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E20-2 Zeller Electronics Inc. produces and sells two models of pocket calculators, XQ- 103 and XQ-104. The calculators sell for $12 and $25, respectively. Because of the intense competition Zeller faces, management budgets sales semiannually. Its projections for the first 2 quarters of 2010 are as follows.

Unit Sales
Product Quarter 1 Quarter 2
XQ-103 20,000 25,000
XQ-104 12,000 15,000
No changes in selling prices are anticipated.
Instructions
Prepare a sales budget for the 2 quarters ending June 30, 2010. List the products and show for each quarter and for the 6 months, units, selling price, and total sales by product and in total.

Answer

ZELLER ELECTRONICS INC.
Sales Budget
For the Six Months Ending June 30, 2010

Quarter 1
Product Units Selling Price Total Sales
XQ-103 20,000 $12 $240,000
XQ-104 12,000 $25 $300,000
Totals 32,000 $540,000

Quarter 2
XQ-103 25,000 $12 $300,000
XQ-104 15,000 $25 $375,000
Totals 40,000 $675,000

Six Months
XQ-103 45,000 $12 $540,000
XQ-104 27,000 $25 $675,000
Totals 72,000 $1,215,000

E20-5 Moreno Industries has adopted the following production budget for the first 4 months of 2011.
Month Units Month Units
January 10,000 March 5,000
February 8,000 April 4,000
Each unit requires 3 pounds of raw materials costing $2 per pound. On December 31, 2010, the ending raw materials inventory was 9,000 pounds. Management wants to have a raw materials inventory at the end of the month equal to 30% of next month’s production requirements.

Instructions
Prepare a direct materials purchases budget by month for the first quarter.

Answer

Moreno Industries
Direct Materials Purchases Budget
For the Quarter Ending March 31, 2010
JanuaryFebruaryMarch
Units to be Produced1000080005000
Direct Materials per Unit333
Total Pounds Needed for Production300002400015000
Add: Desired Ending Direct Materials (Pounds)720045003600 Total Materials Required372002850018600
Less: Beginning Direct Materials (Pounds) 900072004500
Direct Materials Purchases282002130014100
Cost per Pounds$2 $2 $2
Total Cost of Direct Materials Purchases$56,400 $42,600 $28,200

BE21-4 Hannon Company expects to produce 1,200,000 units of Product XX in 2010. Monthly production is expected to range from 80,000 to 120,000 units. Budgeted variable manufacturing costs per unit are: direct materials $4, direct labor $6, and overhead $8. Budgeted fixed manufacturing costs per unit for depreciation are $2 and for supervision are $1. Prepare a flexible manufacturing budget for the relevant range value using 20,000 unit increments.

Answer

Hannon Company
Monthly Flexible Manufacturing Budget
For the Year 2010

Activity level
Finished Units
Variable Costs
Direct Materials ($4)
Direct Labor ($6)
Overhead ($8)
80,000

$ 320,000
480,000
640,000
100,000

$ 400,000
600,000
800,000
120,000

$ 480,000
720,000
960,000
Total Variable costs($18) $1,440,000 $1,800,000 $2,160,000 Fixed Costs
Depreciation (1)
Supervision (2)
Total Fixed Costs200,000
100,000
300,000200,000
100,000
300,000200,000
100,000
300,000
Total Costs $1,740,000 $2,100,000 $2,460,000

(1)$2 x 1,200,000/12
(2) $2 x 1,200,000/12

E22-5 The standard cost of Product B manufactured by Mateo Company includes three units of direct materials at $5.00 per unit. During June, 28,000 units of direct materials are purchased at a cost of $4.70 per unit, and 28,000 units of direct materials are used to produce 9,000 units of Product B.

Instructions
(a) Compute the total materials variance and the price and quantity variances. (b) Repeat (a), assuming the purchase price is $5.20 and the quantity purchased and used is 26,200 units.
Answer

(a) Total materials variance:
= (AQ X AP) - (SQ X SP)
= (28,000 X $4.70) - (27,000 X $5.00)
=...
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