# The Xavier Company Sales Plan

Topics: Direct material price variance, Material, Wage Pages: 9 (1029 words) Published: May 5, 2013
1. The Xavier Company, a merchandising firm, has planned the following sales for the next four months:

| | |March |April |May |June | | |Total budgeted sales |\$70,000 |\$50,000 |\$80,000 |\$60,000 |

Sales are made 40% for cash and 60% on account. From experience, the company has learned that a month’s sales on account are collected according to the following pattern:

| |Month of sale |70% | | |First month following month of sale |20% | | |Second month following month of sale |8% | | |Uncollectible |2% |

The company requires a minimum cash balance of \$4,000 to start a month.

Required:

a. Compute the budgeted cash receipts for June.

| |June |
|Sale |60000 |
|Desired EI |0.7 |
|Total |42000 |
|Begin EI |4000 |
|Required Production |38000 |

b. Assume the following budgeted data for June:

| |Materials Purchases |\$50,000 | | | (Paid for in full in the month of purchase) | | | |Selling and administrative expenses |\$12,000 | | |Depreciation |\$6,000 | | |Equipment purchases |\$16,500 | | |Cash balance, beginning of June |\$5,400 |

Using this data, along with your answer to part (1) above, prepare a cash budget in good form for June. Clearly show any borrowing needed during the month. The company can borrow in any dollar amount, but will not pay any interest until the following month. |Beg Cash |50000 |

|Production |38000 |
|Total |88000 |
|Desired EI |0.7 |
|Total Units |61600 |
|Begin Inv |4000 |
|Total Pro |65600 |

2. McNulty Company uses a standard cost system for its single product. The following data are available:

Actual experience for the current year:

| |Purchases of raw materials (18,000 yards at \$12) |\$216,000 | | |Raw materials used |16,000 yards | | |Direct labor costs (14,200 hours at \$10) |\$142,000 | | |Actual variable overhead cost |\$86,336 | | |Units produced |12,600 units |

Standards per unit of product:

| |Raw materials |1.2 yards at \$14 per yard | | |Direct labor |0.80 hours at \$9.20 per hour | | |Variable overhead |\$6 per direct labor hour |

Required:

Compute the following variances for raw materials, direct labor, and variable overhead, assuming that the price variance for materials is recognized at point of purchase:

a. Direct materials price variance
a. MPV= AQ (AP-SP)

18,000(12-14)=
36000 unfavorable

b. Direct materials quantity variance
a. MQV= SP (AQ-SQ)...