profit $192,000.00
Less: Operating Expense $39,880.00
Less: Depreciation 10000
Operating Income $142,120.00
Less:interest expense -187.5
Less: Income tax expense 33656.48

Net income $108,276.02

Chapter 9: The Master Budget Page 4 of 4