Accounting Seminar Notes

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  • Topic: Revenue, Budget, Cost of goods sold
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Chapter 6
Homework Solutions

6-16 Sales budget, service setting.

1.
Rouse & Sons| 2011 Volume| At 2011Selling Prices| Expected 2012Change in Volume| Expected 2012 Volume| Radon Tests| 12,200| $290| +6%| 12,932|
Lead Tests| 16,400| $240| -10%| 14,760|

Rouse & Sons Sales Budget|
For the Year Ended December 31, 2012|
 |  |  |  |
 | Selling Price| Units Sold| Total Revenues|
Radon Tests| $290| 12,932| $3,750,280|
Lead Tests| $240| 14,760| 3,542,400|
 |  |  | $7,292,680|

2.
Rouse & Sons| 2011 Volume| Planned 2012 Selling Prices| Expected 2012 Change in Volume| Expected 2012 Volume| Radon Tests| 12,200| $290| +6%| 12,932|
Lead Tests| 16,400| $230| -7%| 15,252|

Rouse & Sons Sales Budget|
For the Year Ended December 31, 2012|
 |  |  |  |
 | Selling Price| Units Sold| Total Revenues|
Radon Tests| $290| 12,932| $3,750,280|
Lead Tests| $230| 15,252| 3,507,960|
 | | | $7,258,240|

Expected revenues at the new 2012 prices are $7,258,240, which is lower than the expected 2012 revenues of $7,292,680 if the prices are unchanged. So, if the goal is to maximize sales revenue and if Jim Rouse’s forecasts are reliable, the company should not lower its price for a lead test in 2012.

6-17 Sales and production budget.

Budgeted sales in units200,000
Add target ending finished goods inventory 25,000
Total requirements 225,000
Deduct beginning finished goods inventory 15,000
Units to be produced 210,000

6-18Direct materials purchases budget.

Direct materials to be used in production (bottles)2,500,000
Add target ending direct materials inventory (bottles) 80,000
Total requirements (bottles)2,580,000
Deduct beginning direct materials inventory (bottles) 50,000
Direct materials to be purchased (bottles)2,530,000

6-19 Budgeting material purchases.

Production Budget:
Finished Goods
(units)
Budgeted sales45,000
Add target ending finished goods inventory18,000
Total requirements63,000
Deduct beginning finished goods inventory16,000
Units to be produced47,000

Direct Materials Purchases Budget:
Direct Materials
(in gallons)
Direct materials needed for production (47,000 3)141,000
Add target ending direct materials inventory50,000
Total requirements191,000
Deduct beginning direct materials inventory 60,000
Direct materials to be purchased 131,000

6-20Revenues and production budget.

1.
| SellingPrice| UnitsSold| TotalRevenues|
12-ounce bottles| $0.25| 4,800,000a| $1,200,000|
4-gallon units| 1.50| 1,200,000b| 1,800,000|
| | | $3,000,000|
a 400,000 × 12 months = 4,800,000
b 100,000 × 12 months = 1,200,000

2. Budgeted unit sales (12-ounce bottles)4,800,000
Add target ending finished goods inventory 600,000
Total requirements5,400,000
Deduct beginning finished goods inventory 900,000
Units to be produced4,500,000

3.
= 1,200,000 + 200,000 1,300,000
= 100,000 4-gallon units

6-21 Budgeting: direct material usage, manufacturing cost and gross margin.

1.
Direct Material Usage Budget in Quantity and Dollars|
 | | |  |
 | Material|  |
 | Wool| Dye| Total|
Physical Units Budget| | | |
Direct materials required for| | |  |
Blue Rugs (200,000 rugs × 36 skeins and 0.8 gal.)| 7,200,000 skeins | 160,000 gal. |  | | | |  |
Cost Budget| | | |
Available from beginning direct materials inventory: (a) | | |  | Wool: 458,000 skeins| $ 961,800| | |
Dye: 4,000 gallons| | $ 23,680|  |
To be purchased this period: (b)| | |  |
Wool: (7,200,000 -...
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